ACC EXAM 4

Long-term liabilities are usually associated with ____________.

a purchase of a building.

An​ end-of-period adjusting entry that debits Unearned Revenue most likely will credit

a revenue

During the month, TNT Construction paid $300 to settle warranty claims. TNT uses an estimated warranty account. The journal entry to record the claims payment would have been:

debit Estimated warranty payable, $300; credit Cash, $300.

The accounting principle that requires a company to record warranty expense in the same period that it records sales revenue is the

expense recognition principle.

Research and development costs (R&D) are generally:

expensed and become part of the Income Statement.

It is determined that a computer's depreciation expense for the year is $3,500. The journal entry to record this will be:

debit Depreciation Expense - computer $3,500; credit Accumulated Depreciation, $3,500.

Equipment costing $135,000 with a book value of $124,000 is sold for $125,000. What is the gain or loss on sale and how is it recorded for this transaction?

This transaction results in a gain on Sale of Equipment for $1,000, which must be credited. To record the sale of this plant asset, four accounts have to be effected: Equipment (credited for the cost of the asset), Accumulated Depreciation (debited for the amount of depreciation recorded to date), Cash (debited for the amount received), and Gain (credit) or Loss (debit) to balance the entry.

Which of the following accurately describes how contingent liabilities are reported on the Balance Sheet?

. The accounting treatment for contingent liability could be A, B, or C depending on the likelihood of an actual obligation occurring.

On the first day of its fiscal​ year, Amplify Company purchased a new computer system for a total cost of $35,000. The computer system is expected to have a life of 5 years with a residual value of $8,000. If the company uses the​ double-declining-balance method, its depreciation expense for this computer system in the first year will be

1/5 x 2 = 0.40 $35,000 x 0.40 = $14,000

Betta Group purchased Danio, Inc. for $960,000. The market value of Danio's assets and liabilities at the time of purchase were $1,300,000 and $360,000 respectively. The journal entry to record this will include:

debit to Asset accounts for $1,300,000, debit to Goodwill $20,000, credit to Liabilities $360,000 and credit to Cash $960,000

Evergreen Roofing had cash sales for the month totaling $42,000. Evergreen offers a 1-year warranty on its roofing services. If Evergreen estimates warranty claims will equal 3% of sales, the journal entry to record the estimated warranty expense for the month is:

debit warranty expense $1,260; credit accrued warranty payable $1,260.

Which of the following would be considered an estimated liability?

Warranties payable

Which current liability is generally listed first?

accounts payable

Which account is NOT an example of an accrued liability?

accounts payable The other accounts listed need to be adjusted as needed at the end of each accounting period and are accrued liabilities.

The most frequently used current liabilities are

accounts payable, notes payable, and accrued liabilities

When a company makes a sale, sales tax is collected from the customer. The company records sales tax as a(n)

accrued liability.

Patents, copyrights, and trademarks are:

amortized.

Failure to accrue interest expense results in

an overstatement of net income and an understatement of liabilities.

Fair Market, Inc. purchased land, a warehouse, and a delivery truck for $450,000. The appraised values for the items are $300,000, $150,000 and $50,000, respectively. Fair Market should record this purchase ________.

as assets on the balance sheet: $270,000 for the land, $135,000 for the building, and $45,000 for the delivery truck

Potential liabilities that depend on future events arising out of past events are called

contingent liabilities.

An obligation dependent upon an event that has not yet occurred is an example of a(n):

contingent liability.

Which of the following is an intangible​ asset?

copyright

Connors Company paid​ $700 cash to make a repair on equipment it sold under a​ one-year warranty in the prior year. The entry to record the payment will debit

Accrued Warranty Payable and credit Cash.

A major expenditure made to equipment that extends its useful life beyond the original estimate is journalized by ________.

debiting equipment

Which of the following statements is​ false?

All contingent liabilities should be reported as liabilities on the financial​ statements, even those that are unlikely to occur.

Jun 30, 2018, Beck sold a computer that was purchased on Jan. 1, 2016. The computer cost $14,000, had a useful life of 7 years, no salvage. The computer was sold for $11,500. a. Was the computer sold for a gain or loss? [a] b.How much was the gain or loss on the sale? [b]

gain 2500

Which intangible asset is recorded only when an acquiring company purchases another company?

goodwill

A contingent liability should be recorded in the accounts

if the amount can be reasonably estimated. + if the related future event will probably occur.

Classy Cooks did a major overhaul of their ovens, which extended the useful life of the ovens by 4 years. The journal entry to record this included a debit to repairs expense. This entry is:

incorrect, and as a result net income will be understated.

What kind of account is Unearned​ Revenue?

liability

Which of the following repairs to a FedEx truck would be capitalized? Major engine overhaul Oil change Replacement of windshield New paint job

major engine overhaul

Which accounting principle dictates whether the cost of a repair should be expensed?

matching

Tennis Shoe Warehouse operates in a state with a​ 6.5% sales tax. For​ convenience, Tennis Shoe Warehouse credits Sales Revenue for the total amount​ (selling price plus sales​ tax) collected from each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales​ taxes,

net income will be overstated and liabilities will be understated.

If the likelihood of an obligation is remote:

no action is necessary in the accounting treatment.

According to GAAP, goodwill is

not amortized, but checked annually for impairment

Which of the following would NOT be considered part of the cost of the land?

paving

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is:

possible

Suppose a business makes a lump-sum (basket) purchase. To identify the cost of each asset, the business uses the ______________________________ method, which divides the total cost among the assets according to their relative sales values.

relative-sales-value method

After an asset is fully depreciated, the asset:

remains on the Balance Sheet at (cost - Accumulated Depreciation).

By NOT accruing warranty expense:

reported liabilities will be understated and net income will be overstated.

Which of the following costs are reported on a​ company's income statement and balance​ sheet?

B. Cost of goods sold Accumulated depreciation

Whitmore Corporation purchased a new delivery van on the last day of its fiscal year. The cost of the delivery van will appear on​ Whitmore's _______________ in the year of purchase

Balance sheet

Select all the following costs that are included in the cost of land.

Brokerage commission Survey fees and legal fees Purchase price Property taxes purchaser pays expenditures for grading/clearing the land Removing unwanted buildings

Capitalizing a cost involves increasing what type of​ account?

D. Asset

When a company receives cash from customers before earning the​ revenue, _________ will be credited.

D. unearned revenue

Patents to produce and sell inventions are conveyed by the federal government for a period of:

20 years

A capital expenditure

adds to asset

A company purchased a van at a cost of $42,000 and expects its salvage value to be $6,000 after 100,000 miles of service. Using the units-of-production method, what is the first year's depreciation if the van is driven 30,000 miles?

$10,800

Equity Bank lends Boston Furniture Company $100,000 on December 1st on a 6%, 4-month note. What is the maturity value of the note?

$102,000 First calculate the interest: $100,000 x .06 x (4/12) months = $2,000 Maturity value is $100,000 + $2,000 = $102,000

Stella Corp. has the following liabilities: $30,000 salaries payable, $70,000 accounts payable, $180,000 notes payable (to be made in 10 equal annual payments), and warranty payable $22,000 (all of Stella's products come with a 90-day manufacturer warranty). The total current liabilities is:

$140,000

Ironworks Industries purchased a piece of equipment for $80,000 with an estimated salvage value of $15,000 on January 1. Its estimated life is 5 years. To the nearest dollar, what is the equipment's depreciation using double-declining-balance for year 2?

$19,200

Equity Bank lends Boston Furniture Company $100,000 on December 1st on a 6%, 4-month note. The total cash paid for interest (only) at maturity of the note is (Round your final answer to the nearest dollar.):

$2,000 This is calculated as: $100,000 x .06 x (4/12) months = $2,000

A building was purchased on August 1 for $490,000. It has a salvage value of $38,000 and a useful life of 30 years. To the nearest dollar, how much will the depreciation expense for the building be for the first year ended December 31, using the straight-line method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

$6,278

A new vehicle was purchased on January 1 for $46,000. It has a salvage value of $7,000 and a useful life of 6 years. To the nearest dollar, how much will the depreciation expense for the vehicle be for the first year using the straight-line method?

$6,500

A company signs a note payable for $4,500 at 11% for 65 days. How much interest (to the nearest cent) will the company owe using a 360-day year?

$89.38

A company purchased a computer system on March 1. Its cost was $55,000 and it had an estimated salvage value of $10,000. It was expected to have a useful life of 5 years. To the nearest dollar, the depreciation for year 2 using straight-line depreciation will be:

$9000

GreenhouseGreenhouse Company purchased a delivery van for $35,000 on January 1. The van has an estimated 10​-year life with a residual value of $6,000. What would the depreciation expense for this van be in the first year if GreenhouseGreenhouse uses the​straight-line method?

($35,000-$6,000) / 10 = $2,900

If the accounts payable turnover is 6.7, what is the days' payable outstanding (round to the nearest day):

54 days

Harper Company acquired a $150,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $25,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Harper Company uses double-declining-balance depreciation, what is the depreciation expense in 2019?

2018: 40% × $150,000 = $60,000 2019: 40% × ($150,000 - $60,000) = $36,000 When computing double-declining balance, we first calculate the straight-line rate of depreciation, calculated as 1 / useful life, or 1 / 5, which is 20%. Then, multiply the straight-line rate by 2 to determine the double-declining balance rate of depreciation, resulting in a double-declining balance rate of 40% (20% x 2). Annual depreciation expense is then determined each year as the double-declining balance rate of depreciation (40%) multiplied by the beginning period book value of the asset (Cost - Accumulated Depreciation), resulting in depreciation expense in 2018 and 2019 of:

A typical credit period for payment is:

30 days

Copyrights to protect various forms of media are conveyed by the federal government for a period of:

70 years beyond the author's life

On December 31st, Aubie has cost of goods sold of $734,000 and ending inventory of $123,000. The beginning inventory for the year had been $95,000. Calculate the purchases from suppliers, assume all on account.

762,000

Which of the following statements is TRUE about capital and revenue expenditures related to the long-term operating assets of a company?

A capital expenditure will either increase the life or the productivity of the operating asset

ABC Co. had several contingent liabilities at year-end. Which of the following treatments of contingent liabilities is correct?

ABC had several contingent liabilities for which it believes it is reasonably possible it will result in a loss, so ABC disclosed all of these in the notes to the financial statements

Which of the following is not a​ liability?

Allowance for bad debts

A bookkeeper did not record depreciation expense for a period. As a result ________.

As a result of not recording depreciation expense for the period, shareholders' equity will be overstated. The omitted journal entry would include a debit to depreciation expense and a credit to accumulated deprecation. If this entry was not recorded, assets would be overstated because the accumulated depreciation being a contra asset reducing overall assets would be omitted and depreciation expense reducing net income would be omitted. As net income affects retained earnings and retained earnings affect shareholders' equity, shareholders' equity would be overstated due to this omission.

A company replaced an engine on a vehicle and debited the amount to Repairs and Maintenance expense, rather than debiting the Vehicle account. Which of the following would occur because of this error?

Assets would be understated.

Cardinal Construction has a long-term asset with the following year-end information: Net book Value = $475,000 Estimated future cash flows = $425,000 Fair Value = $410,000 Is Cardinal required to impair this asset? If so, what amount of loss will be recorded?

Cardinal is required to impair this asset and should record an impairment loss of $65,000. To determine if an impairment has occurred and the amount of impairment loss to record, Cardinal must use the following test of impairment: Step 1: Impairment Test - Is the book value > future cash flows (Yes, $475,000 > $425,000) Step 2: Impairment Loss = Net Book Value - Fair Value = $475,000 - $410,000 = $65,000 Impairment Loss.

Gravel Corporation borrowed ​$250 comma 000250,000 from a bank on January​ 1, 20192019​, by signing a​ 10%, six-month note. The journal entry made by Gravel on January​ 1, 20192019​, will debit

Cash for 250,000 and credit Notes Payable for 250,000.

Which of the following is not a plant asset?

Copyright

How do you compute the purchases from suppliers?

Cost of goods sold + ending inventory - beginning inventory.

Jules Jewelers recorded cash sales of $200,000 on April 24. Jules also collected an additional 6% in sales tax payable to the state of Maryland. Which of the following would be included in the journal entry to record this sales transaction?

Debit to Cash $212,000

Southern Airlines received payment from a customer on December 1, 2018, for a round trip airline ticket from Baltimore to Orlando in the amount of $500. The flight from Baltimore to Orlando occurs on December 23, 2018, and the return flight to Baltimore is on January 11, 2019. Which of the following is included in the adjusting entry needed on December 31st to record earned revenue from this transaction?

Debit to Unearned Revenue, $250.

When a company settles a warranty claim by replacing the defective goods, the journal entry will include a debit to _______ and a credit to _______.

Estimated Warranty Payable, Inventory

ActonActon​, ​Inc., uses the​double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first​year?

Estimated residual value

A company replaced tires on a vehicle and debited the amount to Vehicle instead of Repairs and Maintenance Expense. Which of the following would occur because of this error?

Expenses would be understated.

After a building is up and running, insurance, taxes, and maintenance costs are recorded as part of the asset's cost. True or false?

False - recorded as expenses

Harper Company acquired a $150,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $25,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Harper Company uses straight-line depreciation, what is the depreciation expense in 2019?

If Harper Company uses straight-line depreciation, the depreciation expense in 2019 is $25,000. Straight line depreciation spreads the cost of the asset equally over the assets useful life and is calculated by dividing the depreciable cost by the useful life: (Cost - Residual Value) / Useful life ($150,000 - $25,000) / 5 years = $25,000 per year

When a company expenses the cost of maintenance for its heating and cooling​ system, that cost will appear on its

Income statement.

Which account would be reported on the income statement?

Interest Expense

The journal entry to record accrued interest on a short-term note payable includes a debit to:

Interest Expense and a credit to Interest Payable

The journal entry to record accrued interest on a short-term note payable includes a debit to:

Interest Expense and a credit to Interest Payable.

Cash inflows and outflows relating to plant assets, natural resources, and intangibles are reported in which section of the statement of cash flows

Investing Activities

KlineKline Company failed to record depreciation of equipment. How does this omission affect KlineKline​'s financial​statements?

Net income is overstated and assets are overstated.

Sassycat Designs inadvertently recorded an expense as a capital expenditure. Which of the following will occur as a result of this mistake?

Net income will be overstated.

Phoebe Corporation signed a​ six-month note payable on October​ 23, 20182018. What accounts relating to the note payable will be reported on its financial statements for the fiscal year ending December​ 31, 20182018​?

Notes payable and interest payable will be reported on the balance sheet.

The current pay period ends on​ Friday, January​ 2, yet the​ company's fiscal​ year-end is on​ Wednesday, December 31. If the company does not make the proper adjusting entry to accrue payroll expenses at​ year-end, what would be the​ impact?

Operating income will be overstated.

Which of the following would be considered a contingent liability?

Pending litigation

Which number that is not normally reported on the financial statements is needed to calculate the accounts payable turnover ratio?

Purchases from suppliers

On December 31st, end of current year, ABC Company needs to record 4 months of accrued interest on a loan for $10,000 at 5%. The note payable is not due for another 3 months. What is the amount of Interest Payable accrued on December 31st of the current year (round to the nearest dollar)?

Since there is 4 months of accrued interest to record, it would be calculated as: $10,000 x .05 x (4/12 months) = $167. The journal entry would be a debit to Interest Expense, and a credit to Interest Payable, as it has not been paid yet, just accrued.

Steeler Manufacturers reported the following information from its income statement and balance sheet: Income Statement: Net Sales = $2,500,000 Gross Profit = $1,200,000 Net Income = $750,000 Balance Sheet: Total Assets, beginning = $10,500,000 Total Assets, ending, = $13,500,000 What is Steeler's Return on Assets?

Steeler's Return on Assets is 6.25%. Return on Assets is calculated as Net Income / Average Total Assets. Average Total Assets is calculated as (Beginning Total Assets + Ending Total Assets) / 2. For Steeler, Return on Assets is calculated as: $750,000 ((10,500,000 + 13,500,000) / 2)

Which of the following items should be accounted for as a capital​ expenditure?

Taxes paid in conjunction with the purchase of office equipment

How would FedEx divide a $120,000 lump-sum purchase price

The FedEx should divide lum sum purchase price paid on the basis of market value, Such percentage should be taken as basis on the purpose for which amount should be divide, % Share of land in total market value = 40000/150000*100= 26.7% % of share of Building in market value = 95000/150000*100= 63.3% % of share of equipment in market value = 15000/150000*100= 10% Cost of each asset Land = 120000*26.7% = 32040$ Building = 120000*63.3%= 75960$ Equipment = 120000*10% = 12000$ Total. = 120000$

On December 31st, Castello, Inc. has cost of goods sold of $400,000, ending inventory of $110,000, beginning inventory of $130,000, and average accounts payable of $150,000. What is the accounts payable turnover?

The accounts payable turnover is 2.5. The accounts payable turnover = Purchases from suppliers (assumed all on credit) / average accounts payable Purchases from suppliers = cost of goods sold + ending inventory - beginning inventory ($400,000 + $110,000 - $130,000) / $150,000 = 2.5

What is the basic working rule for measuring the cost of an asset?

The cost of any asset is the sum of all the costs incurred to bring the asset to its intended use

Which of the following should be recorded as an intangible asset?

The cost to obtain exclusive rights to manufacture a unique product should be recorded as an intangible asset. An intangible asset is a copyright, patent, etc. that is amortized (expensed) over its useful life (similar to depreciation of a fixed asset). A company would acquire a patent in order to have exclusive rights to manufacture a unique product, so this cost would, therefore, be capitalized. Research and development costs are expensed when incurred because the benefits from this cost are uncertain.

Fathom Company acquired a $50,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $5,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. What is the depreciable value of the machine acquired by Fathom Company?

The depreciable value of the machine acquired by Fathom Company is $45,000. Depreciable cost is calculated by reducing the cost of the asset by any residual value (i.e., $50,000 - $5,000 = $45,000)

What effect does recording a capital expenditure as repairs and maintenance expense have on the financial statements of the current period?

Treating a capital expenditure as repairs and maintenance expense overstates expenses and understates net income. Capital expenditures should be recorded as an increase in the cost of the asset and depreciated over the remaining useful life of the asset. If the expenditure is all expensed in the current period, it will overstate the expenses and understate net income in the current period. Because net income is understated, this results in equity also being understated. Because these expenditures were not capitalized, this also results in total assets being understated.

Equipment costing $20,000 with $17,800 of accumulated depreciation is sold for $2,500 cash. The journal entry will involve a ________.

The journal entry will involve a debit to accumulated depreciation for $17,800. When an asset is sold it must be taken off the books with a credit for the cost (which is still reported in the books in the asset account); in addition, its associated contra asset account, accumulated depreciation (carries a normal credit balance) must also be taken off the books with a debit. If the asset is sold above the book value, there is a gain (credit). If the asset is sold below the book value, there is a loss (debit).

Equipment costing $55,000 with a book value of $24,500 is sold for $21,000. The journal entry will involve a ________.

The journal entry will involve a debit to accumulated depreciation for $30,500. To record the sale of this plant asset, four accounts have to be effected: Equipment (credited for the cost of the asset), Accumulated Depreciation (debited for the amount of depreciation recorded to date), Cash (debited for the amount received), and Gain (credit) or Loss (debit) to balance the entry. In this example, the book value of the asset was given, not the accumulated depreciation. Book value is the cost of the asset less its accumulated depreciation, however, so since we were given the book value and the cost of the equipment, we can determine the balance of accumulated depreciation by subtraction: Accumulated Depreciation = Cost - Book Value Accumulated Depreciation = $55,000 - $24,500 = $30,500.

The process of expensing the cost of an intangible asset over its useful life is called ________.

The process of expensing the cost of an intangible asset over its useful life is called amortization. Intangibles, although not a visible unit producing asset like many fixed / plant assets, are still expensed over their "useful" lives. For example, a patent on an invention may be good for 40 years and is therefore, expensed via amortization over its useful life

Which of the following would NOT be a liability?

The signing of a three-year employment contract at a fixed annual salary

Which financial statement shows how much cash was paid for newly acquired property, plant and equipment when cash is used for part or all of the purchase?

The statement of cash flows shows how much cash was paid for newly acquired property, plant, and equipment when cash is used for all or part of the purchase. The statement of cash flows shows the cash inflows and outflows for the period covered by the statement (i.e., cash paid for newly acquired fixed assets). The statement of financial position (balance sheet) would show the total amount of fixed assets, but not the amount spent on newly acquired assets for the period. The statement of operations would show only the depreciation expense recorded on the plant assets, as well as any repairs expense related to them, but not the amount that was acquired over the period.

Equipment costing $55,000 with a book value of $24,500 is sold for $21,000. What is the gain or loss on sale and how is it recorded for this transaction?

This transaction results in a Loss on Sale of Equipment for $3,500, which must be debited. To record the sale of this plant asset, four accounts have to be effected: Equipment (credited for the cost of the asset), Accumulated Depreciation (debited for the amount of depreciation recorded to date), Cash (debited for the amount received), and Gain (credit) or Loss (debit) to balance the entry.

When a business receives cash from customers before earning the revenue, the ________ account is credited.

Unearned Revenue

Wall Welding Co. offers warranties on all products sold. Over the last several years, Wall's warranty claims have approximated 3% of total sales. Wall's currently has an Estimated Warranty Payable balance of $4,000, and sales for the year totaled $350,000. What is the amount of warranty expense recorded by Wall at year-end?

Warranty expense recorded by Wall at year-end is $10,500. Wall would record Warranty Expense for this year based on past experience. Previous experience suggests that warranty claims will be approximately 3% of total sales. Wall recorded sales of $350,000 for the year, meaning that warranty claims will be approximately $10,500, calculated as $350,000 x .03. The balance currently in the Estimated Warranty Payable account is there from previous years and has no effect on the calculation of Warranty Expense for this year.

Equipment costing $20,000 with $17,800 of accumulated depreciation is sold for $2,500 cash. The journal entry will involve a ________.

When an asset is sold it must be taken off the books with a credit for the cost (which is still reported in the books in the asset account); in addition, its associated contra asset account, accumulated depreciation (carries a normal credit balance) must also be taken off the books with a debit. If the asset is sold above the book value, there is a gain (credit). If the asset is sold below the book value, there is a loss (debit). The entry for the sale of equipment in this problem would be:

Why are contingent liabilities considered unique and different from all other liabilities?

Whether or not a company has an obligation depends on the result of a future event

The amortization of an intangible asset decreases

a business's assets and equity exactly like depreciation does.

Book Value of a Plant Asset = _____________ - _________________________________

cost - accumulated depreciation

Notes payable due in six months are reported as

current liabilities on the balance sheet.

Nicholas Corporation accrues the interest expense on a​ short-term note payable at the end of its fiscal year. Due to this transaction

current liabilities will increase and​ stockholders' equity will decrease.

A patent has amortization this year of $2,300. The journal entry would be to:

debit amortization expense-patent, $2,300; credit patent, $2,300.

ypress Corp. had sales on account of $19,500 which were subject to state sales tax of 12%. The entry to record the sales would be to:

debit Accounts Receivable $21,840; credit Sales Revenue $19,500; credit Sales Tax Payable $2,340

The Print Shoppe had sales on account of $7,000 which were subject to state sales tax of 6.5%. The entry to record the sales would be to: (Round your final answer to the nearest cent.)

debit Accounts Receivable $7,455.00; credit Sales Revenue $7,000; credit Sales Tax Payable $455.00

S&C Roofing had sales on account of $32,500 which were subject to state sales tax of 8%. The entry to record the sales would be to:

debit Accounts Receivable, $35,100; credit Sales revenue, $32,500; credit Sales tax payable, $2,600.

Metropolitan Masonry had sales on account of $7,700 which were subject to state sales tax of 10%. The entry to record the sales would be to:

debit Accounts Receivable, $8,470; credit Sales revenue, $7,700; credit Sales tax payable, $770.

During the month, Evergreen Roofing settled $600 in warranty claims by replacing the defective flashing. Evergreen uses an estimated warranty account. The journal entry to record the settled claims would have been:

debit Accrued Warranty Payable $600; credit Inventory $600

A truck costing $70,000 has accumulated depreciation of $51,000. The truck is scrapped for $0. The journal entry to record this transaction is to:

debit Accumulated Depreciation - Truck for $51,000, debit Loss on Disposal $19,000, and credit Truck for $70,000.

Goodwill is defined as

the excess of the cost of purchasing another company over the sum of the market values of the acquired company's net assets (assets minus liabilities).

The net book value (or carrying value) of an asset is ________.

the original cost of the asset minus its accumulated depreciation

Torres Co. has installed a piece of machinery for a total of $45,000. In its third month of operation, repairs of $900 had to be made on the machine. This $900 would be:

treated as a repairs and maintenance expense.

All of the following are reported as current liabilities EXCEPT:

unearned revenues for services to be provided in 16 months.

MyronMyron​, ​Inc., manufactures and sells computer monitors with a​ three-year warranty. Warranty costs are expected to average​ 7% of sales during the warranty period. The following table shows the sales and actual warranty payments during the first two years of​ operations: ​(Click the icon to view the sales and actual warranty payments during the first two years of​ operations.) Based on these​ facts, what amount of warranty liability should MyronMyron​, ​Inc., report on its balance sheet at December​ 31, 20192019​? Year Sales Warranty Payments 2018 $350,000 $2,800 2019 600,000 30,000

​[($350,000​+m$600,000​) x​ 7%] - $2,800 ​-$30,000 ​= $ 33700

Cesario Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 15,000 units. To the nearest dollar, the depreciation for the first year under the units of production method will be:

$34,500

Pittsburg Resources acquired a coalmine for $6,000,000. The company's survey estimates that 120,000 tons of coal can be extracted from the mine. In the first year of operations, 25,000 tons of coal was extracted, and the coal is considered sold immediately upon extraction. Pittsburg Resources would recognize ________.

($6,000,000 - $0) / 120,000 = $50 per ton $50 per ton × 25,000 tons = $1,250,000

BranderBrander Corporation purchased a forklift for $60,000 on July 1. The forklift has an estimated useful life of 35,000 usage hours with a residual value of $4,000. BranderBrander uses the​units-of-production method for depreciation. If BranderBrander uses the forklift for 6,000 hours during the first​year, the depreciation expense on the forklift would be

($60,000-$4,000) / 35,000 = $1.60 1.60x6,000 = $9,600

Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton. What is the amount of depletion to record in the current period (in tons)?

210,000

Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton.How much gross profit is shown on the Income Statement for the current period?

232,000

Under IFRS, if it is greater than ____ probability that an obligation is going to arise, and the amount can be estimated, then a "provision" should be recorded by making a journal entry.

50%

On October 29th, Raider Red acquired a printer and office chairs for $1,000. The printer has a selling price of $700 and the office chairs have a selling price of $800. Determine the historical costs for the office chairs acquired by Raider Red:

533

On August 1, Costco Lubbock collects sells 150,000 one-year family memberships to customers for $45. Costco has a December 31 year end. The journal entry required on 9/1 would include a credit to Unearned Revenue for how much?

6,750,000

Smatter Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the​ land?

Cost of new parking lot constructed on the land

Accountants Plus has a 5 day work week (Monday through Friday) and pays its employees every other Friday. Each of the 10 employees earns $1,000 per week. December 31 was the second Tuesday in the pay period. The federal income tax rate is 15%, the state income tax rate is 3%, and the FICA rate is 7.65%. The adjusting journal entry required on 12/31 would include a:

Credit to FICA Tax Payable for $1,071

Lionworks Inc. signed a $57,000 8% 30-year installment note on November 1, 2016. The note requires semiannual payments of $950 plus interest on May 1 and November 1 of each year. How will Lionworks classify this loan on its December 31, 2016 Balance Sheet?

Current Portion of Long-term debt, $1,900; Long-term debt, $55,100

Tazo Inc. signed a $12,000 10% 15-year installment note on December 1, 2016. The note requires quarterly payments of $200 plus interest on March 1, June 1, September 1, and December 1 of each year. How will Tazo classify this loan on its December 31, 2016 Balance Sheet?

Current Portion of Long-term debt, $800; Long-term debt, $11,200

TLR Productions pays $150,000 on January 1 to acquire a patent on a new production tool. It is expected that this patent's useful life will be 6 years. What will the journal entry be to record the first year's amortization?

Debit Amortization Expense $25,000, credit Patents $25,000

NorthEast Airlines received payment from a customer on December 1, 2018, for a round trip airline ticket from Baltimore to Orlando in the amount of $1,000. The flight from Baltimore to Orlando occurs on December 27, 2018, and the return flight to Baltimore is on January 10, 2019. Which of the following is included in the adjusting entry needed on December 31 to record earned revenue from this transaction?

Debit to Unearned Revenue, $500. NorthEast must record initial receipts for ticket sales as a liability, Unearned Revenue, as these revenues are not earned until the flights occur. As of December 31st, the flight from Baltimore to Orlando has occurred, so half of the revenue has been earned. An adjusting entry is needed to move half of the ticket sales from Unearned Revenue (debit) to Fees Earned (credit). These transactions would be recorded as:

Which statement about depreciation is​ false?

Depreciation should not be recorded in years in which the market value of the asset has increased.

Harper Company acquired a $150,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $25,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Harper Company uses units-of-production depreciation, and the company produces 50,000 units in 2019, what is depreciation expense for 2019?

If Harper Company uses units-of-production depreciation method, and the company produces 50,000 units in 2019, the depreciation expense for 2019 will be $12,500. The calculation for the units-of-production method of depreciation is very similar to straight-line depreciation: (Cost - Residual Value) / Total units of production = Depreciation expense per unit Depreciation expense per unit × Number of units produced in current year = Depreciation Expense ($150,000 - $25,000) / 500,000 units = $0.25 per unit $.25 x 50,000 units produced in the current year = $12,500

A bookkeeper recorded a capital expenditure as an asset. As a result ________.

If a bookkeeper recorded a capital expenditure as an asset, the books are correct as capital expenditures should be recorded as assets, not expenses. Capital expenditures typically extend the useful life of a fixed asset, and therefore, should be capitalized and expensed over the remaining useful life of the asset. This is called capitalization. As these capital expenditures are expected to benefit future periods, they must be recorded as part of the cost and depreciated over the periods that will be benefited from the costs.

If equipment is purchased for $200,000, freight costs are $3,800, sales tax amounts to $2,000, and maintenance during the first year of use is $7,000, what is the cost of the equipment?

If equipment is purchased for $200,000, freight costs are $3,800, sales tax amounts to $2,000, and maintenance during the first year of use is $7,000, the cost of the equipment is $205,800. The "purchase price" or "cost" of a plant asset includes anything that gets the asset ready for its intended use. In this case, without the payment of the freight and sales tax, we would not have the asset and it would not be ready for its intended use. The maintenance cost for the year would be a period cost and expensed as incurred, not included as part of the cost of the asset.

A major difference between Accounts Payable and Notes Payable is that:

Notes payable charges interest

Safe Scooters, Inc. sold scooters which they knew had faulty brakes. Consumers found out, and Safe Scooters is now facing a lawsuit over the unsafe scooters; however, no dollar amounts have been assigned to the case. This lawsuit would be considered a(n):

contingent liability.

A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $700. The journal entry to record this transaction is to:

debit Cash for $700, debit Accumulated Depreciation - Truck for $50,000, debit Loss on Disposal for $5,300 and credit Truck for $56,000.

During the month, Southeast Plumbing paid $600 to settle warranty claims. Southeast uses an estimated warranty account. The journal entry to record the payment would have been:

debit Estimated warranty payable, $600; credit Cash, $600.

TNT Construction had cash sales for the month of June totaling $44,000. TNT offers a 1-year warranty on its construction services. If TNT estimates warranty claims will equal 5% of sales, the journal entry to record the estimated warranty expense for the month is

debit Warranty expense, $2,200; credit Estimated warranty payable, $2,200

Southeast Plumbing had cash sales for the month totaling $732,000. Southeast offers a 6-month warranty on its services. If Southeast estimates warranty claims will equal 3% of sales, the journal entry to record the estimated warranty expense for the month is:

debit Warranty expense, $21,960; credit Estimated warranty payable, $21,960.

ShelterShelter Company sold inventory with a selling price of $ 5 comma 300$5,300 to customers for cash. It also colected sales taxes of $ 265$265. The journal entry to record this information includes a

debit to Cash of $5,565. 5,300+265

Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton. The journal entry to record the current period depletion would include a

debt to iron efficiency

Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton. The journal entry to record the current period depletion would include a

debt to iron inventory

Minerals, timber and coal are:

depleted

The process of expensing the cost of a natural resource over its useful life is called ________.

depletion

Equipment, buildings, and vehicles are:

depreciated.

The depreciation method that does not initially use the residual value in depreciation calculations is the

double-declining balance method.

What are capital expenditures and what does it mean when a capital expenditure is capitalized?

expenditures that increase an asset's capacity or extend its useful life - cost is added to an asset account and not expensed immediately

The disclosure of a contingent liability in the footnotes and on the Balance Sheet indicates that the potential for the obligation occurring is

probable