Exam 3 ACG

Based on the following year-end account balances, what amount would the company report on its balance sheet as intangible assets? Buildings$35,000,000Accumulated depreciation5,000,000Copyrights2,400,000Patents10,000,000Research and development12,000,000

$12,400,000.

A company has the following: Net income for the current year is $390,000 Net income for the prior year was $350,000 Net sales for the current year is $4,100,000 Net sales for the prior year were $3,800,000 Total assets as of the end of the current year is $4,000,000 Total assets as of the end of the prior year was $3,000,000 What is the company's asset turnover ratio for the current year?

1.17 times

A company purchased truck for $60,000 on January 1 of its first year. The truck was originally depreciated on a straight-line basis over 9 years with an estimated salvage value of $6,000. At the end of the sixth year, before year-end adjusting entries have been recorded, the company decided to revise the estimated life of the truck to a total of 7 years and to change its estimated salvage value to $4,000. How much depreciation expense should be recorded for the sixth year?

$13,000

A company has the following asset account balances: Buildings, $9,500,000 Accumulated depreciation, $1,500,000 Patents, $750,000 Land Improvements, $800,000 Land, $5,000,000 How much will be reported on the balance sheet under property, plant, & equipment?

$13,800,000

The following information is provided for a certain company (in $ millions): Net income for the current year is $390 Net income for the prior year was $350 Net sales for the current year is $4,100 Net sales for the prior year were $3,800 Total assets as of the end of the current year was $4,000 Total assets as of the end of the prior year was $3,000 What is the company's return on assets for the current year?

11.1%

A company purchased land for $420,000. It also paid a real estate brokers' commission of $22,000 and spent $33,000 demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $2,500. The company also assumed $4,000 in property taxes due on the land owed by the previous owner. Under the historical cost principle, the cost of land would be recorded at

476,500.

A company purchased a plant asset for $48,000. It has a salvage value of $3,000 and an annual depreciation expense of $5,000. It calculates depreciation using the straight-line method. The balance of the company's Accumulated Depreciation account at the end of the current year after-adjusting entries is $20,000. What is the asset's remaining useful life?

5 year

At the beginning of the current year, a company purchased machinery for $50,000. It has a salvage value of $5,000 and an estimated useful life of 9 years. How much is depreciation expense for the first year under the straight-line method?

5000

In the current year, a corporation had sales of $500,000, net income of $150,000, interest expense of $30,000, and tax expense of $20,000. Its net sales were $1,000,000 and its cost of goods sold was $200,000. What was its times interest earned for the year?

6.67

A company purchased factory equipment on April 1 of the current year, for $96,000. It is estimated that the equipment will have a $12,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31 of the current year is

6300

A company purchased a plant asset for $53,000. It has a salvage value of $3,000 and annual depreciation expense of $5,000. It calculates depreciation using the straight-line method. The balance of the company's Accumulated Depreciation account at the end of the current year after-adjusting entries is $15,000. What is the asset's remaining useful life?

7 years

A company purchased land for $84,000. It also paid a real estate brokers' commission of $5,000 and spent $7,000 demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building were $1,200. The company also assumed $3,000 in property taxes due on the land owed by the previous owner. Under the historical cost principle, the cost of land would be recorded at

97800

Which one of the following will minimize depreciation expense in the first year of owning an asset?

A long estimated life, a high salvage value, and straight-line depreciation

When using the straight-line depreciation method, which of the following is not a factor that affects the computation of depreciation?

book value of the asset

On May 1, a company purchased a copyright for $90,000. The copyright had been issued exactly 65 years earlier to another party. The company's amortization expense for the current year would be

$12,000.

A company purchased equipment on January 1 at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at the end of the second year if the straight-line method of depreciation is used?

$156,000

The term applied to the periodic expiration of a plant asset's cost is

depreciation

Which of the following is an acceptable way to express the useful life of a depreciable asset?

All of these

A corporation issues $200,000 of 5-year, 7% bonds at 103. What is its total cost of borrowing?

$64,000

A patent

has a legal life of 20 years.

A company acquires land for $160,000 cash. Additional costs are as follows: Removal of shed, $500 Filling and grading, $2,000 Salvage value of lumber of shed, $120 Broker commission, $6,000 Paving of parking lot, $15,500 Closing costs, $1,000 The company should record the acquisition cost of the land as

$169,380

On April 1 of the current year, a company sells some equipment for $18,000. The original cost was $50,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. Straight-line depreciation is used. On January 1 of the current year, the Accumulated Depreciation account had a balance of $28,000. How much is the gain or loss on the sale?

$2,250 loss

A company purchased equipment for $18,000. The estimated salvage value is $2,000 and the estimated useful life is 5 years. On December 31 of the third year, before adjusting entries have been made, the company decided to extend the estimated useful life of the equipment by one year giving it a total life of 6 years. The company did not change the salvage value and continues to use the straight-line method. What is the depreciation expense for the third year?

$2,400

On January 1, a corporation issued $3,500,000, 15%, 7-year bonds for $3,809,583. Interest is payable annually on January 1. The effective interest rate on the bonds is 13%. Use the effective-interest method to determine the amount of interest expense for the first year.

$495,246

A company purchased equipment for $300,000 on January 1. The equipment's original estimated useful life is 10 years and its estimated salvage value is $60,000. The company uses the straight-line method of depreciation. Before recording adjusting entries in the asset's sixth year, the company revises the estimated salvage value to $48,000. It does not change the estimated useful life. How much depreciation expense should be recorded for the sixth year?

$26,400.

A company purchased equipment and incurred these costs: Cash price, $25,000 Sales taxes, $1,400 Insurance during transit, $300 Annual maintenance costs, $300 What amount should be recorded as the cost of the equipment?

$26,700

At the beginning of the current year, a company purchased machinery for $50,000. It has a salvage value of $6,000 and an estimated useful life of 8 years. How much is depreciation expense for the first year under the straight-line method?

$5,500

Based on the following year-end account balances, what amount would the company report on its balance sheet as intangible assets? Research and development$1,500,000Accounts Receivable 4,000,000 Trademarks 1,000,000 Goodwill 2,500,000 Equipment 1,500,000 Patents 2,000,000

$5,500,000.

A company purchased machinery with a list price of $96,000. The seller granted the company a 10 percent discount for paying quickly and in full. The company also paid $600 for shipping and paid sales tax of $4,500 to purchase the machinery. The machinery will have a useful life of 10 years and a salvage value of $30,000. If the company uses straight-line depreciation, annual depreciation will be

$6,150.

On August 1 of the current year, a company purchases and places into service new equipment. The cost of the equipment is $75,000. It has an estimated 3-year life and $15,000 salvage value at the end of its useful life. What is the depreciation expense for the current year ending December 31 if the company uses the straight-line method of depreciation?

$8,333.

A company purchased equipment for $70,000 on January 1 of its first year. The equipment's original estimated useful life is 8 years and its estimated salvage value is $14,000. The company uses the straight-line method of depreciation. On December 31 of its third year, before year-end adjusting entries have been recorded, the company decides to shorten the estimated useful life by 2 years giving it a total life of 6 years. The company did not change the salvage value and continues to use the straight-line method. How much depreciation expense should be recorded for the third year?

10500

On January 1, a company purchased equipment for $15,000. The estimated salvage value is $3,000 and the estimated useful life is 4 years. On December 31, 2017 of the third year, and before adjusting entries have been made, the company decided to extend the estimated useful life of the equipment by one year giving it a total life of 5 years. The company did not change the salvage value and continues to use the straight-line method. What is the depreciation expense for the third year?

2000

A company purchased equipment and incurred these costs: Cash price, $26,000 Sales taxes, $1,200 Insurance during transit, $400 Annual maintenance costs, $500 What amount should be recorded as the cost of the equipment?

27600

A company purchased equipment for $100,000 on January 1 of its first year. The equipment's original estimated useful life is 10 years and its estimated salvage value is $25,000. The company uses the straight-line method of depreciation. On December 31 of its sixth year, before year-end adjusting entries have been recorded, the company decides to revise the estimated salvage value to $20,000 but the estimated useful life is unchanged. How much depreciation expense should be recorded for the sixth year?

8500

Which one of the following will maximize a company's reported net income in the first year of owning an asset?

A long estimated life, a high salvage value, and straight-line depreciation

Which of the following measures provides an indication of how efficient a company is in employing its assets?

Asset turnover ratio

When using the straight-line depreciation method, which of the following is not a factor that affects the computation of depreciation?

Book value of the asset

When a bond is sold at a premium, at what value is it reported on the balance sheet?

Face value plus any unamortized premium

10. Which of the following is a true with regards to the classification of a liability as a current liability? I. It is a debt that the company expects to pay from existing current assets or through the creation of other current liabilities. II. It is a debt that the company expects to pay within one year or the operating cycle, whichever is shorter. III. It is a debt that has been owed for less than one year.

I

A company signs a $300,000, 6%, 9-month note on July 1. It has a December 31 year-end. What year-end adjusting entry is required by the company?

Interest Expense....................... 9,000 Interest Payable............ 9,000

Bonds payable with a face value of $200,000 and a carrying value of $196,000 are redeemed prior to maturity at 102. Which of the following will result?

Loss on redemption of $8,000

Which one of the following costs will not be included in the cost of equipment?

Maintenance costs

Which of the following statements regarding the amortization of discounts and premiums on bonds is true?

The effective interest method applies a constant percentage to the bond carrying value to compute interest expense.

A corporation issued 1,500 bonds with a face value of $1,000 each at 99. The journal entry to record the issuance includes

a credit to Bonds Payable for $1,500,000.

A corporation issues $4,000,000 10-year, 8% bonds dated January 1 at 103. The journal entry to record the issuance will include

a credit to Bonds Payable for $4,000,000.

A corporation issued 2,000 bonds with a face value of $1,000 each at 97. The journal entry to record the issuance includes

a debit to Discount on Bonds Payable for $60,000.

The year-end balance of the Premium on Bonds Payable is

added to Bonds Payable on the balance sheet.

A company receives $192, of which $16 is for sales tax. The journal entry to record the sale with sales tax would include a

credit to Sales Taxes Payable for $16.

a company paid for an ordinary to repair to its equipment

macitence and repair expense

A company purchased equipment and incurred these costs: Cash price, $26,000 Sales taxes, $1,200 Insurance during transit, $400 Annual maintenance costs, $500 What amount should be recorded as the cost of the equipment?

$27,600

A company's average total assets are $200,000, depreciation expense is $10,000, and accumulated depreciation is $60,000. Net income is $1,000,000. Net sales total $250,000. What is the asset turnover?

1.25

A company has the following asset account balances: Buildings, $9,200,000 Accumulated depreciation, $1,200,000 Patents, $750,000 Land Improvements, $1,000,000 Land, $5,000,000 How much will be reported on the balance sheet under property, plant, & equipment?

$14,000,000

An asset purchased on January 1 for $60,000 has an estimated salvage value of $3,000. The current useful life is 8 years. How much is total accumulated depreciation using the straight-line method at the end of the second year of life?

$14,250

A plant asset with a cost of $240,000 and accumulated depreciation of $228,000 is sold for $28,000. What is the amount of the gain or loss on disposal of the plant asset?

$16,000 gain.

On January 1, a corporation issued $1,000,000, 9% bonds for $960,000. This price resulted in an effective interest rate of 10% on the bonds. Interest is payable annually on January 1. The company uses the effective-interest method of amortizing bond discount. At the end of the first year, how much should the corporation report as unamortized bond discount?

$34,000

At the start of the current year, a company paid for the following in cash: Copyrights, $2,000,000 Equipment, $25,000,000 Goodwill, $4,500,000 Inventory, $1,500,000 Land, $15,000,000 Patents, $1,500,000 Prepaid rent, $500,000 Research and development, $500,000 Supplies, $4,000,000 Trademarks, $1,000,000 It amortizes its intangibles over 10 years. Determine its current year amortization expense.

$350,000

A company's average total assets is $200,000, average total equity is $120,000, and net sales is $100,000. Its return on assets is 15%. What was the company's net income?

$30,000

A company purchased machinery with a list price of $64,000. The seller granted the company a 10 percent discount for paying quickly and in full. The company also paid $400 for shipping and paid sales tax of $3,000 to purchase the machinery. The machinery has a useful life of 10 years and a salvage value of $20,000. If the company uses straight-line depreciation, annual depreciation will be

$4,100.

A company purchased equipment that has an invoice price of $18,000. It also paid freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and four years, respectively. Under the straight-line method, how much is annual depreciation expense?

$4,750

In the current year, a company incurred $160,000 of research and development costs in its laboratory to develop a new product. It also spent $25,000 in legal fees for a patent on that new product. Later in the current year, the company paid $15,000 for legal fees in a successful defense of its patent. What is the total amount that should be debited to the company's Patents account in the current year?

$40,000

On January 1, a corporation issued $1,000,000, 9% bonds for $951,000. This price resulted in an effective interest rate of 10% on the bonds. Interest is payable annually on January 1. The company uses the effective-interest method of amortizing bond discount. At the end of the first year, how much should the corporation report as unamortized bond discount?

$43,900

A company purchased equipment for $80,000 on January 1 of its first year. The equipment's original estimated useful life is 5 years and its estimated salvage value is $10,000. The company uses the straight-line method of depreciation. On December 31 of its second year, before year-end adjusting entries have been recorded, the company decides to extend the estimated useful life 1 year giving it a total life of 6 years. The company did not change the salvage value and continues to use the straight-line method. How much depreciation expense should be recorded for the second year?

11200

In the current year, a company sold equipment for $20,000. The original cost was $80,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. The equipment was fully depreciated. How much is the gain or loss on the sale?

12000gain

A company purchased equipment for $46,000 on January 1. Freight charges paid to acquire the equipment amounted to $1,000. There was also a cost of $4,000 for building a foundation for the equipment and installing the equipment. It is estimated that the equipment will have a $7,000 salvage value at the end of its 6-year useful life. The straight-line method of depreciation is used. What is the amount of accumulated depreciation at the end of the second year of using the asset and after adjusting entries have been recorded?

14667

A company purchased a truck for $27,000. The company paid $1,200 to paint the company's logo on the truck. The estimated salvage value and useful life are $1,200 and 5 years, respectively. How much is the accumulated depreciation under the straight-line method after three years?

16200

On March 1 of the current year, a company purchases and places into service new equipment. The cost of the equipment is $125,000. The equipment has an estimated 5-year life and $25,000 salvage value at the end of its useful life. What is the depreciation expense for the current year ending December 31 if the company uses the straight-line method of depreciation?

16667

At the start of the current year, a company paid for the following in cash: Equipment, $25,000,000 Patent, $1,700,000 Goodwill, $2,800,000 Inventory, $1,500,000 Land, $15,000,000 Research and development, $1,500,000 Supplies, $3,000,000 Trademarks, $500,000 It amortizes its intangibles over 10 years. Determine its current year amortization expense.

170000

During the current year, a corporation reported net sales of $3,000,000, net income of $1,320,000, and depreciation expense of $80,000. It also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Its asset turnover ratio is

2.4 times

A company's average total assets for the year are $4,000,000, its average total stockholders' equity for the year are $3,000,000, its net income is $800,000, its gross margin is $2,000,000, and its net sales are $10,000,000. What is its return on assets?

20

A company's average total assets is $240,000, average total equity is $150,000, and net sales is $60,000. Its return on assets is 12%. What was the company's net income?

28800

A company purchased a plant asset for $74,000. It has a salvage value of $10,000 and a five year life. It calculates depreciation using the straight-line method. The balance of the company's Accumulated Depreciation account at the end of the current year after-adjusting entries is $25,600. What is the asset's remaining useful life

3 years

A company purchased a plant asset on January 1 for $48,000. It has a salvage value of $3,000 and its annual depreciation expense is $5,000. It calculates depreciation using the straight-line method. The balance of the company's Accumulated Depreciation account at the end of the current year after-adjusting entries is $25,000. What is the asset's remaining useful life?

4 years

At the start of the current year, a company paid for the following in cash: Copyrights, $1,500,000 Equipment, $25,000,000 Goodwill, $4,500,000 Inventory, $1,500,000 Land, $15,000,000 Patents, $2,500,000 Research and development, $1,500,000 Supplies, $4,000,000 Trademarks, $1,200,000 It amortizes its intangibles over 10 years. Determine its current year amortization expense.

400000

A company purchased land for $350,000. It also paid a real estate brokers' commission of $25,000 and spent $35,000 demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,000. Additionally, the company assumed $2,500 in property taxes due on the land owed by the previous owner. Under the historical cost principle, the cost of land would be recorded at

411500

On April 1 of the current year, a company purchases and places into service new equipment. The cost of the equipment is $75,000. The equipment has an estimated 10-year life and $15,000 salvage value at the end of its useful life. What is the depreciation expense for the current year ending December 31 if the company uses the straight-line method of depreciation?

4500

What term is used for bonds that give the issuing company an option to redeem (or buy back) the bonds prior to maturity for a stated dollar amount?

Callable bonds

At the start of the current year, a company issued a $500,000 note to a bank. The company must pay the bank $50,000 plus interest each January 1 for the next ten years starting at the beginning of next year. The company will report the note payable on its current year's balance sheet as

Current liabilities, $50,000; Long-term Debt, $450,000.

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

Price of replacing the plant asset.

Which ratio is computed by dividing net income by net sales?

The profit margin ratio

The cost of successfully defending a patent in an infringement suit should be

added to the Patent account.

Which of the following is an acceptable way to express the useful life of a depreciable asset?

all of these

In computing depreciation, salvage value is

an estimate of a plant asset's value at the end of its useful life.

A permanent decline in the market value of an asset is called

an impairment

A permanent decline in the market value of an asset is called

an impairment.

A company issued $100,000 in 10-year bonds at 103. It is 10 years later and the final interest payment is being made and recorded. The journal entry that the company records for the redemption of its bonds at maturity includes

debit to Bonds Payable for $100,000.

A truck that cost $45,000 is discarded as worthless. The truck had already been depreciated by $39,000. The entry to record this event would include a

debit to Loss on Disposal of Plant Assets for $6,000.

A truck that cost $48,000 is discarded as worthless. The truck had already been depreciated by $40,000. The entry to record this event would include a

debit to Loss on Disposal of Plant Assets for $8,000.

The term applied to the periodic expiration of a plant asset's cost is

depreciation.

A corporation paid $210,000 for a machine four years ago. This year, the machine was completely destroyed in a fire. The accumulated depreciation on the equipment is $84,000; that amount includes depreciation for the current year. An insurance check for $240,000 was received based on the replacement cost of the equipment. No journal entry for the casualty was recorded until the company received the check from the insurance company. The company's journal-entry to record the insurance proceeds will include a

gain on disposal of $114,000.

If a plant asset is retired and its accumulated depreciation equals its cost

no gain or loss on disposal will be recorded.

When there is a change in a depreciable asset's useful life or salvage value

only that asset's current and future years' depreciation will be affected.

Which ratio is computed by dividing net income by net sales?

profit margin ratio

When a plant asset is retired, the difference between the plant asset's cost and the accumulated depreciation of the same plant asset is

recognized on the income statement as a loss on disposal of plant asset.

all of the following are needed for the computation of depreciation except

wage expense of personal operaring..etc