A311 Review Questions

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Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be

capitalized as part of the cost of the land

A measure of a company's financial flexibility is the

cash debt coverage and free cash flow

The residual interest in a corporation belongs to the

common stockholders

The cost of land does not include

costs of improvements with limited lives

The interest rate written in the terms of the bond indenture is known as the

coupon rate, nominal rate, or stated rate

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation and training are $90,000, $60,000 and $30,000 respectively. The journal entry to record the transaction on March 15, 2018 will include a

credit to Unearned Service Revenue of $24,000

An entry is not made on the

date of record

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a:

debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160.

A journal entry to record the sale of inventory on account will include a

debit to accounts receivable

Assets increase with a () and decrease with a ()

debit, credit

What is the effect of net markups on the cost-retail ratio when using the conventional retail method?

decreases the cost-to-retail ratio

Balance sheet information is useful for all of the following except

determining free cash flows

Which of the following items would be reported net of tax on the face of the income statement? -Discontinued operations -Change in realizability of receivables -Unusual gain -Prior period adjustment

discontinued operations

Stockholders' equity is generally classified into two major categories:

earned capital and contributed capital

The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is

either the proportional method or the incremental method.

Receivables are valued based on their ________.

estimated amount collectible

Bond interest paid is equal to the

face amount of the bonds multiplied by the stated interest rate

In preparing a statement of cash flows, sale of treasury stock at an amount greater than cost would be classified as a(n)

financing activity

Which of the following items should be included in a company's inventory at the balance sheet date? -None of these answer choices are correct. -Goods sold to a customer which are being held for the customer to call for at his or her convenience. -Goods received from another company for sale on consignment. -Goods in transit which were purchased f.o.b. destination.

first one

When boot is involved in an exchange having commercial substance

gains or losses are recognized in their entirely

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

going concern assumption

If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be

greater than if the straight-line method were used

The first step in the process for revenue recognition is to

identify the contract with customers.

A principal objection to the straight-line method of depreciation is that it

ignores variations in the rate of asset use.

When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will

increase if the bonds were issued at either a discount or a premium.

The current assets section of the balance sheet should include (out of) -inventory -goodwill -patents -machinery

inventory

The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in

inventory back into cash, or 12 months, whichever is longer

Elkins Corporation uses the perpetual inventory and the gross method. On March 1, it purchased $50,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost $5,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit

inventory for $900

Making and collecting loans and disposing of property, plant, and equipment are

investing activities

The designated market value

is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.

The transaction price

is the amount of consideration that a company expects to receive from a customer

Treasury shares are shares

issued but not outstanding

Fences and parking lots are reported on the balance sheet as

land improvements

The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as

liquidity

Use of the sum-of-the-years'-digits method

means the book value should not be reduced below salvage value

The income statement reveals

net earnings (net income) of a firm for a period of time.

The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the

net realizable value less normal profit margin.

What is the effect of a $50,000 overstatement of last year's inventory on current years ending retained earning balance?

no effect

Torque Co. has equipment with a carrying amount of $2,400,000. The expected future net cash flows from the equipment are $2,445,000, and its fair value is $2,040,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

no impairment should be recorded

The accounting for cash discounts and trade discounts are (same or no)

not the same

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?

on the face of the income statement

Goodwill may be recorded whenGoodwill may be recorded when

one company acquires another in a business combination.

The accountant for the Lintz Sales Company is preparing the income statement for 2017 and the balance sheet at December 31, 2017. The January 1, 2017 merchandise inventory balance will appear

only in the cost of goods sold section of the income statement

Current assets are presented in the balance sheet in

order of their liquidity

The cost of installing a new computer system in 2017 was not recorded in 2017. It was charged to expense in 2018. The 2017 Net Income would be ____ and 2018 Net Income would be _____.

overstated/understated

"Gains" on sales of treasury stock (using the cost method) should be credited to

paid-in capital from treasury stock

The balance sheet is useful for analyzing all of the following except

profitability

Noncash consideration should be

recognized on the basis of fair value of what is received

The converged standard on revenue recognition

recognizes and measures revenue based on changes in assets and liabilities.

On January 15, 2018, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. This contract should be

recorded on March 31, 2018

Treasury stock should be reported as a(n)

reduction of stockholders' equity

The cumulative feature of preferred stock

requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

The major elements of the income statement are

revenues, expenses, gains, and losses.

Net realizable value is

selling price less costs to compete, sell, and transport

For Mortenson Company, the following information is available: Cost of goods sold $390,000 Dividend revenue 15,000 Income tax expense 36,000 Operating expenses 138,000 Sales revenue 600,000 In Mortenson's multiple-step income statement, gross profit

should be reported at $210,000

should not be reported.

The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the

statement of cash flows

A plant asset has a cost of $40,000 and a salvage value of $10,000. The asset has a three-year life. If depreciation in the third year amounted to $5,000, which depreciation method was used?

sum-of-the-years'-digits

The carrying value of an intangible is

the asset's acquisition cost less the total related amortization recorded to date.

The book value of a plant asset is

the asset's acquisition cost less the total related depreciation recorded to date.

In calculating earnings per share, companies deduct preferred dividends from net income if:

the dividends are declared

If a contract involves a significant financing component,

the fair time value of money is used to determine the fair value of the transaction

The statement of cash flows reports all of the following except

the free cash flows generated during the period

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to

the market rate multiplied by the beginning-of-period carrying amount of the bonds.

Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that

the nominal rate of interest exceeded the market rate

The basis for classifying assets as current or noncurrent is conversion to cash within

the operating cycle or one year, whichever is longer

The term "depreciable base," or "depreciation base," as it is used in accounting, refers to

the total amount to be charged (debited) to expense over an asset's useful life.

The accounting equation must remain in balance

throughout each step in the accounting cycle

A limitation of the balance sheet that is not also a limitation of the income statement is

valuation of items at historical cost

General Products Company bought Special Products Division in 2017 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $6,000,000 and it is carried on General Product's books for a total of $5,100,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $600,000 exists on December 31, 2018. What goodwill impairment should be recognized by General Products in 2018?

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. Using effective-interest amortization, how much interest expense will be recognized in 2017?

$1,176,373

Olmsted Company has the following items: common stock, $950,000; treasury stock, $105,000; deferred income taxes, $125,000 and retained earnings, $454,000. What total amount should Olmsted Company report as stockholders' equity?

$1,299,000

For 2017, cost of goods available for sale for Tate Corporation was $4,500,000. The gross profit rate on sales was 20%. Sales for the year were $4,000,000. What was the amount of the ending inventory?

$1,300,000

Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the land that should be recorded by Wilson Co. is

$1,480,320

Winsor Co. records purchases at net amounts. On May 5 Winsor purchased merchandise on account, $80,000, terms 2/10, n/30. Winsor returned $6,000 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. By how much should the account payable be adjusted on May 31?

$1,480.

At the close of its first year of operations, December 31, 2017, Ming Company had accounts receivable of $1,620,000, after deducting the related allowance for doubtful accounts. During 2017, the company had charges to bad debt expense of $270,000 and wrote off, as uncollectible, accounts receivable of $120,000. What should the company report on its balance sheet at December 31, 2017, as accounts receivable before the allowance for doubtful accounts?

$1,770,000

On January 1, 2017, the merchandise inventory of Glaus, Inc. was $1,600,000. During 2017 Glaus purchased $3,200,000 of merchandise and recorded sales of $4,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2017?

$1,800,000

A company issues $25,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24,505,180. Using effective-interest amortization, how much interest expense will be recognized in 2017?

$1,960,623

A company issues $25,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24,505,180. What is interest expense for 2018, using straight-line amortization?

$1,974,741

On January 1, 2011, Forrest Company purchased equipment at a cost of $390,000. The equipment was estimated to have a salvage value of $12,000 and it is being depreciated over eight years under the sum-of-the-years'-digits method. What should be the charge for depreciation of this equipment for the year ended December 31, 2018?

$10,500

Jeff Corporation purchased a limited-life intangible asset for $375,000 on May 1, 2016. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2018?

$100,000

Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $205,000. What amount of the proceeds should be allocated to the preferred stock?

$111,818

Halltown Company purchased a depreciable asset for $600,000. The estimated salvage value is $40,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

$112,500

Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were

$12,175,000

David Company uses the gross method to record sales made on credit. On June 10, 2017, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2017, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2017. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.?

$125,000.

Slotkin Products purchased a machine for $65,000 on July 1, 2017. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $5,000. Depreciation for 2018 to the closest dollar is

$14,219

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2017 balance sheet?

$14,709,481

Glavine Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $310,000. The proceeds allocated to the common stock is

$140,909

Robust Inc. has the following information related to an item in its ending inventory. Product 66 has a cost of $162, a replacement cost of $155, a net realizable value of $160, and a normal profit margin of $10. What is the final lower-of-cost-or-market inventory value for product 66?

$155

Lexington Company sells product 1976NLC for $20 per unit. The cost of one unit of 1976NLC is $18, and the replacement cost is $17. The estimated cost to dispose of a unit is $4, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?

$16

Transactions for the month of June were: Purchases June 1 bal 3,200 @ $3.20 June 3 8,800 @ 3.10 June 7 4,800 @ 3.30 June 15 7,200 @ 3.40 June 22 2,000 @ 3.50 Sales June 2 2,400 @ $5.50 June 6 6,400 @ 5.50 June 9 4,000 @ 5.50 June 10 1,600 @ 6.00 June 18 5,600 @ 6.00 June 25 800 @ 6.00 Assuming that perpetual inventory records are kept in units only, the ending inventory on a LIFO basis is

$16,440

$16,952

Falcon Company purchased a depreciable asset for $175,000. The estimated salvage value is $14,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

$161,000

Packard Corporation reports the following information: Net cash provided by operating activities $335,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's free cash flow is

$165,000

Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 7,200 units that cost $12 each. During the month, the company made two purchases: 3,000 units at $13 each and 12,000 units at $13.50 each. Checkers also sold 12,900 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month?

$167,055

Transactions for the month of June were: Purchases June 1 bal 3,200 @ $3.20 June 3 8,800 @ 3.10 June 7 4,800 @ 3.30 June 15 7,200 @ 3.40 June 22 2,000 @ 3.50 Sales June 2 2400 @ 5.50 June 6 6400 @ 5.5 June 9 4000 @ 5.5 June 10 1600 @ 6 June 18 5600 @ 6 June 25 800 @ 6 Assuming that perpetual inventory records are kept in dollars, the ending inventory on a LIFO basis is

$17,160

$17,880

Grover Corporation purchased a truck at the beginning of 2017 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2017 and 29,000 miles in 2018. What is the depreciation expense for 2017?

$18,375

Morgan Manufacturing Company has the following account balances at year end: Office supplies $ 4,000 Raw materials 27,000 Work-in-process 59,000 Finished goods 97,000 Prepaid insurance 6,000 What amount should Morgan report as inventories in its balance sheet?

$183,000

Consider the following: Cash in Bank - checking account of $18,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet?

$19,000

Gamma Ray Corp. has annual sales totaling $1,170,000 and an average gross profit of 20% of cost. What is the dollar amount of the gross profit?

$195,000

Lawson Manufacturing Company has the following account balances at year end: Office supplies $ 4,000 Raw materials 27,000 Work-in-process 59,000 Finished goods 109,000 Prepaid insurance 6,000 What amount should Lawson report as inventories in its balance sheet?

$195,000

Houghton Company has the following items: common stock, $1,600,000; treasury stock, $210,000; deferred income taxes, $250,000 and retained earnings, $780,000. What total amount should Houghton Company report as stockholders' equity?

$2,170,000

The following information is available for Naab Company for 2017: Freight-in $ 60,000 Purchase returns 150,000 Selling expenses 460,000 Ending inventory 520,000 The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale?

$2,360,000

On October 31, a fire destroyed PH Inc.'s entire retail inventory. The inventory on hand as of January 1 totaled $2,720,000. From January 1 through the time of the fire, the company made purchases of $660,000 and had sales of $1,440,000. Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?

$2,516,000

Blue Sky Company's 12/31/18 balance sheet reports assets of $7,000,000 and liabilities of $2,800,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $420,000 greater than its book value. On 12/31/18, Horace Wimp Corporation paid $7,140,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase?

$2,520,000

On January 1, 2017, Garden Company purchased a new machine for $4,200,000. The new machine has an estimated useful life of nine years and the salvage value was estimated to be $150,000. Depreciation was computed on the sum-of-the-years'-digits method. What amount should be shown in Garden's balance sheet at December 31, 2018, net of accumulated depreciation, for this machine?

$2,670,000

In 2017, Benfer Corporation reported net income of $210,000. It declared and paid common stock dividends of $24,000 and had a weighted average of 100,000 common shares outstanding. Compute the earnings per share to the nearest cent.

$2.10

Benedict Corporation reports the following information: Net income $750,000 Dividends on common stock $210,000 Dividends on preferred stock $ 90,000 Weighted average common shares outstanding 250,000 Benedict should report earnings per share of

$2.64

King Corporation owns machinery with a book value of $760,000. It is estimated that the machinery will generate future cash flows of $700,000. The machinery has a fair value of $560,000. King should recognize a loss on impairment of

$200,000

Muckenthaler Company sells product 2005WSC for $30 per unit. The cost of one unit of 2005WSC is $27, and the replacement cost is $26. The estimated cost to dispose of a unit is $6, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

$24

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 480 units that cost $65 each. During the month, the company made two purchases: 720 units at $68 each and 360 units at $70 each. Chess Top also sold 1,200 units during the month. Using the average cost method, what is the amount of ending inventory?

$24,314

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue?

$24,750

For Randolph Company, the following information is available: Capitalized leases $560,000 Copyrights 240,000 Long-term receivables 210,000 In Randolph's balance sheet, intangible assets should be reported at

$240,000

Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $6,000 in the allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

$25,400

For Grimmett Company, the following information is available: Capitalized leases $600,000 Trademarks 275,000 Long-term receivables 225,000 In Grimmett's balance sheet, intangible assets should be reported at

$275,000

Farmer Company issues $30,000,000 of 10-year, 9% bonds on March 1, 2017 at 97 plus accrued interest. The bonds are dated January 1, 2017, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

$28,550,000

Norling Corporation reports the following information: Net income $750,000 Dividends on common stock $210,000 Dividends on preferred stock $ 90,000 Weighted average common shares outstanding 200,000 Norling should report earnings per share of

$3.30

ELO Corporation purchased a patent for $135,000 on September 1, 2016. It had a useful life of 10 years. On January 1, 2018, ELO spent $33,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2018?

$30,000

Fogelberg Company purchased equipment for $30,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $400, repairs of $700 for damage during installation, and installation costs of $450. What is the cost of the equipment?

$32,350

Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 6% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year?

$378,000.

Dotel Company's 12/31/18 balance sheet reports assets of $12,000,000 and liabilities of $5,000,000. All of Dotel's assets' book values approximate their fair value, except for land, which has a fair value that is $800,000 greater than its book value. On 12/31/18, Egbert Corporation paid $12,200,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase?

$4,400,000

$4,521,360

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 1,290,000 Dividends declared 960,000 Net income 3,000,000 Retained earnings, 1/1/17, as reported 6,000,000 Moorman should report retained earnings, 1/1/17, as adjusted at

$4,710,000.

Hoyle Company traded machinery with a book value of $760,000 and a fair value of $720,000. It received in exchange from Durler Company a machine with a fair value of $800,000. Hoyle also paid cash of $80,000 in the exchange. Durler's machine has a book value of $760,000. What amount of gain or loss should Hoyle recognize on the exchange (assuming lack of commercial substance)?

$40,000

Ortiz Co. had the following account balances: Sales revenue $ 440,000 Cost of goods sold 220,000 Salaries and wages expense 30,000 Depreciation expense 60,000 Dividend revenue 12,000 Utilities expense 24,000 Rent revenue 60,000 Interest expense 36,000 Sales returns and allow. 33,000 Advertising expense 39,000 What would Ortiz report as total expenses in a single-step income statement?

$409,000

Worthington Chandler Company purchased equipment for $40,000. Sales tax on the purchase was $2,400. Other costs incurred were freight charges of $600, repairs of $350 for damage during installation, and installation costs of $675. What is the cost of the equipment?

$43,675

Lohmeyer Corporation reports: Cash provided by operating activities $320,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 90,000 What is Lohmeyer's ending cash balance?

$440,000

Wellington Corp. has outstanding accounts receivable totaling $6 million as of December 31 and sales on credit during the year of $30 million. There is also a debit balance of $24,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

$480,000.

$5,880

Dicer uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $390,000 ($594,000), purchases during the current year at cost (retail) were $2,055,000 ($3,300,000), freight-in on these purchases totaled $129,000, sales during the current year totaled $3,000,000, and net markups (markdowns) were $72,000 ($108,000). What is the ending inventory value at cost?

$556,842

Berry Corporation has 100,000 shares of $10 par common stock authorized. The following transactions took place during 2017, the first year of the corporation's existence: Sold 20,000 shares of common stock for $13.50 per share. Issued 20,000 shares of common stock in exchange for a patent valued at $300,000. At the end of the Berry's first year, total paid-in capital amounted to

$570,000

Horner Company buys a delivery van with a list price of $70,000. The dealer grants a 15% reduction in list price and an additional 2% cash discount on the net price if payment is made in 30 days. Sales taxes amount to $930 and the company paid an extra $700 to have a special device installed. What should be the recorded cost of the van?

$59,940

Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 645,000 Dividends declared 480,000 Net income 1,500,000 Retained earnings, 1/1/17, as reported 6,000,000 Leonard should report retained earnings, 1/1/17, as adjusted at

$6,645,000

$6,750,000

Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $8,100,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be

$6,885,000.

Harding Corporation reports the following information: Net income $530,000 Depreciation expense 140,000 Increase in accounts receivable 60,000 Harding should report cash provided by operating activities of

$610,000

Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $796,800 ($980,700), purchases during the current year at cost (retail) were $3,205,800 ($4,158,300), freight-in on these purchases totaled $191,700, sales during the current year totaled $4,056,000, and net markups (markdowns) were $6,000 ($288,900). What is the ending inventory value at cost?

$652082

June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 80 units that cost $20 per unit. During the current month, the company purchased 480 units at $20 each. Sales during the month totaled 360 units for $43 each. What is the cost of goods sold using the LIFO method?

$7,200

Jasmine Company purchased a depreciable asset for $375,000. The estimated salvage value is $25,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

$70,313

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively. The transaction price allocated to equipment, installation and training is

$72,000, $48,000 and $24,000 respectively.

On August 1, 2017, Hayes Corporation purchased a new machine on a deferred payment basis. A down payment of $18,000 was made and 4 monthly installments of $15,000 each are to be made beginning on September 1, 2017. The cash equivalent price of the machine was $72,000. Hayes incurred and paid installation costs amounting to $3,000. The amount to be capitalized as the cost of the machine is

$75,000

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 480 units that cost $65 each. During the month, the company made two purchases: 720 units at $68 each and 360 units at $70 each. Chess Top also sold 1,200 units during the month. Using the LIFO method, what is the amount of cost of goods sold for the month?

$81,960

During 2017 the DLD Company had a net income of $85,000. In addition, selectedaccounts showed the following changes: Accounts Receivable $3,000 increase Accounts Payable 1,000 increase Buildings 4,000 decrease Depreciation Expense 1,500 increase Bonds Payable 8,000 increase What was the amount of cash provided by operating activities?

$84,500

For the year ended December 31, 2017, Transformers Inc. reported the following: Net income $300,000 Preferred dividends declared 50,000 Common dividend declared 10,000 Unrealized holding loss, net of tax 5,000 Retained earnings, beginning balance 400,000 Common stock 200,000 Accumulated Other Comprehensive Income, Beginning Balance 25,000 What would Transformers report as total stockholders' equity?

$860,000

Bell Inc. took a physical inventory at the end of the year and determined that $840,000 of goods were on hand. In addition, the following items were not included in the physical count. Bell, Inc. determined that $96,000 of goods purchased were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count).The company sold $40,000 worth of inventory f.o.b. destination. What amount should Bell report as inventory at the end of the year?

$880,000

Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $72,000 and a fair value of $90,000. The asset given up by Armstrong Co. has a book value of $120,000 and a fair value of $114,000. Boot of $24,000 is received by Armstrong Co. What amount should Armstrong Co. record for the asset received?

$90,000

Bell Inc. took a physical inventory at the end of the year and determined that $780,000 of goods were on hand. In addition, Bell, Inc. determined that $60,000 of goods that were in transit that were shipped f.o.b. shipping point were actually received two days after the inventory count and that the company had $90,000 of goods out on consignment. What amount should Bell report as inventory at the end of the year?

$930,000

$96,000

Becky had net sales (all on account) in 2017 of $800,000. At December 31, 2016, before adjusting entries, the balances in selected accounts were: accounts receivable $1,000,000 debit, and allowance for doubtful accounts $2,000 debit. Becky estimates that 3% of its accounts receivable will prove to be uncollectible. What is the net realizable value of the receivables reported on the financial statements at December 31, 2017?

$970,000

Boxer Inc. uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $393,500 ($594,000), purchases during the current year at cost (retail) were $3,408,000 ($5,193,600), freight-in on these purchases totaled $159,500, sales during the current year totaled $4,666,000, and net markups were $414,000. What is the ending inventory value at cost?

$981,248

Long-term liabilities include

-deferred income taxes and most lease obligations. -obligations payable at some date beyond the operating cycle. -obligations not expected to be liquidated within the operating cycle.

Use of the double-declining balance method

-means the book value should not be reduced below salvage value. -means salvage value is not deducted in computing the depreciation base. -results in a decreasing charge to depreciation expense.

Huge Cart Inc. gives you the following information pertaining to the year 2017. Net sales $850,000 Cost of goods sold 500,000 Current assets 500,000 Current liabilities 250,000 Average total assets 1,000,000 Total liabilities 550,000 Net income 150,000 The asset turnover ratio of Huge Cart Inc. is

0.85

Packard Corporation reports the following information: Net cash provided by operating activities $335,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends declared 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's cash debt coverage is

1.34

15%

200 units

The sales price for a product provides a gross profit of 20% of sales price. What is the gross profit as a percentage of cost?

25%

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

A prior period adjustment

Which of the following is not a major characteristic of a plant asset?

Acquired for resale

Which of the following is a limitation of the balance sheet? -Current fair value not reported -Judgements and estimates and used -Many items that are of financial value are omitted

All of the above

Which of the following is true of depreciation accounting? -It is the process of cost allocation. -It is part of the matching of revenues and expenses. -It is not a matter of valuation.

All of the above

Which of the following should be reported for capital stock? -All of these answer choices are correct. -The shares outstanding -The shares issued -The shares authorized

All of the above

When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless: -the stated face amount of the note is materially different from the current cash sales price for similar items or from current fair value of the note. -the stated interest rate is unreasonable. -no interest rate is stated.

All of them

When using a perpetual inventory system which one is right -two entries are required to record a sale. -a Cost of Goods Sold account is used. -no Purchases account is used.

All of them

Long-term liabilities include: -deferred income taxes and most lease obligations. -obligations payable at some date beyond the operating cycle. -obligations not expected to be liquidated within the operating cycle.

All of these

Which of the following is an acceptable method of presenting the income statement? -A consolidated statement of income -A multiple-step income statement -A single-step income statement

All of these

Which of the following is true about the information provided in the income statement? -It helps assess the risk or uncertainty of achieving future cash flows. -It provides a basis for predicting future performance. -It helps in evaluating the past performance of the enterprise.

All of these

Which of the following concepts relates to using the allowance method in accounting for accounts receivable? -Bad debt expense is an estimate that is based on historical and prospective information. -Bad debt expense is based on the actual amounts determined to be uncollectible. -Bad debt expense is an estimate that is based only on an analysis of the receivables aging. -Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.

Bad debt expense is an estimate that is based on historical and prospective information.

The stockholders' equity section is usually divided into what three parts?

Capital stock, additional paid-in-capital, retained earnings

A loss on impairment of an intangible asset is the difference between the asset's

Carrying amount and its fair value

How can accounting for bad debts be used for earnings management?

Changing the percentage of receivables recorded as bad debt expense.

What would be an advantage of having all countries adopt and follow the same accounting standards?

Comparability and lower preparation costs

Which of the following is a characteristic of a perpetual inventory system? -Cost of goods sold is recorded with each sale. -Cost of goods sold is determined as the amount of purchases less the change in inventory. -Inventory records are not kept for every item. -Inventory purchases are debited to a Purchases account.

Costs of good sold is recorded with each sale

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?

Debit Accounts Receivable for $25,000

What is the normal journal entry when writing-off an account as uncollectible under the allowance method?

Debit Allowance for Doubtful Accounts, credit Accounts Receivable.

What is the normal journal entry for recording bad debt expense under the allowance method?

Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

What is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method?

Debit accounts receivable, credit allowance for doubtful accounts

The rate of interest actually earned by bondholders is called the

Effective rate

According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?

Expenses

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?

Finished goods

Which of the following is not considered cash for financial reporting purposes? -Postdated checks and I. O. U.'s -Coin, currency, and available funds -Money orders, certified checks, and personal checks -Petty cash funds and change funds

First

Which of the following is false about an income statement? -It is used to measure the solvency of a company. -Items that cannot be measured reliably are not reported in the income statement. -Income measurement involves judgment. -Income numbers are affected by the accounting methods employed.

First answer

The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except: -developing auditing standards for public companies. -grading the CPA exam. -providing professional education programs. -developing and enforcing professional ethics.

First one

Which item below is not a current liability? -Stock dividends distributable -Unearned revenue -The currently maturing portion of long-term debt -Trade accounts payable

First one

Which of the following best describes a possible result of treasury stock transactions by a corporation? -May decrease but not increase retained earnings. -May increase but not decrease retained earnings. -May increase net income if the cost method is used. -May decrease but not increase net income.

First one

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows? -Cash purchase of treasury stock. -Cash received as repayment for funds loaned. -Cash purchases of bonds issued by another company. -Cash purchases of equipment.

First one

Which of the following is a nominal (temporary) account? -Salaries and Wages Expense -Unearned Service Revenue -Retained Earnings -Inventory

First one

Which of the following is an example of managing earnings up? -Underestimating warranty claims. -Accruing a contingent liability for an ongoing lawsuit. -Writing off obsolete inventory. -Decreasing estimated salvage value of equipment.

First one

Which of the following is not a major challenge facing the accounting profession? -Accounting for hard assets. -Timeliness. -Forward-looking information. -Nonfinancial measurements.

First one

Which of the following is not one of the basic questions that must be answered before the amount of depreciation charge can be computed? -What product or service is the asset related to? -What method of cost apportionment is best for this asset? -What is the asset's useful life? -What is the depreciation base to use for the asset?

First one

Which of the following is not required when using the retail inventory method? -All inventory items must be categorized according to the retail markup percentage which reflects the item's selling price. -A record of the total cost and retail value of the goods purchased. -A record of the total cost and retail value of the goods available for sale. -Total sales amount for the period.

First one

Which of the following is not true of generally accepted accounting principles? -GAAP does not have substantial authoritative support. -GAAP changes over time as the nature of the business environment changes. -GAAP is influenced by pronouncements of the SEC and IRS. -GAAP includes detailed practices and procedures as well as broad guidelines of general application.

First one

Which of the following is true of accounting for changes in estimates? -Changes in estimates are not carried back to adjust prior years -Changes in estimates are considered as errors -A company accounts for changes in estimates only in the period of change, even though it affects the future periods -A company recognizes a change in estimate by making a retrospective adjustment to the financial statements

First one

Which of the following statements best describes the purpose of closing entries? - reduce the balances of revenue and expense accounts to zero so that they may be used to accumulate the revenues and expenses of the next period. -To faciliate posting and taking a trial balance. - To determine the amount of net income or net loss for the following period. - To complete the record of various transactions that were started in a prior period.

First one

Which of the following statements is correct regarding receivables? -Receivables are claims held against customers and others for money, goods, or services. -Receivables are written promises of the purchaser to pay for goods or services. -Receivables are non-financial assets. -Receivables that are expected to be collected within a year are classified as noncurrent.

First one

Which of the following statements is true about the accrual basis of accounting? -Revenues are recognized in the period the performance obligation is satisfied, regardless of the time period the cash is received. -A minimal amount of record keeping is required in accrual basis accounting compared to cash basis. -This method is used less frequently by businesses than the cash method of accounting. -The timing of cash receipts and disbursements is emphasized.

First one

What of the following intangible assets should be shown as a separate item on the balance sheet? -Goodwill -Franchise -Patent -Trademart

Goodwill

Out of Goodwill, Accounts Receivable, and Service Revenue which are real (permanent) accounts?

Goodwill and Accounts Receivable

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

Improved matching of bad debt expense with revenue

What is meant by comparability when discussing financial accounting information?

Information is measured and reported in a similar fashion across companies.

Which of the following is not an acceptable approach in applying the lower-of-cost-and net realizable value method to inventory?

Inventory location

If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?

It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

Which of the following should be excluded from long-term liabilities? -Long-term liabilities that mature within the operating cycle and will be paid from a sinking fund -Most pension obligations -Obligations payable at some date beyond the operating cycle

None

Which of the following is included in comprehensive income? -Unrealized gains on available-for-sale securities. -Distributions to owners. -Changes in accounting principles. -Investments by owners.

None of the above

Which of the following is not a selling expense?

Office salaries expense

In 2018 clerical workers were trained to use the new computer system at a cost of $15,000, which was erroneously capitalized. The cost is to be written off over the expected life of the new computer system. As a result, the net book value of plant assets at 12/31/18 would be _____ and the 2018 net income would be ____.

Overstated/understated

What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory?

Prevents overstatement of the value of obsolete or damaged inventories.

Which of the following is a product cost as it relates to inventory? - Raw materials -abnormal spoilage -interest costs -selling costs

Raw materials

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Relax credit policies for customers

Which type of account is always debited during the closing process?

Revenune

Which of the following is an example of managing earnings down?

Revising the estimated life of equipment from 10 years to 8 years.

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?

Sale of equipment at book value

Which of the following is a period cost? Selling costs. Production costs. Freight in. Direct costs.

Selling costs

A plant asset has a cost of $40,000 and a salvage value of $10,000. The asset has a three-year life. If depreciation in the third year amounted to $5,000, which depreciation method was used?

Sum-of-the-years' digits

Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?

The FASB allows due process

What is a purpose of having a conceptual framework?

To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

Why are inventories stated at lower-of-cost and net realizable value

To report a loss when there is a decrease in the future utility below the original cost

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

Treasury stock for the purchase price

If a company uses the periodic inventory system, what is the impact on net income of including goods in transit f.o.b. shipping point in purchases, but not ending inventory?

Understate net income

If a company chooses the fair value option, a decrease in the fair value of the liability is recorded by crediting

Unrealized holding gain/loss-income

Total SE represents

a claim against a portion of the total assets of a company

A performance obligation exists when

a company provides a distinct product or service

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes

a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000.

An adjusting entry should never include

a debit to an expense account and a credit to a revenue account.

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as

a deduction from sales in the income statement.

Trade discounts are: -used to quote different prices for different quantities purchased. -used to avoid frequent changes in catalogs. -not recorded in the accounts; rather they are a means of computing a price.

all of the above

Which of the following should be reported for capital stock? -The shares outstanding -The shares issued -The shares authorized

all of these

Premium on bonds payable is

an adjunct account

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as

an amount after continuing operations.

The failure to record a purchase of merchandise on account even though the goods are properly included in the physical inventory results in

an understatement of liabilities and an overstatement of owners' equity.

The cash debt coverage is computed by dividing net cash provided by operating activities by

average total liabilities

A transaction price for multiple performance obligations should be allocated

based on what the company could sell the goods for on a standalone basis.

A change in estimate should

be handled in current and future periods.

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:

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