Blair Scott started a sole proprietorship by depositing $40,000 cash in a business checking account. During the accounting period, the business borrowed $20,000 from a bank, earned $5,800 of net income, and Scott withdrew $7,000 cash from the business. Based on this information, what is the balance in Scott’s capital account at the end of the accounting period?

Crowe Company began operations on January 1, Year 1. The company was organized as a sole proprietorship. During Year 1, Crowe acquired $53,000 of capital from John Crowe, the owner. Also, during Year 1 the company earned net income of $33,000 and John Crowe withdrew $28,000 from the business. Based on this information, the company would show:

Taylor Tools, Incorporated has sales of $201,500 in Year 1. Taylor warrants its products and estimates warranty expense to be 19% of sales. Which of the following shows how the year-end adjusting entry would affect the company’s assets, liabilities, and cash flow from operating activities? Total AssetsLiabilitiesCash Flow from Operating ActivitiesA. $ 38,285 B. $ 38,285$ (38,285)C.$ (38,285)$ 38,285 D.$ 38,285$ (38,285)

Which of the following statements about the materiality concept is not true?

On January 1, Year 1, XYZ Company paid $60,000 cash to purchase a truck. The truck has a $5,000 salvage value and a 4-year useful life. XYZ uses the double-declining-balance method. How much depreciation expense would XYZ report on its Year 2 income statement?

On January 1, Year 5, Raven Limo Service, Incorporated sold a used limo that had cost $72,500 and had accumulated depreciation of $44,500. The limo was sold for $38,500 cash. Which of the following shows how the sale of the limo would affect Raven’s financial statements? Balance SheetIncome StatementCash Flow StatementAssets=Liabilities+EquityCash+Book Value of LimoGain−Loss=Net IncomeA.38,500+(28,000)= +10,50010,500− =10,50038,500 IAB.38,500+(28,000)= +10,50010,500− =10,50010,500 IAC.38,500+(28,000)= +10,50038,500− =38,50010,500 OAD.38,500+(28,000)= +10,50038,500−28,000=10,50038,500 OA

Which of the following is not a significant difference between the allowance method and the direct write-off method?

Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $20. The other, purchased in February, cost $22. One of the items was sold in March at a selling price of $40. Poole uses LIFO. Which of the following statements is true?

Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity.After accruing all interest expense due as of April 1, Year 1, Baltimore Company made the cash payment for the full amount due (i.e., principal and interest) to Bank of the Chesapeake. How does the cash payment affect Baltimore’s financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expense=Net Incomea.(9,450)=(9,450)+ − = (9,000) FA,(450) FAb.(8,550)=(8,550)+ − = (8,550) FAc.(9,000)=(9,000)+ − = (9,000) FAd.(9,000)=(9,000)+ − = (8,550) FA,(450) OA

Which of the following is the term commonly used to describe the practice of reporting the net realizable value of receivables in the financial statements?