Acc 131 final

Carey Company buys land for $50,000 on 12/31/12. As of 3/31/13, the land has appreciated in value to $50,700. On 12/31/13, the land has an appraised value of $51,800. By what amount should the land account be increased in 2013?

$0

A customer's NSF check returned by the bank

$1,000

On Jan 1, 2013, a company balance in retained earnings was $10,000,000. At Dec 31, 2013 the balance in retained earnings was $9,400,000. If the company earned net income of $444,000 during the year, how much were dividends?

$1,044,000

Geiss motorsports sold 50 motorbikes for $1,000 each. The bikes carry a 2-year warranty for repairs. Estimates indicate that repairs costs will average 2% of the total selling price. What is the amount that would be recorded in the estimated warranty liability account as a result of selling the bikes?

$1000

On Jan. 1, a machine with a useful life of 5 years & a residual value of $25,000 was purchased for $75,000. What is the depreciation expense for year 2 under double-declining -balance method of depreciation?

$18,000

If a company has assets of $5,000,000, Liabilities of $3,000,000 & retained earnings of $1,200,000, how much is the stockholders equity?

$2,000,000

Company's Balance according to the general ledger - $23,100 Outstanding checks - $550 Interest earned on the checking account - $100 A customer's NSF check returned by the bank - $1,000 The accountant found an error. Recorded $600 but correct amount as $650

$22,250 ($23,100 + ($650 - $600) + $100 - $1,000)

A company had sales of $40,000, sales discounts of $800, sales returns of 1,600 and commissions owned to sales people of $600, compute net sales.

$37,000 $40,000 - ($1,600 + $600) - $800

The following information is available for all care nursing supply fiscal year ending December 31, 2012. Calculate Accounts Receivable Turnover ratio (Net Sales of $450,000, Account Receivable, Dec 31, 2011, $175,000, Accounts Receivable, Dec 31, 2012, $125,000)

$450,000 / ($175,000 + $125,000)/2

A company purchases factory equipment on Jan. 1, 2013 for $80,000 it is estimated that the equipment will have $10,000 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 Dec 31, 2013 is

($80,000 - $10,000) / 10 = $7,000

If a company uses the direct write-off method of accounting for bad debts, it will record:

(It will record) bad debt expense only when an account is determined to be uncollected

A company receiving payment of $20,000 accounts receivable within 10 days with terms of 2/10, n/30 would record a sales discount of:

2% of $20,000

GTO division has $14,000 as current assets, $2,000 in accounts payable & $2,000 in unearned sales revenue. What is the division's current ratio?

3.50

A company purchased office equipment for $40,000 & estimated a salvage value of $8,000 at the end of its 4 year useful life. The constant percent to be applied against book value each year if the double-declining-balance method that is used is:

50%

Mar 1 - On hand, 10 units @ $2 each $20 Mar 4 - Sold 8 units for $10 each $80 Mar 22 - Purchased 50 units @ $4 each $200 Mar 26 - sold 48 units for $10 each $480 If Lowery uses the LIFO investing costing method, how much is cost of goods sold for the month of March? Cost of goods sold:

8@$2 = 16 48@$4 = 192 $208.00

Which of the following statement best describes the term outstanding check from a company's point of view?

A check written by the company but not yet represented to the bank for payment

The chronological record which transactions are initially recorded in the order in which they occur is called:

A journal

What would appear on the balance sheet as a current liability?

A probable loss in the amount of $4 million from a pending lawsuit

A customer returned damaged goods for credit. Under a perpetual system which of the seller's accounts decreases?

Accounts Receivable

Which one of the following adjustments decreases net income for the period?

Accrued expense adjustments

Retained Earnings

Accumulated net income of a company that has not been distributed to owners in the form of dividends.

Know what accounts are associated with which ones (are those accounts recognized by the company or bank?).

Add deposits in transit and subtract outstanding checks from the bank balance. Add interest earned to company balance and subtract the NSF checks and bank service charges.

A credit memo appeared on the September bank statement. How should this amount be treated on the September bank reconciliation?

Add it to the company balance.

Cost allocation of intangible asset is referred to as

Amortization

In computing depreciation salvage value ( residual value) is

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

How is the current portion of long-term debt shown on the balance sheet?

As a current Liability

The book value of an asset is equal to the

Asset's cost - Accumulated Depreciation

Assets classified as property, plant and equipment are reported at each:

Assets (original) cost minus depreciation (since acquisition)

What is the fundamental accounting equation?

Assets = liabilities + stockholder's equity

Home investor purchased land for $400,000 in 2001. In 2013, it was worth $900,000. At what amount should the land be recorded on the company's financial statements?

At the cost of $400,000

How is the Discount on Bonds Payable account shown on the balance sheet?

Cash (100,000*96%) 96,000 Discount on Bonds payable 4,000 Bonds Payable 100,000

The account which records difference between amounts of cash deposited and amounts from the register tapes is called

Cash short and over

Allowance for Doubtful Accounts is a...

Contra Account to accounts receivable

In which form of organization are the owner's legal responsibility for the debt of the business to the amount they invested in the business?

Corporation

The cost of goods sold is equal to

Cost of goods available for sale minus ending inventory

An entry to the right side of an account is always a :

Credit

The payment of Accounts Payable results in an:

Decrease in both liabilities and assets

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

Deposit in transit

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance?

Deposit in transit

The cost of plants and equipment is allocated to expense over the time periods which benefits from the use of the asset. This process is called:

Depreciation

June 1- On hand, 50 units at $18 each June 4- Purchased 115 units at $18.20 June 5- Sold 100 units June 10- Purchased 75 units @ $18.25 each June 24- Sold 40 units If Klump uses the FIFO investing costing method: 1. The amount of the ending inventory reported on the balance is; 2. Cost of goods sold for the month of June is:

Ending Inventory: 25@ $18.20 = 455.00 75@ $18.25 = 1368.75 = $1,823.75 Cost of goods sold: 50 @ $18.00 = 900 50 @ $18.20 = 910 40 @ $18.20 = 728 = $2,538.00

One December 31, 2103, a company signed a one-year contract to provide services to a particular customer for $12,000. The customer will pay for the services during January 2014. Using accrual basis accounting, when should the company recognize revenue?

Equally throughout 2014, as the revenue is earned.

What sets of factors is needed to calculate depreciation on plant & equipment?

Estimate life of the asset, Acquisition cost, Estimated Salvage Value

Which inventory costing method results in the highest inventory balance during a period of rising purchase prices?

FIFO

Businesses engage in which of the following three main activity categories?

Financing,Investing,Operating

Which statement is true?

If all transactions are posted correctly, sum of the accounts with debit balances should equal the sum of accounts with debit balances.

A manufacturing company's weekly payroll is $80,000 for a 5-day work week beginning each Monday & ending each Friday. The last time salaries and wages were recorded was Friday, Dec. 26. What adjustment is needed on Dec 31, the last day of the company's fiscal period?

Increases wages expense by $48,000

Operating assets with no physical properties are called:

Intangible assets

Be able to calculate interest on bonds sold at a discount using the effective interest method.

Interest Rate * Book Value of the Bond at the beginning of the period = Interest

Which of the following items would be added to the company's cash balance on a bank reconciliation?

Interest earned

All of the following accounts have normal credit balances except:

Inventory

All of the following are TRUE for a company that uses the allowance method of accounting for bad debts EXCEPT:

It records bad debt each time an account is determined to be uncollectible

A landlord records the collection of tenants security deposit as a

Liability

When market value of inventory items have declined below their cost, which method would be most appropriate in complying with GAAP?

Lowers of cost or market

According to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing & maintaining a system of internal control over the company's financial reporting?

Management of the company

Which types of inventory accounts would be used by a wholesaler or retailer?

Merchandise Inventory

Which of the following adjusting entries involves the cash account?

None of these

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable specify an interest rate and a maturity date at which any interest and principle must be repaid.

Example of a debit memo

Notice of a bank service charge

Example of a credit memo

Notice on interest earned on a checking account

What is the definition of long-term debt?

Obligations that extend beyond one year, Liabilities (bonds, long-term notes, debentures, and capital leases) that last longer than a year formal agreement

When is the revenue from the sale of merchandise normally recognized?

On the date the sale is made

Which of the following would not appear on a bank statement for a checking account?

Outstanding checks

While preparing a bank reconciliation, which of the following would be subtracted from the balance per bank statement?

Outstanding checks

Accrued expenses originate from:

Paying off liabilities

Each of the following represents an effective cash management practice EXCEPT:

Payments should be expedited in order to simplify the record keeping

Which allowance method approach is considered to be an income statement approach to establishing bad debts?

Percentage of net credit sales

The process of transferring amounts from the book of the original entry into specific account records is referred to as

Posting

When do bonds sell at a discount, par, or at a premium?

Premium (above Par/face value) = Yield < Started Rate Interest Expense < Interest Paid Par= Yield = Started Rate Interest Expense = Interest Paid Discount (below Par) = Yield > Started Rate Interest Expense >Interest Paid

All of the following are acceptable for financial accounting purposes EXCEPT:

Retail Cost

An incentive used by a company to induce the customer to keep damaged goods is called a:

Sales Allowances

An incentive used by a company to encourage prompt payment is called a:

Sales discount

Which items it not a consideration when recording periodic depreciation expense on plant assets?

Salvage Value Cost Estimated Useful Life

All of the following accounts have normal debit balances except:

Service Revenue

Properly closing a temporary account

Service Revenue $20,000 Income Summary $20,000

What are the different terms used to describe the interest rate printed on a bond certificate?

Stated/Coupon/contract Rate

The asset account, supplies. Has a balance of $10,000 on January 1st. During January, $22,000 of supplies were purchased on account and the liability was appropriately recorded. The account for supplies at the end of January indicates a balance of $2,000.

Supplies Expense $30,000 Supplies $30,000

An abbreviated version of an account is known as a...

T-Account

An abbreviated version of an account, which is useful for analyzing the effects of business events is the

T-account

Income statement accounts are known as:

Temporary Accounts

Which of the following statements is true regarding the two allowance procedures used to estimate bed debts?

The aging of accounts receivable method takes into account the existing balance in the Allowance for Doubtful Accounts.

Which of the following is incorrect for established and maintain a petty cash fund?

The company must obtain the cash needed for the fund and record on entry for the establishment of the fund

How will the lender of the promissory note record the note on its books?

The promissory note will be recorded as an asset

A reduction in the price granted by the seller for a particular class of customers is called a:

Trade discount

When​ ​are​ ​revenues​ ​and​ ​expenses​ ​are​ ​recognized​ ​in​ ​the​ ​same​ ​accounting​ ​period​ ​that​ ​cash receipts​ ​and​ ​payments​ ​occur?

Under​ ​Cash​ ​Basis​ ​Accounting

The method most commonly used to compute depletion is the

Units-of-activity method

Which of the following situations violates the matching principle during 202013 for a real estate company that pays its agents on commission?

Wages expense is recognized in 2013 even though pay day is not until sometime in 2014

A current liability is defined as a commitment or obligation which requires a transfer assets, create a new current liability, or provide services to another entity at some point in the future that must occur:

Within one year or within the operating cycle (whichever is longer)

The cost of a purchased building includes all of the following EXCEPT:

all of these are included

The correct term for the entry made on the left side of a T-account is:

debit

What of the following is an intangible asset?

goodwill

Assets increase and stockholder's equity increases when...

recognizing accrued interest revenue at the end of the accounting period.

Financial reporting is

to provide useful information for decision making.

Failure to record amounts earned for services provided to customers but not yet paid results in..

total assets being understated.

Cost of goods sold is the difference between costs of goods available for sale and ending inventory.

true

If contingent liabilities are probable & estimable, then they must be recorded even before the outcome of the future event.

true

The inventory turnover ratio is defined as cost of goods sold divided by average inventory.

true

With the perpetual inventory system, the inventory account is updated after each sale or purchase?

true

Know DEALER

• Normal Balance is whichever side increases the account DEA LER Dividends Liabilities Expenses Equity Assets Revenue

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720

Coffski, Inc. sold merchandise to customer on credit. The invoice date was June 10th; credit terms were 1/10, n/30. What should the customer pay?

$1,000 if invoice is paid July 9th

If the company estimated its bad debt to be 0.02% of the net credit sales, what will be the balance in the Allowance for Doubtful Accounts after the adjustment for bad debts? Net credit sales were 2,450,000.

$49,000 + $20,000 (already in the account previously) = $69,000

A machine with a cost of $240,000 has an estimated salvage value of $15,000 & an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

$75,000

The company sold merchandise to a customer on Dec 1, 2012, for $120,000. The company accepted a promissory note as payment. The note has a term of three months & an annual interest rate of 10%. The company's accounting period ends on Dec 31.

What is the maturity date of the note? March 1, 2013 What amount should the company recognize as interest revenue on Dec 31, 2012? $1,000 What amount should the company recognize as interest revenue on the maturity date of the note? $2,000

A customer's check for $25 that has been deposited into the company's checking account the previous month was returned stamped "NSF" by the bank. Which journal entry is required?

Accounts Receivable $25 Cash $25

On the balance sheet, the cumulative amount of plant & equipment already expensed is reported in an account called:

Accumulated Depreciation

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per company records?

Bank service charges

Which of the following items would not be a reconciling item on a bank reconciliation?

Cancelled checks

During the bank reconciliation process, an accountant identified an error. A check written for $20 to pay a supplier for goods purchased on credit was erroneously recorded in the company's records for $200. Which of the following entries would correct this error?

Cash $180 Accounts Payable $180

If assets are expected to be realizes in cash, sold, or consumed within the normal operating cycle of the business, how are they reported on a classified balance sheet?

Current assets

For which type of merchandise use the specific ID method of Inventory

Custom-made boats

On Oct. 1st, a company borrowed $60,000 from Eighth National Bank on a 1-year, 7% note. If the company's fiscal year ends on Dec 31st, a year-end adjusting entry is required to increase:

Interest payable by $1,050

What does the phrase "Revenue is recognized when revenue is earned mean?"

Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

Which of the following procedures is not part of the preparation of a bank reconciliation for a checking account?

Reversing all the transaction recorded on the company's records that do not yet appear on the bank statement