ACCT 202 Final

On July 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the current year ended December 31?

$1,200.

Grays Company has inventory of 10 units at a cost of $10 each on August 1. On August 3, it purchased 20 units at $12 each. 12 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 12 units that were sold?

$124

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Permanent accounts.

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination

true

If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at:

$137,000.

A company had the following purchases during the current year: May-15 units at $130 September-12 units at $135 November-10 units at $140 On December 31, there were 26 units remaining in ending inventory. Using the LIFO inventory valuation method, what is the cost of the ending inventory?

$148.00

Zabinski Co. paid $150,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $20,000, Building, $150,000, and Office furniture, $30,000. Based on this information the cost that would be allocated to the land is

$15,000

Marquis Company uses a weighted-average perpetual inventory system. August 2nd-10 units purchases at $12 per unit August 18th-15 units purchased at $14 per unit August 29th: 12 units sold What is the amount of the cost of goods sold for this sale?

$158.40

On January 1, 2014, Rugh Company purchased equipment with a list price of $12,000 with a 2% cash discount. The equipment was delivered under terms of FOB destination and freight costs amounted to $400. A total of $1,000 was paid for installation and testing. During the first year, Rugh paid $300 for insurance on the equipment and another $250 for routine maintenance and repairs. Rugh uses the units-of-production method of depreciation. Useful life is estimated at 5 years or 300,000 units and estimated salvage value is $2,000. During 2014, the equipment produced 60,000 units. What is the amount of depreciation for 2014?

$2,152

Starlight Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using the LIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 11 units that were sold?

$2,255

On March 1, Zane Company purchased a new stamping machine with a list price of $24,000. The company paid cash for the machine; therefore, it was allowed a 3% discount. Other costs associated with the machine were: transportation costs, $1,270; sales tax paid, $1,680; installation costs, $450; routine maintenance during the first month of operation, $500. The cost recorded for the machine was:

$26,680

A company had the following purchases during the current year: January-10 units at $120 February-20 units at $125 May-15 units at $130 September-12 units at $135 November-10 units at $140 On December 31, there were 26 units remaining in ending inventory. Using the FIFO inventory valuation method, what is the cost of the ending inventory?

$3,540

Mobley Company purchased an asset with a list price of $35,000. Mobley received a 2% cash discount. The asset was delivered under terms FOB shipping point, and freight costs amounted to $700. Mobley paid $1,500 to have the asset installed. Insurance costs to protect the asset from fire and theft amounted to $400 for the first year of operations. Based on this information, the cost recorded in the asset account would be

$36,500

On January 1, 2014 Morgan Co. purchased a truck that cost $32,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in 2015 assuming that Morgan uses the double declining-balance method is:

$5,120

On January 1, 2014, Rowley Company purchased a truck that cost $22,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. The amount of depreciation expense recognized in 2014 assuming that Rowley uses the double declining balance method is:

$5,280

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is:

$50.00

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

$500,000

On March 31 a company needed to estimate its ending inventory to prepare its first quarter financial statements. The following information is available: Beginning inventory, January 1: $4,000 Net sales: $80,000 Net purchases: $78,000 The company's gross margin ratio is 25%. Using the gross profit method, the cost of goods sold would be:

$60,000

A corporation is:

A business legally separate from its owners.

Which of the following accounts are permanent (real) accounts?

Accounts payable.

Adjusting entries:

Affect both income statement and balance sheet accounts

Physical counts of inventory:

Are necessary to adjust the Inventory account to the actual inventory available.

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

Debit to Telephone Expense for $300

Which of the following terms is used to identify the process of expense recognition for buildings and equipment?

Depreciation

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the:

FASB

A partnership:

Has unlimited liability for its partners

A promissory note:

Is a written promise to pay a specified amount of money at a certain date

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Items that require adjusting entries

Another name for equity is:

Net Assets

Another name for a temporary account is a(n):

Nominal account.

A company's formal promise to pay (in the form of a promissory note) a future amount is a(n):

Note payable

Which of the following would be classified as a long-term operational asset?

Office Equipment

Which of the following are classified as current assets?

Office supplies

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

A classified balance sheet:

Organizes assets and liabilities into important subgroups that provide more information.

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:

Overstate net income by $28,000

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would

Overstate net income by $28,000.

Revenues are:

The increase in equity from a company's sales of products and services.

The matching principle, as applied to bad debts, requires:

The use of the allowance method of accounting for bad debts.

Goods in transit are included in a purchaser's inventory

When the purchaser is responsible for paying freight charges

Distributions of cash or other resources by a business to its owners are called:

Withdrawals

Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

allowance for doubtful accounts: $2,000 accounts receivable-A. Hopkins: $2,000

On January 1, 2014, Racine Company purchased equipment that cost $55,000 cash. The equipment had an expected useful life of six years and an estimated salvage value of $4,000. Assuming that Racine depreciates its assets under the straight-line method, the amount of depreciation expense appearing on the December 31, 2015 income statement and the amount of accumulated depreciation appearing on the December 31, 2015 balance sheet would be:

choice c

A company borrowed $10,000 by signing a six month promissory note at 5% interest. The total amount of interest is $25.

false

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

false

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

false

A company's fiscal year must correspond with the calendar year.

false

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

false

If a buyer does not take advantage of a supplier's credit terms of 2/10, n/30, and instead pays the invoice in full at the end of 30 days, by not taking the discount the buyer loses the equivalent of 18% annual interest on the amount of the purchase

false

Interim financial statements report a company's business activities for a one-year period.

false

The balance sheet shows a company's net income or loss due to earnings activities over a period of time

false

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship

false

The person who signs a note receivable and promises to pay the principal and interest is the:

maker

Which method of depreciation is used by most U. S. companies for financial reporting purposes?

straight line

A company had sales of $350,000 and cost of goods sold of $200,000. Its gross profit equals $150,000.

true

A company paid $9,000 for a twelve-month insurance policy on February 1. The policy coverage began on February 1. On February 28, $750 of insurance expense must be recorded.

true

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

true

Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

true

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

true

Companies can report credit card expense as a discount deducted from sales or as a selling expense

true

Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

true

Goods on consignment are goods shipped by their owner, called the consignor, to another party called the consignee.

true

Owners of a corporation are called shareholders or stockholders

true

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class

true

The cost of an inventory item includes its invoice cost plus any added or incidental costs necessary to put it in a place and condition for sale, and minus any discount

true

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

true

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

true