ACT210 - Final Exam (Chapters 1-12)

Suppose the Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?

$0

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assuming the company uses the traight‐line method, what is the amortization expense for the first year?

$10,000

The Open Grill incurred the following costs in acquiring a new piece of land: Cost of the Land: $80,000 Commissions: $4,800 Liability Insurance: $1,200 Cost of Removing Existing Building: $20,000 Sale of Salvaged Materials: ($4,000) Total Costs: $102,000 What is the total recorded cost of the land?

$100,800

On September 1, 2018, Middleton Corp. lends cash and accepts a $4,000 note receivable that offers 8% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2018?

$107

The following information pertains to Julia & Company: March 1 Beginning Inventory = 27 units @ $5.60 March 3 Purchased 18 units @$3.60 March 9 Sold 19 units @ $8.40 What is the ending inventory balance for Julia & Company assuming that it uses FIFO?

$110

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $380,000 and in Allowance for Uncollectible Accounts of $1,450 (debit) before any adjustments. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for the year should be:

$12,850

Kansas Enterprises purchased equipment for $74,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $6,300 at the end of five years. Using the straight-line method, depreciation expense for 2018 would be:

$13,540

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000 and has cost of goods sold equal to $233,000. Tyler's ending inventory equals:

$15,000

Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers' goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45 have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty expense for the year?

$16,000

Carpenter Inc. estimates warranty expense at 2% of sales. Sales during the year were $11 million and warranty expenditures were $49,500. What was the balance in the Warranty Liability account at the end of the year?

$170,500

Checks Outstanding: $4,500 NSF Checks: $180 Note Collected: $1,800 Deposits Outstanding: $4,000 Bank Service Fees: $160 What is the amount of cash that should be reported in the balance sheet as of August 31?

$20,360

On September 1, 2018, Daylight Donuts signed a $100,000, 9% six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. Daylight Donuts should report interest payable at December 31, 2018, in the amount of?

$3,000

On December 1, 2018, Old World Deli signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. Old World Deli records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the notes payable plus any accrued interest on June 1, 2019?

$307,500

Bricker Enterprises purchased a machine for $207,000 on October 1, 2018. The estimated service life is ten years with a $20,100 residual value. Bricker records partial-year depreciation based on the number of months in service. Depreciation expense for the year ended December 31, 2018, using straight-line depreciation, is:

$4,673

The accounts receivable account has a beginning balance of $10,000 and the company provides services of $50,000 on account during the month. The ending balance was $12,000. How much did the company receive from customers during the month?

$48,000

Bad Brads BBQ purchased a piece of equipment by paying $5,000 cash. They also incurred a shipping cost of $400 to get the equipment to its factory. The fair value of this equipment is $7,000. For what amount should Bad Brads BBQ record the equipment?

$5,400

Airline accessories obtains a $100,000 three year loan, at 6% interest, with monthly payment of $3,042. What amount would be recorded for interest expense for the first full month?

$500

Crimson Inc. recorded credit sales of $738,000, of which $520,000 is not yet due, $130,000 is past due for up to 180 days, and $88,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 3% of the amount not yet due, 16% of the amount past due for up to 180 days, and 22% of the amount past due for more than 180 days. The allowance account had a debit balance of $3,100 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

$55,760

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Cost of the Equipment: $50,000 Sales Tax (8%): $4,000 Shipping: $3,000 Installation: $2,000 Depreciation: $1,000 Total Costs: $60,000 What is the total recorded cost of the equipment?

$59,000

At December 31, Gill Co. reported accounts receivable of $233,000 and an allowance for uncollectible accounts of $1,400 (debit) before any An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

$6,060

Wiley Company purchased new equipment for $52,000. Wiley paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $2,800; sales tax paid $3,100; and installation cost, 3,100. The cost recorded for the equipment was:

$61,000

Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2018. What amount will be recorded for interest expense for the first payment on January 31, 2018?

$625

Kansas Enterprises purchased equipment for $74,500 on January 1, 2018. The equipment is expected to have a ten-year life, with a residual value of $7,350 at the end of ten years. Using the straight-line method, the book value at December 31, 2019 would be:

$67,785

Use the following appropriate amounts to calculate net income: Revenues, $11,300; Liabilities, $3,500; Expenses, $3,900; Assets, $17,700; Dividends, $1,100

$7,400

Kansas Enterprises purchased equipment for $79,500 on January 1, 2018. The equipment is expected to have a ten-year life, with a residual value of $6,600 at the end of ten years. Using the straight-line method, the book value at December 31, 2018 would be:

$72,210

Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000.

$8,000

At December 31, Gill Co, reported accounts receivable of $248,000 and an allowance for uncollectible accounts of $1,450 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 4% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

$8,470

Which of the following is true about an income statement?

- It reports activity for a period of time - It does not include dividends paid - It reports revenues and expenses

United Supply has a $45 million liability at December 31, 2018, of which $9 million is payable in each of the next five years. United Supply reports the liability on the balance sheet as:

A $9 million current liability and a $36 million long-term liability

When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method?

A Debit to Allowance for Uncollectible Accounts, Credit to Accounts Receivable

Sales taxes collected by a company on behalf of the state and local government are recorded by:

A credit to a liability account

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:

A gain of $5,000

Costello Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight‐line method and was sold at the end of the second year of use for $5,000 cash. Costello should record:

A loss of $1,000

Fleming Corp. provided services on account. The transaction would be recorded with a debit to:

Accounts Receivable

The amount of cash owed to a company by its customers from the sale of products or services on account is commonly referred to as?

Accounts Receivable

Which of the following accounts would normally have a debit balance and appear in the balance sheet?

Accounts Receivable

When treasury stock is resold at a price above cost:

Additional Paid-in Capital is increased

When a payment is made on an account payable:

Assets and liabilities decrease

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

Assets increase and stockholders' equity increases

When a company provides services on account, the accounting equation would be affected as follows:

Assets increase and stockholders' equity increases

A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. In which month should the company record supplies expense?

August

Liabilities are shown in which statement?

Balance Sheet

Which of the following has the lowest expected return to the investor?

Bonds

Which of the items would not appear in an income statement?

Cash

A bank reconciliation reconciles the bank statement with the company's:

Cash account in the balance sheet

Operating cash flows include which of the following?

Cash paid for supplies

Financing cash flows, include which of the following?

Cash received from the issuance of common stock

Cash transactions recorded by the bank but not yet recorded by the company include all of the following except?

Checks outstanding

A long-term asset is recorded at the:

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

Using the allowance method, writing off an actual bad debt would include what?

Credit Accounts Receivable

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance?

Credit Additional Paid‐In Capital $40,000

When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include:

Credit to Common Stock for $25,000

Xenon Corporation borrows $75,000 from First Bank. Xenon Corporation records this transaction with a:

Credit to Notes Payable

Liabilities normally carry a ___________ balance and are shown in the ______________.

Credit; Balance Sheet

Revenues normally carry a ____________ balance and are shown in the ______________.

Credit; Income Statement

The normal balance of the account "Allowance for Uncollectible Accounts" is a __________ because ____________.

Credit; it is a contra accounts to Accounts Receivable (debit account)

On May 1, Ace Bonding Company purchased inventory costing $2,000 on account with terms 2/10, n/30. On May 18, Ace pays for this inventory and records which of the following using a perpetual inventory system?

Debit Accounts Payable $2,000, Credit Cash $2,000

Clement Company paid an account payable related to a previous utility bill of $980. This transaction should be recorded as follows on the payment date:

Debit Accounts Payable, Credit Cash

Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of inventory costing $450 for $1,110 on account?

Debit Accounts Receivable $1,110, Credit Sales Revenue $1,110 Debit Cost of Goods Sold $450, Credit Inventory $450

Oswego Clay Pipe Company provides service of $47,700 to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. What would Oswego record on April 12?

Debit Accounts Receivable $47,700, Credit Sales Revenue $47,700

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. How would Flores record the sale on November 10?

Debit Accounts Receivable $8,000, Credit Sales Revenue $8,000

A company received a bill for newspaper advertising services, $400. The bill will be paid in 10 days. How would the transaction be recorded today?

Debit Advertising Expense, Credit Accounts Payable

On November 10 of the current year, Flores Mills provides services to a customer for$8,000 with credit terms 2/10, n/30. The customer made the correct payment on November 17. How would Flores record the collection of cash on November 17.

Debit Cash $7,840, Debit Sales Discount $160, Credit Accounts Receivable $8,000

On February 1, 2018, Sanger Corp. lends cash and accepts a $7,500 note receivable that offers 14% interest and is due in six months. What would Sanger record on August 1, 2018, when the borrower pays Sanger the correct amount owed?

Debit Cash $8,025, Credit Interest Revenue $525, Credit Notes Receivable $7,500

In December 2017, Quebecor Printing received magazine subscriptions for 2018 from a customer, who paid $190 in cash. What would be the appropriate journal entry for this event?

Debit Cash, Credit Deferred Revenue

On July 7, Saints Inc. received $9,000 in cash from a customer for services to be provided on October 10. Which of the following describes how the transaction should be recorded on July 7th?

Debit Cash, Credit Deferred Revenue

Styleson Inc. performed cleaning services for its customers for cash. These transactions would be recorded as:

Debit Cash, Credit Service Revenue

Good Inc., sold inventory for $1,200 that was purchased for $700. Good records which of the following when it sells inventory using a perpetual inventory system?

Debit Cost of Goods Sold $700, Credit Inventory $700

On April 1, Robert LLC purchased two units of inventory, A and B. The cost of unit A was $655 and the cost of unit B was $550. On April 30, Robert LLC has not sold the inventory. The net realizable value of unit A was now $675 while the net realizable value of unit B was $475. The adjustment associated with the lower of cost and net realizable value on April 30 will be:

Debit Cost of Goods Sold $75, Credit Inventory $75

Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries?

Debit Insurance Expense $1,750, Credit Prepaid Insurance $1,750

On August 1, 2018, Turner Manufacturing lends cash and accepts a $15,000 note receivable that offers 14% interest and is due in nine months. How would Turner record the year-end adjustment to accrue interest in 2018?

Debit Interest Receivable $963, Credit Interest Revenue $963

Brian Inc. borrowed $8,000 from First Bank and signed a promissory note. What entry should First Bank record?

Debit Notes Receivable, Credit Cash

Assume that $18,600 cash is paid for insurance to cover the next year. The appropriate debit and credit are:

Debit Prepaid Insurance, Credit Cash

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000 (or $3,200 per weekday). The current pay period ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended December 31. What is the adjusting entry to record accrued salaries at the end of the year?

Debit Salaries Expense $22,400, Credit Salaries Payable $22,400

A company acquires 1,000 shares of its own $1 par common stock for $15 per share. The purchase would be recorded with a?

Debit to Treasury Stock for $15,000

When a company pays utilities of $1,700 in cash, the transaction is recorded as:

Debit utilities expense, Credit Cash

Assets normally carry a _____________ balance and are shown in the ______________.

Debit; Balance Sheet

An increase to an asset account is shown with a ___________. A decrease to an asset account is shown with a ____________.

Debit; Credit

Expenses normally carry a ___________ balance and are shown in the ___________.

Debit; Income Statement

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. In which month should the company record salaries expense?

December

When treasury stock is acquired, what is the effect on total stockholders' equity?

Decrease

An expense has what effect on the accounting equation?

Decrease stockholders' equity

Receiving cash from customers before services are performed results in?

Deferred Revenues

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be?

Disclosed, but not reported as a liability

What is the concept behind separation of duties in establishing internal controls?

Employee fraud is less likely to occur when access to assets and access to accounting records is separated

Which of the following is not a balance sheet item?

Expenses

The body of rules and procedures that guide the measurement and communication of financial accounting information in the United States is known as?

Generally Accepted Accounting Principles (GAAP)

In which financial statement does a company report its revenues?

Income Statement

Revenues have what effect on the accounting equation?

Increase stockholders' equity

Permanent accounts would not include:

Interest Expense

Which one of the following regarding the book value of an asset is correct?

It reflects the original cost of the asset less accumulated depreciation

December 28, 2018: Bills was contacted by a customer for possible accounting and tax services. December 30, 2018: Bills signed a formal agreement with the customer to provide accounting and tax services in 2019. January 4, 2019: The customer paid $1,000 in advance for the services to be provided by Bills Company. January 11, 2019: Bills provided accounting and tax services to the customer. Using the accrual-basis accounting, on which date should Bills Company record revenue for the accounting and tax services?

January 11, 2019

On June 1, the board of directors declares a cash dividend to be paid on June 30 to shareholders of record on June 15. On which date would the company record a credit to the Dividends Payable account?

June 1

Which of the following groups is not among the external users for whom financial statements are prepared?

Managers

The primary function(s) of financial accounting is(are) to?

Measure business activities of a company and communicate information about business activities to outside users

Retained Earnings represent a company's:

Net income less dividends since the company first began operations

A customer purchased a drill press on November 14th on account from Sears. The drill press was delivered two weeks later. The customer paid for the drill press on December 5th. When should Sears record the revenue for this transaction according to the revenue recognition principle?

November

When using an aging method for estimating uncollectible accounts:

Older accounts are considered less likely to be collected

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

One; One

Which of the following expenditures should be recorded as an expense?

Ordinary repairs and maintenance

Which of the following subsequent expenditures would not be capitalized?

Ordinary repairs and maintenance

An exclusive 20-year right to manufacture a product or use a process is a:

Patent

Which of the following transactions cause a decrease in stockholders' equity?

Pay dividends to stockholders

Financial Accounting:

Provides information primarily for external decision makers

Investing cash flows in the statement of cash flows would include which of the following?

Purchase of land

Which of the following would increase assets and increase liabilities?

Purchase office supplies on account

The equation best describing the income statement is:

Revenues - Expenses = Net Income

Gross profit is defined as:

Sales revenue minus cost of goods sold

What best describes credit sales?

Sales to customers on account

What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others?

Sarbanes-Oxley Act

Fleming Corp. provided services on account. The transaction would be recorded with a credit to:

Service Revenue

Which of the following accounts normally has a debit balance?

Supplies

Liabilities can best be described as?

The amount owed to creditors

Goodwill is:

The value of a business as a whole, over and above the value of its net identifiable assets

Net Revenues

Total Revenues - Sales Returns - Sales Discounts

Financing activities include

Transactions involving external sources of funding