accounting test number #3 questions
Which of the following is not an example of an accrued liability?
Accounts payable
Which of the following is not a current liability
Bonds payable due in 5 years
Warranty Expense is
recorded in the period
All of the following represent taxes commonly collected by businesses from customers except
unemployment taxes
When a credit is made to federal income taxes withholding payable account related to taxes withheld from an employee the corresponding debit is made ti
wages expense
when should a contingent liability be recognized
when a reasonable estimation can be made and when the contingent liability is probable
Bonds are a popular source of financing because
bond interest expense is deductible for tax purposes, while dividends paid on stock are not
When bonds are issued by a company, the accounting entry typically shows an
increase in assets and an increase in liabilities
Bower company sold $100,000 of 20 year bonds of 95,000. the stated rate on the bonds was 7% and interest is paid annually on dec 31 what entry would be made on December 31 when the interest is paid
interest expense discount on bonds payable cash
bonds are sold at a premium if the
market rate of interest was less than the stated rate at the time of issue
when bonds are issued at a premium, the interest expense for the period is the amount of interest payment for the period
minus the premium amortization for the period
ABC advisor is being sued by a former customer. Abc's lawyer say that us possible but not probable that the company will lose the lawsuit and the trial should last approximately 18 more months. should ABC lose, they will most likely have to pay approximately 750,000. How should this lawsuit be reported in the financial statements.
no effect on the balance sheet or income statement, but described in the footnotes
Which of the following transactions would cause the current ratio to increase (assuming the current ratio is currently greater than I)
paid off a payable
when bonds are issued at a discount , the interest expense for the period is the amount of interest payment for the period
plus the discount amortization for the period
how is the current ratio calculated?
(cash + marketable securities/ current liabilities)
Sean Corp. issued a $40,000, 10-year bond, with a stated rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period?
1,600
Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a straight-line basis over a useful life of 10 years and used a residual value of $12,000. Chapman's depreciation expense for 2019 was $11,000. What was the original cost of the building?
122,000
Heston Company acquired a patent on January 1, 2013 for $75,000. The patent has a remaining legal life of 15 years, but Heston expects to receive benefits from the patent for only 5 years. What amount of amortization expense does Heston record in 2013 related to the patent?
15,000
Refer to the information for Cox inc above. what amount would cox record as depreciation expenses at December 31 2020, if the double declining balance method were used?
192,000
Refer to the information for Kinsella above. What journal entry should be made with respect to the interest payment on October 1 2020
Debit Interest expense 15,000; debit interest payable 5,000 credit cash 20,000
Kramerica Inc. sold 350 oil drums to Thompson Manufacturing for $75 each. In addition to the $75 sale price per drum, there is a $1 per drum federal excise tax and a 7% state sales tax. What journal entry should be made to record this sale?
Debit accounts receivable 28,438; credit excise taxes payable (federal) 350; credit sales taxes payable (state) 1,838; credit sales revenue 26,250.
Kinsella seed borrowed 200,000 on October 1, 2019, at 10% interest. The interest. The interest and principle are due on October 1, 2020. refer to the information for Kinsella seed above. What journal entry should be recorded on December 31, 2019
Debit interest expense 5,000; credit interest payable 5,000
Payroll taxes typically include all of the following except
Federal excise taxes
When reporting liabilities on a balance sheet in theory, what measurement should be used?
Present value of the present outflow
the result of using the effective interest method of amortization of the discount on bonds is that
a constant interest rate is charged against the debt carrying value
What best describes the discount on bonds payable account
a contra liability
To record warranties the adjusting journal entry would be
a debit to warranty expense and a credit to warranty expense
Installment bonds differ from typical bonds in what way?
a portion of each installment bond payment pays down the principal bonds
if bonds are issued at 101.25, this means that
a.1,000 bond sold for 1,012.50
serenity company issued $100,000 of 6%, 10-year bonds when the market rate if interest was 5%. The proceeds from this bond issue were $107,732. Using the effective interest method of amortization, which of the following statements is true? assume interest is paid annually.
amortization of the premium for the first interest period will be $613
The premium on bonds payable account is shown on the balance sheet as
an addition to a long-term liability
Liabilities are recognized in exchange for
borrowing money, service, goods
how is the current ratio calculated?
current assets/current liabilities
Howton paper company purchased 1,400,000 of timberland in 2018 for its paper operations. Howtons estimates that there are 10,000 acres of timberland, and it cut 2,000 races in 2019. The land is expected to have a residual value of 200,000 once all the timber is cut. Which of the following is true with regard to depletion
depleletion will cause howton's timber inventory to increase
When depreciation is recorded each period, what account is debited?
depreciation expense
The cost principle requires the companies record fixed assets at:
historical cost
Which of the following is not an intangible asset?
research and development
Normal repair and maintenance of an assets is an example of what?
revenue expenditure
Which of the following statements regarding bonds payable is true?
the entire principal amount of most bonds mature on a single date
Which of the following statements is true regarding depreciation methods?
the use of higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement
in 2019, drew company issued $200,000 of bonds for $189,640. If the states rate of interest was 6% and the yield was 6.73% how would drew calculate the interest expense for the first year on the bonds using the effective interest method.
189,640*6.73%
Refer to the information for Cox Inc, above. what amount would cord record as depreciation expense for 2019 if the units of production method were used round your nearest dollar answer?
218,400
Refer to the information for Cox inc. above. What would be the balance in the accumulated depreciation account at December 31, 2020, if the straight-line method were used?
312,000
Jerabek Inc. decided to sell one of its fixed assets that had a cost of $55,000 and accumulated depreciation of $35,000 on July 1, 2013. On that date, Jerabek sold the fixed asset for $15,000. What was the resulting gain or loss from the sale of the asset?
5,000 loss
Marianne Company purchased a machine on February 1 2015, for 100,000. In January 2019, when the book value of the machine is 70,000, Marianne believes the machine is impaired due to recent technological advances. Marianne expects the machine to generate future cash flow of 10,000 and has estimated the fair value of the machine be 55,000. What is the loss from impairment?
55,000-70,000
Bradley Company purchased a machine for 34,000 on January 1, 2017. It depreciates the machine using the straight line method over a useful life 8 years and a 2,000 residual value. On January 1, 2019, Bradley revised it's estimate of residual value to 1,000 and shortened the machines useful life to 4 years. Depreciation expense for 2019.
6,250
bonds in the amount of $100,000 with a life of 10 years were issued by the round company, if the stated rate 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds
60,000
Anniston Company purchased equipment and incurred the following cost, what is the cost of the equipment? purchase price 68,500 cost of trial runs 400 installation costs 325 sales tax 3,425
72,650