ACC 131 - Ed Seipp Illinois State University

Carey company buys land for $50,000 on 12/32/12. 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

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

Land is not depreciated because it

Will provide future benefits for an indeterminable amount of time

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

The method most commonly used to compute depletion is the _______________

units-of-activity method

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)

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?

$208 8@$2 = 16 48@$4 = 192

EX. 1 What is the 2012 depreciating expense using the double declining balance?

$37,000

Bihary Corp has a beginning inventory balance of $2250 and the ending balance is $1500. Cost of goods sold is $9750. Using the COGS model, how much inventory was purchased during the year?

$9,000

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

-Salvage value -Cost -Estimated useful life

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%

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

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

The cost of a purchased building includes all of the following EXCEPT: -closing costs -real estates broker's commission -remodeling costs

All of these are included

The effect of recording depreciation for the year is a(n)

Decrease in assets and decrease in net income

What of the following is an intangible asset? -oil -goodwill -retained earnings -accounts receivable

Goodwill

Which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold?

LIFO

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

Purchased Returns

At the year-end inventory count, if goods in transit are shipping FOB shipping point, they should be included in the inventory count of:

The Buyer

Equipment purchased in the beginning of 2013 costs $20,0000. Residual value is $20,000 and is depreciated over 5 years using DDB. Which of the following is correct at 12/31/13?

The accumulated depreciation account balance is $80,000

A company purchases equipment in the beginning of 2013 for $21,000 and depreciated is over 5 years using straight line method. Residual value is $1,000. FMV at the end of 2013 was $20,000. Which of the following is true at 12/31/13?

The book value of the equipment is $17,000

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 it's useful life

The book value of an asset is equal to the

asset's cost (minus) accumulated depreciation

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 ____________

$7,000 80,000-10,000 -------------- 10

Which of the following accounts would most likely appear on the income statement of a merchandising company but not on a service company?

-Costs of goods sold

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

Accumulated Depreciation

The cost of goods sold is equal to

Cost of goods available for sale (minus) ending inventory

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

Custom-made boats

Which inventory cost flow method assigns the cost of the most recent items to ending inventory?

FIFO

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

FIFO

operating assets with no physical properties are called _________

Intangible Assets

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

Lower of cost or market

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

Merchandise Inventory

Ending inventory is equal to the cost of items on hand plus

Merchandise in transit sold to customers with terms FOB destination

The inventory turnover ratio is defined as cost of goods sold divided by average inventory. True or False?

True

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

assets (original) cost minus depreciation (since acquisition)

The payment of Accounts Payable results in a(n) _________

decrease in both liabilities & assets

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land, $90,0000; cost to clear land, $40,000; cost of paving, $35,000; cost of parking lot lighting, $20,000. How much should be recorded as land improvements?

$55,000

A machine with a cost of $240,00 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

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?

$1,000

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

EX. 1 Fields of Green purchased equipment and 1/1/12 for $175,000. In addition they paid $6,000 for delivery and $4,000 in setup charges. It has an estimated salvage value of $5,000 and an estimated useful life of 10 years of $50,000 hours of operation. The equipment was operated for $5,200 hours in 2012 and $5,000 hours in 2013. What is the 2012 depreciation expense using the straight line method?

$18,000

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

EX. 1 What is the 2012 depreciation expense using the units of production method?

$18,720

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

True

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

True

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

True

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

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

Which of the following best describes "costs of goods available for sale"?

-It is allocated between the cost of ending inventory and cost of goods sold

Which of the following statements is false?

-The inventory account is updated after every sale and after every purchase under the perpetual inventory system -The inventory account ******-A cost of goods sold account us updated after each sale of merchandise under the periodic inventory system -A purchases account is used only under the periodic inventory system

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

-estimated life of the asset -Acquisition cost -estimated residual value

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

A landlord records the collection of tenants security deposit as a(n) _______

Liability

All of the following are acceptable for financial accounting purposes EXCEPT: -Specific ID -LIFO -FIFO -Retail cost

Retail Cost