Accounting Expert Answers & Study Resources : Page 77

Learning Objective 8.8 Questions 1) Appott Technologies recently sold some equipment for $6,800 cash. The equipment cost $23,000 and had accumulated depreciation through the date of sale totaling $17,250. The journal entry to record the sale of the equipment will include a A) credit to accumulated depreciation of $17,250. B) credit to equipment.

Learning Objective 7.6 Questions 1) If the ending inventory is overstated by $18,000 in 20X3, and assuming a constant 30% tax rate, then what will be the effect on net income in 20X4? A) Net income will be understated by $5,400 in 20X4. B) Net income will be overstated by $5,400 in 20X4. C).

Learning Objective 8.4 Questions 1) Dugger Excavating bought a machine for $24,000 on January 1, 20X3, with a useful life of 5 years and a salvage value of $4,000. At the beginning of 20X4, Dugger finds the residual value will be zero. Assuming Dugger employs straight-line depreciation, what will be the depreciation.

Learning Objective 9.1 Questions 1) A liability is created A) when merchandise is purchased with cash. B) when owners invest in a company. C) when merchandise is sold on account. D) when salary expense is recognized before employees are paid. E) when rent is paid in advance. 2) Liabilities that fall due more than 1 year beyond.

11) Using accelerated depreciation instead of straight-line depreciation results in a lower net income but a higher cash balance in the initial years of a fixed asset's life. 12) Depreciation does not generate cash, but it does have a cash benefit if it results in lower taxes. 13) On an after-tax basis,.

11) The premium on bonds payable A) serves to reduce interest expense on the income statement. B) serves to increase interest expense on the income statement. C) is an adjunct account to notes payable. D) increases the cash interest payment. E) is a contra account to bonds payable 12) Under the effective-interest method of amortizing bond.

9) For each of the following items, identify whether they are a capital expenditure or an expense: a. Built a new elevator in the office building. b. Acquired a trademark. c. Incurred research and development expense to develop a patent. d. Modified a machine, thus extending its useful life and capabilities. e. Paid wages for.

37) Clean Out Clutter is located in a state where the sales tax is 7 1/4%. Total sales for the month of February were $104,000, all of which were subject to sales tax. a. Prepare a journal entry that summarizes sales (all in cash) for the month. b. Prepare a journal entry.

Learning Objective 9.3 Questions 1) Which of the following is false? The discount on bonds payable is A) amortized over the life of the bond. B) deducted from bonds payable. C) a contra account to bonds payable. D) reported in liabilities section of the balance sheet. E) an adjunct account to bonds payable. 2) The discount on.

Learning Objective 7.1 Questions 1) Given the following data, what is cost of goods sold? Sales revenue $730,000 Beginning inventory 80,000 Ending inventory 95,000 Purchases of inventory160,000 A) $585,000 B) $145,000 C) $570,000 D) $175,000 E) $555,000 2) Given the following data, what is cost of goods sold? Sales revenue $10,000 Beginning inventory 3,000 Ending inventory 7,000 Purchases of inventory 5,000 A) $12,000 B) $ 9,000 C) $.

Learning Objective 8.9 Questions 1) Companies electing to revalue their fixed assets under IFRS are allowed to A) only increase the carrying value of the fixed asset. B) only decrease the carrying value of the fixed asset. C) only increase the historical cost of the fixed asset. D) only decrease the historical cost of the.

11) When the market interest rate is 13% and the coupon rate is 10%, a bond sells at A) a discount. B) a premium. C) par. D) liquidation value. E) Cannot be determined without more information 12) Bond interest payments are typically made A) annually. B) semiannually. C) monthly. D) quarterly. E) weekly. 13) When the market interest rate is 7% and.

21) Interest expense on bonds exhibits the following attributes except A) interest expense is greater than the cash payment for interest when a bond is sold at a premium and effective-interest amortization is used. B) interest expense is the same dollar amount for every interest payment period, if a bond was issued.

34) Tall Trees Gear uses the periodic inventory method and recorded the following inventory and purchase transactions for the month of August, 20X3. Date         Transaction              Units     Unit Cost Aug 1  Beginning inventory 2,800 units @ $1.10 Aug 3  Purchases 500 units@ $1.20 Aug 10  Purchases 300 units@ $1.30 Aug 17  Purchases 400 units@ $1.40 Aug 24.

12) Formula Results signed a 10-year lease for a store in the best mall in the area. At the beginning of the seventh year of the lease, the company decided to refurbish the store. The following expenditures were made: Item Cost Useful Life Carpeting $ 6,000 3 years Lighting Fixtures $ 4,500.

7) MLJ Manufacturing has prepared the following depreciation schedule: Straight-line depreciation schedule of snow blowers Annual depreciationBook value $85,000 Year 1 $21,25063,750 Year 2 21,25042,500 Year 3 21,25021,250 Year 4 21,250 0 Suppose at the beginning of year 3, MLJ Manufacturing no longer believes the snow blowers will last 4 years, but instead decides the snow blowers will.

Learning Objective 7.2 Questions 1) The calculation of cost of goods sold under the periodic system is A) beginning inventory + purchases. B) beginning inventory + ending inventory - purchases. C) beginning inventory + ending inventory + purchases. D) beginning inventory + purchases - ending inventory. E) ending inventory + purchases - beginning inventory. 2) Which of.

21) Debenture bonds may be subordinated, which means that their interest rates may vary depending on the prime rate. 22) A protective covenant is a contract whereby the issuing corporation of a bond promises that it will abide by stated provisions. 23) Sinking fund bonds require the issuer to make annual payments.

31) The accumulated depreciation account represents a growing amount of cash to be used to replace the asset. 32) In order to calculate depreciation, the current market value of the equipment, the salvage value, and the estimated useful life must be known. 33) Book value is determined by adding salvage value to.

11) Queen Mattresses, Inc. had the following transactions occur during May 20X3. Assume there is no beginning inventory. May 2 Inventory was purchased on account for $5,000, terms 2/10, n/30. May 3 Inventory costing $1,000 was returned. May 9 Paid for the inventory. May 15Inventory costing $2,200 was sold on account for $3,800, terms.

7) Holton Automotive computed gross profit for the month ended January 31, 20X3 as follows: Sales $5,200 Cost of goods available for sale 4,800 Ending inventory (200 units) 1,900 Cost of goods sold 2,900 Gross profit$2,300 Holton Automotive experienced a sudden decline in the replacement cost of its inventory during the month of January with per.

Learning Objective 8.1 Questions 1) Repairs made to equipment as part of yearly maintenance would be recorded in the journal by A) debiting equipment. B) debiting repairs expense. C) debiting depreciation expense. D) debiting accumulated depreciation. E) crediting accumulated depreciation. 2) Treating a capital expenditure as repairs and maintenance expense A) understates expenses and overstates owners' equity. B) understates.

12) Delta Company acquired land and a building on March 1, 20X3, paying a total of $1,400,000. Separately, the land had an estimated fair market value of $750,000 and the building had an estimated fair market value of $1,125,000. In order to use the property, land improvements of $20,000 were.

Learning Objective 7.4 Questions 1) Using the LIFO method, the earliest purchases of inventory are assumed to be contained A) on the balance sheet as part of ending inventory. B) on the income statement as part of cost of goods sold. C) equally split between the income statement and the balance sheet. D) Impossible to.

31) Revenues that are collected before services or goods are delivered are called unearned revenue under accrual accounting. 32) Deposits to a bank by customers are considered to be current liabilities by the bank. 33) Corporations pay taxes in one lump sum at the end of the year. 34) The journal entry to.

25) Fill in the appropriate blank figures in the income statement below. Gross sales $7,500 Sales returns and allowances A Less: Cash discounts on sales 250 B _______________________ $7,100 Cost of goods sold Inventory, January 1, 2X10 200 Purchases (gross) $3,210 C _______________________ 275 Less: Cash discounts on purchases 280 Net Purchases D Add: Freight In 50 Total cost of merchandise acquired.

Learning Objective 7.3 Questions 1) In a transaction where the merchandise invoice indicates F.O.B. shipping point, who pays the cost of shipping? A) The buyer B) The seller C) The common carrier D) The freight forwarder E) None of the above 2) On March 1, 20X3, Environmental Impacts acquired inventory on account. The cost of the inventory.

11) The current portion of long-term debt represents A) the amount of principal on long-term debt that comes due in the coming year. B) the amount of long-term debt that appears in the noncurrent liability section of the balance sheet. C) the amount of interest that comes due in the coming year. D) a.

Learning Objective 8.12 Questions 1) Jets Company buys Pack Company for $11 million. Pack Company has assets with a fair value of $9 million and liabilities with a fair value of $2 million. Pack's stockholders' equity is recorded at $6 million. What goodwill should Jets Company record? A) $10 million B) $8 million C).

Learning Objective 7.9 Questions 1) What order does inventory typically travel in an organization? A) Raw materials, customer, finished goods, work in process B) Raw materials, work in process, customer, finished goods C) Raw materials, work in process, finished goods, customer D) Work in process, raw materials, finished goods, customer E) Work in process, finished goods,.

Learning Objective 8.7 Questions 1) A major expenditure made to equipment that extends its useful life beyond the original estimate is journalized by A) debiting repairs expense. B) debiting depreciation expense. C) debiting equipment. D) crediting depreciation expense. E) crediting accumulated depreciation. 2) Which of the following activities can be classified as a betterment? A) waxing a car B).

22) Silver Line Transportation purchased inventory on account for $20,000 on April 2, 20X3. They use a periodic inventory system. The terms of the purchase were 3/10, n/45. Shipping was $800, FOB destination. On April 4, the inventory was inspected, and it was discovered that some was damaged. The seller.

11) The two main types of inventory systems are the periodic system and the gross margin method. 12) Under a periodic inventory system, a business maintains a continual record of inventory on hand. 13) When using a perpetual inventory system, a business will debit inventory and credit cost of goods sold each.

Learning Objective 9.2 Questions 1) ________ are a form of long-term debt that is secured by the pledge of specific property. A) Convertible bonds B) Mortgage bonds C) Callable bonds D) Sinking fund bonds E) Debentures 2) ________ are bonds whose holders have claims against only the assets that remain after the claims of the more senior.

11) Compatibility Services acquired an $80,000 machine on January 1, 20X3. The machine is estimated to have a useful life of 8 years, and a residual value of $4,000. For units-of-production depreciation purposes, the machine is expected to produce 400,000 units. What is the balance in the accumulated depreciation account.

11) Biscuit Bakery had the following activity in its inventory account during August 20X3. Cost per Date        Activity                 Units     Unit Cost     Total August 1  Beginning inventory100 $3.00$300 August 3  Purchase 403.10 124 August 7  Sale 50 August 12  Purchase 503.20160 August 16  Sale 70 August 23  Sale 40 August 30  Purchase 603.30198 What is the ending inventory balance at August.

Learning Objective 7.5 Questions 1) The lower-of-cost-or-market practice is based on the A) consistency principle. B) entity concept. C) reliability principle. D) conservatism principle. E) historical cost concept. 2) The replacement costs have increased from $5.60 per unit to $6.20 per unit from the time 200 units of inventory were purchased. The year-end audit found 120 units.

Learning Objective 8.6 Questions 1) Which of the following statements is considered incorrect? A) Depreciation methods provide a systematic way to expense the cost of an asset, although this expense is not a negative cash flow. B) Depreciation is an allocation of the original cost of an asset to the periods in which.

8) The following information is associated with the bank reconciliation of Tall Hills Ski Resort as of October 31, 20X4: Balance per bank $ 956 Balance per books 538 Bank service charge 31 Deposits in transit 108 NSF check from a credit customer 57 Outstanding checks 614 a. Prepare a bank reconciliation for Tall Hills Ski Resort.

21) If unit costs and prices did not fluctuate, specific identification, LIFO, FIFO, and weighted-average would show the same ending inventory and cost of goods sold balances. 22) The specific identification method is frequently used for items with common characteristics, such as tons of coal. 23) Under the FIFO method, ending inventory.

Learning Objective 7.7 Questions 1) Fortune Company had sales during July 20X3 of $29,000. During the month, the company had purchases of $17,000. At July 1, 20X3, the company had inventory of $4,500. Assuming the company has a gross profit percentage of 40%, what is the estimated ending inventory for Fortune.

Learning Objective 6.7 Questions 1) The following represent common reconciling items within a bank reconciliation: 1. Bank service charges 2. Deposits in transit 3. Outstanding checks Which of the above items will be an adjustment to the balance per books? A) 1 only B) 2 only C) 3 only D) 1 and 2 E) 2 and 3 2) In a bank.

44) Hartman Manufacturing acquired a vehicle on January 1, 20X2, for $78,000. The machine is estimated to have a 6-year life, with a residual value of $6,000. Hartman Manufacturing is not certain whether to use the straight-line or double-declining-balance method of depreciation. Straight-Line Double-Declining-Balance Depreciation Book Depreciation Book Date Expense Value Expense Value 01/01/2X02.

Learning Objective 8.11 Questions 1) Which statement is FALSE? A) The economic life of an intangible asset does not always equal its legal life. B) The cost of developing an intangible asset internally is capitalized as an asset. C) Intangible assets are similar to fixed assets, in that their acquisition costs are capitalized as.

21) Machiel Manufacturing acquired a $60,000 machine on January 1, 2009. The machine is estimated to have a useful life of 4 years, and a residual value of $10,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Machiel Manufacturing uses straight-line depreciation, what is the.

Learning Objective 8.2 Questions 1) Kolonial Township acquired a building and the 3 acres of land on which it is located. The total purchase price was $2,500,000. For valuation purposes, the company contacted three local commercial real estate agents, who gave the following valuation estimates: Land Building M. Mulhan $ 900,000 $2,100,000 H. Ivan.

Learning Objective 8.5 Questions 1) Which of the following statements is TRUE? A) For most assets, MACRS approximates straight-line depreciation. B) MACRS depreciates assets over a longer useful life than would be expected from the asset. C) MACRS allows for greater depreciation expense in the later years of an asset's life, thus reducing the.

21) The portion of a long-term liability that is due within a year is still included in the long-term liability section of the balance sheet. 22) A line of credit is a written promise to repay the loan principal plus interest at a specific future date. 23) A promissory note is an.

Learning Objective 7.8 Questions 1) An increase in the replacement cost of the inventory held during the current period is called a A) holding gain. B) holding loss. C) unusual gain. D) operating gain. E) operating loss. 2) With inflation, a LIFO liquidation will A) decrease net income. B) increase cost of goods sold. C) increase gross profit. D) increase inventory. E).

Learning Objective 8.3 Questions 1) Compatibility Services acquired an $80,000 machine on January 1, 20X3. The machine is estimated to have a useful life of 8 years, and a residual value of $4,000. For units-of-production depreciation purposes, the machine is expected to produce 400,000 units. What is the depreciable value of.