MGT 11a Final

A company's cost of goods sold was $4,000. Determine net purchases and ending inventory given goods available for sale were $11,000 and beginning inventory was $5,000.A. Net Purchases: $15,000; Ending Inventory: $7,000. B. Net Purchases: $10,000; Ending Inventory: $15,000. C. Net Purchases: $9,000; Ending Inventory: $6,000. D. Net Purchases: $6,000; Ending Inventory: $7,000. E. Net Purchases: $16,000; Ending Inventory: $20,000

Net Purchases: $6,000; Ending Inventory: $7,000.

An example of an investing activity is: A. Paying wages of employees. B. Paying dividends. C. Purchasing land. D. Selling inventory. E. Contribution from owner.

Purchasing land.

On December 1, Martin Company signed a $5,000 3-month 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note?A. $0 B. $25 C. $50 D. $75 E. $300

$25

The interest accrued on $3,600 at 7% for 60 days is:A. $ 36. B. $ 42. C. $252. D. $180. E. $420.

$ 42.

When originally purchased, a vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated salvage value is $1,500. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:A. $ 5,375.00. B. $ 2,687.50. C. $ 5,543.75. D. $10,750.00. E. $ 2,856.25.

$ 5,375.00.

Use the following information to calculate cash paid for wages and salaries: 1. Salaries expense: 168,000 2. Salaries payable: 6,400 3. Salaries payable: 10,600" A. $157,400. B. $163,800. C. $168,000. D. $172,200. E. $174,400.

$163,800.

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12 they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 12 after the sale?A. $140. B. $160. C. $210. D. $380. E. $590.

$210.

A company purchased a rope braiding machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?A. $25,200. B. $26,160. C. $26,660. D. $27,613. E. $53,160.

$26,160.

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory. $1,000 goods sold by Faltron to another company. The goods are in transit and shipping terms are FOB destination. $2,000 goods sold by another company to Faltron. The goods are in transit and shipping terms are FOB destination. $3,000 owned by Faltron but in the possession of another company the consignee. Damaged goods owned by Faltron which originally cost $4,000 but which now have a $500 net realizable value.A. $10,000. B. $6,500. C. $5,500. D. $5,000. E. $4,500.

$4,500.

A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?A. $ 500. B. $ 800. C. $ 864. D. $1,000. E. $1,080.

. $ 864

Blanket Corporation sold equipment for cash of $40,500. Accumulated depreciation on the sale date amounted to $34,000 and a loss of $1,800 was recognized on the sale. What was the original cost of the asset?A. $72,300. B. $75,900. C. $ 4,700. D. $76,300. E. $42,300

. $76,300.

A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called:A. Book value depreciation. B. Declining-balance depreciation. C. Straight-line depreciation. D. Units-of-production depreciation. E. Modified accelerated cost recovery system (MACRS) depreciation.

. Declining-balance depreciation

An adjusting entry could be made for each of the following except:A. Prepaid expenses. B. Depreciation. C. Dividends. D. Unearned revenues. E. Accrued revenues.

. Dividends.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:A. Financing activities. B. Investing activities. C. Operating activities. D. Direct activities. E. Indirect activities.

. Operating activities.

A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.A. Sales: $350,000; Gross Profit: $150,000. B. Sales: $350,000; Gross Profit: $50,000. C. Sales: $500,000; Gross Profit: $400,000. D. Sales: $500,000; Gross Profit: $50,000. E. Sales: $400,000; Gross Profit: $500,000.

. Sales: $500,000; Gross Profit: $400,000.

A depreciable asset currently has a $24,500 book value. The company owning the asset uses straight-line depreciation. They paid $37,000 for this asset and consider it to have a $2,000 salvage value with a seven year useful life. How long has the company owned this asset?A. 2.5 years. B. 2.36 years. C. 2.1 years. D. 7 years. E. Cannot be determined from the given information

2.5 years

On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September?A. A $0 balance. B. A $4,300 debit balance. C. A $4,300 credit balance. D. A $5,700 debit balance. E. A $5,700 credit balance.

A $4,300 debit balance.

The statement of cash flows is:A. Another name for the statement of financial position. B. A financial statement that presents information about changes in equity during a period. C. A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. D. A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. E. A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

Incidental and necessary costs of inventory A. Can be assigned to each inventory unit. B. May be immaterial. C. Can be allocated to cost of goods sold. D. Are subject to the cost-to-benefit constraint when deciding how to account for them. E. All of the above.

A. Can be assigned to each inventory unit. B. May be immaterial. C. Can be allocated to cost of goods sold. D. Are subject to the cost-to-benefit constraint when deciding how to account for them. -------------E. All of the above----------

Preparation of the statement of cash flows involves:A. Computing the net increase or decrease in cash. B. Computing and reporting net cash provided or used by operations. C. Computing and reporting net cash provided or used by investing activities. D. Computing and reporting net cash provided or used by financing activities. E. All of the above.

A. Computing the net increase or decrease in cash. B. Computing and reporting net cash provided or used by operations. C. Computing and reporting net cash provided or used by investing activities. D. Computing and reporting net cash provided or used by financing activities. -----------E. All of the above.--------------

A cash equivalent is an investment that:A. Is readily convertible to a known amount of cash. B. Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. C. Generally is within 3 months of its maturity date. D. Is highly liquid. E. All of the above.

A. Is readily convertible to a known amount of cash. B. Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. C. Generally is within 3 months of its maturity date. D. Is highly liquid. --------------E. All of the above.----------------

Employer payroll taxes:A. Are an added expense beyond the wages and salaries earned by employees. B. Represent the federal taxes withheld from employees. C. Represent the social security taxes withheld from employees. D. Are paid by the employee. E. All of the above.

Are an added expense beyond the wages and salaries earned by employees.

Uncertainties such as natural disasters:A. Are not contingent liabilities because they are future events not arising out of past transactions or events. B. Are contingent liabilities because they are future events arising from past transactions or events. C. Should be disclosed because of their usefulness to financial statements. D. Are estimated liabilities because the amounts are uncertain. E. Arise out of transactions such as debt guarantees.

Are not contingent liabilities because they are future events not arising out of past transactions or events.

Land improvements are:A. Assets that increase the usefulness of land, and like land, are not depreciated. B. Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. C. Included in the cost of the land account. D. Expensed in the period incurred. E. Also called basket purchases.

Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.

The total cost of an asset less its accumulated depreciation is called:A. Historical cost. B. Book value. C. Present value. D. Current (market) value. E. Replacement cost.

Book value.

Which of the following groups of accounts are not balance sheet accounts?A. Assets. B. Liabilities. C. Revenues. D. Equity accounts. E. All of the above are balance sheet accounts.

Revenues

A statement of cash flows should reconcile the differences between the beginning and ending balances of:A. Net income. B. Equity. C. Cash and cash equivalents. D. Working capital. E. Cash, cash equivalents, and short-term investments.

Cash and cash equivalents.

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months services in advance. Management Services' general journal entry to record this transaction will include a A. Debit to Unearned Management Fees for $60,000. B. Credit to Management Fees Earned for $60,000. C. Credit to Cash for $60,000. D. Credit to Unearned Management Fees for $60,000. E. Debit to Management Fees Earned for $60,000.

Credit to Unearned Management Fees for $60,000.

Unearned revenue is initially recognized with a:A. Credit to unearned revenue. B. Credit to revenue. C. Debit to revenue payable. D. Debit to revenue. E. Debit to unearned revenue.

Credit to unearned revenue.

The employer should record payroll deductions as:A. Employee receivables. B. Payroll taxes. C. Current liabilities. D. Wages payable. E. Employee payables.

Current liabilities.

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:A. Direct method of reporting net cash provided or used by operating activities. B. Cash basis of accounting. C. Classified statement of cash flows. D. Indirect method of reporting net cash provided or used by operating activities. E. Net method of reporting cash flows from operating activities.

Direct method of reporting net cash provided or used by operating activities.

Revenues are:A. The same as net income. B. The excess of expenses over assets. C. Resources owned or controlled by a company D. Increases in retained earnings from a company's earning activities. E. The costs of assets or services used.

Increases in retained earnings from a company's earning activities.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these. This is not reported on the statement of cash flows.

Investing activities

An estimated liability:A. Is an unknown liability of a certain amount. B. Is a known obligation of an uncertain amount that can be reasonably estimated. C. Is a liability that may occur if a future event occurs. D. Can be the result of a lawsuit. E. Is not recorded until the amount is known for certain.

Is a known obligation of an uncertain amount that can be reasonably estimated.

A contingent liability:A. Is always of a specific amount. B. Is a potential obligation that depends on a future event arising out of a past transaction or event. C. Is an obligation not requiring future payment. D. Is an obligation arising from the purchase of goods or services on credit. E. Is an obligation arising from a future event.

Is a potential obligation that depends on a future event arising out of a past transaction or event.

The direct method of reporting operating cash flowsA. Is recommended but not required by the FASB. B. Must be used by all companies. C. Is used by most companies. D. Is considered supplementary disclosure. E. Is not recommended by the FASB, but is commonly used.

Is recommended but not required by the FASB.

Once the estimated depreciation expense for an asset is calculated:A. It cannot be changed due to the historical cost principle. B. It may be revised based on new information. C. Any changes are accumulated and recognized when the asset is sold. D. The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. E. It cannot be changed due to the consistency principle.

It may be revised based on new information.

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:A. Specific identification method. B. Average cost method. C. Weighted-average method. D. FIFO method. E. LIFO method.

LIFO method.

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these. This is not reported on the statement of cash flows.

Operating activities.

A company paid $150,000, plus a 6% commission and $4,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?A. Land $75,000; Land Improvements, $30,000; Building, $45,000. B. Land $75,000; Land Improvements, $30,800; Building, $46,200. C. Land $81,500; Land Improvements, $32,600; Building, $48,900. D. Land $79,500; Land Improvements, $32,600; Building, $47,700. E. Land $87,500; Land Improvements; $35,000; Building; $52,500.

Land $81,500; Land Improvements, $32,600; Building, $48,900.

Creditors' claims on the assets of a company are called: A. Net losses. B. Expenses. C. Revenues. D. Equity. E. Liabilities.

Liabilities.

On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?A. Decrease in net income; no effect on total assets. B. No effect on net income; no effect on total assets. C. Decrease in net income; decrease in total assets. D. Increase in net income; no effect on total assets. E. No effect on net income; decrease in total assets.

No effect on net income; no effect on total assets.

Another name for temporary accounts is:A. Real accounts. B. Contra accounts. C. Accrued accounts. D. Balance column accounts. E. Nominal accounts.

Nominal accounts.

Due to an oversight, a company made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would:A. Understate net income by $24,000. B. Overstate net income by $24,000. C. Have no effect on net income. D. Overstate assets by $24,000. E. Understate assets by $24,000.

Overstate net income by $24,000.

An example of an operating activity is: A. Paying wages. B. Purchasing office equipment. C. Borrowing money from a bank. D. Selling stock. E. Paying off a loan.

Paying wages

Which of the following items is reported on the statement of cash flows under financing activities?A. Declaration of a cash dividend. B. Payment of a cash dividend. C. Declaration of a stock dividend. D. Payment of a stock dividend. E. Stock split.

Payment of a cash dividend.

Contingent liabilities must be recorded if:A. The future event is probable and the amount owed can be reasonably estimated. B. The future event is remote. C. The future event is reasonably possible. D. The amount owed cannot be reasonably estimated. E. All of the above.

The future event is probable and the amount owed can be reasonably estimated.

The matching principle requires:A. That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user. B. The use of the direct write-off method for bad debts. C. The use of the allowance method of accounting for bad debts. D. That bad debts be disclosed in the financial statements. E. That bad debts not be written off.

The use of the allowance method of accounting for bad debts.

A company estimates that warranty expense will be 4% of sales. The company's sales for the current period is $185,000. The current period's entry to record the warranty expense is:

Warranty Expense................................7400 Estimated Warranty liability..........7400

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

bad debt expense.......................................15925 allowance for doubtful accounts.......15925