Question : 91. Peter Company signed a new $36,000 three-year lease beginning October : 1230540

91. Peter Company signed a new $36,000 three-year lease beginning October 1, Year 1, for a storage facility for holding merchandise inventory. On October 1, Year 1, Peter Company recorded the first year’s payment of $12,000 in the Prepaid Rent account. There was no balance in the Prepaid Rent account prior to this entry. Peter Company records adjustments only at the calendar year end. At December 31, Year 1, the adjusting entry needed to accurately reflect the correct balances in the Prepaid Rent and Rent Expense accounts would be to debit: 
A. Prepaid Rent for $12,000 and credit Rent Expense for $12,000
B. Rent Expense for $12,000 and credit Prepaid Rent for $12,000
C. Prepaid Rent for $3,000 and credit Rent Expense for $3,000
D. Rent Expense for $3,000 and credit Prepaid Rent for $3,000
E. Prepaid Rent for $9,000 and credit Rent Expense for $9,000

92. The sales manager of Sebastian Company failed to record a valid sale on account of merchandise that had been shipped to a customer prior to the end of the current year, however the merchandise had been properly excluded from inventory at the end of the current year. As a result of this error, Sebastian Company’s 
A. total assets are overstated for the current year
B. total expenses are understated for the current year
C. net income is overstated for the current year
D. total assets are understated at the end of the current year
E. none of the above

93. Electra Company purchased $100,000 worth of office supplies on January 1. Electra expects to use 60 percent of the supplies in the first year and the remainder in the second year. After adjusting entries (and before closing entries), how much should Electra show in its Supplies Expense account?. 
A. $100,000
B. $60,000
C. $50,000
D. $30,000
E. $0

94. Bethesda Manufacturing Corp. purchased a new lathe machine for its baseball bat manufacturing plant on January 1. The machine cost $12,000 and is expected to be used in production for 4 years at which time its estimated salvage value will be $2,000. The yearly straight-line depreciation for this asset would be 
A. $2,500
B. $3,000
C. $4,000
D. $12,000
E. $9,500

95. On April 1, Year 1, Marshall Bookstore bought an insurance policy costing $48,000 that would insure the retail building for two years against fire loss. What asset account and what amount are recorded on the balance sheet at December 31, Year 1? 
A. Prepaid Insurance, $30,000
B. Insurance Expense, $30,000
C. Prepaid Insurance, $18,000
D. Insurance Expense, $18,000
E. Insurance Expense, $9,000

96. On November 1, Year 1, Deadbeat Collections Agency accepted a $100,000, 3-month note from a customer. The note earns 24% interest per year. What is the amount of interest receivable recorded by August Collections Agency at December 31, Year 1? (Assume no other entries to record interest have been made.) 
A. $6,000
B. $4,000
C. $12,000
D. $0, because interest is not due until February 1 of Year 2
E. $2,000

97. Many firms provide similar types of airline services with similar types of assets. They each received unqualified opinions from their independent auditors. Yet, Flash Airlines appears to apply its accounting principles more aggressively in income-enhancing ways relative to its competitors. The choices for Flash Airlines in applying generally accepted accounting principles under the accrual basis of accounting include: 
A. depreciable lives for buildings and equipment
B. estimated uncollectibles for accounts receivable
C. estimated warranty costs
D. all of the above
E. none of the above