Test 2 - Study Guide (7,8,9,10,12)

Colvin Enterprises purchased a depreciable asset at the 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. Use the double-declining balance method to find the assets depreciation expense for year 2.

$36,000

Lima Enterprises purchased a depreciatble asset for $22,000. Using the straight line method, what will the depreciation expense be at the end of its four year useful life if the salvage value is $2000?

$5000

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

$544

Colvin Enterprise's purchases an asset at the cost of $180,000. The salvage value is 17,000 at the end of its five year useful life. Using the double-declining balance method, what is the book value at the end of year 2?

$97,200

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 the sale of $5000

When preparing a statement of cash flows using the indirect method, which of the following is correct?

A loss on the sale of land should be added to net income in operating activities

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Aging of accounts receivable method

A decrease in inventory during the year should be reported on the indirect method statement of cash flows as:

An increase in cash flows from operating activities

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:

Debit: Allowance for doubtful accounts $2000 Credit: Accounts receivable - A. Hopkins $2000

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Debit: Bad Debts Expense $16125 Credit: Allowance for Doubtful accounts $16125

If a company has an advance ticket sales totalling $200,000,000 for an upcoming football season, the receipt of cash would be journalized as:

Debit: Cash Credit: Unearned Revenue

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $9500 of cash sales that are subject to an 9% sales tax, what is the journal entry to record the cash sales?

Debit: Cash $10355 Credit: Sales $9500 Sales Tax Payable $855

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

Debit: Cash $4680 Debit: Credit Card Expense $120 Credit:Sales $4800

On May 22nd, Jarret company borrows $7500 from Fairmont Financing signing a 90 day, 8% $7500 note. What is the journal entry needed to record this transaction on the day of maturity?

Debit: Notes Payable $7500 Interest Expense $150 Credit: Cash $7650

Cash flows reporting the issuance of common stock is:

Financing Activities

Cash flows for both short term and long term debt are:

Financing activities

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

Fredrick Company borrows money from First city Bank and pledges money as security, which of the following is true?

Fredrick's Company's financial statements must disclose the pledging of recievables

Addams Corporation paid cash dividends totaling $75,000 during its most recent fiscal year. How should this information be reported on Addam's statement of cash flows?

In financing activities as a use of funds

Purchasing equipment for cash is reported as:

Investing activities

Depreciation:

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

Which of the following is not true about the Allowance for Doubtful Accounts?

It is a liability account

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Operating Activity

Cash flows for reporting the cash payment of wages is:

Operating activities

FICA includes:

Social Security and Medicare

The expense recognition (matching) principle, as applied to bad debts requires:

The use of the allowance method of accounting for bad debts

Salvage value is:

an estimate of the asset's value at the end of its benefit period