exam 3 acct

Crane Company buys land for $50300 on 12/31/17. As of 3/31/18, the land has appreciated in value to $51000. On 12/31/18, the land has an appraised value of $52200. By what amount should the Land account be increased in 2018?

$0

Swifty Company lends Blossom Company $10500 on April 1, accepting a four-month, 4% interest note. Swifty Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?

$10500 × 0.04 × 1/12 = $35.(Principal x Interest rate x Fraction of a year = Interest received/Interest revenue)

The financial statements of Waterway Manufacturing Company report net sales of $1109600 and accounts receivable of $61000 and $91000 at the beginning and end of the year, respectively. What is the average collection period for accounts receivable in days?

$1109600 ÷ $76000 = 14.60; 365 ÷ 14.60 = 25.00 [(Net sales ÷ ((Beginning accounts Receivable + Ending accounts Receivable) ÷ 2) = Accounts receivable turnover); (Days in a year ÷ Accounts receivable turnover = Average collection period)]

Sheffield Company had net credit sales during the year of $1350000 and cost of goods sold of $820000. The balance in accounts receivable at the beginning of the year was $240000, and the end of the year it was $120000. What was the accounts receivable turnover?

$1350000 ÷ [($240000 + $120000) ÷ 2] = 7.50 [Net credit sales ÷ ((Beginning accounts Receivable + Ending accounts receivable) ÷ 2) = Accounts receivable turnover]

On November 1, Swifty Company received a $3600, 4%, three-month note receivable. The cash to be received by Swifty Company when the note becomes due is:

$3600 + ($3600 × 0.04 × 3/12) = $3636 [Principal + (Principal x Interest rate x Fraction of a year) = Cash received at maturity]

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $32500. If the balance of the Allowance for Doubtful Accounts is $7620 debit before adjustment, what is the amount of bad debt expense for that period?

$40120 $32500 + $7620 = $40120.(Total estimated uncollectible amount + Allowance for doubtful account debit balance = Bad debt expense adjusted amount)

Using the following information: 12/31/17 Accounts receivable. $521000 Allowance. (34700) Cash realizable value. $486300 During 2018, sales on account were $146100 and collections on account were $99700. Also during 2018, the company wrote off $4090 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $40700.Bad debt expense for 2018 is

$40700 - ($34700 - $4090) = $10090 .[Estimated total uncollectible amount - (Beginning allowance account balance - Accounts written off) = Bad debt expense]

Marigold Company reported net sales of $555000, net income of $70200, beginning total assets of $241000, and ending total assets of $359000. What was the company's asset turnover?

$555000 ÷ [($241000 + $359000) ÷ 2] = 1.85.[Net sales ÷ ((Beginning total assets + Ending total assets) ÷ 2) = Asset turnover]

Admire County Bank agrees to lend Waterway Brick Company $615000 on January 1. Waterway Brick Company signs a $615000, 8%, 9-month note. The entry made by Waterway Brick Company on January 1 to record the proceeds and issuance of the note is

$615000 × 0.08 × 9/12 = $36900. Cash 615000 crNotes Payable 615000

Marigold Company purchased equipment and these costs were incurred: Cash price$64200 Sales taxes3900 Insurance during transit690 Installation and testing810 Total costs$69600 Marigold will record the acquisition cost of the equipment as

$64200 + $3900 + $690 + $810 = $69600. Cash price + Sales tax + Insurance during transit + Installation and testing = Cost of equipment)

On February 1, Concord Company received a $6700, 4%, four-month note receivable. The cash to be received by Concord Company when the note becomes due is

$6700 + ($6700 × 0.04 × 4/12) = $6789 [Principal + (Principal x Interest rate x Fraction of a year) = Cash received at maturity]

On July 4, 2018, Crane Mining Company purchased the mineral rights to a granite deposit for $1640000. It is estimated that the recoverable granite will be 400000 tons. During 2018, 90000 tons of granite was extracted and 50000 tons were sold. The amount of the Depletion Expense recognized for 2018 would be

($1640000 ÷ 400000) × 50000 = $205000 [(Cost ÷ Estimated total tons) x Actual tons extracted = Depletion]

Crane Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $604000 and credit sales are $2780000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Crane Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $4800 credit balance before adjustment?

($604000 × 0.05) - $4800 = $25400.(Accounts receivable balance x Estimated uncollectible %) - Credit Balance if Allowance for Doubtful Accounts = Adjusted amount) DR Bad Debt Expense 25400 CR Allowance for Doubtful Accounts 25400

A company purchased factory equipment for $620000. It is estimated that the equipment will have a $62000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

($620000 - 0) × .40 = $248000; ($620000 - $248000) × .40 = $148800 [((Cost - Accumulated depreciation) x Double-declining-balance rate = 1st year depreciation expense); ((Cost - 1st year accumulated depreciation) x Double-declining-balance rate = 2nd year depreciation expense)]

On December 1, 2017, Sunland Corporation incurs a 15-year $550000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $6600, which include interest computed at the rate of 12% per year. The first monthly payment is made on December 31, 2017. The portion of the second monthly payment made on January 31, 2018, which represents repayment of principal is:

(Mortgage x (Interest Rate /12) = Interest payment; (Mortgage - (Monthly Payment - Interest Payment)) x (Interest Rate / 12) = Interest; Monthly Payment - Interest = Principal$550000 × .01 = $5500; [$550000 - ($6600 - $5500)] × .01 = $5489; $6600 - $5489 = $1111

Admire County Bank agrees to lend Sheffield Brick Company $602000 on January 1. Sheffield Brick Company signs a $602000, 10%, 9-month note. What entry will Sheffield Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

(Principal x Interest rate x Fraction of a year = Interest payable)$602000 × 0.10 × 9/12 = $45150. Notes Payable602000 Interest Payable45150 cr Cash 647150

Bramble Company on July 15 sells merchandise on account to Cullumber Co. for $4300, terms 2/10, n/30. On July 20 Cullumber Co. returns merchandise worth $1800 to Bramble Company. On July 24 payment is received from Cullumber Co. for the balance due. What is the amount of cash received?

4300-1800=2500*2%=2500-50 =2450 ($4300 - $1800) × 0.98 = $2450 [(Sales price - Sales returns) x (1 - Sales disount %) = Cash received]

On October 1, Waterway's Carpet Service borrows $352000 from First National Bank on a 4-month, $352000, 9% note. What entry must Waterway's Carpet Service make on December 31 before financial statements are prepared?

Interest Expense10560 cr Interest Payable 10560 (Principal x Interest rate x Fraction of a year = Interest expense)$352000 × 0.09 × 4/12 = $10560.

A company purchased factory equipment on April 1, 2018 for $168000. It is estimated that the equipment will have a $22000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2018 is

[($168000 - $22000) ÷ 10] × 9/12 = $10950 [((Cost - Salvage value) ÷ Useful life) x Fraction of a year = Depreciation expense]

Marigold Company has decided to sell one of its old machines on June 30, 2018. The machine was purchased for $220000 on January 1, 2014, and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $61000, what was the amount of the gain or loss recorded at the time of the sale?

[($220000 - 0)/10] × 4.5 = $99000; $61000 - ($220000 - $99000) = ($60000) [(((Cost - Salvage value) ÷ Useful life) x Years elapsed = Accumulated depreciation); ((Cash proceeds - (Cost - Accumulated depreciation) = Loss on disposal)]

On July 1, 2018, Swifty Company purchased the copyright to Jackson Computer tutorials for $335000. It is estimated that the copyright will have a useful life of 5 years with an estimated salvage value of $26000. The amount of Amortization Expense recognized for the year 2018 would be

[($335000 - $26000) ÷ 5] × 6/12 = $30900 [((Cost - Salvage value) ÷ Useful life) x Fraction of a year elapsed = Amortization expense]

A factory machine was purchased for $387000 on January 1, 2018. It was estimated that it would have a $72000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 36000 hours in the 5 years. The company ran the machine for 3600 actual hours in 2018. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2018 would be

[($387000 - $72000) ÷ 36000] × 3600 = $31500 [((Cost - Salvage value) ÷ Estimated total hours) x Actual hours = Depreciation expense]

On May 1, 2018, Marigold Company sells office furniture for $306000 cash. The office furniture originally cost $742000 when purchased on January 1, 2011. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $76600. What gain should be recognized on the sale?

[($742000 - $76600) ÷ 10] × 7⅓ = $487960; $306000 - ($742000 - $487960) = $51960 [(((Cost - Salvage value) ÷ Useful life) x Years used = Accumulated depreciation);(Cash received - (Cost - Accumulated depreciation) = Gain)]

Swifty Company purchased a building on January 2 by signing a long-term $471000 mortgage with monthly payments of $4100. The mortgage carries an interest rate of 8 percent. The amount owed on the mortgage after the first payment will be

[(Mortage x Interest rate x Time = Interest expense; Mortage - (Payment - Interest expense) = Mortage after payment.]$471000 × 0.08 × 1/12 = $3140; $471000 - ($4100 - $3140) = $470040.

In a recent year Crane Corporation had net income of $153000, interest expense of $30000, and tax expense of $12000. What was Crane Corporation's times interest earned for the year

[Times interest earned = (Net income + Interest expense + Tax expense) ÷ Interest expense]($153000 + $30000 + $12000)/$30000 = 6.50.

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

a bond indenture

The cost of successfully defending a patent in an infringement suit should be

added to the cost of the patent

Under the allowance method, writing off an uncollectible account

affects only balance sheet accounts.

All of the following are reported as current liabilities except accounts payable. notes payable. bonds payable. unearned revenues.

bonds payable

Depreciation is a process of

cost allocation

The entry to record the proceeds upon issuing an interest-bearing note is

dr Cash cr Notes Payable

Goodwill can be recorded

only when there is an exchange transaction involving the purchase of an entire business

Unearned Rent Revenue is

reported as a current liability.

When authorizing bonds to be issued, the board of directors does not specify the

selling price

A current liability is a debt that can reasonably be expected to be paid between 6 months and 18 months. out of cash currently on hand. out of currently recognized revenues. within one year or the operating cycle, whichever is longer.

within one year or the operating cycle, whichever is longer