Accounting I Final Exam (Chp 7, 8, 9)

Venus Wholesale Company started carrying a new product in December. Purchases and sales of this product during the month were: December 20Purchased 100 units at $80 per unit.December 26Sold 80 units.December 28Purchased 100 units at $90 per unit. Assuming the LIFO flow assumption is in use, the perpetual inventory records will indicate an ending inventory of this product of:

$10,600. Explanation (20 × $80) + (100 × $90) = $10,600

At the end of last year, Games-2-Use had merchandise costing $180,000 in inventory. During January of the current year, the company purchased merchandise costing $114,000, and sold merchandise that it had purchased at a total cost of $100,000. Games-2-Use uses a perpetual inventory system. The total amount debited to the Inventory account during January was:

$114,000.

Land and a warehouse were acquired for $730,000. What amounts should be recorded in the accounting records for the land and for the warehouse if an appraisal showed the estimated values to be $320,000 for the land and $665,000 for the warehouse?

$237,250 for land; $492,750 for warehouse Total estimated values = $320,000 + $665,000 = $985,000 $320,000 ÷ $985,000 = 32.5% Amount allocated to land: 0.325 × $730,000 = $237,250 Amount allocated to building: $665,000 ÷ $985,000 = 67.5% 0.675 × $730,000 = $492,750

Land is purchased for $212,000. Additional costs include a $14,700 fee to a broker, a survey fee of $2,400, $2,250 to construct a fence, and a legal fee of $9,500. What is the cost of the land?

$238,600 Cost of land = $212,000 + $14,700 + $2,400 + $9,500 = $238,600

On April 2, Year 1, Victor, Incorporated acquired a new piece of filtering equipment. The cost of the equipment was $160,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years. Victor uses a calendar year-end for financial reporting. Assume that in its financial statements, Victor uses straight-line depreciation and rounds depreciation for fractional years to the nearest whole month. Depreciation recognized on this equipment in Year 1 and Year 2 will be:

$26,250 in Year 1 and $35,000 in Year 2. Depreciation for Year 1 = [($160,000 − $20,000) ÷ 4 years] × 9/12 = $35,000 × 9/12 = $26,250 Depreciation for Year 2 = ($160,000 − $20,000) ÷ 4 years = $35,000

At year-end, the perpetual inventory records of Anderson Company indicate 60 units of a particular product in inventory, acquired at the following dates and unit costs:Purchased in August: 30 units at $750 per unit.Purchased in November: 30 units at $700 per unit.A complete physical inventory taken at year-end indicates only 50 units of this product actually are on hand. Under the FIFO cost flow assumption, the cost of these items to be included in inventory in the company's year-end balance sheet is:

$36,000. (20 × $750) + (30 × $700) = $36,000

Beech Soda, Incorporated uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: On January 14, Beech Soda, Incorporated sold 26 units of this product. The other 32 units remained in inventory at January 31. Assuming that Beech Soda uses the LIFO cost flow assumption, the cost of goods sold to be recorded at January 14 is:

$390. (13 × $18) + (13 × $12) = $390

Land is purchased for $456,000. Additional costs include a $30,300 fee to a broker, a survey fee of $3,400, $2,750 to construct a fence, and a legal fee of $12,500. What is the cost of the land?

$502,200

Green Leaf Company had the following information available on December 31: Management applies the LCM rule on the basis of the total inventory. What is the write-down required?

$556.

When straight-line depreciation is in use, the depreciation rate of an asset is equal to:

1 divided by the life of the asset.

During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million.

10 times. Explanation $500,000,000 ÷ $50,000,000 = 10 times

The legal life of most patents is:

20 years.

Which of the following items on a bank reconciliation would have been known to the depositor before the bank statement arrived?

A deposit in transit

A company with a liquid inventory will have:

A high inventory turnover and a low average number of days to sell inventory.

The "just-in-time" concept of inventory management is best illustrated by:

A homebuilder who has its suppliers deliver lumber and other building materials to the building site the night before these materials will be used by the company's construction crews.

An asset that costs $39,000 and has accumulated depreciation of $12,800 is sold for $21,200. What amount of gain or loss will be recognized when the asset is sold?

A loss of $5,000.

The cost of a new windshield wiper on a delivery vehicle would be classified as:

A revenue expenditure.

Coca-Cola's famous name printed in distinctive typeface is an example of:

A trademark.

Which of the following is not considered a cash equivalent?

Accounts receivable

All of the following may be considered intangible assets except:

Accounts receivable.

The primary reason a physical inventory is taken is to:

Adjust the perpetual inventory record for unrecorded shrinkage losses.

Marketable securities are:

Almost as liquid as cash.

Capital expenditures are recorded as:

An asset.

Revenue expenditures are recorded as:

An expense.

In reconciling a bank statement, which of the following items could cause the cash per the bank statement to be greater than the balance of cash shown in the depositor's accounting records?

An outstanding check

With a line of credit, a liability arises:

As soon as any money is borrowed.

Which of the following is not an example of internal control over cash?

Combining the functions of signing checks with the approval of expenditures

Kent Company has used the same inventory method for many years. This is an example of which principle?

Consistency

At year-end, the perpetual inventory records of Anderson Company indicate 60 units of a particular product in inventory, acquired at the following dates and unit costs:Purchased in August: 30 units at $750 per unit.Purchased in November: 30 units at $700 per unit.A complete physical inventory taken at year-end indicates only 50 units of this product actually are on hand. Assuming that Anderson uses the LIFO cost flow assumption, it should record this inventory shrinkage by:

Debiting Cost of Goods Sold $7,000. 10 × $700 = $7,000

When preparing a bank reconciliation, outstanding checks will:

Decrease the balance per the bank statement.

The book value of equipment:

Decreases with the passage of time.

Which of the following would not be amortized?

Goodwill.

The accounts receivable turnover rate:

Indicates how many times the receivables were converted into cash during the year.

After preparing a bank reconciliation, a journal entry would be required for which of the following:

Interest earned on the company's checking account.

Each of these categories of assets is normally shown in the balance sheet at current value, except:

Inventories.

Financial assets include all of the following except:

Inventories.

Which of the following is generally not true about inventory?

Inventory must be managed on a unit-by-unit (i.e., specific identification) method.

J. Lennon borrows a sum of money from Y. Ono. A promissory note is used to document the terms of the transaction. In this situation:

J. Lennon is considered the maker of the note.

When prices are increasing, which inventory method will produce the highest cost of goods sold?

LIFO

Which of the following assets is not subject to depreciation and does not decline in usefulness over time?

Land

In a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows:

One entry recognizes the sales revenue and the other recognizes the cost of goods sold.

In a periodic inventory system, recording a sale on account involves crediting which of the following accounts?

Only Sales.

An accelerated depreciation method:

Recognizes more depreciation expense in the early years of an asset's useful life and less in the later years.

The direct write-off method of recognizing uncollectible accounts expense:

Records uncollectible accounts expense when individual accounts receivable are determined to be worthless.

As a result of taking an annual physical inventory, it usually is necessary in a perpetual inventory system to make an entry:

Reducing assets and increasing the cost of goods sold.

Which of the following is a capital expenditure?

Sales tax paid in conjunction with the purchase of office equipment

The inventory turnover rate provides an indication of how quickly the average quantity of inventory on hand:

Sells.

In which of these inventory approaches is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?

Specific identification

Which of the four inventory approaches is best suited to inventories of high-priced, low-volume items?

Specific identification

Which depreciation method is most commonly used among publicly owned corporations?

Straight-line

Each of the following transactions would be reflected in both the income statement and the statement of cash flows for the current period, except:

The adjustment of marketable securities to their current market value.

The primary advantage of a just-in-time inventory system is:

The amount of money tied up in inventory is minimized.

Goods in transit between the buyer and the seller belong to:

The answer depends upon whether the goods were shipped F.O.B. shipping point or F.O.B. destination.

A bank reconciliation explains the differences between:

The balance per bank statement and the cash balance per the accounting records of the depositor.

The adjustment of marketable equity securities to their current market value affects:

The balance sheet and the income statement.

When comparing the units-of-output method of depreciation with straight-line depreciation:

The depreciation expense in the first year may be greater than, equal to, or less under the units-of-output method.

The Allowance for Doubtful Accounts represents:

The difference between the face value of accounts receivable and the net realizable value of accounts receivable.

The book value of an asset in the plant and equipment category is:

The undepreciated cost of the asset.