Accounting Exam 3 Review

Lawn & Order, Inc. has the following items that the controller is uncertain of where to place on the Statement of Cash Flows: Net Income $55,000 Sale of Plant Assets $120,000 Depreciation Expense $35,000 Purchase of Plant Assets $185,000 What is the proper amount for the Net Cash from (for) Investing Activities?

$(65,000)

On January 1, Robbin, Inc., issued $200,000 of 9%, 10-year bonds for $213,419 given a market rate of interest of 8%. The bonds pay interest once a year. How much and on which financial statement will the amount of interest paid by Robbin, Inc., be reported for the year ended December 31?

$18,000; Statement of Cash Flow

Robbin, Inc., issued $200,000 of 9%, 10-year bonds for $213,419 given a market rate of interest of 8%. How much principal will Robbin, Inc., pay to the bond holders at the end of the tenth year?

$200,000

On January 1, Year 1, Brewed Awakenings, Inc., paid $81,000 cash for espresso machines with an estimated useful life of 5 years and $11,000 salvage value. What is Depreciation Expense for Year 1 if the straight-line method is used?

14,000 ± 0%

On February 28, Year 1, Mighty Ducks, Inc., issued $300,000, 20-year, 5% bonds at 100.000. The bonds pay interest semiannually on February 28 and August 31. At the end of the year, December 31, Year 1, the adjusting entry includes a debit to Interest Expense of $______. (round to the nearest $ amount)

5,000 ± 0%

On November 1, Sofa So Good, Inc., lent $5,000 on a 3-month, 6% note with interest and principal due at maturity. Calculate the amount of interest in the adjusting entry for the year ended December 31.

50 ± 0%

Z Best, Inc.'s, corporate charter allows it to issue 2,000,000 shares of common stock. In its first year of business, the company sold 800,000 shares of common stock. During the year, the company bought back 3,000 shares to be held as treasury stock. The number of shares of common stock that are outstanding equals ______ shares.

797,000 ± 0%

Microhard, Inc., issued a $85,000, 10-year, 10% bonds dated January 1, at 100.000. By what amount should the Cash account be debited when the bonds are issued?

85,000 ± 0%

Robbin, Inc., issued $200,000 of 9%, 10-year bonds for $213,419 given a market rate of interest of 8%. The bonds pay interest once a year. Did Robbin, Inc.'s, bonds sell at a par, premium or discount and why?

A premium; the market rate of interest is lower than the stated rate of interest.

On January 1, Year 1, The Merchant of Tennis, Inc., purchased a $600,000 machine with an estimated useful life of 10 years or 500,000 units and a $100,000 salvage value. The machine actually produced 150,000 units in Year 1 and 120,000 units in Year 2. Record the depreciation adjusting entry for Year 1 using the straight-line method:

Account Title- Depreciation Expense Debit- 50,000 Account Title- Accumulated Depreciation Credit- 50,000

On January 1, Year 1, Rex Carr's Driving School, Inc., purchased $400,000 of vehicles (Equipment) with an estimated useful life of 5 years or 500,000 miles and a $50,000 salvage value. The vehicles were driven 120,000 miles in Year 1 and 110,000 miles in Year 2. Record the adjusting entry to record depreciation for Year 1 using the straight-line method:

Account Title- Depreciation Expense Debit- 70,000 Account Title- Accumulated Depreciation Credit- 70,000

On November 1, Blade for Blade, Inc., lent $900 on a 3-month, 6% note with interest and principal due on February 1. Record the adjusting entry for interest earned for the year ended December 31.

Account Title- Interest Receivable Debit- 9 Account Title- Interest Revenue Credit- 9

Why is Accumulated Depreciation on the balance sheet more than Depreciation Expense on the income statement in the subsequent years of an asset's useful life?

Accumulated Depreciation accumulates and reports all of the asset's usefulness used since the asset was purchased.

Central Perk, Inc. issued 10,000 shares of no-par value common stock at $10 per share. The proper entry to record this issuance of shares is to debit _______.

Cash and credit Common Stock for $100,000

On December 1, Year 1, the board of directors of Buy & Large, Inc., declared a cash dividend of $2 per share on the 300,000 common shares outstanding on record at December 31, Year 1, payable January 10, Year 2, the following year. No other dividends were declared in either year. What is the amount and on which Year 1 financial statement does Dividends and Dividends Payable appear?

Dividends- $(600,000); Statement of Shareholders' Equity Dividends Payable- $600,000; Balance Sheet On December 1, the declaration date, the company is obligated to pay the dividend and records a debit to Dividends (-SE) and a credit to Dividends Payable (+L). The date of record, December 31, determines who receives the dividend which are those who own the shares on that date. The payment date, January 10, is when the company records a debit to Dividends Payable (-L) and a credit to Cash (-A).

Which of the following is NOT an intangible asset? a. Copyrights b. Goodwill c. Human resources d. Patents

Human resources

A company's bookkeeper forgot to make the adjusting entry to accrue Interest Expense at the end of September. As a result, there will be an error(s) on September's ________.

Income Statement and Balance Sheet

Classify each of the items below according to the section of a firm's financial statements in which it would be reported. Some sections may be used more than once. Some may not be used at all.

Land- Long-term Assets Accounts Payable- Current Liabilities Inventory- Current Assets Equipment (Net of Accumulated Depreciation)- Long-term Assets

Show if the bond will be issued at a premium, at a discount, or at par:

Roll N Wok, Inc., issued $1,000,000 worth of bonds with a stated interest rate of 5% when the market rate of interest for similar investments was 4%.- premium Wok N Roll, Inc., issued $200,000 worth of bonds with a stated interest rate of 5% when the market rate of interest for similar investments was 5%.- par Wok the Walk, Inc., issued $100,000 worth of bonds with a stated rate of 4% when the market rate of interest for similar investments was 5%.- discount

Planet of the Grapes, Inc., purchases an $80,000 truck with an estimated useful life of 5 years and no salvage value. Which of the following statements is TRUE regarding this truck?

The purchase of the truck is a capital expenditure.

If the bond's contract (stated) rate of interest is less than the market rate of interest, the bonds will sell at _______.

a discount

Common stock's par value is ______.

a minimal amount specified in the corporate charter

On January 1, Year 1, Sew What, Inc., issued $100,000 of 9%, 10-year bonds for $106,710 when the market rate of interest was 8%. The bonds pay interest annually on December 31.Record the amounts (rounded to the nearest $1) in the Bonds Payable, net T-account below for the year ended December 31, Year 1, given this information:

a- 0 b- 463 c- 106,710 d- 0 e- 0 f- 106,247

The date, which follows the date of declaration, and determines which shareholders will receive the dividend is the ______.

date of record

If a bond is sold at a premium, Interest Expense reported on the Income Statement in subsequent years ________.

decreases each year

The purchase of treasury stock ______.

decreases total assets and decreases shareholders' equity

When a shareholder sells its shares to another person for more than its original cost, the corporation ______.

does not make a journal entry

During the year, Quiche & Tell, Inc., spent $1,500,000 on advertising and capitalized the entire amount, intending to write it off over 5 years. This accounting treatment is ______.

incorrect. The company should treat the entire amount as an expense

During the year, Reid & Wright Learning Center, Inc., spent $500,000 on training and capitalized the entire amount, intending to write it off over 5 years. This accounting treatment is ______.

incorrect. The company should treat the entire amount as an expense during the year

Retained Earnings of $100,000 represents a corporation's cumulative earnings ______ and is reported on the ______.

kept; balance sheet and statement of shareholders' equity

On January 1, Year 1, Bottoms Up, Inc., issued $1,000,000 of 6%, 20-year bonds when the market rate of interest was 5%. The bonds pay interest annually on December 31. On its income statement for the year ended December 31, Year 1, Bottoms Up will show Interest Expense of ________.

less than $60,000