ACCT 2081 - Practice Exam #4

Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000. The new sailboat had an invoice price of $270,000. Hunter received a trade in allowance of $70,000 on the old sailboat, which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat. If this transaction has commercial substance, what amount of gain or loss should be recorded on this exchange?

$10,000 gain

Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $18,361 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following: Deposit in transit1,450 Outstanding checks837 Additionally, a $29 check written and recorded by the company correctly was recorded by the bank as a $92 deduction.The adjusted cash balance per the bank records should be:

$19,307

Merchant Company purchased property for a building site. The costs associated with the property were: Purchase price$185,000 Real estate commissions 15,000 Legal fees 700 Expenses of clearing the land 2,000 Expenses to remove old building 4,000 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

$206,700 to Land; $0 to Building.

The following information is available for Birch Company at December 31: Money market fund balance $2,790 Certificate of deposit maturing June 30 of next year $10,000 Postdated checks from customers $1,475 Cash in bank account $21,430 NSF checks from customers returned by bank $650 Cash in petty cash fund $200 Inventory of postage stamps $24 U.S. Treasury bill purchased on December 15 and maturing on February 28 of following year $5,000 Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

$29,420

Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. Based on this information, the amount of cash in the fund before the replenishment is:

$32

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

$45,600.

Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

$54,000

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 second year of its useful life using the double-declining-balance method?

$544

A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):

$800 loss

Spears Co. had net sales of $35,400 million. Its average total assets for the period were $14,700 million. Spears' total asset turnover equals:

2.41

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

6 years

Freeman Co. had net sales of $4.2 million and ending accounts receivable of $0.8 million. Its days' sales uncollected equals:

69.5

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

A loss on sale of $5,000

Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

Assuring that no loss will occur.

Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

Debit Petty Cash $200 and credit Cash $200.

A company wants to decrease its $200 petty cash fund to $175. The entry to reduce the fund is:

Debit to Cash $25; credit Petty Cash $25.

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Deduct the check amount from the bank balance.

The number of days' sales uncollected is used to:

Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.

Extraordinary repairs:

Extend the useful life of an asset beyond its original estimate.

A total asset turnover ratio of 3.5 indicates that:

For every $1 in assets, the firm produced $3.50 in net sales during the period.

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

For safety, only one person should open the mail, and that person should immediately deposit the cash received in the bank.

Depreciation

Is the process of allocating the cost of a plant asset to expense.

The straight-line depreciation method and the double-declining-balance depreciation method:

Produce the same total depreciation over an asset's useful life.

Internal control systems are:

Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange (a public company).

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Straight-line depreciation.

A bank statement provided by the bank includes:

The beginning and the ending balance of the depositor's account.

Amortization is:

The systematic allocation of the cost of an intangible asset to expense over its estimated useful life.

Outstanding checks refer to checks that have been:

Written, recorded on the company books, sent to the payee, but not yet paid by the bank.

Cash, not including cash equivalents, includes:

coins, currency, and checking accounts

Two clerks sharing the same cash register is a violation of which internal control principle?

establish responsibilities