accounting ch4-8 quizes

. A building with an appraisal value of $250,000 is made available at an offer price of $180,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $65,000, and a mortgage amounting to $63,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

$163,000

Which of the following statements is true regarding dividend income?

dividend income appears in the stockholder's equity section of the balance sheet

If the number of periods is known, the interest rate is determined by

dividing the future value by the present value and looking for the quotient in the future value of 1 table

Which of the following is not a requirement of the Sarbanes-Oxley Act?

external auditors can no longe provide human resource services

The Cost of Goods Sold account is updated after each sale of merchandise under the periodic inventory system. True or false?

false

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable result from a written promise to pay within a specified amount of time

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

accumulated depreciation

What is not a generally recognized internal control procedure?

reducing the cost of hiring seasonal employees

Assume ABC Company deposits $90,000 with First National Bank in an account earning interest at 6% per annum, compounded semi-annually. How much will ABC have in the account after five years if interest is reinvested?

$120,953

Sonata Corporation will receive $40,000 today (January 1, 2020), and also on each January 1st for the next five years (2021 - 2025). What is the present value of the six $40,000 receipts, assuming a 12% interest rate?

$184,191

Al Darby wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?

$20,000 times the present value of a 5 year, 10% ordinary annuity of 1

Using the following information, what is the amount of cost of goods sold? Purchases $32,000 Merchandise Inventory, September 1 5,700 Merchandise Inventory, September 30 6,370 Purchase returns and allowances 1,200 Purchase discounts 960 Transportation-in 1,040 Sales 63,000

$28,130

The data presented below are for Falconi, Inc. for 2021. Credit sales during the year $2,100,000 Accounts receivable—December 31, 2021 395,000 Allowance for doubtful accounts—December 31, 2021 20,000 Bad debts expense for the year 17,000 What amount will Falconi show on its year-end balance sheet for the net realizable value of its accounts receivable?

$375,000

Birken Co. purchased a building for $500,000 in 2020. At the end of 2021, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Birken rejected the offer. What amount is in Birken's records at the end of 2021 in the Building account?

$500,000

On January 1, 2020, Accounts Receivable and Allowance for Uncollectible Accounts for Darius Company carried balances of $20,000 and $550, respectively. During the year, the company reported $70,000 of credit sales. There were $400 of receivables written off as uncollectible in 2021. Cash collections of receivables amounted to $74,700. The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance. The amount of bad debts expense recognized in the 2021 income statement will be:

$595

Which inventory costing method assigns the cost of the most recent items purchased to ending inventory?

LIFO

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2021. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2021. Park paid the amount due on June 13, 2021. ​ Who is responsible for payment of the transportation costs on the merchandise sold by Jay Zee Music to Park?

Park, Inc.

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long? a. company may need to borrow to acquire operating cash b. company may offer trade discounts to lengthen the collection period c. cash flows from operations may be higher than expected for company sales d. the company should expand operations with its excess cash

a. company may need to borrow to acquire operating cash

A customer returned damaged goods and was given an allowance. Which of the seller's accounts decreases?

accounts receivable

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair markets values

A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an

annuity due

. Arena, Inc. uses straight-line depreciation for its equipment. Arena purchased equipment for $300,000 and estimated its useful life at eight years. The bookkeeper failed to consider the residual value of $50,000. What is the impact on earnings per share and operating income of failing to consider the residual value?

both earnings per share and operating income will be understated

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for

both the periodic and perpetual inventory systems

What would appear on the income statement of a merchandising company, but not on the income statement of a service company?

cost of goods sold

Which one of the following is not an accurate description of Allowance for Doubtful Accounts? Contra account, balance sheet account, income statement account, or current asset account

income statement account

The recognition of cost of goods sold as an expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

matching principle

what type of inventory accounts would be used by a retailer?

merchandise inventory

What are the effects on the accounting equation from the purchase of a short-term investment?

no effects- assets increase and decrease by the same amount

On December 1, 2020, Richards Company sold some machinery to Fleming Company. The two companies entered into an installment sales contract at a predetermined interest rate. The contract required four equal annual payments with the first payment due on December 1, 2020, the date of the sale. What time value of money concept is appropriate for this situation?

present value of an annuity due of 1 for four periods

Effective cash management and control includes all of the following except

purchase of stocks and bonds

which of the following is an example of capital expenditure?

replacing an engine in a company car

An internal control system consists of all of the following policies and procedures except those necessary to ensure

that cash on hand and on deposit in checking accounts is beyond the minimal amount for ongoing operations

At the year-end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of

the buyer

. Borden Company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, lighting for the parking lot, and landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which cost should be recorded as Land?

the costs with an unlimited life will increase land, and the costs with a limited useful life will increase land improvements

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

the estimated life of the asset, its acquisition cost, and the residual value

How are cash equivalents reported or disclosed in the financial statements?

they are included with cash under current assets on the balance sheet

Why do businesses invest in short-term investments?

they are investing excess to meet future business operation or investment needs

The audit committee is a subset of individuals on the board of directors that acts as a direct contact between the stockholders and the independent accounting firm. True or false?

true

The balance in the control accounts, Accounts Receivable should be equal to the sum of the balances in the subsidiary ledger for accounts receivable. True or false?

true

Blanket Airlines acquires a new aircraft. It has an estimated life of 15 years and should be used for 15,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

units of production