Exam 2

Prime Cost = Direct Materials + Direct Labor Conversion Cost = Direct Labor + Factory Overhead PC(3Mill) - DM(1Mill) = $2,000,000 or CC(7Mill) - FO(5Mill) = $2,000,000

A company's prime costs total $3,000,000 and its conversion costs total $7,000,000. If direct materials are $1,000,000 and factory overhead is $5,000,000, then direct labor is:

$40k x 2% = 800 - 300 = $500

Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of: 1.$500 2.$10300 3.$9700 4.$800 5.$1100 6.$10000

$13,000

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation, using the straight-line method, at the end of the period?

(100%/8=.125) x 2=25%. 15,000 x 25%=3,750 for first year. Second year=(15,000-3750) x 25% = ANS. 2812.50.

Bina Co. purchased a vehicle on January 1st for $15,000 and estimates it will use the vehicle for eight years with a $3,000 salvage value. Using the double declining-balance depreciation method, compute the vehicle's second year depreciation expense.

$6,000

Finish Co. uses the allowance method to account for bad debts. At the end of the year, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

$7500

Flash Co. uses the allowance method to account for bad debts. At the end of the year, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of:

10

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.

$400

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

1.Notes Receivable in the amount of $5,000

Multiple Choice Question DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to: 1.Notes Receivable in the amount of $5,000 2.Accounts Receivable in the amount of $5,000 3.Sales in the amount of $5,000 4.Cash in the amount of $5,000

Notes Payable; $10,000

On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash) ______ in the amount of ______.

5.Notes Payable; $1,000

On June 1, Button Co. borrowed $1,000 cash from National Bank by signing a 120-day, 6% interest-bearing note. Button will record this transaction with a credit to ______ in the amount of ______. 1.Notes Payable; $1,020 2.Notes Payable; $1,060 3.Cash; $1,020 4.Cash; $1,000 5.Notes Payable; $1,000 6.Cash; $1,060

2.We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two. 3.The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. 4.Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation.

Select all that apply Determine the statements below that are true regarding why a bank reconciliation is used. 1.The Cash account balance in the general ledger is accurate, but the bank statement balance is not. 2.We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two. 3.The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. 4.Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation.

2.aging of receivables

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. Multiple choice question. 1.percentage of sales 2.aging of receivables 3.percentage of receivables

Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine the entries to correct the record cash sales and the shortage.

True

The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them. T or F

3.$1,850 Reason: (12,000-500)/5=2,300 per year. $2,300 x 2 years = $4,600 depreciation taken. Book value at beginning of year 3 = $12,000-4,600= $7,400/4 = $1,850.

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year. 1.$2,875 2.$2,375 3.$1,850 4.$1,250

Field 1: Cash Field 2: 900

Anchor Co. has accrued payroll expense of $1,300 which includes employee withholdings of $400. On payday, Anchor will record the distribution of paychecks with a credit to _____ in the amount of $ _____.

3. $7500 Reason: When allowance method is based on sales, do not take into account previous balance in the allowance account. $1,500,000x.005=$7,500

Flash Co. uses the allowance method to account for bad debts. At the end of the year, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of: 1.$750,000 2.$7,900 3.$7,500 4.$795,000 5.$7,100

Field 1: Payable Field 2: 500

Harvey Co. has current period employee salary expenses of $800. Employee withholdings total $300. The entry to accrue current period payroll will include a credit to Salaries _____ in the amount of $ _____.

$5,000

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

$3,000

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for three years with a $2,000 salvage value. It expects to produce a total of 8,000 units as follows: 3,000 during year one; 2,500 during year two; and 2,500 during year three. Using the units-of-production depreciation method, compute the machine's first year depreciation expense.

1.Interest Receivable for $20.

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: 1.Interest Receivable for $20. 2.Interest Revenue for $20 3.Interest Revenue for $120. 4.Interest Receivable for $120.

4.Interest Revenue for $37.50.

Multiple Choice Question 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: 1.Interest Receivable for $37.50. 2.Interest Receivable for $75. 3.Interest Revenue for $75. 4.Interest Revenue for $37.50.

6.Interest Payable; $750

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting ______ in the amount of ______. 1.Cash; $1,125 2.Interest Expense; $750 3.Interest Expense; $1,125 4.Cash; $750 5.Interest Payable; $1,125 6.Interest Payable; $750

$1,000

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.

2.declining-balance

Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the Blank______ depreciation method. Multiple choice question. 1.units-of-production 2.declining-balance 3.straight-line

2.Each bank deposit is supported by a deposit ticket. 3.To withdraw money from an account, the depositor can use a check. 5.A bank account is a record set up by a bank for a customer.

Select all that apply Determine which of the statements below accurately describe services provided by a bank. Multiple select question. 1.Each bank deposit is supported by a check. 2.Each bank deposit is supported by a deposit ticket. 3.To withdraw money from an account, the depositor can use a check. 4.To limit access to a bank account, all persons authorized to write checks on the account must sign a deposit slip. 5.A bank account is a record set up by a bank for a customer.

1.credited; $1,150

Teva Co. has current period employee salary expense of $2,000. Employee withholdings total $850. To accrue the current period payroll, Salaries Payable will be (debited/credited) ______ in the amount of ______. 1.credited; $1,150 2.debited; $1,150 3.debited; $2,850 4.credited; $2,850

3.Accounts Receivable for $3,025

Multiple Choice Question On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to: 1.Cash for $3,000 2.Cash for $3,025 3.Accounts Receivable for $3,025 4.Cash for $3,150 5.Accounts Receivable for $3,150 6.Accounts Receivable for $3,000

2.the company does not want to deal with collecting receivables. 3.the company needs cash.

Select All that Apply: 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: 1.to satisfy customer's needs. 2.the company does not want to deal with collecting receivables. 3.the company needs cash. 4.to quickly increase profit.

1.current liabilities 2.long-term liabilities

SATA - Woods Co. has a note payable due in monthly installments over the next five years. This note will be reported under which of the following categories of the balance sheet? 1.current liabilities 2.long-term liabilities 3.long-term assets 4.current assets

1.Cash in the amount of $10,100

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: 1.Cash in the amount of $10,100 2.Cash in the amount of $10,000 3.Notes Receivable in the amount of $10,000 4.Notes Receivable in the amount of $10,100

3.Interest Revenue for $200.

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: 1.Interest Receivable for $200. 2.Cash for $10,000. 3.Interest Revenue for $200. 4.Note Receivable for $10,200.

3.Accounts Receivable - AZC for $5,100

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: 1.Notes Receivable for $5,100 2.Cash for $5,100 3.Accounts Receivable - AZC for $5,100 4.Notes Receivable for $5,000

Perform regular and independent reviews. Maintain adequate records. Establish responsibilities. Divide responsibility for related transactions.

Select all that apply Which of the following are principles of internal control? Perform regular and independent reviews. Maintain adequate records. Reduce vendor payables. Increase revenues. Establish responsibilities. Divide responsibility for related transactions.

4.Credit to Notes Payable 6.Debit to Accounts Payable

SATA - Niwa Co. replaced a $3,000 account payable balance to Fiona Co. with a 60-day, $3,000 note bearing 5% annual interest. Niwa's entry to record this transaction would include which of the following entries? 1.Credit to Cash 2.Debit to Notes Payable 3.Credit to Accounts Payable 4.Credit to Notes Payable 5.Debit to Cash 6.Debit to Accounts Payable

1.Credit to Cash for $700. 4.Debit to Salaries Payable for $700.

SATA - Zilo Co. has accrued employee salary expense of $1,000 which includes employee withholdings that total $300. On payday, Zilo will record the payment with which of the following entries? 1.Credit to Cash for $700. 2.Credit to Cash for $1,300. 3.Debit to Salaries Expense for $1,000. 4.Debit to Salaries Payable for $700. 5.Credit to Cash for $1,000.

2.debit to Notes Receivable for $6,000. 4.credit to Accounts Receivable for $6,000.

Select All that Apply: 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: 1.credit to Notes Receivable for $6,060. 2.debit to Notes Receivable for $6,000. 3.debit to Accounts Receivable for $6,060. 4.credit to Accounts Receivable for $6,000.

Money should be spent only when it is available. Encourage quick collection of receivables. Keep a minimum level of cash necessary to operate. Plan cash receipts to meet cash payments when due.

Select all that apply Which of the statements below describe the goals and principles of cash management? Money should be spent only when it is available. Encourage quick collection of receivables. Keep a minimum level of cash necessary to operate. Encourage quick payment of liabilities. Plan cash receipts to meet cash payments when due. Excess cash should be kept on hand to pay bills.