Accounting Test 4

Conroy Company uses the allowance method to account for bad debts. During the year, Conroy determined that a balance of $200 from Alegia Co. was uncollectible and wrote the balance off. What is the total decrease to net income related to this entry?

$0

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

describe a control account.

A control account appears in the general ledger and is supported by a subsidiary ledger.

Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the Blank______ account:

Accounts Receivable

On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay. The journal entry that Zest would make to record the failure to pay this note on the due date would include a debit to:

Accounts Receivable - AZC for $5,100

Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period. This entry will be recorded with a credit to:

Accumulated Depletion - Mineral Deposit

A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to:

Allowance for Doubtful Accounts

Receivable

Amount due from another party

Principal

Amount that the signer agrees to pay back, not including interest

Accounts receivable

Amounts due from customers for credit sales

Notes receivable

An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates

On August 1, Hanes Co. determines that it cannot collect $150 from a customer. Hanes uses the direct write-off method. Hanes will record the write-off of this account by debiting:

Bad Debts Expense for $150.

Accumulated depreciation is recorded on which of the following financial statements?

Balance sheet

Which of the following items are plant assets?

Building used for operations Equipment used in operations

On January 1, JC Co. accepted a 60-day, 6%, note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full. The journal entry that JC would make to record the receipt of payment of this note would include a debit to:

Cash in the amount of $10,100

Interest

Charge from using money loaned from one entity to another

Maturity date

Day that the principal and interest must be paid

A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry:

Debit to Bad Debts Expense for $1,000 Credit to Allowance for Doubtful Accounts

Which of the following items related to depreciating equipment would be found on a company's income statement?

Depreciation Expense - Equipment

Depreciation Expense is reported on which of the following financial statements?

Income statement

Blank______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages

Intangible assets

Kaiven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to:

Interest Receivable for $20.

On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to:

Interest Revenue for $200.

Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 for Lion Company would include a credit to:

Interest Revenue for $37.50.

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?

Loss on Disposal of Equipment for $1,500

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the Blank______ account.

Machinery

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost Blank______)/total units of capacity.

Minus salvage value

Determine which of the following expenses are considered revenue expenditures related to a company vehicle.

Oil change Dent repair Car wash

Maker

One who signed the note and promised to pay at maturity

______ are expenditures that extend the asset's useful life beyond its original estimate.

Ordinary repairs

Which of the following assets are amortized?

Patent Copyright

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs?

Shipping charges Testing Assembling

Payee

The person to whom the note is payable

Promissory note

Written promise to pay a specified amount of money

A(n) Blank______ is a supplementary record created to maintain a separate account for each customer.

accounts receivable ledger

The ________ is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period.

accounts receivable turnover

The (aging/percent) of accounts receivable method uses several percentages, based on how long an account is past due, to estimate the allowance.

aging

The __ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

aging of receivables

The (allowance/direct write-off) method of accounting for bad debts records estimated bad debts expense in the period when the related sales are recorded.

allowance

If an intangible asset has a limited life, its cost is systematically allocated to expense over its useful life through the process of:

amortization

The total asset turnover ratio is computed by taking net sales divided by:

average total assets

To record a customer's check in full payment for a sale that was made the prior month, the company should debit the Blank______ account.

cash

The factors necessary to compute depreciation include (cost/selling price/market value), salvage value and useful life.

cost

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) to Accounts Receivable

credit

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) to Accounts Receivable.

credit

On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 overdue account. Eli's journal entry to record this transaction on November 1, would include a:

credit to Accounts Receivable for $6,000. correct debit to Notes Receivable for $6,000.

Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset except:

damage done when unpacking the plant asset

On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from Ali Co., a customer. On the due date of the note, Ali dishonors the note. The journal entry that Ian would record on the due date would include a:

debit to Accounts Receivable - Ali for $1,025. credit to Notes Receivable for $1,000. credit to Interest Revenue for $25.

On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a:

debit to Cash for $5,025. credit to Note Receivable for $5,000. credit to Interest Revenue for $25.

The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the

depletion expense account

______ is the process of allocating the cost of a plant asset to expense while it is in use.

depreciation

The __ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

direct write-off

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to Blank______ the asset by recording an entry to remove it from the balance sheet.

discard

Sioux Co. replaced the roof on its existing building, therefore increasing the building's life by 10 years. The cost of the roof is considered a(n):

extraordinary repair

The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation True false question.

false

Land (improvements/additions) are assets that are additions to land and have limited useful lives, such as walkways and fences.

improvements

Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:

land improvements

The purchase of a group of plant assets for one price is called a Blank______ purchase.

lump-sum

Accounts receivable turnover formula:

net credit sales/average net accounts receivable

Total asset turnover is computed as

net sales/average total assets.

______ are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life.

ordinary repairs

A Blank______ is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years.

patent

(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.

plant

assets used in a company's operations that have a useful life of more than one accounting period.

plant or fixed

The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:

realizable value

_______ expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.

revenue

Straight-line depreciation is calculated by taking cost minus (salvage/market) value divided by useful life.

salvage

______ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.

salvage

Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include:

the company needs cash. the company does not want to deal with collecting receivables.

The allowance for doubtful accounts is a contra asset account that equals:

total uncollectible accounts

The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them. True false question.

true