ACC 201 Test 2 Missouri State University CVhapters 4-7

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of: a. 10% of $20,000 b. (100% - 10%) x $20,000 c. 2% of $20,000 d. (100% - 2%) x $20,000

c

If the amount assigned to ending inventory is incorrect, a. the income statement is affected, but the balance sheet is not. b. the balance sheet is affected, but the income statement is not. c. the balance sheet is affected, but cost of goods sold is not. d. both the balance sheet and income statement are affected.

d

Which of the following is an intangible asset? a. accounts receivable b. goodwill c. oil d. retained earnings

c

Which of the following would be correct if a company factored $2,500,000 of receivables with a 2 percent fee? a. $2,450,000 credit to cash b. $50,000 debit to factoring fee receivable. c. $50,000 debit to factoring fee expense d. $2,500,000 debit to accounts receivable.

c

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement? a. bank service charges b. interest earned on the bank account c. outstanding checks d. deposits in transit

c

At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of a. the buyer. b. the shipping company. c. neither the buyer nor the seller. d. the seller.

d

Parlato Corp. has an inventory turnover rate of 8 times. Calculate the company's average days to sell inventory. a. 120 b. 45.625 c. 150 d. 1,200

b

Which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold? a. weighted average cost b. LIFO c. FIFO d. specific identification

b

his company received a promissory note from a customer on July 1, 2019. The face amount of the note is $45,000; the terms are 12 months and 10% annual interest. Refer to Art Shoes. At the maturity date, the customer pays for the note and interest. The company made the proper adjustment at the end of December for interest. The effect of recognizing the transaction on the maturity date is a. an increase to Notes Receivable. b. a decrease to Notes Receivable. c. a decrease to Cash. d. an increase to Discount on Notes Receivable.

b

On January 1, 2019 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. Refer to Fantasy Cruise Lines. What will be the book value of the ship after 10 years? a. $ 0 b. $400,000 c. $100,000 d. $200,000

c

The company sold merchandise to a customer on December 1, 2019, for $100,000. The customer paid with a promissory note that has a term of 6 months and an annual interest rate of 9%. The company's accounting period ends on December 31. Refer to A Better Mousetrap. What amount should the company recognize as interest revenue on the maturity date of the note? a. $ -0- b. $9,000 c. $3,750 d. $4,500

c

Which of the following is a transposition error? a. debiting or crediting an amount to the wrong account b. writing $10 as $100 c. writing $89 as $98 d. debiting or crediting the right account with the wrong amount

c

Which of the following items would not be a reconciling item on a bank reconciliation? a. bounced checks b. NSF checks c. canceled checks d. outstanding checks

c

Which inventory cost flow method assigns the cost of the most recent items purchased to ending inventory? a. weighted average cost b. LIFO c. specific identification d. FIFO

d

Which of the following is not a sound internal control procedure for cash disbursements? a. marking supporting documents when paid in order to prevent duplicate payment b. designating an authorized check-signer who has no cash record keeping responsibilities c. paying with petty cash to expedite the payment process d. paying with a check to provide a record of the payment

c

A check returned by a bank because the issuer's cash account balance could not cover the check is called a(n) a. NSF check b. canceled check c. outstanding check. d. certified check

a

A customer returned damaged goods for credit. Under a perpetual system, which of the seller's accounts decreases? a. accounts receivable b. purchase returns c. sales revenue d. sales returns

a

Aaron Corporation is a merchandising company. Selected account balances are listed below: Sales $250,000 Purchases 112,500 Beginning Inventory 8,000 Ending Inventory 15,000 Operating Expenses 74,000 Income Tax Expense 5,000 Beginning Retained Earnings 26,500 Dividends 7,500 Refer to the information provided for Aaron Corporation. Calculate the Cost of Goods Sold. a. $105,500 b. $137,500 c. $120,500 d. $129,500

a

Action Signs recorded credit sales of $10,000 on the gross method. Terms are 2/20, n/30. Select the correct statement about the entry to record this sale. a. Accounts receivable increases $10,000. b. Sales increase $9,800 c. Sales discounts increase $200 d. All of the above are correct

a

An oil company purchased 10,000 acres of land on January 1, 2019, 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 barrels 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 2021, how much depletion would be recorded? a. $1,575,000 b. $1,600,000 c. $160,000 d. $157,500

a

At the year-end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of: a. the buyer. b. the seller. c. the shipping company. d. both the seller and the buyer.

a

Checks presented for payment and paid by the bank are known as a. canceled checks. b. certified checks. c. NSF checks. d. outstanding checks.

a

Transportation-in is a. part of the net cost of purchases. b. an operating expense. c. added to transportation-out as part of the calculation of cost of goods sold. d. part of purchase returns and allowances.

a

In the reconciliation of a bank statement, deposits in transit should be a. subtracted from the unadjusted bank statement balance. b. added to the unadjusted bank statement balance. c. added to the unadjusted balance per the company's records. d. subtracted from the unadjusted balance per the company's records.

b

Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2019. Refer to the information provided for Eli Company. If the customer pays the amount of the invoice for its purchase on March 14, 2019, how much cash will Eli Company receive? a. $1,800 b. $2,000 c. $1,980 d. $1,400

c

In order to determine inventory for its balance sheet, a company must count the inventory at the end of its accounting period according to a. neither the periodic nor perpetual inventory systems. b. the perpetual inventory system. c. the periodic inventory system. d. both the periodic and perpetual inventory systems.

c

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called a. amortization expense. b. depreciation expense. c. accumulated depreciation. d. accumulated amortization.

c

Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January: Jan. 1 Beginning inventory: 10 units at $2 each $20 20 Purchased 90 units for $3 each $270 Cost of goods available for sale $290 ​ Refer to the information provided for Tedder Co. If the company uses the LIFO inventory method, how much is inventory on the balance sheet at the end of January? a. $58 b. $40 c. $60 d. $50

d

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. Refer to the information for Accent Flooring. What is the total amount of interest the company will receive when the note is collected? a. $ 300 b. $ 150 c. $1,800 d. $ 450

d

The following selected financial information is available for Pham Enterprises for the year ended December 31: Net sales $450,000 Inventory, January 1 $48,400 Cost of goods sold $299,500 Inventory, December 31 $49,670 Refer to the information provided for Pham Enterprises. What is the company's inventory turnover ratio for the year ended December 31? a. 6.030 b. 6.188 c. 16.372 d. 6.108

d

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2021? a. $ 8,000 b. $10,000 c. $ 4,000 d. $ 6,000

d

Which of the assets listed below is considered the most liquid? a. Inventory b. Accounts receivable c. Prepaid insurance d. Cash

d

Which of the following sets of factors is needed to calculate depreciation on plant and equipment? a. the estimated residual value of the asset, its replacement cost, and its market value b. the asset's acquisition cost, replacement cost, and its estimated residual value c. the asset's replacement cost, its estimated life, and its estimated residual value d. the estimated life of the asset, its acquisition cost, and its estimated residual value

d

All of the following would be considered internal control weaknesses except a. the practice of shipping goods to customers right before year-end even though the customers had not ordered them. b. it takes two days to get a check written because of the approvals required. c. the person who opens the mail also makes the journal entry to record any customer payments received in the mail. d. no physical inventory is ever taken to confirm the amount of inventory recorded in the accounting records.

b

During a period of increasing purchase prices, which inventory costing method will yield the lowest cost of goods sold? a. LIFO b. any method in which the company uses a periodic system c. weighted average cost d. FIFO

d

A company's unadjusted bank balance is $3,000. Outstanding checks amount to $500 and deposits in transit total $300. Based on this information alone, what is the company's adjusted cash balance for the purpose of preparing a bank reconciliation? a. $2,700 b. $3,200 c. $2,800 d. $3,300

c

Each of the following documents is used in the control of cash disbursements except a. bank debit memos. b. canceled checks. c. outstanding checks. d. bank credit memos.

d

Cost of goods sold is equal to a. the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchased discounts minus ending inventory. b. the cost of merchandise purchased plus transportation costs less ending inventory. c. the total amount of merchandise purchased during the year. d. the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchase discounts.

a

Each of the following documents is used in the control of cash receipts except a. outstanding checks. b. NSF checks. c. bank credit memos. d. bank deposit slips.

a

If a company uses the direct write-off method of accounting for bad debts, a. It will reduce the accounts receivable account at the end of the accounting period for estimated uncollected accounts. b. It will record bad debt expense only when an account is determined to be uncollected. c. When an account is written off, total assets will stay the same. d. It establishes an estimate for the allowance for doubtful accounts.

b

A physical count of inventory is required even though the company uses the perpetual inventory system. This is an example of which of the following internal control activities? a. safeguarding of assets and records b. clearly defined authority and responsibility c. segregation of duties d. checks on recorded amounts

d

Which of the following is a reconciling item on the bank side of a bank reconciliation? a. canceled checks b. outstanding checks c. NSF checks d. both b and c

b

Aaron Corporation is a merchandising company. Selected account balances are listed below: Sales $250,000 Purchases 112,500 Beginning Inventory 8,000 Ending Inventory 15,000 Operating Expenses 74,000 Income Tax Expense 5,000 Beginning Retained Earnings 26,500 Dividends 7,500 Refer to the information provided for Aaron Corporation. Calculate net income. a. $58,000 b. $70,500 c. $144,500 d. $65,500

d

Land is not depreciated because it a. has a useful life that is limited to the period of time a company is in business b. appreciates in value. c. does not have an established depreciable life. d. will provide future benefits for a company for an unlimited period of time.

d

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for a. financial reporting purposes because depreciation is not allowed for tax purposes. b. financial reporting purposes and a different method for tax purposes. c. tax purposes because it results in a larger net income in the early years of a plant asset's life. d. tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes.

d

The following data are from the company's records for the year ended December 31: Accounts Receivable--January 1 $455,000 Credit sales during the year 900,000 Collections from credit customers during the year 825,000 Customer accounts written off as uncollected during the year 15,000 Allowance for Doubtful Accounts (After write-off of uncollected accounts) 2,100 Estimated uncollected accounts based on an aging analysis 29,200 Refer to A-One Construction. If the aging approach is used to estimate bad debts, what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment? a. $ 2,100 b. $27,100 c. $31,100 d. $29,200

d

On October 1, 2019, the company received a $50,000 promissory note from a customer. The annual interest rate is 6%. Principal and interest will be collected in cash at the maturity date of September 30, 2020. Refer to Academy Grill Supply. The effect on the company's financial statements on December 31, 2019 is as follows a. no net change in assets. b. assets and Stockholders' equity increase. c. assets and liabilities increase. d. assets and Stockholders' equity decrease.

b

Which one of the following is an accurate description of the Allowance for Doubtful Accounts? a. Contra Account b. Expense Account c. Revenue Account d. Liability Account

a

Each of the following items is considered a cash equivalent except a. a 180-day note issued by a local government. b. a 30-day certificate of deposit. c. a 75-day U.S. Treasury bill. d. 60-day corporate commercial paper.

a

For which type of merchandise would a company most likely use the specific identification method of inventory costing? a. custom-made boats b. Barbie dolls c. gasoline held in storage tanks d. cases of bottled water

a

This company received a promissory note from a customer on July 1, 2019. The face amount of the note is $45,000; the terms are 12 months and 10% annual interest. Refer to Art Shoes. How much interest revenue will the company recognize for the year ended December 31, 2019? a. $9,000 b. $ 0 c. $2,250 d. $4,500

c

The following selected financial information is available for Pham Enterprises for the year ended December 31: Net sales $450,000 Inventory, January 1 $48,400 Cost of goods sold $299,500 Inventory, December 31 $49,670 Refer to the information provided for Pham Enterprises. What is the company's average-days-to-sell inventory measure? a. 60.53 b. 58.98 c. 22.29 d. 59.76

d

Goodwill can be recorded as an asset when a(n) a. business is purchased and payment is made in excess of the value of the net assets. b. business has above normal profitability compared to other businesses in its industry. c. offer is received to purchase the business at a price in excess of the value of the assets. d. business can determine that it has created customer goodwill and name recognition.

a

Which of the following is the correct entry to establish a petty cash fund in the amount of $300? a. Cash 300 Petty Cash Fund 300 b. Petty Cash Fund 300 Cash 300 c. Miscellaneous Expense 300 Petty Cash Fund 300 d. None of these, as no entry is necessary to record an exchange of cash.

b

The following data are from the company's records for the year ended December 31: Accounts Receivable--January 1 $455,000 Credit sales during the year 900,000 Collections from credit customers during the year 825,000 Customer accounts written off as uncollected during the year 15,000 Allowance for Doubtful Accounts (After write-off of uncollected accounts) 2,100 Estimated uncollected accounts based on an aging analysis 29,200 Refer to A-One Construction. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense? a. $ 2,100 b. $31,300 c. $27,100 d. $29,200

c

A company had beginning accounts receivable of $175,000. All sales were on account and totaled $550,000. Cash collected from customers totaled $650,000. Calculate the ending accounts receivable balance. a. $725,000 b. $175,000 c. $275,000 d. $ 75,000

d

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance? a. deposits in transit b. outstanding checks c. interest earned on the bank account d. bank service charges

a

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company records? a. outstanding checks b. bank service charges c. interest earned on the bank account d. deposits in transit

b

Aaron Corporation is a merchandising company. Selected account balances are listed below: Sales $250,000 Purchases 112,500 Beginning Inventory 8,000 Ending Inventory 15,000 Operating Expenses 74,000 Income Tax Expense 5,000 Beginning Retained Earnings 26,500 Dividends 7,500 Refer to the information provided for Aaron Corporation. Calculate gross margin. a. $137,500 b. $120,500 c. $144,500 d. $212,500

c

The journal entries required for purchase and sales transactions using the perpetual system are more complex than under the periodic system but offer the advantage of a. requiring the additional control of a physical inventory count whenever accurate inventory amounts are needed. b. delaying the majority of the accounting effort until year-end. c. providing management with more complete information from which to control inventories. d. requiring the use of the average cost method.

c

The operating cycle is the elapsed time between the a. purchase of goods from suppliers and the performance of the related service for customers. b. sale of goods and the delivery of those goods to customers. c. purchase of goods or services and the ultimate collection of cash from customers related to the sale of those goods. d. sale of goods or services to customers and the payment to suppliers for those goods.

c

Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January: Jan. 1 Beginning inventory: 10 units at $2 each $20 20 Purchased 90 units for $3 each $270 Cost of goods available for sale $290 ​ Refer to the information provided for Tedder Co. If the company uses FIFO inventory costing, how much is cost of goods sold for January? a. $250 b. $240 c. $232 d. $230

d

The company sold merchandise to a customer on December 1, 2019, for $100,000. The customer paid with a promissory note that has a term of 6 months and an annual interest rate of 9%. The company's accounting period ends on December 31. Refer to A Better Mousetrap. What amount should the company recognize as interest revenue on December 31, 2019? a. $1,500 b. $9,000 c. $ 750 d. $ -0-

c

Fresh n' Fit Cuisine purchased land and a building for $320,000 so that it could open a new restaurant. The building's fair market value at the time of purchase was $220,000. In addition, the following costs were incurred prior to the restaurant's opening: Transfer taxes $10,000 Interest incurred on the mortgage loan taken out to make the purchase 4,000 Attorney and real estate agent's fees 15,000 Repave the parking lot 6,000 How much will be recorded as land improvements? a. $6,000 b. $125,000 c. $106,000 d. $25,000

a

Having one employee prepare company checks and sign those checks relates to which internal control activity? a. a violation of proper segregation of duties b. a good example of clearly defined authority and responsibility c. a violation of adequate documents and records d. a good example of checks on recorded amounts

a

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. Refer to the information for Accent Flooring. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized? a. Increase Cash by $20,450, increase Interest Revenue by $450, and decrease Notes Receivable by $20,000 b. Increase Cash and decrease Notes Receivable by $20,000 c. Increase Cash by $20,450, increase Notes Receivable by $20,000, and increase Interest Revenue by $450 d. No entry is required; the customer pays the amount due to Accent Flooring.

a

If a company erroneously records a $50 check received from a customer as $500 in its records, which of the following must occur when reconciling its bank statement? a. The company must decrease the balance per its records by $500. b. The company must decrease the balance per its records by $450. c. The company must increase the balance per its records by $450. d. The company must increase the balance per its records by $500.

b

Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2019. Refer to the information provided for Eli Company. If the customer pays the invoice on March 31, 2013, how much sales discount will Eli Company recognize? a. $600 b. $ 20 c. $ -0- d. $200

c

If a company uses the allowance method to account for doubtful accounts, when will the company's Stockholders' equity decrease? a. At the date a customer's account is determined to be uncollected b. When the accounts receivable amount becomes past due c. At the end of the accounting period when an adjusting entry for bad debts is recorded d. At the date a customer's account is written off

c

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units Total cost of goods available for sale $4,361.75 30 On hand, 1000 units Refer to the information provided for Klump Co. If the company uses the (moving) Average Cost inventory costing method, ending inventory at June 30th is: a. $1,815.00 b. $1,817.40 c. $1,819.86 d. $1,818.00

c

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units Total cost of goods available for sale $4,361.75 30 On hand, 1000 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, the amount of ending inventory reported on the balance sheet is: a. $1,810.00 b. $1,825.00 c. $1,823.75 d. $1,800.00

c

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement? a. The company must increase the balance per its records by $450. b. The company must increase the balance per its records by $500. c. The company must decrease the balance per its records by $450. d. The company must decrease the balance per its records by $500.

a

On January 1, 2019 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. Refer to Fantasy Cruise Lines. What will be the book value of the ship at the end of its useful life? a. $100,000 b. $ -0- c. Need more information to determine this answer. d. $200,000

a

The following data are from the company's records for the year ended December 31: Accounts Receivable--January 1 $455,000 Credit sales during the year 900,000 Collections from credit customers during the year 825,000 Customer accounts written off as uncollected during the year 15,000 Allowance for Doubtful Accounts (After write-off of uncollected accounts) 2,100 Estimated uncollected accounts based on an aging analysis 29,200 Refer to A-One Construction. What is the balance of Accounts Receivable at December 31? a. $515,000 b. $440,000 c. $545,000 d. $530,000

a

The following selected financial information is available for Pham Enterprises for the year ended December 31: Net sales $450,000 Inventory, January 1 $48,400 Cost of goods sold $299,500 Inventory, December 31 $49,670 Refer to the information provided for Pham Enterprises. What is the company's gross profit ratio for the year ended December 31? a. 33.44% b. 50.25% c. 299.00% d. 66.55%

a

Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January: Jan. 1 Beginning inventory: 10 units at $2 each $20 20 Purchased 90 units for $3 each $270 Cost of goods available for sale $290 ​ Refer to the information provided for Tedder Co. Which of the following entries correctly records the purchase assuming the units were acquired on credit under terms of 2/10, n/30? a. Inventory 270.00 Accounts payable 270.00 b. Purchases 270.00 Accounts payable 270.00 c. Inventory 270.00 Cash 270.00 d. Purchases 264.60 Purchase discounts 5.40 Accounts payable 270.00

b

Depreciation is a. the cash allocated each period to maintain a plant asset. b. the difference between the original cost and salvage value of an asset. c. an effort to achieve proper matching of the cost of operating assets with related revenues. d. an accumulation of funds to replace the related plant asset.

c

This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000. Refer to Fernbank Farms. What amount should be recorded as depreciation expense each year starting in 2021? a. $18,000 b. $12,400 c. $13,600 d. $16,000

a

This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000. Refer to Fernbank Farms. What is the truck's book value at December 31, 2021? a. $80,000 b. $98,000 c. $62,000 d. $68,000

a

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2019? a. double-declining-balance b. All methods produce the same expense in 2019. c. units-of-production d. straight-line

a

On October 1, 2019, the company received a $50,000 promissory note from a customer. The annual interest rate is 6%. Principal and interest will be collected in cash at the maturity date of September 30, 2020. Refer to Academy Grill Supply. If the company's year ends December 31, 2019, an adjusting entry is needed to a. increase notes receivable by $2,250. b. increase notes receivable by $750. c. increase interest receivable by $750. d. increase interest revenue by $2,250.

c

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2020? a. units-of-production b. straight-line c. double-declining-balance d. All methods produce the same expense in 2020.

c

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2020? a. $2,000 b. $1,728 c. $2,880 d. $4,800

c

Tedder uses a periodic inventory system. At the end of January, 20 units were on hand. The following additional information is available for the month of January: Jan. 1 Beginning inventory: 10 units at $2 each $20 20 Purchased 90 units for $3 each $270 Cost of goods available for sale $290 ​ Refer to the information provided for Tedder Co. If the company uses the weighted average method of inventory costing, how much is cost of goods sold for January? a. $232 b. $240 c. $250 d. $230

a

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment? a. $1.10 b. $1.00 c. $0.10 d. $0.12

a

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment? a. $10,000 b. $ 8,000 c. $ 4,000 d. $12,000

a

What is the distinguishing characteristic between accounts receivable and notes receivable? a. Notes receivable generally specify an interest rate and a maturity date at which any interest and principle must be repaid. b. Accounts receivable are usually current assets while notes receivable are usually long-term assets. c. Accounts receivable require payment of interest while notes receivable does not have payment of interest. d. Notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies.

a

A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the custodian tallies the records of the petty cash transactions and presents them for reimbursement. April 4 U.S. Post Office (postage) $ 48 April 21 Callabaugh Supply (office supplies) 146 April 25 Speedy Delivery (package delivery) 35 Which of the following entries is necessary for recording the replenishment of the fund? a. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Petty Cash 229 b. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash 229 c. Cash 229 Petty Cash Fund 229 d. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash Over and Short 21 Petty Cash Fund 250

b

Irwin Company counted its ending inventory as $178,000 at year-end, January 31, 2019. Upon review of the records, it was noted that the following items were in transit during the count: - Goods totaling $2,000 shipped by the supplier FOB destination on January 31 were received February 5th and were not counted by Irwin Company. - Goods totaling $5,000 shipped by the supplier FOB shipping point on January 30 were received February 2nd and were not counted by Irwin Company. - Goods totaling $6,000 shipped by Irwin Company to a customer FOB shipping point on January 31 were received by the customer on February 3rd and were counted by Irwin Company. What is Irwin Company's correct inventory balance on January 31, 2019? a. $174,000 b. $177,000 c. $178,000 d. $172,000

b

On January 1, 2019 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. Refer to Fantasy Cruise Lines. Compute the amount of depreciation expense for the year ended December 31, 2019. a. $180,000 b. $200,000 c. $100,000 d. $ 90,000

b

On January 1, 2019 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. Refer to Fantasy Cruise Lines. What is the depreciation expense for the year ended December 31, 2020? a. $180,000 b. $160,000 c. $200,000 d. $ -0-

b

On January 1, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine for the year ended December 31? a. loss of $6,500 b. loss of $1,500 c. gain of $1,500 d. gain of $5,000

b

On January 2, Alfredo Corporation sold merchandise with a gross price of $100,000 to a customer with terms of 2/10, n/30. How much Sales Discounts would be recorded if payment was received from the customer on January 8? Assume the company uses the Gross Method of recording receivables. a. $100.000 b. $2,000 c. $98,000 d. $0

b

On June 30, a company had $1,924 in its cash account according to its general ledger. This included a deposit of $174 that was in transit on June 30th. The June 30th bank statement contained the following information: Bank statement balance $2,178 Bank service charge 14 Collection of notes receivable 136 NSF check 32 Assuming outstanding checks of $338, what is the company's adjusted cash balance at June 30th? a. $2,178 b. $2,014 c. $1,840 d. $1,880

b

Which of the following statements best describes the act of collusion? a. Collusion is an intentional act of two or more employees to accomplish theft of company assets. b. Collusion is one of the necessary outcomes of a system of internal control over financial reporting. c. Collusion is caused by an overstatement of ending inventory. d. Collusion is enhanced by an effective system of independent reconciliations and other checks on recorded amounts.

a

This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000. Refer to Fernbank Farms. When calculating depreciation for 2021, the company's accountant should a. expense the $30,000 and depreciate the original cost of $100,000 over its revised estimated total live of 7 years. b. add the $30,000 to the book value at December 31, 2020, and then allocate the revised depreciation basis over the remaining adjusted useful life of 5 years. c. ignore the change in life on the original cost of $100,000 and depreciate the additional $30,000 cost separately over its useful life. d. report the effect of the change in life as an expense on the income statement in 2019.

b

Depreciation is a process by which a. replacement funds are accumulated for plant and equipment. b. the decline in market value of plant and equipment is determined and recorded. c. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. d. the difference between current market value and historical cost of plant and equipment.

c

Dietz, Inc. sells merchandise on credit. If a customer pays its balance due within the discount period, what is the effect of the payment on Dietz's accounting equation? a. Assets and stockholders' equity increase. b. Stockholders' equity decreases and liabilities increase. c. Assets and stockholders' equity decrease. d. Assets decrease and liabilities increase.

c

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units Total cost of goods available for sale $4,361.75 30 On hand, 1000 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, ending inventory at June 30th is: a. $1,806.25 b. $1,823.25 c. $1,811.75 d. $1,810.00

c