Midterms 1, 2, and 3 Accounting

Alanna Inc sells specialized mountain bikes. Each specialized bike purchased includes free maintenance service for 12 months. The price of the specialized bike is $1,200. When sold separately, a maintenance contract is $600 and a comparable but non-specialized bike is $1,000. What amount of revenue will Alanna Inc recognize at the date of sale for each bike?

$1,200 × [$1,000/($1,000 + $600)] = $750

MedicineCo. purchases equipment for $1,200,000 paying $180,000 in cash and issuing $1,020,000 in promissory notes. When the journal entry is posted to the related accounts:

$1,200,000 will be debited and $180,000 will be credited to asset accounts; $1,020,000 will be credited to liability accounts

Which of the following statements about adjustments is NOT correct?

Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance.

The financial statements of Hanna Company contained the following information: Net Sales Revenue$1,000,000 Net Accounts Receivable, beginning of year 200,000 Net Accounts Receivable, end of year 120,000 What is the receivables turnover ratio?

= $1,000,000 ÷ [($200,000 + $120,000) ÷ 2] = 6.25 times

JennieCo uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging analysis equals $20,000. The unadjusted credit balance in the Allowance for Doubtful Accounts account is $6,400. What is the estimated Bad Debt Expense for the period?

= $20,000 − $6,400 = $13,600

Which of the following statements about a multistep income statement is true?

A key measure available on a multistep income statement is the amount of profit earned over the cost of goods sold.

Which account is most unlikely to be credited when an expense is recorded?

Accounts Receivable

Clifford Accounting provides tax services on October 14th. They receive payment for their services on November 9. Which of the following is an appropriate journal entry for October 14th?

Debit Accounts Receivable and credit Tax Preparation Revenue.

AlfordCo paid $12,500 in advance for six months of rent. What journal entry will AlfordCo prepare to record this transaction?

Debit Prepaid Rent and credit Cash for $12,500

Mackenzie Inc. has a $72,500 note payable at December 31. Interest in the amount of $3,625 has accrued but has not yet been paid. Both the note payable and the accrued interest will become due next year. How will the interest affect the adjustments at the end of the period?

Interest Expense should be increased, because the cost of interest relates to the current period.

Gibbons Inc. financial statements for the last two years revealed the following: Beginning Inventory Ending Inventor Cost of Goods Sold Year 1$90,000 $130,000 $605,000 Year 2 130,000 110,000 720,000 The inventory turnover ratio in Year 1 was:

Inventory turnover ratio = Cost of Goods Sold ÷ Average Inventory$605,000 ÷ [($95,000 + $125,000) ÷ 2] = 5.50 times

Massimo Company has the following information: Sales Revenue$660,000Ending inventory 72,000Cost of Goods Sold 520,000Beginning inventory 62,000 What is Massimo's number of days to sell?

Inventory turnover ratio = Cost of goods sold ÷ Average inventory= $520,000 ÷ [($62,000 + $72,000) ÷ 2] = 7.76 times Days to sell = 365 ÷ Inventory turnover ratio= 365 ÷ 7.76 = 47.0 days

Catherine, Inc. borrowed $62,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in two years. What is the correct journal entry for this transaction?

Debit cash and credit notes payable for $62,000

The Sarbanes-Oxley Act (SOX) requires company executives to sign a report certifying that the financial statements are free of error.

False

Elsa Inc. starts the year with a beginning inventory of 490 units at $24 per unit. Elsa Inc. purchases 595 units at $42 each in February and 580 units at $25 each in October. Elsa Inc. sells 245 units during the year. Elsa Inc. has a periodic inventory system and uses the FIFO inventory costing method. What is the amount of cost of goods sold?

First-in, first-out (FIFO) assumes that the costs of the first goods purchased (first in) are the costs of the first goods sold (first out). As such, since 490 units were in the beginning inventory and the company only sold 245 units during the period, we use the $24 per unit cost of the beginning inventory units to calculate cost of goods sold.Cost of goods sold = 245 units x $24 per unit = $5,880

Truong Corp reported a gross profit percentage of 26% with net sales of $260,000. What is the amount of cost of goods sold?

Gross profit = Net sales × Gross profit percentage= $260,000 × 0.26 = $67,600 Net sales − Cost of goods sold = Gross profit Cost of goods sold = Net sales − Gross profit= $260,000 − $67,600 = $192,400

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Alissa Inc. as they appear on the Alissa Inc.'s adjusted trial balance. Accounts Payable$14,000 Accounts Receivable 15,000 Inventory 20,800 Advertising Expense 14,000 Cost of Goods Sold 105,000 Delivery Expense 6,400 Income Tax Expense 3,900 Insurance Expense 1,000 Rent Expense 13,600 Sales Revenue 200,000 Sales Discounts 10,600 Sales Returns & Allowances 25,000 Gross profit would be:

Gross profit = Net sales − Cost of goods sold= $164,400 − $105,000 = $59,400

Gains Corp has gross profit of $58,600 and a gross profit percentage of 40%. What were the Gains Corp's net sales?

Gross profit percentage = [(Net sales − Cost of goods sold) ÷ Net sales] × 100 Gross profit percentage = (Gross profit ÷ Net sales) × 100 Net sales = (Gross profit ÷ Gross profit percentage) × 100= $58,600 ÷ 40% = $146,500

Which of the following statements about pre-close trial balances is true?

The order of accounts on a trial balance is as follows: assets, liabilities, stockholders' equity, dividends, revenues, and expenses.

A decreasing inventory turnover ratio indicates:

a longer time span between the purchase and sale of inventory.

On January 1, 2018, Otis Inc. sells a machine for $23,400. The machine was originally purchased on January 1, 2016 for $40,700. The machine was estimated to have a useful life of 5 years and a residual value of $0. Otis uses straight-line depreciation. In recording this transaction:

a loss of $1,020 would be recorded.

Harvey Co. pays income tax at an average rate of 35 percent. This year its revenue is $126,000 and its expenses are $83,000. The adjusting entry to record the income tax expense will:

decrease stockholders' equity by $15,050.

A person who is looking at a company's financial statements cannot determine whether the:

company's owners are financially secure.

Given the unadjusted Allowance for Uncollectible Accounts has a $50 debit balance, the receivables written off were ________ than the amount estimated in the prior period. Bad debt expense will be ________ in the current period than had the unadjusted balance been a credit balance.

greater; greater

A prepayment of rent for the next three months (not including this month):

has no effect on total assets.

IwanCo purchases inventory for $17,000 with terms 2/10, n/30. It then returns $2,700 of the inventory purchased to the supplier and also receives an allowance for defective inventory of $170. The company pays the amount due within the discount period. What is the amount of the discount that will be taken?

Purchase discount = (Purchase − Purchase return − Purchase allowance) × Discount percentage= ($17,000 − $2,700 − $170) × 0.02 = $283

WallaceCo has a building that originally cost $395,000. Wallace expects to be able to sell the facility for $260,000 at the end of its useful life. The balance of the related Accumulated Depreciation account is $115,000. The residual value of the facility is:

Residual (or salvage) value is the estimated amount to be recovered at the end of the company's estimated useful life of an asset. In this case, the residual value is $260,000.

Which of the following would not be considered a bundled product?

Sale of a $50 pair of jeans

On June 15, Powell Company sells inventory on account to JamesonCo for $5,000, terms 4/10, n/30. On June 20, JamesonCo returns to Powell Company inventory that JamesonCo had purchased for $1,100. On June 24, JamesonCo completely fulfills its obligation to Powell Company by making a cash payment. What is the amount of cash paid by JamesonCo to Powell Company?

Sales discount = (Sale − Sales return) × Discount %= ($5,000 − $1,100) × 4% = $156 Cash paid by customer = Sales revenue − Sales return − Sales discount= $5,000 − $1,100 − $156 = $3,744

A company's assets totaled $24,550 and liabilities totaled $8,530 at the beginning of the year. During the year, assets decreased by $3,530 and liabilities increased by $2,830. What is the amount of stockholders' equity at the end of the year?

Stockholders' Equity = Assets - Liabilities Beginning of year:= $24,550 - $8,530 = $16,020Change in assets = Change in liabilities + Change in stockholders' equity Change in stockholders' equity = Change in assets - Change in liabilities= ($3,530) - $2,830 = ($6,360)Ending stockholders' equity = $16,020 - $6,360 = $9,660

When purchased, a vehicle had an estimated useful life of 9 years. The vehicle cost $57,000 and its estimated residual value is $3,000. After 3 years of straight-line depreciation, the asset's total estimated useful life was revised from 9 years to 4 years and there was no change in the estimated residual value. The Depreciation Expense in year 4 is:

The amount of depreciable cost as of the end of year 3 is: ($57,000 − $3,000) − [($54,000 ÷ 9) × 3] = $36,000. The remaining depreciation will be recorded over the remaining 1-year useful life: $36,000 ÷ 1 = $36,000

The write-down of an unlimited-life intangible asset due to impairment will cause:

intangible assets to decrease.

Aman Corp. paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The estimated residual value of the equipment is $5,000. Aman began using the equipment on May 1, 2020. Aman has an October 31, 2020 year-end. It used the equipment for a total of 11,200 hours between May 1 and October 31, 2020. Using the units-of-production method, what amount of depreciation expense would Aman report in the income statement prepared for the year-ended October 31, 2020?

Cost includes all necessary and reasonable expenditures to acquire the asset and prepare it for its intended use. Cost = Purchase price + Delivery and installation costs= $500,000 + $15,000 = $515,000 Depreciation expense this period = (Cost − Residual value) × (Actual production this period ÷ Estimated total production)= ($515,000 − $5,000) × (11,200 ÷ 28,000) = $204,000

Mcghee Corp. uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 250 $6 June 2 Purchase 65 $5 November 5 Sales 265 What amounts would be reported as the cost of goods sold and ending inventory balances for the year?

Cost of goods sold $1,575; Ending inventory $250

Paul Inc. updates its inventory periodically. The company's beginning inventory was $4,860 and purchases were $10,080 during the year. Paul Inc.'s ending inventory count was $9,000. What was the amount of its cost of goods sold?

Cost of goods sold = Beginning inventory + Purchases − Ending inventory= $4,860 + $10,080 − $9,000 = $5,940

Sanders' beginning inventory is $27,000, goods purchased during the period cost $112,000, and the cost of goods sold for the period is $132,000. What is the amount of Sanders' ending inventory?

Cost of goods sold = Beginning inventory + Purchases − Ending inventoryEnding inventory = Beginning inventory + Purchases − Cost of goods sold= $27,000 + $112,000 − $132,000 = $7,000

The Beatriz Corp. uses a periodic inventory system. The company has a beginning inventory of 300 units at $5 each on January 1. Beatriz Corp. purchases 500 units at $4 each in February and 200 units at $6 each in March. There were no additional purchases or sales during the remainder of the year.Beatriz Corp. sells 150 units during the quarter. If Beatriz Corp. uses the weighted average method, what is its cost of goods sold?

Weighted Average − Periodic Beginning inventory300 units × $5$1,500 +February purchase500 units × $4 2,000 +March purchase200 units × $6 1,200 =Goods available for sale1,000 units$4,700 −Ending inventory850 × $4.70 3,995 =Cost of goods sold 150 units × $4.70 $705

Foley Corp. has a periodic inventory system. Foley Corp. purchased 295 units of inventory at $18.50 per unit and 490 units at $19.50 per unit. What is the weighted average unit cost for these purchases of inventory?

Weighted average cost = Cost of goods available for sale ÷ Number of units available for sale= [($295 × $18.50 per unit) + ($490 × $19.50 per unit)] ÷ (295 units + 490 units) = $19.12 per unit

ArtCo has 11,400 items of building supplies on hand that cost $342,000; a bill from the vendor for $240,000 of these supplies has not yet been paid. The company expects to earn $814,000 for its services when it uses the building supplies. The company's balance sheet would include an asset, Supplies, in the amount of:

$342,000.

The Schofield Inc. uses a periodic inventory system. The company has a beginning inventory of 2,050 units at $23 each on January 1. Schofield purchases 2,300 units at $22 each in February and 1,100 units at $24 each in March. There were no additional purchases or sales during the remainder of the year.Schofield sells 2,100 units during the quarter. If Schofield uses the LIFO method, what is its cost of goods sold?

$48,400

Gonzales Inc. uses a periodic inventory system. On March 31, Gonzales has two plasma TVs on hand at a cost of $1,500 each (serial numbers 1534892 and 1534894). In April, Gonzales purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 1542631 through 1542634). In May, Gonzales purchases five more identical TVs for $1,600 each (serial numbers 1550964 through 1550968). In June, Gonzales sells two of these TVs (serial numbers 1534894 and 1542631). There were no additional purchases or sales during the remainder of the year.Gonzales Inc. uses the LIFO method. What is the cost of its ending inventory?

13,600

A machine was acquired on January 1, 2020, at a cost of $28,000, with an estimated residual value of $2,000 and an estimated useful life of ten years. The company uses the double-declining-balance method. What is its book value at December 31, 2021?

2018:= ($28,000 − $0) × 2 / 10 = $5,600 2019:= ($28,000 − $5,600) × 2 / 10 = $4,480 Book value at end of 2019 = Cost − Accumulated depreciation= $28,000 − ($5,600 + $4,480) = $17,920

ClarkeCo uses the allowance method. At December 31, 2018, the company's balance sheet reports Accounts Receivable, Net in the amount of $21,000. On January 2, 2019, ClarkeCo writes off a $2,300 customer account balance when it becomes clear that the customer will never pay. What is the amount of Accounts Receivable, Net after the write-off?

21,000

Ishika Corp. had $12,000 of supplies at the end of August. During September, the company bought $4,000 of supplies. At the end of September, the company had $2,000 of supplies remaining. Which of the following statements is not correct?

An asset should be debited for $2,000 in September.

Which of the following claims about asset impairment is correct?

Asset impairment losses are reported on the income statement as an operating expense.

Greenleaf started the current year with assets of $710,000, liabilities of $355,000 and common stock of $210,000. During the current year, assets increased by $410,000, liabilities decreased by $55,000 and common stock increased by $285,000. There was no payment of dividends to owners during the year. Based on this information, what was the amount of Greenleaf's retained earnings at the beginning of the year?

Assets = Liabilities + Stockholders' Equity Stockholders' Equity = Assets − Liabilities= $710,000 − $355,000 = $355,000Stockholders' Equity = Common Stock + Retained earnings. Retained Earnings = Stockholders' Equity − Common Stock= $355,000 − $210,000 = $145,000

Audient began the year with assets of $107,000, liabilities of $23,500, and stockholders' equity of $83,500. During the year assets increased $55,700 and stockholders' equity increased $21,400. What was the change in liabilities for the year?

Assets = Liabilities + Stockholders' equityLiabilities = Assets − Stockholders' equityChange in liabilities = Change in assets − Change in stockholders' equity= $55,700 − $21,400 = $34,300 Increase of $34,300

Whelan Inc.'s unadjusted trial balance at the end of the year includes the following: Accounts Receivable$98,000 Unadjusted debit balance in Allowance for Doubtful Accounts 1,000 Whelan uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging analysis equals $5,800. What is the amount of Bad Debt Expense to be recorded for the year?

Bad Debt Expense = Ending balance in Allowance for Doubtful Accounts − Unadjusted ending credit (debit) balance in Allowance for Doubtful Accounts = $5,800 − ($1,000) = $6,800

BaldwinCorp uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $234,000 in total sales during the year; $190,000 of which were on credit. BaldwinCorp has experienced bad debt losses of 6% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year?

Bad Debt Expense = Net credit sales × Bad debt loss rate = $190,000 × 0.06 = $11,400

JordiCo reported net credit sales of $330,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $575. The company has experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage of credit sales method, what amount should JordiCo record as an estimate of Bad Debt Expense?

Bad Debt Expense = Net credit sales × Bad debt loss rate = $330,000 × 0.01 = $3,300

OakleyCorp reported net credit sales of $588,000 for the year ending December 31, 2019. On January 1, 2019, the Allowance for Doubtful Accounts had a credit balance of $14,400. During 2019, $24,000 of uncollectible accounts receivable were written off. OakleyCorp has experienced bad debt losses of 3% of credit sales in prior periods. Using the percentage of credit sales method, what is the adjusted balance in the Allowance for Doubtful Accounts at December 31, 2019?

Bad Debt Expense = Net credit sales × Bad debt loss rate = $588,000 × 0.03 = $17,640 Ending balance in Allowance for Doubtful Accounts = Beginning credit balance in Allowance for Doubtful Accounts − Write-offs + Bad Debt Expense = $14,400 − $24,000 + $17,640 = $8,040

Ruby-Rose Company uses the percentage of credit sales method to estimate Bad Debt Expense. At the end of the year, the company's unadjusted trial balance includes the following: Accounts Receivable$351,000 Allowance for Doubtful Accounts (credit balance) 400 Net Credit Sales 902,000 Ruby-Rose has experienced bad debt losses of 0.7% of credit sales in prior periods. What is the Bad Debt Expense to be recorded for the year?

Bad Debt Expense = Net credit sales × Bad debt loss rate = $902,000 × 0.007 = $6,314.

Lisa-Marie Corp's unadjusted trial balance includes Accounts Receivable of $10,000, a credit balance in its Allowance for Doubtful Accounts of $50, and Sales Revenue of $100,000. Based on an aging of its receivables, management estimates that $1,000 of receivables will be uncollectible. Lisa-Marie's financial statements will show:

Bad Debt Expense of $950. = $1,000 − $50 = $950

Martinez Company's ending inventory count was $65,000, cost of goods sold was $35,100, and purchases were $72,800, its beginning inventory must have been:

Beginning inventory = Cost of goods sold − Purchases + Ending inventory= $35,100 − $72,800 + $65,000 = $27,300

Beyerdynamic began the year with assets of $108,000 and liabilities of $79,000. During the year assets increased by $13,600 and liabilities decreased by $9,800. What is the amount of the change in Beyerdynamic's stockholders' equity during the year?

Beginning of year:Change in Assets = Change in Liabilities + Change in Stockholders' EquityChange in Stockholders' Equity = Change in Assets − Change in Liabilities= $13,600 − ($9,800) = $13,600 + $9,800 = $23,40

At the end of last year, ArtisanCo's assets totaled $874,000 and its liabilities totaled $747,000. During the current year, the total assets increased by $59,400 and its total liabilities increased by $24,700. At the end of the current year, stockholders' equity was:

Beginning stockholders' equity = $874,000 − $747,000 = $127,000 Change in stockholders' equity = Change in assets − Change in liabilities= $59,400 − $24,700 = $34,700 Ending stockholders' equity = Beginning stockholders' equity + Change in stockholders' equity= $127,000 + $34,700 = $161,700

On January 1, JacqueCo had total assets of $869,000. During the month, the following activities occurred: JacqueCo acquired equipment costing $7,900, promising to pay cash for it in 60 days. JacqueCo purchased $3,690 of supplies for cash. JacqueCo sold land, which it had acquired 2 years ago. The land had cost $16,900 and it was sold for $16,900 cash. JacqueCo signed an agreement to rent additional storage space next month at a charge of $1,190 per month. What is the amount of total assets of JacqueCo at the end of the month?

Beginning total assets of $869,000 + Equipment purchased of $7,900 + Supplies purchased of $3,690 - Cash paid of $3,690 + Cash received from sale of land of $16,900 - Land sold of $16,900 = $876,900 Signing a rental agreement is not an accounting transaction since there was no exchange involving assets, liabilities, and/or stockholders' equity between the company and someone else.

Jibril Inc. sold its fleet of trucks for $56,500. The trucks originally cost $1,481,000 and had Accumulated Depreciation of $1,284,000 recorded through the date of disposal. What gain or loss did the Jibril record when it sold the fleet of trucks?

Book value = $1,481,000 − $1,284,000 = $197,000Gain (loss) on disposal = Proceeds − Book Value= $56,500 − $197,000 = ($140,500)

On December 31, 2018, VasquezCo records an adjusting entry to accrue interest on a note. On January 31, 2019, Infinity receives a check for $4,680, which represents two months of accumulated interest on the note. Upon receipt of this interest payment, VasquezCo should debit:

Cash for $4,680, credit Interest Receivable for $2,340, and credit Interest Revenue for $2,340.

YassarCo was recently formed with a $25,000 investment in the company by stockholders in exchange for common stock. YassarCo then borrowed $10,000 from a local bank, purchased $5,000 of supplies on account, and also purchased $25,000 of equipment by paying $10,000 in cash and signing a promissory note for the balance. Based on these transactions, the YassarCo 's total assets are:

Cash of $25,000 from stock issuance + Cash of $10,000 borrowed from bank + Supplies purchased in the amount of $5,000 + Equipment purchased in the amount of $25,000 − Cash paid for equipment of $10,000 = $55,000

White Company, which uses the double-declining-balance method of depreciation, purchased new equipment on January 1, 2020. The equipment cost $160,000, had an estimated useful life of 8 years and $20,000 residual value at the end of its useful life. What is the depreciation expense for 2020?

Depreciation expense = (Cost − Accumulated depreciation) × (2 ÷ Useful Life)= ($160,000 − $0) × (2 ÷ 8) = $40,000

Factory equipment is purchased on January 1, 2020, for $104,000. It is expected to have a useful life of ten years and a residual value of $12,000. The company closes its books on December 31. Under the double-declining balance method, what is the total amount of depreciation to be expensed during the 2021?

Depreciation expense = Book value × (2 ÷ Useful life)Depreciation expense = (Cost − Accumulated depreciation) × (2 ÷ Useful life) 2018:= ($104,000 − $0) × 2 / 10 = $20,800 2019:= ($104,000 − $20,800) × 2 / 10 = $16,640 <--

ImanCorp uses the units-of-production method to estimate depreciation. ImanCorp purchased a new machine for $62,000 that will produce an estimated 470,000 units over its useful life. The estimated residual value of the machine is $4,000. What is the depreciation rate per unit?

Depreciation rate per unit = (Cost − Residual value) ÷ Estimated total production= ($62,000 − $4,000) ÷ 470,000 units = $0.12 per unit

The following account balances are taken from the December 31, 2019, financial statements of Tye Advertising Co. The company uses accrual basis accounting. Advertising Revenue$46,482Cash 41,516Accounts Receivable 7,296Interest Expense 2,299Accounts Payable 5,000Operating Expenses 37,460Deferred Revenue 1,178Equipment 18,048Income Tax Expense 2,326 The following activities occurred in 2020: Performed advertising services on account, $55,000. Received cash payments on account, $10,400. Received deposits from customers for advertising services to be performed in 2021, $2,500. Made payments to suppliers on account, $5,000. Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year. What is the balance of Accounts Receivable at December 31, 2020?

Ending Accounts Receivable = Beginning Accounts Receivable + Sales on account − Cash collected on account= $7,296 + $55,000 − $10,400 = $51,896

The following account balances are taken from the December 31, 2019, financial statements of Tiernan Advertising Co. The company uses accrual basis accounting. Advertising Revenue$ 58,322 Cash 51,907 Accounts Receivable 8,426 Interest Expense 2,530 Accounts Payable 5,500 Operating Expenses 47,241 Deferred Revenue 1,476 Equipment 22,746 Income Tax Expense 2,916 The following activities occurred in 2020: Performed advertising services on account, $69,000. Received cash payments on account, $13,400. Received deposits from customers for advertising services to be performed in 2021, $4,500. Made payments to suppliers on account, $5,500. Incurred $56,450 of operating expenses; $48,950 was paid in cash and $7,500 was on account and unpaid as of the end of the year. What is the balance in the Cash account at December 31, 2020?

Ending Cash balance = Beginning Cash balance + Receipts of payments on account + Receipts of deposits - Payments on account - Cash paid for operating expenses incurred = $51,907 + $13,400 + $4,500 − $5,500 − $48,950 = $15,357

A company tracks its obligation to honor gift cards previously issued to customers using Deferred Revenue. This account totaled $5,700 at the beginning of the year and $7,900 at the end of the year. Customers purchased gift cards amounting to $44,000 during the year. What was the amount of gift cards redeemed (i.e., used to buy goods or services) by customers during the year?

Ending Deferred Revenue = Beginning Deferred Revenue + Gift cards sold - Gift cards redeemedGift cards redeemed = Beginning Deferred Revenue + Gift cards sold - Ending Deferred Revenue= $5,700 + $44,000 - $7,900 = $41,800

Procedural Instrument Co. had Retained Earnings of $137,000 at December 31, 2018. Net income for 2019 was $87,000, and dividends for 2019 were $27,000. What amount of Retained Earnings should be reported at December 31, 2019?

Ending Retained Earnings = Beginning Retained Earnings + Net income - Dividends = $137,000 + $87,000 - $27,000 = $197,000

Benny Company has beginning Retained Earnings of $36,000, ending Retained Earnings of $40,000, and net income of $22,000. What was the amount of dividends declared during the year?

Ending Retained Earnings = Beginning Retained Earnings + Net income - Dividends Dividends = Beginning Retained Earnings + Net income - Ending Retained Earnings= $36,000 + $22,000 - $40,000 = $18,000

A company's financial records at the end of the year included the following amounts: Cash$71,900 Accounts Receivable 29,900 Supplies 5,900 Accounts Payable 11,900 . Notes Payable 5,950 Retained Earnings, beginning of year 18,900 Common Stock 59,000 Service Revenue 40,650 Wages Expense 9,900 Advertising Expense 6,900 Rent Expense 11,900 What is the amount of total stockholders' equity that would be reported on the Balance Sheet at the end of the year?

Expenses are comprised of Wages Expense, Advertising Expense, and Rent Expense Net income = Revenue − Expenses= $40,650 − ($9,900 + $6,900 + $11,900) = $11,950 Ending retained earnings = Beginning retained earnings + Net income − Dividends= $18,900 + $11,950 − $0 = $30,850 Ending stockholders' equity = Common stock + Ending retained earnings= $59,000 + $30,850 = $89,850

Arham Company uses a periodic inventory system. On March 31, Arham has two plasma TVs on hand at a cost of $1,500 each (serial numbers 1534892 and 1534894). In April, Arham purchases four more identical TVs from Toshiba for $1,450 each (serial numbers 1542631 through 1542634). In May, Arham purchases five more identical TVs for $1,600 each (serial numbers 1550964 through 1550968). In June, Arham sells two of these TVs (serial numbers 1534894 and 1542631). There were no additional purchases or sales during the remainder of the year.Arham Company uses the FIFO method. What is the cost of its ending inventory?

FIFO − Periodic Beginning inventory 2 units × $1,500 $3,000 + April purchase 4 units × $1,450 5,800 +May purchase 5 units × $1,600 8,000 = Goods available for sale $16,800 −Ending inventory (4 units × $1,450) + (5 units × $1,600) 13,800

LetterCo, which uses the periodic inventory method, purchases different letters for resale. LetterCo had no beginning inventory. It purchased A thru G in January at $7.50 per letter. In February, it purchased H thru L at $9.50 per letter. It purchased M thru R in March at $10.50 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year.If LetterCo uses the FIFO method, what is the cost of its ending inventory?

FIFO − Periodic January purchase7 units × $7.50 $52 +February purchase5 units × $9.50 48 +March purchase6 units × $10.50 63 =Goods available for sale $163 −Ending inventory (1 unit × $7.50) + (5 units × $9.50) + (6 units × $10.50) 118

WeberCo rents computers to local businesses and schools. Weber has 4,800 computers with a book value of $150,500. As a result of changing technology, Weber's computers are more difficult to rent so they must drastically reduce their rental price, which causes a decrease in estimated future cash flows. The fair value of the computers is estimated to be $146,000 because of their outdated technology. Weber should report an asset impairment loss of:

Impairment Loss = Book Value − Fair Value= $150,500 − $146,000 = $4,500

Anisha Inc. bought a piece of equipment for $40,000 and expects to use it for eight years. Anisha then plans to sell it for $3,500. The company has already recorded depreciation of $35,995. Using the double-declining-balance method, what is Anisha's annual depreciation expense for the upcoming year?

Initial calculation: Depreciation expense = (Cost − Accumulated depreciation) × (2 ÷ Useful life)= ($40,000 − $35,995) × 2 / 8 = $1,001.25 (rounded to $1,001)Book value at end of the upcoming year = ($40,000 − $35,995 − $1,000) = $3,005, which is less than the residual value of $3,500. Recording this amount of depreciation expense in the upcoming year would cause the book value to drop below the residual value. Revised calculation: Depreciation expense = Beginning book value of $4,005 (or Cost of $40,000 − Accumulated depreciation of $35,995) − residual value of $3,500 = $505

On July 1, 2018, Ariyan Company lends $18,600 to a customer and receives a 8% note due in two years. Interest is due in full on July 1, 2020, the due date of the note. What is the amount of Interest Revenue that will be reported on Ariyan's income statement for the year ended December 31, 2018?

Interest = Principal × Interest rate × Time = $18,600 × 0.08 × 6/12 (July 1 through December 31) = $744

MoonCorp lends its supplier $170,000 for 3 years at a 8% annual interest rate. Interest payments are to be made twice a year. Each interest payment will be for:

Interest payments are made twice per year; six months are covered by each interest payment. Interest = Principal × Interest Rate × Time = $170,000 × 0.08 × 6/12 = $6,800

Oliver Company sells $849,300 of goods during the year that have a cost of $588,600. Inventory was $31,683 at the beginning of the year and $35,938 at the end of the year. What is the inventory turnover ratio?

Inventory turnover = Cost of goods sold ÷ Average inventory. = $588,600 ÷ [($31,683 + $35,938) ÷ 2] = 17.4 times (rounded)

JoaoCo has a gross profit percentage of 61%, while Mustafa Corp. has a gross profit percentage of 37%. Which of the following statements is correct?

JoaoCo and Mustafa Corp. both earn enough on each sale to make a contribution to their operating costs

HarrisCo uses a periodic inventory system. The company started the month with 7 masks in its beginning inventory that cost $9 each. During the month, HarrisCo purchased 42 additional masks for $11 each. At the end of the month, HarrisCo counted its inventory and found that 4 masks remained unsold. Using the LIFO method, its cost of goods sold for the month is:

LIFO − Periodic Beginning inventory7 units × $9 $63 Purchase 42 units × $11 462 = Goods available for sale 49 units $525 −Ending inventory 4 units × $9 36 = Cost of goods sold (3 units × $9) + (42 units × $11) $489

LetterCo, which uses the periodic inventory method, purchases different letters for resale. LetterCo had no beginning inventory. It purchased A thru G in January at $4 per letter. In February, it purchased H thru L at $6 per letter. It purchased M thru R in March at $7 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year.If LetterCo uses the LIFO method, what is the cost of its ending inventory?

LIFO − Periodic January purchase 7 units × $4 $28 +February purchase5 units × $6 30 March purchase6 units × $7 42 =Goods available for sale $100 −Ending inventory (7 units × $4) + (5 units × $6) 58 =Cost of goods sold6 × $7 $42

Salinas Inc. uses an accelerated depreciation method while Jayden-James Corp uses the straight-line method. All other things being equal, during the first few years of the asset's use, Salinas will show which of the following compared to Jayden-James?

Lower asset values and lower net income.

Storey Corp. had income before income tax of $165,400 last quarter and a 32% tax rate. What is the company's net income?

Net Income = Income before income tax - Income tax expense= $165,400 - ($165,400 × 0.32) = $112,472

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for RubyCo as they appear on the adjusted trial balance. Accounts Payable$11,000 Accounts Receivable 12,000 Inventory 20,200 Advertising Expense 12,500 Cost of Goods Sold 93,000 Delivery Expense 6,100 Income Tax Expense 2,250 Insurance Expense 1,000 Rent Expense 12,400 Sales Revenue 170,000 Sales Discounts 10,900 Sales Returns & Allowances 20,500 Net income would be:

Net income = Net sales − Cost of goods sold − Selling, general, and administrative expenses − Income tax expense= $138,600 − $93,000 − ($12,500 + $6,100 + $1,000 + $12,400) − $2,250 = $11,350

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Mccartney Inc. as they appear on the company's adjusted trial balance. Accounts Payable$30,000 Accounts Receivable 33,000 Inventory 60,000 Advertising Expense 36,000 Cost of Goods Sold 267,000 Delivery Expense 18,000 Income Tax Expense 6,000 Insurance Expense 3,000 Rent Expense 36,000 Sales Revenue 480,000 Sales Discounts 33,000 Sales Returns & Allowances 57,000 Net income would be:

Net income = Net sales − Cost of goods sold − Selling, general, and administrative expenses − Income tax expense= $390,000 − $267,000 − ($36,000 + $18,000 + $3,000 + $36,000) − $6,000 = $24,000

A company lends its supplier $171,000 for 3 years at a 9% annual interest rate. Interest payments are to be made twice a year. The entry to record this lending transaction includes a debit to:

Notes Receivable and a credit to Cash for $171,000.

ShaniaCo declared and paid a dividend of $8,200 this year. The entry to close Dividends at the end of the year will include a debit to:

Retained Earnings and a credit to Dividends for $8,200.

Donell Company uses the aging of accounts receivable method. The following information comes from its accounting records: Cash sales$400,000 Credit sales 1,600,000 Total sales 2,000,000 Credit balance in the Allowance for Doubtful Accounts 10,000 Estimated uncollectible accounts receivables 38,000 What is the estimate of bad debt expense?

The estimated uncollectible accounts receivable is the desired balance in the Allowance for Doubtful Accounts. The entry for bad debts expense equals $28,000, which is the difference between the current credit balance of $10,000 and the desired credit balance of $38,000.

During February 2020, the first month of operations, Vaughn Consulting firm had following transactions: Issued common stock to owners in exchange for $28,000 cash. Purchased $7,000 of equipment, paying $1,400 cash and signing a promissory note for $5,600. Received $12,600 in cash for consulting services performed in January. Purchased $2,100 of supplies on account; all of the supplies were used in January. Provided consulting services on account in the amount of $22,400. Paid $1,050 on account. Paid $4,200 to employees for work performed during February. Received a bill for utilities for February of $4,750; the bill remains unpaid. What is the amount of total revenue to be reported on the income statement for the month of February?

The income statement would report the revenues earned of $35,000 ($12,600 + $22,400).

BruceCo purchased a computer system on January 2, 2018 for $1,600,000. The company used the straight-line depreciation method with an estimated useful life of 6 years and a residual value of $130,000. The company prepares financial statements at December 31. Assume BruceCo decides to sell the computer system on July 1, 2020 for $1,000,000. Which of the following statements about the journal entry (or entries) required on July 1 is not correct?

The loss on the sale is $12,500. First, update the Deprecation Expense and Accumulated Depreciation accounts. Depreciation expense for 6 months (January through July) = (Cost − Residual value) × (1 ÷ Useful life) × 6 / 12= ($1,600,000 − $130,000) × (1 ÷ 6) × 6 / 12 = $122,500 Accumulated depreciation at July 1, 2020 = $245,000 + $245,000 + $122,500 = $612,500Gain (loss) on disposal = Proceeds from sale − Book value at time of saleGain (loss) on disposal = Proceeds from sale − (Cost − Accumulated depreciation at time of sale)= $1,000,000 − ($1,600,000 − $612,500) = $12,500

Mcdowell Inc. uses the percentage of credit sales method to estimate Bad Debt Expense. The company reported net credit sales of $640,000 during the year. Mcdowell has experienced bad debt losses of 4% of credit sales in prior periods. At the beginning of the year, Mcdowell has a credit balance in its Allowance for Doubtful Accounts of $5,400. No write-offs or recoveries were recorded during the year. What amount of Bad Debt Expense should Mcdowell recognize for the year?

The percentage of credit sales method estimates Bad Debt Expense by multiplying the historical percentage of bad debt losses by the current period's credit sales. Bad Debt Expense = Net credit sales × Bad debt loss rate = $640,000 × 0.04 = $25,600

Businesses with the same asset may report different amounts of depreciation in a given year for all of the following reasons, except:

They are in different industries. NOT They use different depreciation methods. They use different residual values. They use different estimated useful lives.

McmanusCo began business this year and entered into the following transactions during the year. McmanusCo issued common stock in exchange for cash of $80,000 from stockholders, borrowed $40,000 from a bank, bought $12,000 of inventory on account, and purchased $32,000 of equipment by paying $12,000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet at the end of the year?

This company's assets include Cash, Inventory, and Equipment. (These transactions also affect its liabilities, including Notes Payable and Accounts Payable, and its stockholders' equity, including Common Stock. The impact of these transactions on its liabilities and stockholders' equity is not set forth below.)Total assets = Cash received from stockholders of $80,000 + Inventory purchase of $12,000 + Equipment purchase of $32,000 + Cash received from bank borrowing of $40,000 − Cash used to purchase equipment of $12,000 = $152,000

The following is a complete listing of all account balances on the trial balance of Todd Company at the end of the period: Account Balance Accounts Payable$34,400 Cash 52,700 Common Stock 49,000 Equipment 23,000 Land 54,500 Notes Payable 69,500 Todd's trial balance is not in balance and the company's accountant has determined that the error is in the cash account. What is the correct balance in the cash account?

Total credits = Accounts Payable $34,400 + Common Stock $49,000 + Notes Payable $69,500 = $152,900 Total debits = Cash (unknown) + Equipment $23,000 + Land $54,500 Total debits must also equal $152,900$152,900 = Cash (unknown) + Equipment $23,000 + Land $54,500 Cash = $152,900 - Equipment $23,000 - Land $54,500 = $75,400

T-account: Accounts Receivable Beg. Bal.189,000 106,400 18,150 64,050 5,550 14,850 19,350 Partial list of account balances at the end of the year: Cash$28,150 Accounts Receivable Unknown Equipment 35,750 Accounts Payable 6,050 The amount of total current assets that will be reported on the balance sheet at the end of the year is:

Total current assets = Cash + Accounts Receivable Accounts Receivable is an asset; it is increased with debits (right-side of T-account) and decreased with credits (right-side of T-account)Ending Accounts Receivable balance = Beginning debit balance of $189,000 + $106,400 + $64,050 - $18,150 - $5,550 - $14,850 - $19,350 = $301,550Total Current Assets = $28,150 + $301,550 = $329,700

At year end, Aaliya Company's inventory consists of 200 bottles of Aaliya Soda at $1 per bottle and 100 boxes of Aaliya Candy Bars at $10 per box. Market values are $1.20 per bottle for Aaliya Soda and $8 per box for Aaliya Candy Bars. Aaliya Company should report its inventory at:

Total lower of cost or market = Lower of cost or market per unit × Number of units in inventory= ($1 × 200 units) + ($8 × 100 units) = $1,000

At year end, DarinCo's inventory consists of 280 bottles of DarinClean at $3 per bottle and 180 boxes of DarinDye at $8 per box. Market values are $3.30 per bottle for DarinClean and $6 per box for DarinDye. DarinCo should report its inventory at:

Total lower of cost or market = Lower of cost or market per unit × Number of units in inventory= ($3 × 280 units) + ($6 × 180 units) = $1,920

Atkinson Corp. reported net sales revenue of $18.8 billion and cost of goods sold of $5.6 billion, while Jace Company reported net sales revenue of $22.3 billion and cost of goods sold of $9.3 billion. Which of the following statements is correct?

While Jace Company generated more revenue than Atkinson Corp., Jace Company generated a lower gross profit percentage. Gross profit percentage = [(Net sales − Cost of goods sold) ÷ Net sales] × 100 Pixie: = [($18.8 − $5.6) ÷ $18.8] × 100 = 70.2% Stardust: = [($22.3 − $9.3) ÷ $22.3] × 100 = 58.3%

Evie-Rose Inc. uses a perpetual inventory system. When Evie-Rose sells inventory which cost $1,000 for a selling price of $3,000, the accounting equation would shows a net:

increase in assets and net increase in stockholders' equity.

Sales Revenue is a(n) ______ account and ______ is an expense account.

revenue; Cost of Goods Sold