acct exam #4

On the first day of its fiscal​ year, Solstice Company purchased a new computer system for a total cost of $30,000. The computer system is expected to have a life of 5 years with a residual value of $6,000. If the company uses the​ double-declining-balance method, its depreciation expense for this computer system in the first year will be: A. $12,000. B. $9,600. C. $4,800. D. $6,000.

A

Potential liabilities that depend on future events arising out of past events are called: A. estimated liabilities. B. current liabilities. C. contingent liabilities. D. ​long-term liabilities.

C

Notes payable due in six months are reported as: A. current liabilities on the balance sheet. B. ​long-term liabilities on the balance sheet. C. contra-assets on the income statement. D. current liabilities on the income statement.

A

Castle Corporation purchased a forklift for $65,000 on July 1. The forklift has an estimated useful life of 20,000 usage hours with a residual value of $5,000. Castle uses the​ units-of-production method for depreciation. If Castle uses the forklift for 5,500 hours during the first​ year, the depreciation expense on the forklift would be : A. $65,000. B. $16,500. C. $5,000. D. $17,875

B

When a company receives cash from customers before earning the​ revenue, _________ will be credited. A. estimated cash B. unearned revenue C. accounts payable D. accounts receivable

B

Gardiner Company purchased a delivery van for $35,000 on January 1. The van has an estimated 4​-year life with a residual value of $2,000. What would the depreciation expense for this van be in the first year if Gardiner uses the​ straight-line method? A. $35,000 B. $33,000 C. $8,250 D. $8,750

C

Hamilton Company purchased a machine for $10,800 on January​ 1, 2016. The machine has been depreciated using the​ straight-line method assuming it has a five​-year life with a $1,200 residual value. Hamilton sold the machine on January​ 1, 2018​, for $8,200. The book value as of December​ 31, 2017 is $6,960. What gain or loss should Hamilton record on the​ sale? A. Gain, $1,400 B.​ Loss, $680 C. Gain, $1,240 D. ​Loss, $1,240

C

Savory Company sold inventory with a selling price of $5,100 to customers for cash. It also collected sales taxes of $255. The journal entry to record this information includes a: A. credit to Sales Tax Expense $255. B. credit to Sales Revenue $5,355. C. debit Sales Tax Payable $255. D. debit to Cash of $ 5,355.

D

Suppose you buy land for $3,000,000 and spend $1,500,000 to develop the property. You then divide the land into lots as​ follows: Category Sale Price per Lot 15 Hilltop lots $575,000 15 Valley lots $143,750 How much did each Hilltop lot cost​ you? Review Only A. $575,000 B. $50000 C. $60,000 D. $240,000

D

Which of the following is an intangible​ asset? A. Land B. Leasehold improvements C. Equipment D. Copyright

D

Whitmore Corporation purchased a new delivery van on the last day of its fiscal year. The cost of the delivery van will appear on​ Whitmore's _______________ in the year of purchase. A. Income statement B. Statement of retained earnings C. Statement of​ stockholders' equity D. Balance sheet

D

The current pay period ends on​ Friday, January​ 2, yet the​ company's fiscal​ year-end is on​ Wednesday, December 31. If the company does not make the proper adjusting entry to accrue payroll expenses at​ year-end, what would be the​ impact? A. Liabilities will be overstated. B. ​Stockholders' equity will be understated. C. Operating income will be overstated. D. Assets will be understated.

C

A contingent liability should be recorded in the accounts: A. if the amount can be reasonably estimated. B. if the amount is due in cash within one year. C. if the related future event will probably occur. D. both b and c. E. both a and c.

E

Phoebe Corporation signed a​ six-month note payable on October​ 23, 2018. What accounts relating to the note payable will be reported on its financial statements for the fiscal year ending December​ 31, 2018​? A. Notes payable and interest payable will be reported on the balance sheet. B. Interest receivable will be reported on the balance sheet and notes payable will be reported on the income statement. C. Notes​ payable, interest​ payable, and interest expense will be reported on the balance sheet. D. Notes payable will be reported on the balance sheet and interest payable will be reported on the income statement.

A

Failure to accrue interest expense results in: A. an overstatement of net income and an overstatement of liabilities. B. an understatement of net income and an overstatement of liabilities. C. an understatement of net income and an understatement of liabilities. D. an overstatement of net income and an understatement of liabilities

D

Nicholas Corporation accrues the interest expense on a​ short-term note payable at the end of its fiscal year. Due to this transaction A. current liabilities will increase and​ stockholders' equity will increase. B. current liabilities will decrease and​ stockholders' equity will decrease. C. current liabilities will increase and current assets will increase. D. current liabilities will increase and​ stockholders' equity will decrease.

D

Capitalizing a cost involves increasing what type of​ account? A. Asset B. ​Stockholders' equity C. Expense D. Liability

A

Chavela Company purchased a building and land for $600,000 in total.​ Individually, the land appraised for $252,000 and the building appraised for $378,000. How much of the purchase price should be allocated to the cost of the​ land? A. $600,000 B. $252,000 C. $151,200 D. $240,000

D

A capital expenditure: A. adds to an asset. B. records additional capital. C. is expensed immediately. D. is a credit like capital​ (equity).

A

Acton​, ​Inc., uses the​ double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first​ year? A. Estimated residual value B. Expected useful life in years C. Original cost D. All the items listed are needed.

A

At the beginning of last​ year, Bratworth Corporation purchased a piece of heavy equipment for $63,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $3,000. Bremond used the equipment for 16,000 hours last year and 21,000 hours this year. Depreciation expense for year two using​ double-declining-balance (DDB) and​ units-of-production (UOP) methods would be as​ follows: DDB UOP A. $15,120 $12,600 B. $14,400 $13,230 C. $14,400 $12,600 D. $15,120 $13,230

A

Capture Co. was organized to sell a single product that carries a​ 45-day warranty against defects. Engineering estimates indicate that 4​% of the units sold will prove defective and require an average repair cost of $45 per unit. During Capture​'s first month of​ operations, total sales were 400 ​units; by the end of the​ month, seven defective units had been repaired. The liability for product warranties at​ month-end should be A. $405. B. $720 C. $315. D. $1,035.

A

Connors Company paid​ $700 cash to make a repair on equipment it sold under a​ one-year warranty in the prior year. The entry to record the payment will debit: A. Accrued Warranty Payable and credit Cash. B. Warranty Expense and credit Cash. C. Repair Expense and credit Cash. D. Operating Expense and credit Cash.

A

Jackson Bank lends Jabbour Clothing Company ​$125,000 on September 1. Jabbour signs a ​$125,000​, ​6%, six-month note. The journal entry made by Jabbour on December​ 31, its fiscal​ year-end, is: A. debit Interest Expense and credit Interest Payable for ​$2,500. B.debit Interest Expense and credit Cash for ​$2,500. C. debit Interest Payable and credit Cash for ​$2,500. D. debit Interest Payable and credit Interest Expense for ​$2,500

A

Kline Company failed to record depreciation of equipment. How does this omission affect Kline​'s financial​ statements? A. Net income is overstated and assets are overstated. B. Net income is understated and assets are overstated. C. Net income is overstated and assets are understated. D. Net income is understated and assets are understated

A

Leopold Corporation borrows cash by signing a $ 60 comma 000​, 6​%, seven​-month note on December 1 with its local bank. The total cash paid for interest​ (only) at the maturity of the note by Leopold will be: A. $2,100. B. $1,800. C. $3,600. D. $300.

A

McKnight Company purchased a machine for $11,200 on January​ 1, 2016. The machine has been depreciated using the​ straight-line method assuming it has a five​-year life with a $400 residual value. Harrison sold the machine on January​ 1, 2018​, for $8,900. What is the book value of the machine on December​ 31, 2017​? A. $6,880 B. $2,700 C. $10,800 D. $11,200

A

Smatter Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the​ land? A. Cost of new parking lot constructed on the land B. Purchase price of the land C. Brokerage commission paid to the real estate agent who handled the land transaction D. Cost of demolishing an old garage located on the land

A

What kind of account is Unearned​ Revenue? A.Liability account B. Revenue account C. Asset account D. Expense account

A

Which of the following is not a​ liability? A. Allowance for bad debts B. Income taxes payable C. Accrued vacation pay D. Accrued warranties payable

A

Which of the following items should be accounted for as a capital​ expenditure? A. Taxes paid in conjunction with the purchase of office equipment B. Maintenance fees paid with funds provided by the​ company's capital C. The monthly rental cost of an office building D. Costs incurred to repair leaks in a​ building's roof

A

A company purchased mineral assets holding approximately 250,000 tons of ore for $850,000. The estimated residual value of the assets is zero. During the first​ year, 42,500 tons are extracted and sold. What is the amount of depletion for the first​ year? A. $12,500 B. $144,500 C. ​$250,000 D. Cannot be determined from the data given

B

All of the following are reported as current liabilities​ except: A. salaries payable. B. bonds payable due in 18 months. C. interest payable. D. sales tax payable.

B

Gagnon Excavating purchased a used dump truck for $115,000 on January​ 1, 2018. The company has depreciated the dump truck using the​ straight-line method over its estimated 10​-year life with a $4,500 residual value. Gagnon sold the dump truck on January​ 1, 2021​, for $95,000. Total accumulated depreciation on the dump truck on the date of sale was $33,150. What gain or loss should be recorded on the​ sale? A. A loss of $20,000 B. A gain of $13,150 C. A gain of $20,000 D. A loss of $13,150

B

Gravel Corporation borrowed ​$250,000 from a bank on January​ 1, 2019​, by signing a​ 10%, six-month note. The journal entry made by Gravel on January​ 1, 2019​, will debit A. Interest Expense for ​$25,000 and credit Interest Payable for ​$25,000. B. Cash for ​$250,000 and credit Notes Payable for ​$250,000. C. Interest Expense for ​$25,000 and credit Cash for ​$25,000. D. Cash for ​$225,000 and credit Notes Payable for ​$225,000.

B

Suppose Quick Travel pays $75 million to buy Lone Circle Overnight. The fair value of Lone Circle​'s assets is $76 ​million, and the fair value of its liabilities is $20 million. How much goodwill did Quick Travel purchase in its acquisition of Lone Circle ​Overnight? A. $55 million B. $19 million C. $21 million D. $20 million

B

When a company expenses the cost of maintenance for its heating and cooling​ system, that cost will appear on its: A. Statement of retained earnings. B. Income statement. C. Statement of​ stockholders' equity. D. Balance sheet.

B

An​ end-of-period adjusting entry that debits Unearned Revenue most likely will credit: A. an asset. B. a liability. C. a revenue. D. an expense.

C

Bidwell Fuel purchased an oil well for $260,000. The well is estimated to contain 80,000 ​barrels, have a four​-year ​life, and have no residual value. If the company extracts and sells 2,600 barrels of oil in the first​ year, how much in cost of sales should be​ recorded? A. $130,000 B. $65,000 C. $8,450 D. $211,250

C

Tennis Shoe Warehouse operates in a state with a​ 6.5% sales tax. For​ convenience, Tennis Shoe Warehouse credits Sales Revenue for the total amount​ (selling price plus sales​ tax) collected from each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales​ taxes, A. net income will be overstated and liabilities will be overstated. B. net income will be understated and liabilities will be understated. C. net income will be overstated and liabilities will be understated. D. net income will be understated and liabilities will be overstated.

C

The depreciation method that does not initially use the residual value in depreciation calculations is the A. direct method. B. ​units-of-production method. C. double-declining balance method. D. ​straight-line method.

C

Which of the following costs are reported on a​ company's income statement and balance​ sheet? Income Statement // Balance Sheet A. Goodwill // Accounts payable B. Accumulated Depr. // Land C. COGS // Accumulated Depr. D. Gain on sale of land // COGS

C

Which of the following statements is​ false? A. A contingent liability is a potential obligation that depends on the future outcome of past events. B. A contingent liability should be accrued if the loss is probable and the amount of the loss can be reasonably estimated. C. All contingent liabilities should be reported as liabilities on the financial​ statements, even those that are unlikely to occur. D. A contingent liability should be disclosed in the notes to the financial statements if there is a reasonable possibility that a loss​ (or expense) will occur.

C

Which statement about depreciation is​ false? A. Depreciation is a process of allocating the cost of an asset to expense over its useful life. B. A major objective of depreciation accounting is to allocate the cost of using an asset against the revenues it helps to generate. C. Obsolescence as well as physical wear and tear should be considered when determining the period over which an asset should be depreciated. D. Depreciation should not be recorded in years in which the market value of the asset has increased.

D