Quest 3

Ogden Motors, Inc. is involved in a lawsuit. It is reasonably possible that the jury will find in favor of the plaintiff and Ogden will owe ten million dollars. What is the appropriate reporting of this lawsuit and what is the effect on the balance sheet?

Record, Decrease Owner's Equity, Increase Liabilities

On March 1, Wright Company purchased new equipment for 50,000. Wright paid cash for the equipment. Other costs associated with the equipment were: transportation costs, 1,000; sales tax paid 3,000; and installation cost, 2,500. The cost recorded for the equipment was:

56,000

A machine has a cost of 18,000, an estimated residual value of 3,000, and an estimated useful life of five years. The machine is being depreciated on a straight line basis. At the end of the second year, what amount will be reported for accumulated depreciation?

6,000

The balance sheet of Bronco Company shows assets of 86,400 and liabilities of 14,400. The fair market value of the assets is 90,000, and the liabilities can be settled at their book value of 14,400. Lion inc. paid Bronco Company 83,520 to acquire it. Lions inc. should record goodwill on this purchase of:

7,920

Region Jet has a $50 million liability at December 31, 2015, of which $10 million is payable in 2016. In its December 31, 2015 balance sheet, the company reports the $50 million debt as

A $10 million current liability and a $40 million long-term liability on the balance sheet

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

A credit to a liability account

What is the amount of long term assets assuming the accounts above reflect normal activity?

buildings+furniture+copyrights= 173,000

Which of the following is true regarding LIFO and FIFO?

In a period of rising costs, LIFO results in lower net income than FIFO

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

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.

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent:

Liabilities until the product or service is provided

In accounting, goodwill

May be recorded when a company purchases another business.

Productive assets that are physically used up, or depleted are:

Natural Resources

Baker Fine Foods has beginning inventory for the year of $12,000. During the year, Baker purchases inventory for $150,000 and ends the year with $20,000 of inventory. Baker will report cost of goods sold equal to:

142,000

Citizen Company purchased a large tractor on January 1, 2010, for $64,000. The tractor's useful life is estimated to be 30,000 miles and has a residual value of $4,000. If Citizen used the tractor for 5,000 miles in 2010, 3,000 in 2011, what amount of depreciation expense should Citizen Company record in 2010 using the activity method?

16,000

Cutter Enterprises purchased equipment for 72,000 on January 1, 2010. The equipment is expected to have a five year life, with a residual value of 6,000 at the end of five years. Using the double declining balance method, depreciation expense for 2010 would be:

28,800

Carpenter Inc. estimates warranty expense at 2% of sales. Sales during the year were $4 million and warranty expenditures were $44,000. What was the balance in the Warranty Liability account at the end of the year?

36,000

The primary reason for the popularity of lIFO is that it gives:

A lower income tax obligation

Gains on the sale of fixed assets for cash:

Are the excess of the cash received over the book value.

Davis Hardware Company uses a periodic inventory system. How should Davis record the sale of inventory costing $620 for $960 on account?

B. Accounts Receivable 960 Sales Revenue 960 Cost of goods sold 620 Inventory 620

The practice of using the lower of cost or market to evaluate inventory reflects which of the following accounting principles?

Conservatism

The exclusive right to benefit from a creative work, such as a film, is a:

Copyright

The factors that need to be known to compute depreciation are an asset's:

Cost, residual value, and service life

Research and development costs should be:

Expensed in the period incurred

Goodwill is:

The excess of the fair market value of a business over the fair market value of all net identifiable assets.

The exclusive right to display a symbol of product identification is a:

Trademark