ACCT 210 Final (part 1)

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

Using different depreciation methods for book purposes versus tax purposes for the same asset is

the direct result of the differing goals of financial and tax accounting.

The accounting life of intangible assets is determined by

their legal lives or useful lives, whichever is shorter.

A subsidiary is a separate legal entity that is owned or controlled by another entity.

true

When land and building are acquired for a lump sum, the purchase amount should be allocated on the basis of the market values of the two assets.

true

Sweetson Enterprises' comparative balance sheets included accounts receivable of $220,300 at December 31, 2017, and $200,900 at December 31, 2018. Sales reported on Sweetson's 2018 income statement amounted to $2,350,000. What is the amount of cash collections that Sweetson will report in the Operating Activities category of its 2018 statement of cash flows assuming that the direct method is used?

$2,369,400

On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. What was the depreciation expense for Grove City Corp. for the year ended December 31, 2017?

$400,000

The following information is for Chambersburg Corp. for 2018 and 2017. Chambersburg uses the straight-line depreciation method. 20182017Property, plant, and equipment$ 250,000$190,000 Accumulated depreciation100,00085,000 Depreciation expense62,50047,500 Net sales1,000,000900,000 Average total assets625,000475,000 Refer to the information for Chambersburg Corp. Using the 2018 data, what is the average age of Chambersburg's property, plant, and equipment (rounded to two decimal places)?

1.6 years

The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000Accounts receivable (December 31, 2017)170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017)1,300 Estimated amount of uncollectible accounts based on aging analysis14,000 See the data for Lynx Corp.If Lynx Corp. uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debts expense for 2017?

12,700

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2017, for $9,000 and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on the maturity date of the note?

120

The data below are for Benton Corporation for 2017: Accounts Receivable—January 1, 2017$334,000 Credit sales during 2017850,000 Collections from credit customers during 2017725,000 Customer accounts written off as uncollectible during 201712,000 Allowance for doubtful accounts (credit balance) (after write-off of uncollectible accounts)1,700 Estimated uncollectible accounts based on an aging analysis13,200 Refer to the data for Benton Corporation.If the aging approach is used to estimate bad debts, what should the balance in Allowance for Doubtful Accounts be after the bad debts adjustment?

13200

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2018?

15,000

If Rope Inc. receives $23,825 from credit card collections and has an average rate of 4.7% charged by the credit card company, its credit card sales during the period were

25000

Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence, and a legal fee of $8,500. What is the cost of the land?

282,200

Darrin Brown bought a pub. The purchase price was $695,000. An appraiser provided the following appraisal values: land, $320,000; building, $370,000; and equipment, $60,000. What cost should be allocated to the building?

342,867

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale?

41,000

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000. The truck had an estimated life of six years and an estimated residual value of $24,000. On January 1, 2016, the company made major repairs of $20,000 to the truck that extended the life one year. Thus, starting with 2017, the truck has a remaining life of five years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What is the book value of the truck to be reported on the balance sheet at December 31, 2017?

56,000

On January 15, 2017, the accounts receivable balance was $7,000 and the balance in Allowance for Doubtful Accounts was $700. On January 16, 2017, a $200 uncollectible account was written off. The net realizable value of accounts receivable on January 16 immediately after the write-off is

6500

Pocono Co. purchased a patent at the beginning of 2017 for $490,000. Economic benefits were expected for seven years, but the patent's legal life was 20 years. Also, during 2017, the company incurred research and development costs of $150,000. Patent amortization expense for 2017 is

70,000

Where can the amounts needed to compute the accounts receivable turnover ratio be found?

Both the income statement and balance sheet

Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. Refer to the information about Wexford Co. Wexford Co. wants to use the depreciation method that will result in the highest depreciation expense for 2017. Which method should be used?

Double-declining-balance

When are consolidated financial statements prepared?

If one company owns more than 50% of another company

Select the financial statement on which the user would most likely find the answer to the question given. (Select all that apply.) How much depreciation expense did the company report during the year?

Income Statement Statement of Cash flows

The comparative balance sheets of Midnite Corp. for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018. How will this change be reported on Midnite's statement of cash flows, if Midnite uses the indirect method?

It will be reported as a deduction from net income in the Operating Activities section.

Yellow Dog Transit sold an old truck on December 31, 2017, for $18,400 cash. The following data were available when the truck sold: Acquisition cost$75,000 Estimated residual value at time of acquisition8,000 Accumulated depreciation on December 31, 2017, after adjustment53,600 When this transaction is recorded, it should include a(n)

Loss on Disposal account for $3,000.

How should intangible assets be disclosed on the balance sheet?

Net of the costs already amortized

Which statement is true concerning operating assets?

Operating assets are used over two or more periods to generate revenues.

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

The company may need to borrow to acquire operating cash.

How will the payee of the promissory note record the note on its books?

The promissory note will be recorded as an asset.

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt?

There is no effect on overall assets or equity.

Capitalizing an expenditure rather than recording it as a revenue expenditure

affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

Depreciation is

an effort to achieve proper matching of the cost of operating assets.

Comfort Shoes received a promissory note from a customer on April 1, 2017. The face amount of the note is $2,000; the terms are 12 months and 8% annual interest. At the maturity date, the customer pays for the note and interest. Comfort Shoes made the proper adjustment at the end of December for interest. The effect of recognizing the transaction on the maturity date is a(n)

decrease to Notes Receivable

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

false

Both stock and bond investments have maturity dates.

false

If a company accepts a major credit card such as VISA from a customer, then the company is responsible for the amount of the sale in case of nonpayment from a cardholder.

false

Interest is never a part of the cost of property, plant, and equipment or intangible assets.

false

Lewisburg Corp. had sales during the year of $15,000,000 and an average accounts receivable of $5,000,000. Its accounts receivable turnover ratio is 0.33 times.

false

One of the problems with the use of the allowance method to account for bad debts is that it often violates the matching principle.

false

Research and development costs should be presented as intangible assets.

false

The accounts receivable turnover ratio is computed by dividing net income by average accounts receivable.

false

The reason the allowance method of recognizing bad debts is used is primarily because it recognizes the maximum amount of write-off in each period.

false

The equity method of accounting for an investment is used when a company purchases

more than 20% of the equity securities of a second company

Assuming a company uses the allowance method, the entry to recognize the write-off of the specific uncollectible accounts will

not affect total assets or total equity.