Accounting Exam 3

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$2,800

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold?

$22,200

At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. Cost of goods sold for the year is $11,500. What amount will Bennett report for inventory?

$4,000

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What is the amount of net revenues (total revenue minus sales discounts) as of August 12?

$4,850.

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4?

$5,000.

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.)

$50000

The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?

$60,000

On January 1, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in eight months. Calculate the amount of interest revenue Nees will record on September 1, the date that the note is due.

$600

A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation?

$8000

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:

$96,000

The allowance method for uncollectible accounts

- Reports net accounts receivable for the amount of cash expected to be collected. - Allows for the possibility that some accounts will not be collected. - Is required by Generally Accepted Accounting Principles.

At the beginning of the year, Dawnetta Fashions has total accounts receivable of $300,000. By the end of the year, Dawnetta reports total credit sales of $1,500,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Dawnetta Fashions?

6.0

At the beginning of the year, Clay Ventures has total accounts receivable of $100,000. By the end of the year, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the average collection period for Clay Ventures?

60.8

At the end of its first year of operations, a company estimates future uncollectible accounts to be $4,500. The company's year-end adjusting entry would include

A credit to Allowance for Uncollectible Accounts for $4,500.

Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record:

A loss of $10,000

When a company provides services on account, which of the following accounts is debited?

Accounts Receivable.

If equipment is retired, which of the following accounts would be debited?

Accumulated depreciation

To capitalize an expenditure means to record the expenditure as a(n):

Asset

The book value of an asset is equal to the

Asset's cost less accumulated depreciation.

A long-term asset is recorded at the:

Cost of the asset plus all costs necessary to the asset ready for use.

Using a perpetual inventory system, the purchase of inventory on account would be recorded as

Debit Inventory; credit Accounts Payable.

Which of the following correctly describes the nature of depreciation?

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life?

Double-declining-balance method.

Which inventory cost flow assumption generally results in the lowest reported amount for cost of goods sold when inventory costs are rising?

First-in, first-out (FIFO).

Operating income is defined as:

Gross Profit minus Operating Expenses.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

Inventory

Which inventory cost flow assumption generally results in the lowest reported amount for inventory when inventory costs are rising?

Last-in, first-out (LIFO).

Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to I. Decrease total assets. II. Decrease net income.

Neither I nor II

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account:

Net accounts receivable do not change.

Return on assets is equal to:

Net income/average total assets.

Which of the following levels of profitability in a multiple-step income statement best represents profitability from primary activities of the company?

Operating income.

Return on assets is equal to:

Profit margin x asset turnover.

Which of the following transactions would result in an account receivable?

Providing services to customers on account.

Which of the following is not reported as an intangible asset in the balance sheet?

Research and development.

Which of the following refers to the seller reducing the customer's balance owed because of some deficiency in the company's product or service?

Sales Allowance.

Gross profit is defined as:

Sales Revenue minus Cost of Goods Sold.

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities.

Research and development costs

Should be expensed.

Over the entire service life of an asset, which depreciation method records the highest total depreciation?

The activity-based method, the straight-line method, the double-declining-balance method (all)

A company's gross profit ratio measures:

The amount by which the sale of inventory exceeds its cost per dollar of sales.

The balance in the Accumulated Depreciation account represents

The amount charged to depreciation expense since the acquisition of the plant asset.

Which of the following statements is true regarding the amortization of intangible assets?

The expected residual value of most intangible assets is zero.

The receivables turnover ratio is a measure of:

The number of times during a year that the average accounts receivable balance is collected.

A company's inventory turnover ratio measures:

The number of times the company sells its average inventory balance during the year.

The amount of the gain on the sale of equipment equals:

The selling price minus the book value of the equipment.

If a company uses the allowance method of accounting for uncollectible accounts and collects cash on an account receivable previously written off:

There is no change in total assets.