Accounting 201 Final

The balance in the Accumulated Depreciation account represents the

amount charged to expense since the acquisition of the plant asset

25%

A truck was purchased for $180,000 and it was estimated to have a $36,000 salvage value at the end of its useful life. Monthly depreciation expense of $3,000 was recorded using the straight-line method. The annual depreciation rate is

$980

A $1,000 face value bond with a quoted price of 98 is selling for

Sinking fund bonds

A bond secured by specific assets set aside to redeem the bonds is called a

$204,500

A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of

$10,500

A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated that the equipment will have a $20,000 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, 2015 is

$102,000

A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

40%

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

within one year, or the operating cycle, whichever is longer

A current liability is a debt that can reasonably be expected to be paid

A bond indenture

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

A written promissory note

A note payable is in the form of

Why do companies re-purchase shares of its own stock?

Acquire another corporation, purchase shares to avoid a hostile takeover of the company, to reissue them to employees as compensation, and to maintain a strong market for their stock or to show management confidence in the current price.

In the balance sheet the account Premium on Bonds Payable is

Added to bonds payable

Debit - Cash - 600,000 Credit - Notes payable - 600,000

Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1. Givens Brick Company signs a $600,000, 8%, 9-month note. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is

Bonds payable

All of the following are reported as current liabilities except

Costs

All of the following factors in computing depreciation are estimates except

Unsecured bonds/debenture bonds

Bonds issued against the general credit of the borrower are called

Mortgage bonds

Bonds that are secured by real estate are termed

Callable bonds

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

Convertible bonds

Bonds that may be exchanged for common stock at the option of the bondholders are called

Debenture Bonds

Companies with good credit ratings use _________________ bonds extensively

State laws

Corporations are granted the power to issue bonds through

The cost of a purchased building includes all of the following except

Costs occurred after renovations

Four thousand bonds with a face value of $1,000 each, are sold at 105. The entry to record the issuance is

Debit - Cash - 4,200,000 Credit - Pre. on bonds payable - 200,000 Bonds payable - 4,000,000

A large stock dividend is a distribution of stock that is?

Declared more than 20-25% and will most likely be split.

Which is not a disadvantage of a corporation?

Disadvantages - Gov. Regulation Corp taxation Corporate management

Federal unemployment taxes

Employee payroll deductions include each of the following except

$29,400

Equipment was purchased for $150,000. Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $30,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

$179,700

Gagner Clinic purchases land for $175,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Gagner Clinic record as the cost for the land?

$13,230

Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

$89,370

Hull Company acquires land for $86,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Hull will record the acquisition cost of the land as

during the construction period of a self-constructed asset.

Interest may be included in the acquisition cost of a plant asset

Long term

Liabilities are classified on the balance sheet as current or

Recording depreciation each period is necessary in accordance with the

Matching principle - expense recognition

One year out of current assets

Most companies pay current liabilities

DR - Cash - 5,100,000 Cr - Bonds payable - 5 million Premium on bonds payable - 100,000

On January 1, 2015, Carter Corporation issued $5,000,000, 10-year, 8% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2015 is

QUESTIONS FROM BOOK

PG 535

What type of stock has priority over common stock?

Preferred stock

$70,100

Presto Company purchased equipment and these costs were incurred: Cash price $65,000 Sales taxes 3,600 Insurance during transit 640 Installation and testing 860 Total costs $70,100 Presto will record the acquisition cost of the equipment as

$300,000

Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is

have specific assets of the issuer pledged as collateral.

Secured bonds are bonds that

64.3%

The 2015 financial statements of Marker Co. contain the following selected data (in millions).

Accelerated depreciation method. It was designed to permit companies to quickly write off the cost of plant assets and thereby stimulate investment in new plant assets.

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which

Annual rate

The contractual interest rate is always stated as a(n)

Annual property taxes

The cost of land does not include

Current assets / current liabilities

The current ratio is

a decreasing depreciation expense each period

The declining-balance method of depreciation produces

Straight-line

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

Face value

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's

Land, land improvements, buildings, equipment

The four subdivisions for plant assets are..

Market interest rate

The interest rate investors demand for loaning funds is the

$65,000 should be debited to land improvements.

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking area cost $25,000. Which of the following statements is true with respect to these additions?

Treasury stock

What is it called when a company re-purchases shares of its own stock?

1. A sufficient balance in retained earnings 2. The cash necessary to pay the dividend

What is required for a corporation to pay a cash dividend?

Date of Declaration Date of Record Date of Payment

Which is not an important date, which needs to be recognized in accordance with cash dividends?

Par Value No-par value Stated value

Which is not one of the 3 classes of stock?

Land

Which of the following assets does not decline in service potential over the course of its useful life?

Notes payable

Which of the following is usually not an accrued liability?

Units-of-activity

Which of the following methods of computing depreciation is production based?

Truck license

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

Selected by a vote of the stockholders

Who elects the Board of Directors for a corporation?

Equal to the note's face value

With an interest-bearing note, the amount of assets received upon issuance of the note is generally

Current assets less current liabilities

Working capital is

Depreciation is a process of

cost allocation, not asset valuation

If bonds are issued at a discount, it means that the

market interest rate is higher than the contractual interest rate