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Accounting 326 (Ledwith)- Cumulative FInal

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A schedule of machinery owned by Micco Co. is presented below: Estimated Estimated Total Cost Salvage Value Life in Years Machine X $600,000 $40,000 14 Machine Y 800,000 80,000 10 Machine Z 300,000 60,000 6 Micco computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is a. 8.94. b. 10.59. c. 8.57. d. 15.56.

Among the short-term obligations of Larsen Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Dennison National Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on the balance sheet of Larsen Company as a. current liabilities. b. deferred charges. c. long-term liabilities. d. intermediate debt.

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. What is the actual interest for Arlington Company? a. $2,344,000 b. $2,376,000 c. $1,960,000 d. $939,220

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $1,800 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.15 each. Group 2 consists of 5,500 pieces that are expected to sell for $0.36 each. Group 3 consists of 500 pieces that are expected to sell for $0.72 each. Using the relative sales value method, what is the cost per item in Group 3? a. $0.48. b. $0.23. c. $0.72. d. $0.54.

Elmer Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. If the stock is sold for $30 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities? a. $1,500,000 b. $2,500,000 c. $1000,000 d. $0

Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2016. Its inventory at that date was $1,100,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Date Inventory at Current Prices Current Price Index December 31, 2017 $1,284,000 107 December 31, 2018 $1,450,000 125 December 31, 2019 $1,625,500 130 What is the cost of the ending inventory at December 31, 2019 under dollar-value LIFO? a. $1,281,200. b. $1,274,000. c. $1,250,000. d. $1,317,000.

In the recent year Hill Corporation had net income of $210,000, interest expense of $50,000, and tax expense of $90,000. What was Hill Corporation's times interest earned for the year? a. 7.0 b. 6.0 c. 5.2 d. 4.2

John Thomas has recently entered into an agreement with Longman Inc. Under this agreement, John will sell its products using the trade name of Longman in a specified geographical location. What type of intangible asset is this agreement between John Thomas and Longman Inc.? a. contract-related intangible assets b. artistic-related intangible assets c. marketing-related intangible assets d. customer-related intangible assets

Jump Corporation has $3,000,000 of short-term debt it expects to retire with proceeds from the sale of 85,000 shares of common stock. If the stock is sold for $25 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities? a. $2,125,000 b. $3,000,000 c. $875,000 d. $0

Lower-of-cost or net realizable value as it applies to inventory is best described as the A. drop of future utility below its original cost. B. method of determining cost of goods sold. C. assumption to determine inventory flow. D. change in inventory value to market value.

On December 31, 2015, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. *105. Nolte should record interest expense for 2018 of a. $0. b. $75,000. c. $150,000. d. $225,000

On July 1, 2016, Noble, Inc. issued 9% bonds in the face amount of $10,000,000, which mature on July 1, 2022. The bonds were issued for $9,560,000 to yield 10%, resulting in a bond discount of $440,000. Noble uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2018, Noble's unamortized bond discount should be a. $322,400. b. $340,000. c. $352,000. d. $310,000.

On March 1, Imhoff Co. began construction of a small building. Payments of $800,000 were made monthly for three months beginning March 1. The building was completed and ready for occupancy on June 1. In determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures are a. $400,000. b. $800,000. c. $1,600,000. d. $3,480,000. --------------------------

On May 1, 2017, Goodman Company began construction of a building. Expenditures of $600,000 were incurred monthly for 5 months beginning on May 1. The building was completed and ready for occupancy on September 1, 2017. For the purpose of determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures on the building during 2017 were a. $500,000. b. $600,000. c. $2,400,000. d. $3,000,000.

On September 1, Horton purchased $39,900 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $840. Payment for the purchase was made on September 18. Assuming Horton uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as inventory from this purchase? a. $39,501. b. $40,341. c. $40,740. d. $39,900.

The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. The actual interest cost incurred during 2017 was a. $450,000. b. $504,000. c. $252,000. d. $420,000.

The term "depreciable base," or "depreciation base," as it is used in accounting, refers to a. the total amount to be charged (debited) to expense over an asset's useful life. b. the cost of the asset less the related depreciation recorded to date. c. the estimated market value of the asset at the end of its useful life. d. the acquisition cost of the asset.

Vanco Company has 70 employees who work 8-hour days and are paid hourly. On January 1, 2017, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2017 may first be taken on January 1, 2018. Information relative to these employees is as follows: Hourly Vacation Days Earned Vacation Days Used Year Wages by Each Employee by Each Employee 2017 $20.50 10 0 2018 22.50 10 8 2019 25.50 10 10 Vanco has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2019? a. $168,000. b. $394,800. c. $142,800. d. $193,200.

What is interest? a. Payment for the use of money. b. An equity investment. c. Return on capital. d. Loan.

What is the normal journal entry when writing-off an account as uncollectible under the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

Which characteristic is not possessed by intangible assets? a. Physical existence. b. Long-lived. c. Result in future benefits. d. Expensed over current and/or future years.

Which of the following concepts relates to using the allowance method in accounting for accounts receivable? a. Bad debt expense is an estimate that is based on historical and prospective information. b. Bad debt expense is based on the actual amounts determined to be uncollectible. c. Bad debt expense is an estimate that is based only on an analysis of the receivables aging. d. Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.

Which of the following is included in inventory costs? a. Product costs. b. Period costs. c. Product and period costs. d. Neither product or period costs.

Which of the following is not an acceptable approach in applying the lower-of-cost-and net realizable value method to inventory? A. Inventory location. B. Categories of inventory items. C. Individual item. D. Total of the inventory.

Which of the following is true about accounts payable? 1. Accounts payable are also called trade accounts payable. 2. When accounts payable are recorded at the net amount, a Purchase Discounts account will be used. 3. When accounts payable are recorded at the gross amount, a Purchase Discounts Lost account will be used. a. 1 b. 2 c. 3 d. Both 2 and 3 are true.

Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence? a. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. b. A capital lease is entered into with the initial lease payment due one-month subsequent to the signing of the lease agreement. c. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 7%. d. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 9%.

4. During the year Tulip reported net sales of $960,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip's average collection period (assume 365 days a year.) a. 28.5 days b. 37.2 days. c. 45.7 days. d. 74.2 days

All of the following may be included under the heading of "cash" except a. currency. b. money market funds. c. checking account balance. d. savings account balance.

An analysis of the machinery accounts of Noller Company for 2018 is as follows: Machinery, Net of Accumulated Accumulated Machinery Depreciation Depreciation Balance at January 1, 2018 $500,000 $125,000 $375,000 Purchases of new machinery in 2018 for cash 200,000 — 200,000 Depreciation in 2018 — 100,000 (100,000) Balance at Dec. 31, 2018 $700,000 $225,000 $475,000 The information concerning Noller's machinery accounts should be shown in Noller's statement of cash flows (indirect method) for the year ended December 31, 2018, as a(n) a. subtraction from net income of $100,000 and a $200,000 decrease in cash flows from financing activities. b. addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities. c. $100,000 increase in cash flows from financing activities. d. $200,000 decrease in cash flows from investing activities.

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. What are the weighted-average accumulated expenditures? a. $11,680,000 b. $8,413,333 c. $19,680,000 d. $9,840,000

Craig borrowed $700,000 on October 1, 2017 and is required to pay $720,000 on March 1, 2018. What amount is the note payable recorded at on October 1, 2017 and how much interest is recognized from October 1 to December 31, 2017? a. $700,000 and $0. b. $700,000 and $12,000. c. $720,000 and $0. d. $700,000 and $20,000.

Goodwill a. represents the purchase price of a business that is about to be sold. b. is the difference between the fair value of the net tangible and identifiable intangible assets and the purchase price of the acquired business. c. generated internally should be capitalized in the year it occurs. d. is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

Hay Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $379,500, and the price index was 110. What is Hay Company's gross profit? a. $1,245,000. b. $1,249,500. c. $1,279,500. d. $2,650,500.

June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 80 units that cost $20 per unit. During the current month, the company purchased 480 units at $20 each. Sales during the month totaled 360 units for $43 each. What is the cost of goods sold using the LIFO method? a. $1,600. b. $7,200. c. $9,600. d. $15,480.

Nichols Company had 500 units of "Dink" in its inventory at a cost of $5 each. It purchased, for $2,400, 300 more units of "Dink". Nichols then sold 600 units at a selling price of $10 each, resulting in a gross profit of $2,100. The cost flow assumption used by Nichols. a. is FIFO. b. is LIFO. c. is weighted average. d. cannot be determined from the information given.

On December 31, 2015, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. *103. Nolte should recognize a gain or loss on the transfer of the equipment of a. $0. b. $200,000 gain. c. $300,000 gain. d. $950,000 loss.

On January 4, 2017, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Kiley received $800,000 covering the first two years' rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Dodd upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Kiley's December 31, 2017 balance sheet? TEST MIDTERM Current Liability Long-term Liability a. $0 $800,000 b. $200,000 $400,000 c. $400,000 $400,000 d. $400,000 $200,000

Posner Co. is a retail store operating in a state with a 7% retail sales tax. The retailer may keep 2% of the sales tax collected. Posner Co. records the sales tax in the Sales Revenue account. The amount recorded in the Sales Revenue account during May was $754,350. 100. The amount of sales taxes (to the nearest dollar) for May is a. $62,286. b. $49,350. c. $67,893. d. $52,806.

RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year- end prices was $430,080, and the price index was 112. What is RF Company's gross profit? a. $1,248,000. b. $1,294,080. c. $1,330,380. d. $2,605,920.

Robertson Corporation acquired two inventory items at a lump-sum cost of $96,000. The acquisition included 3,000 units of product CF, and 7,000 units of product 3B. CF normally sells for $27 per unit, and 3B for $9 per unit. If Robertson sells 1,000 units of CF, what amount of gross profit should it recognize? a. $3,000. b. $9,000. c. $18,000. d. $24,000.

Shelton Company has the following account balances at year-end: TEST MIDTERM Accounts receivable $140,000 Allowance for doubtful accounts $7,200 Sales discounts $4,800 Shelton should report accounts receivable at a net amount of a. $128,000. b. $132,800. c. $135,200. d. $140,000.

Slotkin Products purchased a machine for $65,000 on July 1, 2017. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $5,000. Depreciation for 2017 is a. $32,500 b. $8,125 c. $14,219 d. $15,000

The accountant for the Lintz Sales Company is preparing the income statement for 2017 and the balance sheet at December 31, 2017. The January 1, 2017 merchandise inventory balance will appear a. only as an asset on the balance sheet. b. only in the cost of goods sold section of the income statement. c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) a. addition to net income. b. deduction from net income. c. investing activity. d. financing activity.

The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. Assume the weighted-average accumulated expenditures for the construction project are $4,350,000. The amount of interest cost to be capitalized during 2017 is a. $391,500. b. $414,000. c. $450,000. d. $504,000.

The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called a. financial accounting. b. managerial accounting. c. tax accounting. d. auditing.

Transactions for the month of June were: See numbers above: 106. Assuming that perpetual inventory records are kept in units only, the ending inventory on an averagecost basis, rounded to the nearest dollar, is a. $16,384. b. $16,952. c. $17,160. d. $17,280

Which factor would be greater — the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period? a. Present value of $1 for 10 periods at 8% per period. b. Future value of $1 for 10 periods at 8% per period. c. The factors are the same. d. Need more information.

Which of the following is a nominal (temporary) account? TEST MIDTERM a. Unearned Service Revenue b. Salaries and Wages Expense c. Inventory d. Retained Earnings

Which of the following is considered cash? a. Certificates of deposit (CDs) b. Money market checking accounts c. Money market savings certificates d. Postdated checks

Which of the following most accurately reflects the concept of depreciation as used in accounting? a. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred. b. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. c. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved. d. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets.

Which of the following represents a form of communication through financial reporting but not through financial statements? a. Balance sheet. b. President's letter. c. Income statement. d. Notes to financial statements.

Which of the following tables would show the smallest value for an interest rate of 5% for six periods? a. Future value of 1 b. Present value of 1 c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1

Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost? a. Purchase discounts lost b. Interest incurred during the production of discrete projects such as ships or real estate projects c. Interest incurred on notes payable to vendors for routine purchases made on a repetitive basis d. All of these should be capitalized.

. Finley, Inc.'s checkbook balance on December 31, 2017 was $84,800. In addition, Finley held the following items in its safe on December 31. (1) A check for $1,800 from Peters, Inc. received December 30, 2017, which was not included in the checkbook balance. (2) An NSF check from Garner Company in the amount of $3,600 that had been deposited at the bank, but was returned for lack of sufficient funds on December 29. The check was to be redeposited on January 3, 2018. The original deposit has been included in the December 31 checkbook balance. (3) Coin and currency on hand amounted to $5,800. The proper amount to be reported on Finley's balance sheet for cash at December 31, 2017 is a. $85,200. b. $81,600. c. $88,800. d. $87,100

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. What amount of interest should be charged to expense? a. $1,020,778 b. $1,960,000 c. $1,404,780 d. $1,107,178

Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b. written off as a loss in the year the hotel is torn down. c. capitalized as part of the cost of the land. d. capitalized as part of the cost of the new hotel.

Crabbe Company reported $80,000 of selling and administrative expenses on its income statement for the past year. The company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative expenses for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expenses to the cash basis? Increase in Depreciation Prepaid Expenses a. Deducted From Deducted From b. Added To Added To c. Deducted From Added To d. Added To Deducted From

During 2017, Kimmel Co. incurred weighted-average accumulated expenditures of $1,600,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2017 was a $2,000,000, 10%, 5-year note payable dated January 1, 2017. What is the amount of interest that should be capitalized by Kimmel during 2017? a. $0. b. $40,000. c. $160,000. d. $200,000.

During 2018, equipment was sold for $468,000. The equipment cost $786,000 and had a book value of $432,000. Accumulated Depreciation—Equipment was $2,061,000 at 12/31/17 and $2,205,000 at 12/31/18. Depreciation expense for 2018 was a. $144,000. b. $288,000. c. $498,000. d. $576,000.

Each of the following are physical factors affecting depreciation except a. casualties. b. decay. c. obsolescence. d. wear and tear

Equipment which cost $426,000 and had accumulated depreciation of $228,000 was sold for $222,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n) a. addition to net income of $24,000 and a $222,000 cash inflow from financing activities. b. deduction from net income of $24,000 and a $198,000 cash inflow from investing activities. c. deduction from net income of $24,000 and a $222,000 cash inflow from investing activities. d. addition to net income of $24,000 and a $198,000 cash inflow from financing activities.

Falcon Company purchased a depreciable asset for $175,000. The estimated salvage value is $14,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset? a. $16,100 b. $17,500 c. $161,000 d. $175,000

Generally accepted accounting principles a. are fundamental truths or axioms that can be derived from laws of nature. b. derive their authority from legal court proceedings. c. derive their credibility and authority from general recognition and acceptance by the accounting profession. d. have been specified in detail in the FASB conceptual framework

Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2016. Its inventory at that date was $1,100,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Date Inventory at Current Prices Current Price Index December 31, 2017 $1,284,000 107 December 31, 2018 $1,450,000 125 December 31, 2019 $1,625,500 130 What is the cost of the ending inventory at December 31, 2018 under dollar-value LIFO? a. $1,160,000. b. $1,157,000. c. $1,164,200. d. $1,200,000.

Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2016. Its inventory at that date was $1,100,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Date Inventory at Current Prices Current Price Index December 31, 2017 $1,284,000 107 December 31, 2018 $1,450,000 125 December 31, 2019 $1,625,500 130 125. What is the cost of the ending inventory at December 31, 2017 under dollar-value LIFO? a. $1,200,000. b. $1,284,000. c. $1,207,000. d. $1,177,000.

Hager Company sold some of its plant assets during 2018. The original cost of the plant assets was $900,000 and the accumulated depreciation at date of sale was $840,000. The proceeds from the sale of the plant assets were $90,000. The information concerning the sale of the plant assets should be shown on Hager's statement of cash flows (indirect method) for the year ended December 31, 2018, as a(n) a. subtraction from net income of $30,000 and a $60,000 increase in cash flows from financing activities. b. addition to net income of $30,000 and a $90,000 increase in cash flows from investing activities. c. subtraction from net income of $30,000 and a $90,000 increase in cash flows from investing activities. d. addition of $90,000 to net income.

Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2019 and 2018 are provided below. BALANCE SHEETS 12/31/19 12/31/18 Cash $408,000 $ 192,000 Accounts receivable 360,000 216,000 Inventory 384,000 480,000 Property, plant and equipment $608,000 $960,000 Less accumulated depreciation (320,000) 288,000 (304,000) 656,000 $1,440,000 $1,544,000 Accounts payable $ 176,000 $ 96,000 Income taxes payable 352,000 392,000 Bonds payable 360,000 600,000 Common stock 216,000 216,000 Retained earnings 336,000 240,000 $1,440,000 $1,544,000 INCOME STATEMENT For the Year Ended December 31, 2019 Sales revenue $8,400,000 Cost of sales 7,152,000 Gross profit 1,248,000 Selling expenses $600,000 Administrative expenses 192,000 792,000 Income from operations 456,000 Interest expense 72,000 Income before taxes 384,000 Income taxes 96,000 Net income $ 288,000 The following additional data were provided: 1. Dividends for the year 2019 were $192,000. 2. During the year, equipment was sold for $240,000. This equipment cost $352,000 originally and had a book value of $288,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales. 3. All depreciation expense is in the selling expense category. 55. The net cash provided (used) by financing activities is a. $(240,000). b. $48,000. c. $(432,000). d. $192,000.

In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as a. other assets. b. indirect costs. c. goodwill. d. direct costs.

In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from TEST MIDTERM a. operating activities. b. financing activities. c. investing activities. d. selling activities.

In recent year Cey Corporation had net income of $750,000, interest expense of $150,000, and a times interest earned ratio of 9. What was Cey Corporation's income before taxes for the year? a. $1,000,000 b. $1,350,000 c. $1,200,000 d. None of these answers are correct.

Jeff Corporation purchased a limited-life intangible asset for $375,000 on May 1, 2016. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2018? a. $ -0- b. $75,000 c. $100,000 d. $112,500

June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 80 units that cost $20 per unit. During the current month, the company purchased 480 units at $20 each. Sales during the month totaled 360 units for $43 each. What is the number of units in the ending inventory? a. 80 units. b. 120 units. c. 200 units. d. 560 units.

Morgan Corporation purchased a depreciable asset for $600,000 on January 1, 2015. The estimated salvage value is $60,000, and the estimated useful life is 9 years. The straightline method is used for depreciation. In 2018, Morgan changed its estimates to a total useful life of 5 years with a salvage value of $90,000. What is 2018 depreciation expense? a. $60,000 b. $90,000 c. $165,000 d. $180,000

Mortenson Corporation sells its product, a rare metal, in a controlled market with a quoted price applicable to all quantities. The total cost of 5,000 pounds of the metal now held in inventory is $200,000. The total selling price is $560,000, and estimated costs of disposal are $20,000. At what amount should the inventory of 5,000 pounds be reported in the balance sheet? a. $180,000. b. $200,000. c. $540,000. d. $560,000.

On January 1, 2018, Huff Co. sold $5,000,000 of its 10% bonds for $4,426,480 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Huff report as interest expense for the six months ended June 30, 2018? a. $221,330 b. $250,000 c. $265,589 d. $300,000

On June 30, 2018, Omara Co. had outstanding 8%, $8,000,000 face amount, 15-year bonds maturing on June 30, 2028. Interest is payable on June 30 and December 31. The unamortized balance in the bond discount account on June 30, 2018 was $360,000. On June 30, 2018, Omara acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt? a. $7,920,000. b. $7,720,000. c. $7,640,000. d. $7,520,000.

Parton owes $3 million that is due on February 28. The company borrows $2,400,000 on February 25 (5-year note) and uses the proceeds to pay down the $3 million note and uses other cash to pay the balance. How much of the $3 million note is classified as longterm in the December 31 financial statements? a. $3,000,000. b. $0. c. $2,400,000. d. $600,000.

RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year- end prices was $430,080, and the price index was 112. What is RF Company's ending inventory? a. $300,000. b. $384,000. c. $394,080. d. $430,080

Rodriguez Corporation sells its product, a rare metal, in a controlled market with a quoted price applicable to all quantities. The total cost of 5,000 pounds of the metal now held in inventory is $315,000. The total selling price is $840,000, and estimated costs of disposal are $15,000. At what amount should the inventory of 5,000 pounds be reported in the balance sheet? a. $300,000. b. $315,000. c. $825,000. d. $840,000.

The computation of depreciation under MACRS differs from the GAAP computation except for a. a mandated tax life, which is generally shorter than the economic life. b. Cost recovery on an accelerated basis. c. the determination of asset cost. d. an assigned salvage value of zero

The cost of land typically includes the purchase price and all of the following costs except a. grading, filling, draining, and clearing costs. b. street lights, sewers, and drainage systems cost. c. private driveways and parking lots. d. assumption of any liens or mortgages on the property.

Under IFRS, a decrease in economic benefit that results in a decrease in equity is termed as a(an): a. Loss of economic benefit b. Comprehensive loss c. Expense d. Distributions to owners

Valley, Inc., is a retail store operating in a state with a 5% retail sales tax. The state law provides that the retail sales tax collected during the month must be remitted to the state during the following month. If the amount collected is remitted to the state on or before the twentieth of the following month, the retailer may keep 3% of the sales tax collected. On April 10, 2017 Valley remitted $203,700 tax to the state tax division for March 2017 retail sales. What was Valley's March 2017 retail sales subject to sales tax? a. $4,074,000. b. $3,990,000. c. $4,200,000. d. $4,112,500.

What interest rate (the nearest percent) must Charlie earn on a $452,000 investment today so that he will have $1,140,000 after 12 years? TEST MIDTERM a. 6%. b. 7%. c. 8%. d. 9%.

What is not a variable that is considered in interest computations? a. Principal. b. Interest rate. c. Assets. d. Time.

What is the normal journal entry for recording bad debt expense under the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as a. a prior period adjustment. b. an extraordinary item. c. an amount after continuing operations. d. a bulk sale of plant assets included in income from continuing operations.

When a corporation pays a note payable and interest, TEST MIDTERM a. the account notes payable will be increased. b. the account interest expense will be decreased. c. they will debit notes payable and interest expense. d. they will debit cash.

Which of the following characteristics do intangible assets possess? a. Physical existence. b. Claim to a specific amount of cash in the future. c. Long-lived. d. Held for resale

Which of the following intangible assets cannot be sold by a business to raise needed cash for a capital project? a. Patent. b. Copyright. c. Goodwill. d. Brand Name.

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? TEST MIDTERM a. The gain or loss on disposal should be reported as an unusual gain or loss. b. Results of operations of a discontinued component should be disclosed immediately before income from continuing operations. c. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement. d. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

Which of the following is not true concerning a conceptual framework in accounting? a. It should be a basis for standard-setting. b. It should allow practical problems to be solved more quickly by reference to it. c. It should be based on fundamental truths that are derived from the laws of nature. d. All of these answer choices are true.

Which of the following is true of accounting for changes in estimates? a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements. b. A company accounts for changes in estimates only in the period of change, even though it affects the future periods. c. Changes in estimates are not carried back to adjust prior years. d. Changes in estimates are considered as errors.

Which table has a factor of 1.00000 for 1 period at every interest rate? a. Future value of 1 b. Present value of 1 c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1

Xanthe Corporation had the following transactions occur in the current year: 1. Cash sale of merchandise inventory. 2. Sale of delivery truck at book value. 3. Sale of Xanthe common stock for cash. 4. Issuance of a note payable to a bank for cash. 5. Sale of a security held as an available-for-sale investment. 6. Collection of loan receivable. How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? a. Five items b. Four items c. Three items d. Two items

*Debit always means a. the right side of an account. b. an increase. c. a decrease. d. None of these answer choices are correct.

A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n) a. addition adjustment to net income in the cash flows from operating activities section. b. cash outflow from investing activities. c. cash inflow from investing activities. d. cash inflow from financing activities.

A journal entry to record a receipt of rent in advance will include a TEST MIDTERM a. debit to Rent Revenue. b. credit to Rent Revenue. c. credit to Cash. d. credit to Unearned Revenue.

A limitation of the balance sheet that is not also a limitation of the income statement is A. the use of judgments and estimates B. omitted items C. the numbers are affected by the accounting methods employed D. valuation of items at historical cost

A schedule of machinery owned by Micco Co. is presented below: Estimated Estimated Total Cost Salvage Value Life in Years Machine X $600,000 $40,000 14 Machine Y 800,000 80,000 10 Machine Z 300,000 60,000 6 Micco computes depreciation by the composite method. The composite life (in years) for these assets is a. 15.6. b. 8.6. c. 8.9. d. 10.0

All of the following costs should be charged against revenue in the period in which costs are incurred except for a. manufacturing overhead costs for a product manufactured and sold in the same accounting period. b. costs which will not benefit any future period. c. costs from idle manufacturing capacity resulting from an unexpected plant shutdown. d. costs of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory.

Alonzo Co. acquires 3 patents from Shaq Corp. for a total of $280,000. The patents were carried on Shaq's books as follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000. When Alonzo acquired the patents their fair values were: Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000. At what amount should Alonzo record Patent BB? a. $93,333 b. $186,666 c. $2,000 d. $210,000

An accounting record into which the essential facts and figures in connection with all transactions are first recorded is called the a. ledger. b. account. c. trial balance. d. None of these answer choices are correct.

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. What is the avoidable interest for Arlington Company? a. $384,000 b. $1,236,820 c. $438,682 d. $939,220

Contreras Corporation acquired a patent on May 1, 2017. Contreras paid cash of $35,000 to the seller. Legal fees of $1,500 were paid related to the acquisition. What amount should be debited to the patent account? a. $1,500 b. $33,500 c. $35,000 d. $36,500

Economic factors that shorten the service life of an asset include a. obsolescence. b. supersession. c. inadequacy. d. all of these answers are correct

Factors that shape an accounting information system include the a. nature of the business. b. size of the firm. c. volume of data to be handled. d. All of these answer choices are correct

Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. 30. Another step in calculating the issue price of the bonds is to a. multiply $10,000 by the table value for 10 periods and 10% from the present value of an annuity table. b. multiply $10,000 by the table value for 20 periods and 5% from the present value of an annuity table. c. multiply $10,000 by the table value for 20 periods and 4% from the present value of an annuity table. d. None of these answers is correct.

If a corporation purchases land and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on a. the significance of the cost allocated to the building in relation to the combined cost of the land and building. b. the length of time for which the building was held prior to its demolition. c. the contemplated future use of the parking lot. d. the intention of management for the property when the building was acquired.

If a petty cash fund is established in the amount of $300, and contains $180 in cash and $115 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts a. Petty Cash, $90. b. Petty Cash, $120. c. Cash, $115; Cash Over and Short, $5. d. Cash, $120.

Lynne Corporation acquired a patent on May 1, 2017. Lynne paid cash of $90,000 to the seller. Legal fees of $2,000 were paid related to the acquisition. What amount should be debited to the patent account? a. $2,000 b. $88,000 c. $90,000 d. $92,000

McGlone Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $40,000. During 2017, it wrote off $28,000 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/17, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as its Allowance for Doubtful Accounts at 12/31/17? TEST MIDTERM a. $19,200. b. $19,600. c. $27,600. d. $48,000.

On December 31, 2015, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $3,000,000 note with $300,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $1,450,000, an original cost of $2,400,000, and accumulated depreciation of $1,150,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. *104. Nolte should recognize a gain on the partial settlement and restructure of the debt of a. $0. b. $75,000. c. $275,000. d. $375,000.

On January 1, 2013, Goll Corp. issued 3,000 of its 10%, $1,000 bonds for $3,120,000. These bonds were to mature on January 1, 2023 but were callable at 101 any time after December 31, 2016. Interest was payable semiannually on July 1 and January 1. On July 1, 2018, Goll called all of the bonds and retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Goll's gain or loss in 2018 on this early extinguishment of debt was a. $90,000 gain. b. $36,000 gain. c. $30,000 loss. d. $24,000 gain

On its December 31, 2017 balance sheet, Emig Corp. reported bonds payable of $6,000,000 The bonds had been issued at par. On January 2, 2018, Emig retired $3,000,000 of the outstanding bonds at par plus a call premium of $70,000. What amount should Emig report in its 2018 income statement as loss on extinguishment of debt (ignore taxes)? a. $0 b. $30,000 c. $35,000 d. $70,000

Rock Company purchased a depreciable asset for $600,000 on April 1, 2015. The estimated salvage value is $60,000, and the estimated total useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2018 when the asset is sold? a. $234,000 b. $252,000 c. $297,000 d. $333,000

Stine Corp.'s trial balance reflected the following account balances at December 31, 2017: TEST MIDTERM Accounts receivable (net) $38,000 Trading securities $12,000 Accumulated depreciation on equipment and furniture $30,000 Cash $32,000 Inventory $6,000 Equipment $50,000 Patent $8.000 Prepaid expenses $4,000 Land held for future business site $36,000 In Stine's December 31, 2017 balance sheet, the current assets total is a. $180,000. b. $164,000. c. $154,000. d. $146,000.

The effective interest on a 12-month, zero-interest-bearing note payable of $400,000, discounted at the bank at 7% is a. 6.54%. b. 7%. c. 14.29%. d. 7.53%.

The financial statements most frequently provided include all of the following except the a. balance sheet. b. income statement. c. statement of cash flows. d. statement of retained earnings.

The interest rate written in the terms of the bond indenture is known as the a. coupon rate. b. nominal rate. c. stated rate. d. coupon rate, nominal rate, or stated rateq

The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. The weighted-average accumulated expenditures on the construction project during 2017 were a. $1,920,000. b. $14,670,000. c. $1,560,000. d. $3,280,000.

The rate of interest actually earned by bondholders is called the a. stated rate. b. coupon rate. c. nominal rate. d. effective rate.

Transactions for the month of June were: See numbers above 105. Assuming that FIFO basis is a. $16,440. b. $16,640. c. $17,160. d. $17,880

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as TEST MIDTERM a. an increase in depreciation expense for the year in which the error is discovered. b. a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. c. a change in accounting principle for the year in which the error was made. d. a prior period adjustment.

What best describes the time value of money? a. The interest rate charged on a loan. b. Accounts receivable that are determined uncollectible. c. An investment in a checking account. d. The relationship between time and money.

What is a purpose of having a conceptual framework? a. To make sure that economic activity can be identified with a particular legal entity. b. To segregate activities among different companies. c. To provide comparable information for different companies. d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

When a new company is acquired, which of these intangible assets, unrecorded on the acquired company's books, might be recorded in addition to goodwill? a. A brand name. b. A patent. c. A customer list. d. All of these answer choices are correct.

Which method may be used to record cash discounts a company receives for paying suppliers promptly? a. Net method. b. Gross method. c. Average method. d. Both the net method and the gross method.

Which of the following is a current liability? a. A long-term debt maturing currently, which is to be paid with cash in a sinking fund b. A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue c. A long-term debt maturing currently, which is to be converted into common stock d. None of these answers are correct.

Which of the following is not a benefit associated with the FASB Conceptual Framework Project? TEST MIDTERM a. A conceptual framework should increase financial statement users' understanding of and confidence in financial reporting. b. Practical problems should be more quickly solvable by reference to an existing conceptual framework. c. A coherent set of accounting standards and rules should result. d. Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

Which of the following is not considered cash for financial reporting purposes? a. Petty cash funds and change funds b. Money orders, certified checks, and personal checks c. Coin, currency, and available funds d. Postdated checks and I. O. U.'s

Which of the following items should not be included in the Cash caption on the balance sheet? a. Coins and currency in the cash register b. Checks from other parties presently in the cash register c. Amounts on deposit in checking account at the bank d. Postage stamps on hand

Which of the following organizations has been responsible for setting U.S. accounting standards? TEST MID TERM a. The Accounting Principles Board. b. The Committee on Accounting Procedure. c. The Financial Accounting Standards Board. d. All of the answer choices are correct

Which of these is not a major characteristic of a plant asset? a. Possesses physical substance b. Acquired for use in operations c. Yields services over a number of years d. All of these are major characteristics of a plant asset.

Which table would you use to determine how much must be deposited now in order to provide for 5 annual withdrawals at the beginning of each year, starting one year from the first deposit? a. Future value of an ordinary annuity of 1 b. Future value of an annuity due of 1 c. Present value of an annuity due of 1 d. Present value of an ordinary annuity of 1.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts? a. Allowance method is used for tax purposes. b. Estimates are used. c. Determining worthless accounts under direct write-off method is difficult to do. d. Improved matching of bad debt expense with revenue.

At a lump-sum cost of $69,000, Pratt Company recently purchased the following items for resale: Item No. of Items Purchased Resale Price Per Unit M 4,000 $3.75 N 2,000 $12.00 O 6,000 $6.00 The appropriate cost per unit of inventory is: M N O e. $3.75 $12.00 $6.00 f. $3.38 $10.80 $5.40 g. $3.45 $11.04 $5.52 h. $5.75 $5.75 $5.75

The balance sheet contributes to financial reporting by providing a basis for all of the following except TEST MIDTERM e. computing rates of return. f. evaluating the capital structure of the enterprise. g. determining the increase in cash due to operations. h. assessing the liquidity and financial flexibility of the enterprise.

The balance sheet is useful for analyzing all of the following except e. liquidity. f. solvency. g. profitability. h. financial flexibility.

Balance sheet information is useful for all of the following except e. assessing a company's risk f. evaluating a company's liquidity g. evaluating a company's financial flexibility h. determining free cash flows.

Which of the following is a limitation of the balance sheet? e. Many items that are of financial value are omitted. f. Judgments and estimates are used. g. Current fair value is not reported. h. All of these answer choices are correct.

Which method(s) may be used to record a loss due to a price decline in the value of inventory? i. The cost-of-goods-sold method. j. The sales method. k. The loss method l. Both the cost-of-goods-sold method and the loss method.

Ortiz Co. had the following account balances: TEST MIDTERM Sales revenue $440,000 Cost of goods sold 220,000 Salaries and wages expense 30,000 Depreciation expense 60,000 Dividend revenue 12,000 Utilities expense 24,000 Rent revenue 60,000 Interest expense 36,000 Sales returns and allow. 33,000 Advertising expense 39,000 What would Ortiz report as total revenues in a single-step income statement? a. $479,000 b. $ 70,000 c. $472,000 d. $440,000

a. $479,000 $440,000 + $12,000 + $60,000 - $33,000 = $479,000.

7. In preparing its bank reconciliation for the month of April 2017, Henke, Inc. has the following information available. Balance per bank statement, 4/30/17 $102,420 NSF check returned with 4/30/17 bank statement $1,350 Deposits in transit, 4/30/17 $15,000 Outstanding checks, 4/30/17 $15,600 Bank service charges for April $60 What should be the correct balance of cash at April 30, 2017? a. $103,110 b. $101,820 c. $100,470 d. $100,410

c. $100,470 $102,420 + $15,000 - $15,600 = $101,820.

When the cost-of-goods-sold method is used to record inventory at net realizable value i. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. j. a loss is recorded directly in the inventory account by crediting Inventory and debiting Loss on Inventory Decline. k. only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. l. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.

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