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10.
On October 1, 2009, Ethan Company borrowed $20,000 on a 6-month note with an annual interest rate of 10 percent.
How much interest expense should be reported on December 31, 2009?
A) $333.
B) $500.
C) $2,000.
D) $ -0-.
E) None of the above is correct.
20.
Albert Company uses the allowance method to account for bad debts.
The entry to write-off a bad account (one that will never be collected) should be:
A) Debit: Bad debt expense; Credit: Accounts receivable
B) Debit: Bad debt expense; Credit: Allowance for doubtful accounts
C) Debit: Sales revenue; Credit: Accounts receivable
D) Debit: Allowance for doubtful accounts; Credit: Accounts receivable
E) None of the above is correct
22.
A customer purchased a $200 item at Best Bike Shop, paying with a credit card (VISA).
The merchant is charged a 2% fee by the credit card company. When recording this sale, the merchant would:
A) debit accounts receivable for $200.
B) credit sales revenue for $200.
C) credit sales revenue for $196.
D) credit unearned sales revenue for $200.
E) None of the above is correct.
23.
Which of the following would cause the receivable turnover ratio to increase?
A) Reducing the time it takes to collect our customer accounts
B) Increasing sales revenue at a faster rate than the rate of increase in accounts receivable
C) Strengthening our credit and collection policies resulting in reduced receivables while sales remain constant
D) None of the above causes the ratio to increase
E) All of the above cause the ratio to increase
28.
In the periodic inventory system, ending inventory is determined by taking an actual physical count of goods on hand on the last day of
the accounting period; beginning inventory for the next period is determined by taking another physical count of goods on the first day of
the new period.
A) True
B) False
29.
The actual physical flow of goods in a company usually determines a company’s choice of inventory costing method.
A) True
B) False
30.
Owners of a company would prefer use of FIFO costing in a period of declining costs because it would minimize taxes paid.
A) True
B) False
