Accounting Exam 3

which of the following accounts would not be reported in the Property, plant, and equipment section of a balance sheet?

depreciation expense- buildings

An example of a current liability that must be accured is

wages payable

Giff services company experienced some difficulties with cash flow so it approached one of its vendors about a payment extension. The vendor agreed to the extension on the condition that the company sign a note that includes 9% interest. what is the impact on the accounting equation of recording a note payable in exchange for the account payable?

There is no net impact, as there are corresponding increases and decreases in liability accounts.

A company purchased a building for $900,000 on January 1, 2018. The building us being depreciated over 40 years with an estimated residual value of $100,000. What will the book value of the building in 10 years using the straight line method of depreciation?

$700,000

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory. if current liabilities are $14,350 then the quick ratio will be

1.2

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

3.5

Which of the following would describe a callable bond?

Borrower has the right to pay off the bonds prior to due dates

A convertible bond is one where

The bondholder can convert the bond into common stock at a future time

operating assets with no physical properties are called:

intangible assets

Long-term debt generally includes

obligations that extend beyond one year

When bonds are sold for less than the par par amount, this means that the

stated rate of interest is less than the yield of interest

What is the depreciation expense for the year ended December 31 2019?

$160,000

which of the following is an intangible asset?

copyrights

A landlord records the collection of a tenant's security deposit as a

liability

Which of the following terms does not describe the interest rate printed on the bond certificate?

yield rate

a premium on bonds payable account would appear on the balance sheet as

an increase to a long-term liability

Which of the following statements regarding liabilities is true?

Liabilities arise from past activities that require some future sacrifice of economic benefits

which of the following costs related to the purchase of production equipment would be considered a revenue expenditure?

Repair and maintenance costs during the equipment's first year or service

When will bonds sell at a discount?

The face rate of interest is less than the market rate of interest at the time of issue.

Bonds are a popular source of financing because

bond interest expense is deductible for tax purposes, while dividends paid on stock are not

Goodwill can be recorded as an asset when:

business is purchased and payment is made in excess of the value of the net assets

assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition

On May 1, a company borrowed $30,000 from the First National Bank on a 1-year, 6% note. Assuming the company keeps its records on a calendar year basis, an entry is needed on December 31st to increase

interest payable by $1,200

which of the following statements regarding liabilities is true?

liabilities arise from past activities that require some future sacrifice of economic benefits

A twenty year lease obligation would appear on the balance sheet as

long term asset

Land is not depreciated because it

will provide future benefits for a company for an unlimited period of time

On January 1 2018 the company purchased a ship for $1,000,000. it has a 10-year useful life and a residual value of $100,000. The company uses the double-declining -balance method

$200,000

A graphics design company issued bonds in the amount of $1,000,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds?

$800,000

During 2018, Gardner Home Center sold 800 power washers for $350 each. The power washers carry a 2-year warranty for repairs. Estimates indicate that repair costs will average 2% of sales. How much warranty expense should be accrued as a result of the 2018 sales of this product?

$5,600

the following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land $900,000 cost to clear the land $40,000 cost of paving, $35000, and cost of lighting for the parking lot, $20,000. At what cost should the land be recorded?

940000

on January 1, 2018 a company sold a machine for $5000 that it had used for several years. The machine costs $11000 and had accumulated depreciation of $4500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

loss of $1500

A current liability is defined as a commitment or obligation which requires a company to 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

What will be the book value after 10 years?

$100,000

Keystone Corporation's balance sheet showed the following liability and stockholders' equity accounts: Current liabilities, $100,000: Bonds Payable: $150,000: Capital Lease Obligations, $20,000; Deffered Income Tax Liability, $5,000, and total stockholders' equity $500,000. The debt to equity ratio is

.55

A discount on bonds payable account would appear on the balance sheet as

contra liability

depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset

An oil company purchased 10,000 acres of land on January 1, 2017 for $5,000,000 on which it developed an underground oil site. The company spent $11,000,000 to prepare the site for operation but believes that 500,000 of oil can be extracted from the site over 5 years after drilling begins. The land has a residual value of $250,000. Assuming 50,000 barrels of oil were extracted from the land in 2017, how much depletion would be recorded?

1,575,000

on January 2, 2017 this company issued 1,000,000 10-year bonds for 1,150,000. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%. This company plans to use the straight-line interest method of amortizing bond discounts and premiums.

$57,500