ACCOUNTING 7 & 8

You just purchased a new cell phone, which comes with a manufacturer's warranty of one year. The company that manufactures the cell phone would record the warranty as a(n): A. estimated liability. B. known liability. C. accrued liability. D. contingent liability.

A

What kind of account is Unearned​ Revenue? A. Asset account B. Liability account C. Expense account D. Revenue account

B

When a company receives cash from customers before earning the​ revenue, _________ will be credited. A. accounts payable B. unearned revenue C. estimated cash D. accounts receivable

B

Which of the following would be considered an estimated liability? A. Pending litigation B. Warranties payable C. Notes payable D. Sales tax payable

B

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. A. Statement of retained earnings B. Balance sheet C. Statement of​ stockholders' equity D. Income statement

B

On the first day of its fiscal​ year, Western Company purchased a new computer system for a total cost of $ 85,000. The computer system is expected to have a life of 5 years with a residual value of $ 6,500. If the company uses the​ double-declining-balance method, its depreciation expense for this computer system in the first year will be? A. $17,000. B. $34,000. C. $15,700. D. $31,400.

B (1/5)x2=0.40 (85,000x0.40)=34,000

A capital expenditure? A. is a credit like capital​ (equity). B. records additional capital. C. adds to an asset. D. is expensed immediately.

C

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? A. Assets would be understated. B. Retained Earnings would be understated. C. Expenses would be understated. D. Net income would be understated.

C

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: A. debit Cash for $700, debit Truck for $50,000, debit Loss on Disposal for $5,300 and credit Accumulated Depreciation - Truck for $56,000. B. debit Accumulated Depreciation - Truck for $50,000, debit Loss on Disposal $6,000, and credit Truck for $56,000. C. debit Cash for $700, debit Accumulated Depreciation - Truck for $50,000, debit Loss on Disposal for $5,300 and credit Truck for $56,000. D. debit Cash for $700, debit Loss on Disposal for $55,300 and credit Truck for $56,000.

C

Assets that CANNOT be seen, touched, or held are called: A. natural resources. B. plant assets. C. intangible assets. D. tangible assets.

C

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: A. debit to Investments for $1,300,000, credit to Cash $960,000 and credit to Gain on Investment $340,000. B. debit to Investments for $960,000, credit to Cash $960,000. C. debit to Asset accounts for $1,300,000, debit to Goodwill $20,000, credit to Liabilities $360,000 and credit to Cash $960,000. D. debit to Asset accounts for $1,300,000, credit to Gain on Investments $340,000 and credit to Cash $960,000.

C

By NOT accruing warranty expense: A. reported liabilities will be overstated and net income will be understated. B. reported expenses will be understated and net income will be understated. C. reported liabilities will be understated and net income will be overstated. D. reported expenses will be overstated and reported liabilities will be understated.

C

Capitalizing a cost involves increasing what type of​ account? A. Stockholders' equity B. Expense C. Asset D. Liability

C

Copyrights to protect various forms of media are conveyed by the federal government for a period of: A. 50 years beyond the author's life. B. 20 years. C. 70 years beyond the author's life. D. a useful life that is agreed upon by the company.

C

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

Unearned Revenue

All of the following are reported as current liabilities EXCEPT:

Unearned Revenues for services to be provided in 16 months.

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?

$10,500 ($350,000x.03)= $10,500

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

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)?

$167 ($10,000 x .05 x (4/12 months)) = $167.

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 ($100,000 x .06 x (4/12) months) = $2,000

Wacky Welding Co. offers warranties on all products sold. Over the last several years, Wacky's warranty claims have approximated 2% of total sales. Wacky's currently has an Estimated Warranty Payable balance of $5,000, and sales for the year totaled $300,000. What is the amount of warranty expense recorded by Wacky at year-end?

$6,000 ($300,000x.02)=$6,000

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?

2.5 Purchases from suppliers = cost of goods sold + ending inventory - beginning inventory ($400,000 + $110,000 - $130,000) / $150,000 = 2.5

A typical credit period for payment is:

30 days

On December 31st, Alex, Inc. has cost of goods sold of $500,000, ending inventory of $110,000, beginning inventory of $130,000, and average accounts payable of $100,000. What is the accounts payable turnover?

4.8 ($500,000+$110,000-$130,000)/$100,000= 4.8

If the accounts payable turnover is 8.2, what is the days' payable outstanding (round to the nearest day):

45 days (365/8.2= 45)

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%

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

54 days (365 / 6.7) = 54 days

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? A. Assets would be understated. B. Repairs expense would be understated. C. Net income would be overstated. D. Assets would be overstated.

A

An obligation dependent upon an event that has not yet occurred is an example of a(n): A. contingent liability. B. estimated liability. C. known liability. D. accrued liability.

A

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: A. $34,500. B. $37,500. C. $28,750. D. $31,250.

A

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: A. incorrect, and as a result net income will be understated. B. correct, as this is an example of a betterment. C. incorrect, and as a result assets will be overstated. D. correct, as this is an example of an ordinary repair.

A

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: A. debit Accrued Warranty Payable $600; credit Inventory $600. B. debit Accrued Warranty Payable $600; credit Cash $600. C. debit Warranty Expense $600; credit Cash $600. D. debit Warranty Expense $600; credit Accrued Warranty Payable $600.

A

If the likelihood of an obligation is remote: A. no action is necessary in the accounting treatment. B. the obligation with the estimated dollars is recorded and put into the footnotes. C. the obligation with the estimated dollars is recorded on the Balance Sheet. D. the disclosure with explanation is put into the financial statement footnotes.

A

Jackson Bank lends Jabbour Clothing Company ​$125,000 on September 1. Jabbour signs a ​$125,000​, ​6%, six-month note. The journal entry made by Jabbour on December​ 31, its fiscal​ year-end, is? A. debit Interest Expense and credit Interest Payable for ​$2,500. B. debit Interest Payable and credit Cash for ​$2,500 C. debit Interest Expense and credit Cash for ​$2,500 D. debit Interest Payable and credit Interest Expense for ​$2,500

A

Nicholas Corporation accrues the interest expense on a​ short-term note payable at the end of its fiscal year. Due to this transaction? A. current liabilities will increase and​ stockholders' equity will decrease. B. current liabilities will increase and​ stockholders' equity will increase. C. current liabilities will increase and current assets will increase. D. current liabilities will decrease and​ stockholders' equity will decrease.

A

Patents, copyrights, and trademarks are: A. amortized. B. depleted. C. depreciated. D. expensed.

A

Phoebe Corporation signed a​ six-month note payable on October​ 23, 2018. What accounts relating to the note payable will be reported on its financial statements for the fiscal year ending December​ 31, 2018? A. Notes payable and interest payable will be reported on the balance sheet. B. Interest receivable will be reported on the balance sheet and notes payable will be reported on the income statement. C. Notes payable will be reported on the balance sheet and interest payable will be reported on the income statement. D. Notes​ payable, interest​ payable, and interest expense will be reported on the balance sheet.

A

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? A. Operating income will be overstated. B. Liabilities will be overstated. C. Assets will be understated. D. Stockholders' equity will be understated.

A

The disclosure of a contingent liability in the footnotes and on the Balance Sheet indicates that the potential for the obligation occurring is: A. probable. B. certain. C. possible. D. remote.

A

When a company expenses the cost of maintenance for its heating and cooling​ system, that cost will appear on its? A. Income statement. B. Statement of retained earnings. C. Statement of​ stockholders' equity. D. Balance sheet.

A

When a company settles a warranty claim by replacing the defective goods, the journal entry will include a debit to _______ and a credit to _______. A. Estimated Warranty Payable, Inventory B. Warranty Expense, Cash C. Warranty Expense, Inventory D. Estimated Warranty Payable, Cash

A

Which of the following costs are reported on a​ company's income statement and balance​ sheet? Income Statement Balance Sheet A. Cost of goods sold Accumulated depreciation B. Goodwill Accounts payable C. Gain on sale of land Cost of goods sold D. Accumulated depreciation Land

A

Which of the following is an intangible​ asset? . A. Copyright B. Land C. Leasehold improvements D. Equipment

A

Which of the following items should be accounted for as a capital​ expenditure? A. Taxes paid in conjunction with the purchase of office equipment B. The monthly rental cost of an office building C. Costs incurred to repair leaks in a​ building's roof D. Maintenance fees paid with funds provided by the​ company's capital

A

Which of the following would be considered a contingent liability? A. Pending litigation B. Salaries payable C. Warranties payable D. Federal income tax payable

A

Which of the following would be debited as part of what you got in a transaction involving an exchange of assets? A. Equipment (new) B. Accumulated Depreciation C. Old machine D. Gain on exchange

A

Why are contingent liabilities considered unique and different from all other liabilities? A. Whether or not a company has an obligation depends on the result of a future event. B. Whether or not a company has an obligation depends on the result of a past event. C. The company knows the amount of the obligation. D. Both B and C are unique to contingent liabilities.

A

Greenland Company purchased a delivery van for $45, 000 on January 1. The van has an estimated 4​-year life with a residual value of $ 3,500. What would the depreciation expense for this van be in the first year if Greenland uses the​ straight-line method? A. $10,375 B. $45,000 C. $11,250 D. $41,500

A (45,000-3,500)/4=10,375

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? A. $6,500 B. $639 C. $7,667 D. $542

A (46,000-7,000)/6= 6,500

Sanders Company sold inventory with a selling price of $ 5,400 to customers for cash. It also collected sales taxes of $ 270. The journal entry to record this information includes a? A. debit to Cash of $ 5,670. B. credit to Sales Revenue $ 5,670. C. debit Sales Tax Payable $ 270. D. credit to Sales Tax Expense $ 270.

A (5,400+270)=5,670

McKnight Company purchased a machine for $ 10,300 on January​ 1, 2016. The machine has been depreciated using the​ straight-line method assuming it has a five​-year life with a $ 400 residual value. McKnight sold the machine on January​ 1, 2018​, for $ 7,800. The book value as of December​ 31, 2017 is $ 6,340. What gain or loss should McKnight record on the​ sale? A. Gain, $ 1,460. ​B. Gain, $ 2,100 C. Loss, $ 520 D. Loss, $ 1,460

A (7,800-6,340)=1,460

Long-term liabilities are usually associated with ____________.

A purchase of a building.

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 account is NOT an example of an accrued liability?

Accounts Payable

The most frequently used current liabilities are:

Accounts Payable, Notes Payable, and Accrued Liabilities

A major difference between Accounts Payable and Notes Payable is that: A. only Accounts Payable are classified as current assets. B. only Notes Payable charge interest. C. Notes Payable are only used for receiving cash. D. Notes Payable are only long-term assets.

B

A method best suited for depreciating items, such as copy machines and vehicles, would be the: A. expense method. B. units-of-production method. C. double-declining balance method. D. straight-line method.

B

A patent has amortization this year of $2,300. The journal entry would be to: A. debit amortization expense-patent, $2,300; credit Accumulated Depreciation-patent, $2,300. B. debit amortization expense-patent, $2,300; credit patent, $2,300. C. debit accumulated amortization-patent, $2,300; credit patent, $2,300. D. debit accumulated amortization-patent, $2,300; credit amortization expense-patent, $2,300.

B

According to GAAP, goodwill is: A. recorded as a gain only when the goodwill is gaining value. B. recorded as a loss only when the goodwill is losing value. C. amortized every year. D. amortized like other intangible assets.

B

Acton​, ​Inc., uses the​ double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first​ year? A. Expected useful life in years B. Estimated residual value C. Original cost D. All the items listed are needed.

B

After 4 years, a machine had an accumulated depreciation of $40,000. Originally, the machine had an anticipated life of 8 years and a salvage value of $6,000. If the current book value after 4 years is $45,000 and the machine has only 2 years of useable life left, how much will be depreciated in Year 5 and in Year 6 using the straight-line method of depreciation, and assuming the salvage value is still $6,000? A. $22,500 each year B. $19,500 each year C. $9,875 each year D. $10,625 each year

B

After an asset is fully depreciated, the asset: A. must be removed from the Balance Sheet. B. remains on the Balance Sheet at (cost - Accumulated Depreciation). C. remains on the Balance Sheet at cost. D. remains on the Balance Sheet at a value of $0.

B

All of the following are reported as current liabilities​ except: A. salaries payable B. bonds payable due in 18 months C. sales tax payable D. interest payable

B

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? A. Warranty Expense and credit Cash. B. Accrued Warranty Payable and credit Cash. C. Operating Expense and credit Cash. D. Repair Expense and credit Cash.

B

Equipment costing $73,000 has accumulated depreciation of $54,000. The equipment is a trade-in for new equipment costing $90,191. If the trade-in value received for the old equipment is $15,000, the journal entry to record this transaction is to: A. debit Equipment (New) for $90,191, debit Accumulated Depreciation - Equipment for $54,000, debit Loss on Exchange of Assets for $19,000, credit Equipment (Old) for $73,000, credit Cash for $90,191. B. debit Equipment (New) for $90,191, debit Accumulated Depreciation - Equipment for $54,000, debit Loss on Exchange of Assets for $4,000, credit Equipment (Old) for $73,000 and credit Cash for $75,191. C. debit Equipment (new) $90,191, credit Cash $90,191. D. debit Equipment (New) for $90,191, debit Accumulated Depreciation - Equipment for $54,000, credit Equipment (Old) for $73,000 and credit Cash for $90,191.

B

Failure to accrue interest expense results in? A. an understatement of net income and an understatement of liabilities. B. an overstatement of net income and an understatement of liabilities. C. an overstatement of net income and an overstatement of liabilities. D. an understatement of net income and an overstatement of liabilities.

B

Gravel Corporation borrowed ​$250,000 from a bank on January​ 1, 2019​, by signing a​ 10%, six-month note. The journal entry made by Gravel on January​ 1, 2019​, will debit? A. Interest Expense for ​$25,000 and credit Cash for ​$25,000. B. Cash for ​$250,000 and credit Notes Payable for ​$250,000. C. Interest Expense for ​$25,000 and credit Interest Payable for ​$25,000. D. Cash for ​$225,000 and credit Notes Payable for ​$225,000.

B

It is determined that a computer's depreciation expense for the year is $3,500. The journal entry to record this will be: A. debit Accumulated Depreciation - computer $3,500; credit Cash $3,500. B. debit Depreciation Expense - computer $3,500; credit Accumulated Depreciation, $3,500. C. debit Cash $3,500; credit Depreciation Expense - computer $3,500. D. debit Depreciation Expense - computer $3,500; credit Cash $3,500.

B

Minerals, timber and coal are: A. amortized. B. depleted. C. depreciated. D. expensed.

B

Notes payable due in six months are reported as? ​A. contra-assets on the income statement. B. current liabilities on the balance sheet. ​C. long-term liabilities on the balance sheet. D. current liabilities on the income statement.

B

Patents to produce and sell inventions are conveyed by the federal government for a period of: A. 70 years. B. 20 years. C. 50 years. D. time that is agreed upon by the company.

B

Research and development costs (R&D) are generally: A. listed as "other intangibles" on the Balance Sheet. B. expensed and become part of the Income Statement. C. listed as "long-term assets" on the Balance Sheet. D. listed as "current assets" on the Balance Sheet.

B

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): A. estimated liability. B. contingent liability. C. deferred expense. D. known liability.

B

Garcia Excavating purchased a used dump truck for $ 115,000 on January​ 1, 2018. The company has depreciated the dump truck using the​ straight-line method over its estimated 10​-year life with a $ 7,000 residual value. Garcia sold the dump truck on January​ 1, 2021​, for $ 93,000. Total accumulated depreciation on the dump truck on the date of sale was $ 32,400. What gain or loss should be recorded on the​ sale? A. a gain of $ 22,000 B. a gain of $ 10,400 C. a loss of $ 22,000 D. a loss of $ 10,400

B (115,000-32,400)=82,600 (93,000-82,600)=10,400

Peters Company purchased a machine for $ 6,400 on January​ 1, 2016. The machine has been depreciated using the​ straight-line method assuming it has a twelve​-year life with a $ 400 residual value. Peters sold the machine on January​ 1, 2018​, for $ 8,400. What is the book value of the machine on December​ 31, 2017​? A. $6,400 B. $5,400 C. $545 D. $6,000

B (6,400-400)/12=500 6,400-(500+500)=5,400

A company purchased mineral assets holding approximately 200,000 tons of ore for $ 800,000. The estimated residual value of the assets is zero. During the first​ year, 41,000 tons are extracted and sold. What is the amount of depletion for the first​ year? ​ A. $ 10,250 B. $ 164,000 ​C. $ 200,000 D. Cannot be determined from the data given

B (800,000/200,000)=4 (41,000x4)=164,000

Suppose Quick Travel pays $ 68 million to buy Lone Star Overnight. The fair value of Lone Star​'s assets is $ 78 ​million, and the fair value of its liabilities is $ 26 million. How much goodwill did Quick Travel purchase in its acquisition of Lone Star ​Overnight? A. $ 26 million B. $ 16 million C. $ 42 million D. $ 36 million

B 68-(78-26)=16

Cypress 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: A. debit Accounts Receivable $19,500; credit Sales Revenue $19,500. B. debit Accounts Receivable $19,500; debit Sales Tax Payable $2,340; credit Sales Revenue $21,840. C. debit Accounts Receivable $21,840; credit Sales Revenue $19,500; credit Sales Tax Payable $2,340. D. debit Accounts Receivable $21,840; credit Sales Revenue $21,840.

C

Equipment costing $120,000 has accumulated depreciation of $97,000. The equipment is a trade-in for new equipment costing $190,000. If the trade-in value received for the old equipment is $36,000, the journal entry to record this transaction is to: A. debit Equipment (New) for $190,000, debit Accumulated Depreciation - Equipment for $97,000, debit Loss on Exchange of Assets for $23,000, credit Equipment (Old) for $120,000, credit Cash for $190,000. B. debit Equipment (New) for $190,000, debit Accumulated Depreciation - Equipment for $97,000, credit Equipment (Old) for $120,000 and credit Cash for $167,000. C. debit Equipment (New) for $190,000, debit Accumulated Depreciation - Equipment for $97,000, credit Gain on Exchange of Assets for $13,000, credit Equipment (Old) for $120,000 and credit Cash for $154,000. D. debit Equipment (New) for $190,000, and credit Cash for $190,000.

C

Equipment costing $123,000 has accumulated depreciation of $95,000. The equipment is a trade-in for new equipment costing $188,000. If the trade-in value received for the old equipment is $34,000, the journal entry to record this transaction is to: A. debit Equipment (New) for $188,000, debit Accumulated Depreciation - Equipment for $95,000, debit Loss on Exchange of Assets for $28,000, credit Equipment (Old) for $123,000 and credit Cash for $188,000. B. debit Equipment (New) for $188,000, and credit Cash for $188,000. C. debit Equipment (New) for $188,000, debit Accumulated Depreciation - Equipment for $95,000, credit Equipment (Old) for $123,000 and credit Cash for $160,000. D. debit Equipment (New) for $188,000, debit Accumulated Depreciation - Equipment for $95,000, credit Equipment (Old) for $123,000, credit Cash for $154,000, and credit Gain on Exchange of Assets for $6,000.

C

Equipment, buildings, and vehicles are: A. amortized. B. depleted. C. depreciated. D. expensed.

C

Potential liabilities that depend on future events arising out of past events are called? A. ​long-term liabilities. B. current liabilities. C. contingent liabilities. D. estimated liabilities.

C

Sassycat Designs inadvertently recorded an expense as a capital expenditure. Which of the following will occur as a result of this mistake? A. Assets will be understated. B. Net income will be understated. C. Net income will be overstated. D. Both A and C will occur.

C

Smatter Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the​ land? A. Cost of demolishing an old garage located on the land B. Brokerage commission paid to the real estate agent who handled the land transaction C. Cost of new parking lot constructed on the land D. Purchase price of the land

C

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: A. debit Estimated warranty payable, $21,960; credit Warranty expense, $21,960. B. debit Warranty expense, $21,960; credit Sales revenue, $21,960. C. debit Warranty expense, $21,960; credit Estimated warranty payable, $21,960. D. debit Warranty expense, $21,960; credit Cash, $21,960.

C

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: A. $122,000 B. $100,000 C. $140,000 D. $302,000

C

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? A. Debit Patents $150,000, credit Amortization $150,000 B. Debit Amortization Expense $150,000, credit Cash $150,000 C. Debit Amortization Expense $25,000, credit Patents $25,000 D. Debit Amortization Expense $25,000, credit Accumulated Amortization $25,000

C

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? A. net income will be understated and liabilities will be overstated. B. net income will be understated and liabilities will be understated. C. net income will be overstated and liabilities will be understated. D. net income will be overstated and liabilities will be overstated.

C

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.) A. debit Accounts Receivable $7,000; debit Sales Tax Payable $455.00; credit Sales Revenue $7,455.00. B. debit Accounts Receivable $7,000; credit Sales Revenue $7,000. C. debit Accounts Receivable $7,455.00; credit Sales Revenue $7,000; credit Sales Tax Payable $455.00. D. debit Accounts Receivable $7,455.00; credit Sales Revenue $7,455.00.

C

The depreciation method often used for income tax purposes is the: A. expense method. B. units-of-production method. C. double-declining balance method. D. straight-line method.

C

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is: A. remote. B. certain. C. possible. D. probable.

C

The need to create an estimated warranty liability arises from the ________ principle. A. objectivity B. entity C. matching D. conservatism

C

Which current liability is generally listed first? A. Notes payable B. Current portions of long-term debt C. Accounts Payable D. Accrued payables

C

Which intangible asset is recorded only when an acquiring company purchases another company? A. Franchise B. Trademark C. Goodwill D. Brand name

C

Which of the following statements is​ false? A. A contingent liability should be accrued if the loss is probable and the amount of the loss can be reasonably estimated. B. A contingent liability is a potential obligation that depends on the future outcome of past events. C. All contingent liabilities should be reported as liabilities on the financial​ statements, even those that are unlikely to occur. D. A contingent liability should be disclosed in the notes to the financial statements if there is a reasonable possibility that a loss​ (or expense) will occur.

C

Which of the following would NOT be considered an intangible asset? A. Copyright B. Goodwill C. Land D. Franchise

C

Leo's Lawn Care purchased equipment on January 1. The cost was $15,000, and the equipment had a residual value of $5,000. The equipment was given a useful life of 10 years. After the end of two years, it was determined that the equipment would be obsolete in 5 more years and the residual value would still be $5,000. What will be the depreciation under the straight-line method to the nearest dollar be for the third year? A. $1,000 B. $8,000 C. $1,600 D. $1,500

C (15,000-5,000)/10= 1,000 (15,000-5,000)=10,000/10+5 more years=666 (1,000+666)= 1,666 or 1,600

Copper Company purchased a building and land for $ 580,000 in total.​ Individually, the land appraised for $ 270,000 and the building appraised for $ 330,000. How much of the purchase price should be allocated to the cost of the​ land? A. $270,000 B. $148,500 C. $261,000 D. $580,000

C (270,000+330,000=600,000) (270,000/600,000= 45%) (45%x580,000=261,000)

Lindle Corporation borrows cash by signing a $ 30,000​, 6​%, ten​-month note on December 1 with its local bank. The total cash paid for interest​ (only) at the maturity of the note by Lindle will be? A. $ 1,800. B. $ 900. C. $ 1,500. D. $ 150.

C (30,000x6%x10/12)=1,500

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: A. $6,750. B. $11,000. C. $9,000. D. $7,500.

C (55,000-10,000)/5= 9,000

Bundle Corporation purchased a forklift for $ 65,000 on July 1. The forklift has an estimated useful life of 20,000 usage hours with a residual value of $ 5,000. Bundle uses the​ units-of-production method for depreciation. If Bundle uses the forklift for 5,500 hours during the first​ year, the depreciation expense on the forklift would be? A. $5,000 B. $65,000 C. $16,500 D. $17,875

C (65,000-5,0000)/20,000=3.00 (3.00x5,500)=16,500

How do you compute the purchases from suppliers?

Cost of goods sold + ending inventory - beginning inventory

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: A. debit Truck for $51,000, debit Loss on Disposal for $19,000 and credit Accumulated Depreciation - Truck for $70,000. B. debit Truck for $70,000, credit Accumulated Depreciation - Truck for $51,000 and credit Gain on Disposal for $19,000. C. debit Accumulated Depreciation - Truck for $51,000, and credit Truck for $51,000. D. debit Accumulated Depreciation - Truck for $51,000, debit Loss on Disposal $19,000, and credit Truck for $70,000.

D

Acme paid $120,000 for a machine with a $10,000 salvage value and an estimated life of 200,000 hours. Acme reports on a calendar year basis and used the machine for 1800 hours during the first year it owned the asset. Which of the following statements accurately compare the first year depreciation expense if the asset had been purchased on January 1 of the current year versus a March 1 acquisition date. A. Depreciation Expense if acquired January 1 is $990 and if acquired March 1 is $743. B. Depreciation Expense if acquired January 1 is $990 and if acquired March 1 is $825. C. Depreciation Expense if acquired January 1 is $1080 and if acquired March 1 is $900. D. In both cases, the Depreciation Expense is $990.

D

An​ end-of-period adjusting entry that debits Unearned Revenue most likely will credit? A. an asset B. a liability C. an expense D. a revenue

D

Contingent liabilities may be classified as: A. long-term liabilities only. B. notes in the financial statements only. C. current liabilities only. D. either current or long-term liabilities.

D

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? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.) A.$13,000 B. $26,000 C. $32,000 D. $19,200

D

Kline Company failed to record depreciation of equipment. How does this omission affect Kline​'s financial​ statements? A. Net income is understated and assets are understated. B. Net income is overstated and assets are understated. C. Net income is understated and assets are overstated. D. Net income is overstated and assets are overstated.

D

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: A. debit Warranty expense, $2,200; credit Cash, $2,200. B. debit Estimated warranty payable, $2,200; credit Warranty expense, $2,200. C. debit Warranty expense, $2,200; credit Sales revenue, $2,200. D. debit Warranty expense, $2,200; credit Estimated warranty payable, $2,200.

D

The depreciation method that does not initially use the residual value in depreciation calculations is the? ​A. straight-line method. B. direct method. C. units-of-production method. D. double-declining balance method.

D

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: A. capitalized in an asset account. B. added to the cost of the machinery. C. deducted from cost of the machinery. D. treated as a repairs and maintenance expense.

D

Which accounting principle dictates whether the cost of a repair should be expensed? A. Entity B. Objectivity C. Conservatism D. Matching

D

Which of the following accurately describes how contingent liabilities are reported on the Balance Sheet? A. Contingent liabilities are not reported. B. Contingent liabilities are reported in the liabilities section. C. Contingent liabilities are disclosed in the footnotes only. D. The accounting treatment for contingent liability could be A, B, or C depending on the likelihood of an actual obligation occurring.

D

Which of the following is not a​ liability? A. Accrued warranties payable B. Accrued vacation pay C. Income taxes payable D. Allowance for bad debts

D

Which of the following would NOT be a liability? A. An obligation to provide goods or services in the future B. An obligation that is estimated in amount C. A note payable with no specified maturity date D. The signing of a three-year employment contract at a fixed annual salary

D

Which of the following would NOT be considered part of the cost of the land? A. Survey and legal fees B. Realtor commissions C. Unpaid property taxes on the land D. Paving

D

Which statement about depreciation is​ false? A. Depreciation is a process of allocating the cost of an asset to expense over its useful life. B. Obsolescence as well as physical wear and tear should be considered when determining the period over which an asset should be depreciated. C. A major objective of depreciation accounting is to allocate the cost of using an asset against the revenues it helps to generate. D. Depreciation should not be recorded in years in which the market value of the asset has increased.

D

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? A. $14,400 B. $1,800 C. $12,600 D. $10,800

D (30,000/100,000)=.3 (42,000-6,000)=36,000 (.3x36,000)=10,800

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? (Round your final answer to the nearest cent.) A. $88.15 B. $495.00 C. $99.21 D. $89.38

D (4,500x.11x65/360)=89.38

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? A. $16,333 B. $6,278 C. $6,805 D. $15,067

D (490,000-38,000)/30= 15,067

Bosley Fuel purchased an oil well for $ 700,000. The well is estimated to contain 125,000 ​barrels, have an ten​-year ​life, and have no residual value. If the company extracts and sells 2,400 barrels of oil in the first​ year, how much in cost of sales should be​ recorded? A. $ 392,000 B. $ 140,000 C. $ 70,000 D. $ 13,440

D (700,000/125,000)=5.60 (5.60x2,400)=13,440

Camping Co. was organized to sell a single product that carries a​ 45-day warranty against defects. Engineering estimates indicate that 3​% of the units sold will prove defective and require an average repair cost of $ 25 per unit. During Camping​'s first month of​ operations, total sales were 700 ​units; by the end of the​ month, nine defective units had been repaired. The liability for product warranties at​ month-end should be? A. $ 525 B. $ 750. C. $ 225. D. $ 300.

D ​Year-end liability: ($ 525 ​- $ 225) ​= $ 300

Tangers Jewelers recorded cash sales of $100,000 on May 8. Tangers also collected an additional 7% in sales tax payable to the state of Kansas. Which of the following would be included in the journal entry to record this sales transaction?

Debit to Cash $107,000

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.

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

A contingent liability should be recorded in the accounts? A. if the amount can be reasonably estimated. B. if the amount is due in cash within one year. C. if the related future event will probably occur. D. both b and c. E. both a and c.

E

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

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 credit to Interest Payable

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

Purchases from suppliers

The journal entry to accrue salaries earned by employees will debit:

Salary Expense for gross pay, credit FICA Tax Payable, credit Employee Income Tax Payable and credit Salary Payable for net pay.