ACCOUNTING EXAM
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?
$680.Explanation:Depreciation Expense = Beginning of Year Book Value Double Straight-line Rate Depreciation Expense = $3,400 (2 * 10%) = $680 (Year 1, depreciation)
Plant
(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.
Revenue
(Revenue/Capital) expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.
A partnership agreement will include each of the following:
1. names of partners 2. income and loss sharing 3. partner rights and duties
Discard
A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to Blank______ the asset by recording an entry to remove it from the balance sheet.
The useful life of a plant asset is: A) The length of time it is used in a company's operations. B) Never related to its physical life. C) Its productive life, but not to exceed one year. D) Determined by the FASB. E) Determined by law
A. The length of time it is used in a company's operations.
______ are amounts owed to suppliers for products or services purchased on credit.
Accounts payable
$ 350,000
Alin Co. purchases a building for $300,000 and pays an additional $30,000 for title fees and lawyer fees. Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:
Land improvements
Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:
The cost of land would not include: A) Purchase price. B) Cost of parking lot lighting. C) Costs of removing existing structures. D) Title insurance fees. E) Government assessments
B. Cost of parking lot lighting
Natural resources
Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) Blank______ on the balance sheet.
Amortization
Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:
Dent repair Car wash Oil change
Determine which of the following expenses are considered revenue expenditures related to a company vehicle.
Machinery
Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the Blank______ account.
Which of the following situations is not a contingent liability?
Future natural disaster
$ 495,000
Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 for taxes and lawyer fees. Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $.
______ is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.
Gross pay
Limited Partnership
Has both general partners and limited partners
is the difference between the amount borrowed and the amount repaid.
Interest
$ 196,500
Ion Co. purchased land for $190,000. Ion also paid $5,000 in real estate commissions, $1,000 in legal fees, and $500 in title insurance fees. Ion should record the cost of this land at:
Improvements
Land (improvements/additions) are assets that are additions to land and have limited useful lives, such as walkways and fences.
Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) Blank______ account.
Liability
When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) Blank______ account.
Liability
Which of the following items are considered employee benefits? (Check all that apply.)
Medical insurance Pension plans
Partnership
More than one owner allowed; owners have unlimited liability
In partnership accounting, ownership rights are divided among partners. Each partner will use a capital account, withdrawal account, and be allocated ________ according to the partnership agreement.
Net income
Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals pay.
Net pay
Betterment
Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):
Bushra Co. replaced a $1,000 account payable balance to Elin Co. with a 120-day, $1,000 note bearing 8% annual interest. Bushra's entry to record this transaction would include a credit to which account?
Notes payable
Which of the following liabilities could be a multi-period known liability? (Check all that apply.)
Notes payable Unearned subscription revenues
Loss on Disposal of Equipment for $1,500
On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?
1400
On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.
$ 1,000
On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.
C Corporation
One or more owners; owners have limited liability; business is taxed
LLC
One or more owners; owners have limited liability; no business tax
$ 250,000
PT Co. purchased land and an existing building for $200,000. In addition, PT paid real estate commissions of $15,000. PT removed the unwanted building and graded the land for a total cost of $35,000. PT should record the cost of the land at:
Assembling Testing Shipping Charges
Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.)
Which of the following represent reasonably possible contingent liabilities? (Check all that apply.)
Potential legal claims Debt guarantees
Limited liability partnerships
Protects innocent partners from malpractice or negligence claims of other partners
S corporation
Provides all shareholders with limited liability, but allows them to elect to be treated as partnership for tax purposes
50,000
Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold 200,000 tons of coal. Depletion expense for the period will be how much?
A written promise to pay a specified amount on a stated future date within one year or the company's operating cycle, whichever is longer, is considered a Blank______.
Short-term note payable
Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) Blank______ on her balance sheet.
Short-term note payable
(cost minus salvage value)/useful life
Straight-line depreciation can be calculated by taking:
Installation Shipping fees Taxes Purchase Price
The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.)
False
The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation
Cost
The factors necessary to compute depreciation include (cost/selling price/market value), salvage value and useful life.
Depletion expense
The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the account.
Depreciation
The process of allocating the cost of a plant asset to expense while it is in use is called (depreciation/salvage) _.
Lump-sum
The purchase of a group of plant assets for one price is called a Blank______ purchase.
$ 235,000
Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:
Book value
When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (Blank______ - revised salvage value)/revised remaining useful life.
Book value is less than the selling price= loss on sale of asset Book value is equal to the selling price=gain on sale of asset Book value is equal to the selling price= no gain or loss recognized
When considering the sale of a plant asset, match the following outcomes to the appropriate situations.
Useful life Cost of asset Salvage value
Which of the following factors determine depreciation? (Check all that apply.)
Equipment used in operations Building used for operations
Which of the following items are plant assets? (Check all that apply.)
Depreciation
______ is the process of allocating the cost of a plant asset to expense while it is in use.
A liability created by buying goods or services on credit is typically recorded to
accounts payable
A partnership BLANK includes partners' names, rights, income and loss sharing agreement, withdrawal arrangement, dispute procedures, admission and withdrawal procedures and rights and duties in the event a partner dies.
agreement
Natural resources
are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.
Ordinary repairs
are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life.
Betterments
are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.
Intangible assets
are nonphysical assets used in operations that give companies long-term rights, or competitive advantages.
Plant or Fixed
assets are assets used in a company's operations that have a useful life of more than one accounting period.
Amounts withheld from employee's earnings for employee income tax is considered a Blank______ by the employer until the government is paid.
current liability
During a liquidation, capital ________ means that at least one partner has a debit balance in his or her capital account at the point of final cash distribution.
deficiency
A measurable obligation arising from agreements, contracts, or laws is called a
known liability
Unearned subscription revenues that extends over multiple periods is an example of a Blank______ known liability.
multi-period
Employee income tax depends on: (Check all that apply.)
number of employee withholding allowances employee's income
A potential legal claim is recorded
only if payment for damages is probable and the amount can be reasonably estimated.
A is an unincorporated association of two or more people who pursue a business for profit as co-owners.
partnership
In order for a contingent liability to be recorded as a journal entry in the financial statements, it must be BLANK and reasonably estimable.
probable
Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?
sales tax payable
Amounts received in advance from customers for future products or services are typically recorded in a liability account called
unearned revenues
A known liability is a measurable obligation arising from agreements, contracts, or laws. Known liabilities would include all of the following items, except:
warranties