Question

The journal entry to record 31 days of accrued interest at the end of the month on a $10,000 note payable at 9% interest would include (use a 365-day year to calculate interest):

		a. debit Interest Expense for $76.44
		b. debit Interest Payable for $900.00
		c. debit Interest Expense for $900.00
		d. debit Interest Payable for $76.44

When a company issues stock that has a par or stated value, then the par or stated value of the shares is the most that can be recorded in the Common Stock account.

		a. true
		b. false

Freight paid on goods shipped to customers ('Freight Out') would be included on the Income Statement in which of the following cost categories?

		a. Cost of Goods Sold
		b. Selling Expense
		c. Administrative Expense
		d. 'Other' (non-operating) Expense

Samson Co. sold $4,000 of goods to Ramsey Co. on account. Ramsey later returned $500 of the goods purchased from Samson. Upon receipt of the returned merchandise, Samson should record a

		a. debit to Sales Returns and Allowances for $500.
		b. debit to Accounts Receivable for $500.
		c. debit to Cash for $500.
		d. credit to Sales for $500.

Answer 1

1.

Interest expense = 10000 *9%*31/365 = $76.44

Hence option "a" is ocrrect i.e. debit Interest Expense for $76.44.

2.

True.

When a company issues stock that has a par or stated value, then the par or stated value of the shares is the most that can be recorded in the Common Stock account.

3.

Freight paid on goods shipped to customers ('Freight Out') would be included on the Income Statement in "Selling Expense".

Hence option "b" is correct.

4.

Upon receipt of the returned merchandise, Samson should record a "a. debit to Sales Returns and Allowances for $500".

Hence option "a" is correct.