Franklin Company issued a $40,000 note to the Mercantile Bank onAugust 1, Year 1. The note carried a one-year term and a 12% rateof interest. How will the adjustment, dated December 31, Year 1, torecord accrued interest expense impact the elements of thefinancial statements?
Multiple Choice
Decrease assets and decrease retained earnings by $2,000
Increase liabilities and decrease equity by $2,000
Increase liabilities and decrease equity by $1,600
Decrease equity and increase liabilities by $4,800
The following account balances were taken from the adjustedtrial balance of Kendall Company:
| | |
| Revenues | $ | 26,900 |
| Operating Expenses | | 16,500 |
| Dividends | | 6,000 |
| Retained Earnings | | 18,500 |
|
What is the Retained Earnings account balance that will beincluded on the post-closing trial balance?
Multiple Choice
$28,900.
$22,900.
$4,400.
$10,400.
On August 1, Year 1, Bellisa Company issued a $15,000 4%, 1-yearnote to Citizens Bank. Which of the following entries reflects theadjustment required as of December 31, Year 1?
Multiple Choice
| Interest Payable | 600 | |
| Interest Expense | | 600 |
| Interest Expense | 250 | |
| Notes Payable | | 250 |
| Interest Expense | 250 | |
| Interest Payable | | 250 |
| Interest Expense | 600 | |
| Interest Payable | | 600 |
Vargas Company purchased a computer for $6,200 on January 1,Year 1. The computer is estimated to have a 5-year useful life anda $2,100 salvage value. What adjusting entry would Vargas record onDecember 31, Year 1 to recognize expense related to use of thecomputer?
Multiple Choice
| Depreciation Expense | 820 | |
| Accumulated Depreciation | | 820 |
| Depreciation Expense | 820 | |
| Computer | | 820 |
| Depreciation Expense | 1,240 | |
| Accumulated Depreciation | | 1,240 |
| Accumulated Depreciation | 820 | |
| Depreciation Expense | | 820 |
Manhattan Company recorded an adjusting entry to accrue interestowed of $850 as of December 31, Year 1. When the related note waspaid during Year 2, the company paid $1,550 in interest. Which ofthe following journal entries correctly records this Year 2transaction? (Assume that the entry to record the payment of thenote itself was recorded in a separate journal entry.)
Multiple Choice
| Interest Expense | 700 | |
| Interest Payable | 850 | |
| Cash | | 1,550 |
| Interest Expense | 1,550 | |
| Cash | | 1,550 |
| Interest Expense | 1,550 | |
| Cash | | 850 |
| Interest Payable | | 700 |
| Interest Expense | 700 | |
| Cash | | 700 |
Manhattan Company recorded an adjusting entry to accrue interestowed of $850 as of December 31, Year 1. When the related note waspaid during Year 2, the company paid $1,550 in interest. Which ofthe following journal entries correctly records this Year 2transaction? (Assume that the entry to record the payment of thenote itself was recorded in a separate journal entry.)
Multiple Choice
| Interest Expense | 700 | |
| Interest Payable | 850 | |
| Cash | | 1,550 |
| Interest Expense | 1,550 | |
| Cash | | 1,550 |
| Interest Expense | 1,550 | |
| Cash | | 850 |
| Interest Payable | | 700 |
| Interest Expense | 700 | |
| Cash | | 700 |
