acc practice test

Rains Company purchased equipment on January 1 at a list price of $125000, with credit terms 2/10, n/30. Payment was made within the discount period. Rains paid $6250 sales tax on the equipment, and paid installation charges of $2200. Prior to installation, Rains paid $5000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

$135950 ($125000 × 0.98) + $6250 + $2200 + $5000 = $135950 (List price × (1 - .02) + sal. tax + inst. + conc. Slab)

Vickers Company uses the units-of-activity method in computing depreciation. Anew plant asset is purchased for $18,000 that will produce an estimated 100,000units over its useful life. Estimated salvage value at the end of its useful life is$2,000. What is the depreciation cost per unit?a.$1.60b.$1.80c.$0.16d.$0.18C is

$18,000 - $2,000 = $16,000. $16,000/100,000 = $0.16 per unit

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $10,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $400,000. 7. Bought inventory for cash of $160,000. 8. Acquired an investment in Zynga stock for cash of $21,000. 9. Converted bonds payable to common stock in the amount of $500,000. 10. Repaid a 6 year note payable in the amount of $220,000. What is the net cash provided by operating activities? $305,000. $180,000. $290,000. $240,000.

$180,000. (Solution: $400,000 - $160,000 - $60,000 = $180,000)

Jack's Copy Shop bought equipment for $150,000 on January 1, 2013. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014?

$25,000. 150000/3=50000 150000-50000=100000 100000/4= 25000

Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is

$275,000 (260,000 + 45000 - 21000 - 9000)

Equipment was purchased for $150000. Freight charges amounted to $7000 and there was a cost of $20000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $30000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be

$29400. ($150000 + $7000 + $20000 - $30000) ÷ 5 = $29400 (Pur. Price + freight + found. - Sal. value) ÷ 5yrs.

A company sells a plant asset that originally cost $180,000 for $60,000 on December 31, 2010. The accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $15,000 had been recorded. The company should recognize a

$30,000 loss on disposal Book Value = Cost - Accumulated Depreciation = 180000 - 90000 = 90000 Loss on Sale = Sales Value - Book Value = 60000 - 90000 = -30000

A company purchased land for $350,000 cash. Real estate brokers' commission was $25,000 and $35,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

$410,000 350,000+25,000+35,000 = 410,000

Nance Corporation's December 31, 2014 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 30,000 shares authorized; 15,000 shares issued $300,000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding $19,500,000 Paid-in capital in excess of par value - preferred stock $60,000 Paid-in capital in excess of par value - common stock $27,000,000 Retained earnings $7,650,000 Treasury stock (30,000 shares) $630,000 Nance's total paid-in capital was $46,860,000. $27,060,000. $47,490,000. $46,230,000.

$46,860,000. (Solution: $300,000 + $19,500,000 + $60,000 + $27,000,000 = $46,860,000) everything is included except retained earnings and treasury stock

Bonds with a face value of $600,000 and a quoted price of 98½ have a selling price of

$591,000 $600,000 × .985 = 591,000

A company had net income of $890,000. Depreciation exp is $ 110,000. During the year, accounts receivable and inventory increased $60,000 and $160,000, respectively. Prepaid expenses and accounts payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities?

$890,000+ $110,000-$60,000-$160,000+$8,000-$16,000 + $12,000= $784,000

Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014?

($48,000 - $0) × .40 = $19,200

Foyle Company purchased a new van for floral deliveries on January 1, 2013. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2014?

($48,000 - $0) × .40 = $19,200; [($48,000 - $19,200) × .40] + $19,200 = $30,720

During 2014, Ronald Corporation reported net sales of $1,500,000, net income of $900,000, and depreciation expense of $100,000. Ronald also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Ronald's asset turnover ratio is

1.2 times net sales/[(begin asset + end asset)/2]

Johnson Company issued 900 shares of no-par common stock for $17,100. Which of the following journal entries would be made if the stock has no stated value?

17,100 (the number that is repeated down the credit entries)

A $100000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

20 interest periods, 1.5% interest

McGoff Co. deposits $20000 in a fund at the end of each year for 5 years. The fund pays interest of 4% compounded annually. The balance in the fund at the end of 5 years is computed by multiplying:

20,000 by the future value of an annuity factor

The interest charged on a 300000 note payable, at the rate of 6%, on a 90 day note would be

300000 x 0.06 x 90/360

Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $223,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

40000-35000=5000 223000-5000= 218000

Which of the following discount rates will produce the smallest present value

9% the highest percent

Which accounts normally have DEBIT balances?

Assets, dividends, and expenses

Which of the following represents the largest number of common shares?

Authorized shares

The return on common stockholders' equity is computed by dividing net income less preferred dividends by A : ending common stockholders' equity. B : average common stockholders' equity. C : beginning common stockholders' equity. D : None of the choices is correct.

B : average common stockholders' equity.

The following data is available for BOX corporation at December 31, 2014 Common stock par $10 (authorized 30,000 shares) ... $250,000 Treasury stock (at cost $15 per share) ... $1,200 based on the data how many shares of common stock are issued? A) 30,000 B) 25,000 C) 29,920 D) 24,920

B) 25,000

a legal document that indicates the name of the issuer, the face value of the bonds, and such other data as the contractual interest rate and the maturity date of the bonds

Bond certificate

A gain or a loss on disposal of a plant asset is determined by comparing the

Book value of the asset with the proceeds received from its sale

Which of the following is not typically a characteristic experienced by a company during the growth phase of the corporate life cycle?

C) Cash from investing is positive

Two sisters operate a bed and breakfast on the coast of Maine. As customers make reservations they are required to pay cash in advance equal to one-half of the rate for their stay. How should the sisters account for the cash received as reservations are made? Cash Unearned Service Revenue

Cash Unearned Service Revenue

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is

Cash 300,000 Notes Payable 300,000

Dawson Company issued 600 shares of no-par common stock for $5,400. Which of the following journal entries would be made if the stock has stated value of $2 per share?

Cash 5,400 Common Stock 1,200 Paid-in Capital in Excess of Stated Value 4,200

A cash register tape shows cash sales of $6,000 and sales taxes of $300. The journal entry to record this information is

Cash 6,300 Sales Revenue 6,000 Sales Taxes Payable 300

Tomlinson Packaging Corporation began business in 2017 by issuing 50,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2017 balance sheet, Tomlinson Packaging would report

Common Stock of $250,000 (50000 x $5)

If Lantz Company issues 10,000 shares of $5 par value common stock for $210,000, the account

Common Stock will be credited for $50000. (10,000 x 5)

On January 1, 2012, Keisler Company, a calendar-year company, issued $500,000 of notes payable, of which $125,000 is due on January 1 for each of the next four years. The proper balance sheet presentation for the $500,000 principal amount of the debt is December 31, 2012, is

Current Liabilities, $125,000; Long-term Debt, $375,000.

The following data is available for BOX corporation at December 31, 2014: Common stock par $10 (authorized 30,000 shares) ... $250,000 Treasury stock (at cost $15 per share) ... $1,200 Based on the data how may shares of common stock are outstanding? A) $30,000 B) $25,000 C) $29,920 D) $24,920

D) $24,920 250,000/10 - 1200/15 =

a CREDIT is not the normal balance for which account listed below?

DIVIDENDS account

Which of the following would be added to net income using the indirect method?

Depreciation Expense

Which of the following accounts is INCREASED with a DEBIT?

Dividends

Which of the following is not an intangible asset that is reported on the balance sheet?

Employees

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, LONG-TERM DEBT RETIRED WITH CASH would be reported on the statement of cash flows.

Financing activites section

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, common stock issued for cash would be classified.

Financing activities section.

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?

Gain on sale of equipment

On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 4% note. What entry must Sam's Painting Service make on December 31 before financial statements are prepared?

Interest Expense ... 1,000 Interest Payable ... 1,000 (100000/100) big first number/100

Financing activities involve

Issuing debt

During 2017, Lowes Company sold equipment with a book value of $120,000 for proceeds of $145,000. The company purchased new equipment for $320,000 by signing a long-term note payable. No other transactions impacted long-term asset accounts during 2017. The investing section of the statement of cash flows will report

Net cash flow 145,000 only the proceeds from selling the equipment is included

Compton Inc. made a $500 ordinary repair to a piece of equipment. Compton's accountant debited this amount to the asset account, Equipment and credited Cash. Was this the correct entry and if not, why not?

No, the correct entry would be a debit to Maintenance and Repairs Expense and a credit to Cash.

Which accounts normally have credit balances

Revenues, liabilities, and retained earnings

Which of the following accounts is INCREASED with a CREDIT?

Sales revenue

A debit is not the normal balance for which account listed below?

Service Revenue

Which depreciation method is most frequently used in businesses today?

Straight-line

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

Truck license

Par value of a stock refers to the

Value assigned to a share of stock by the corporate charter

On January 1, Ripken Corporation had 80,000 shares of $10 par value common stockoutstanding. On March 17 the company declared a 10% stock dividend to stockholdersof record on March 20. Market value of the stock was $13 on March 17. The stock wasdistributed on March 30. The entry to record the transaction of March 30 would include a a.credit to Common Stock for $80,000. b.debit to Common Stock Dividends Distributable for $104,000. c.credit to Paid-in Capital in Excess of Par Value for $24,000. d.debit to Stock Dividends for $24,000.

a. CREDIT to Common Stock for $80,000.

On January 1, Ripken Corporation had 80,000 shares of $10 par value common stockoutstanding. On March 17 the company declared a 10% stock dividend to stockholdersof record on March 20. Market value of the stock was $13 on March 17. The entry torecord the transaction of March 17 would include a a.debit to Stock Dividends for $104,000. b.credit to Cash for $104,000. c.credit to Common Stock Dividends Distributable for $104,000. d.credit to Common Stock Dividends Distributable for $24,000.

a. DEBIT to Stock Dividends for $104,000.

Which of the following most likely would be classified as a current liability? a. Dividends payable b. Bonds payable in 5 years c. Three-year notes payable d. Mortgage payable as a single payment in 10 years

a. Dividends payable

A truck that cost $72,000 and on which $60,000 of accumulated depreciation has beenrecorded was disposed of for $18,000 cash. The entry to record this event would include a a.gain of $6,000. b.loss of $6,000. c.credit to the Equipment account for $12,000. d.credit to Accumulated Depreciation for $60,000.

a.gain of $6,000. Solution: $18,000 -($72,000 -$60,000) = $6,000

Liquidity ratios measure a company's

ability to pay off its short-term debt obligations

The primary purpose of the statement of cash flows is to provide information

about the cash receipts and cash payments of an entity during a period.

The balance in the Accumulated Depreciation account represents the

amount charged to expense since the acquisition of the plant asset

Which of the following would be subtracted from net income using the indirect method

an increase in accounts receivable

The book value of an asset is equal to the

asset's cost less accumulated depreciation

If the market rate of interest is greater than the contractual rate of interest, bonds will sell

at a discount

If the market rate of interest is lower than the contractual rate of interest, bonds will sell

at a premium

Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month? a. $23,043 b. $23,100 c. $24,255 d. It cannot be determined.

b. $23,100 24255/1.05

193. Ferman Corporation had net income of $160,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2014. Ferman Corporation's common stockholders' equity at the beginning and end of 2014 was $870,000 and $1,130,000, respectively. Ferman Corporation's return on common stockholders' equity was a. 16%. b. 14%. c. 11%. d. 9%.

b. 14%. (Net income-Preferred dividends)/Average common stockholders equity

All of the following are true regarding financial statement analysis ratios associated with liabilities except a. a high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled b. high liquidity ratios mean that lines of credit should be high to compensate c. if a company's current ratio is lower than the industry average, then it may lack liquidity d. unrecorded obligations causing sizeable differences between liquidity and solvency ratios can be ignored

b. high liquidity ratios mean that lines of credit should be high to compensate

Which of the following items does not appear in the statement of cash flows under the direct method? a) Cash payments to suppliers. b) Cash collections from customers. c) Depreciation Expense. d) Cash from the sale of equipment.

c) Depreciation Expense.

Racer Corporation's December 31, 2014 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 40,000 shares authorized; 20,000 shares issued $ 400,000 Common stock, $10 par value, 4,000,000 shares authorized; 2,600,000 shares issued, 2,560,000 shares outstanding 26,000,000 Paid-in capital in excess of par value - preferred stock 80,000 Paid-in capital in excess of par value - common stock 36,000,000 Retained earnings 10,200,000 Treasury stock (30,000 shares) 840,000 Racer declared and paid a $100,000 cash dividend on December 15, 2014. If the company's dividends in arrears prior to that date were $24,000, Racer's common stockholders received a. $76,000. b. $36,000. c. $44,000. d. no dividend.

c. $44,000. arrears prior to that date

Goodwill

can only be identified with the business as a whole

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

cash flows from operating activities

Investing activities include

collecting cash on loans made

What is the total stockholder's equity based on the following account balance common stock 2300000 paid in capital in excess of par 120000 retained earnings 570000 treasury stock 60000

common stock + retained earnings + treasury stock = 2930000

Depreciation is a process of

cost allocation

a company receives $264, of which $24 is for sales tax. the journal entry to record the sale would include a

credit to sales taxes payable for $24

CAB Inc. has 1000 shares of 5%, $100 par value, cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock? a)$0.05 per share. b)$50 per share. c)$500 in total. d)$5000 in total.

d)$5000 in total.

bonds with a face value of $500,000 and a quoted price of 102 1/4 have a selling price of a. 601, 125 b. 510,125 c. 510,013 d. 511,250

d. 511,250.00 500,000*102.25%

On January 1, 2017, $3,000,000, 10-year, 10% bonds, were issued for $2,910,000.Interest is paid annually on January 1. If the issuing corporation uses the straight-linemethod to amortize discount on bonds payable, the monthly amortization amount is a.$29,100. b.$9,000. c.$2,424. d.$750.

d. 750. Solution: [($3,000,000 - $2,910,000) / 10]/12=$750 [(Bond face val. - sell. Pr.)÷10]÷12

Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits b. Time valuation c. Straight-line d. Declining-balance

d. Declining-balance

Which of the following is not true of ordinary repairs? a. They primarily benefit the current accounting period. b. They can be referred to as revenue expenditures. c. They maintain the expected productive life of the asset. d. They increase the productive capacity of the asset.

d. They increase the productive capacity of the asset.

The current portion of long-term debt should a.be classified as a long-term liability. b.not be separated from the long-term portion of debt. c.be paid immediately. d.be reclassified as a current liability.

d.be reclassified as a current liability.

Cash receipts from customers are greater than sales revenues when there is a(n)

decrease in accounts receivable

In the present value calculations, the process of determining the present value is called

discounting

Which of the following is not an advantage of issuing bonds instead of common stock

earnings per share on common stock may be lower

Burke Company purchases land for $180,000 cash. Burke assumes $5,000 in property taxes due on the land. The title and attorney fees totaled $2,000. Burke has the land graded for $4,400. They paid $20,000 for paving of a parking lot. What amount does Burke record as the cost for the land?

everything is included except for the paving of the parking lot 191,400

If accounts PAYABLE have increased during a period,

expenses on an accrual basis are greater than EXPENSES on a cash basis.

The future value of 1 factor will always

greater than 1

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

is used for tax purposes

Land improvements should be depreciated over the useful life of the

land improvements

research and development costs

must be expensed when incurred under generally accepted accounting principles

A corporation has the following account balances: Common Stock, $1 par value, $60,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the

number of shares issued is 60,000.

Assume that Fitzgerald Corp. uses the indirect method to depict cash flows. Indicate where, if at all, ACCOUNTS RECEIVABLE COLLECTED would be classified on the statement of cash flows.

operating activities section

Sizemore, Inc. has 10000 shares of 4%, $100 par value, cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31, 2017. If the board of directors declares a $25000 dividend, the

preferred stockholders will receive the entire $25000.

If accounts RECEIVABLE have increased during the period

revenues on an accrual basis are greater than REVENUES on a cash basis.

When an asset is sold, a gain occurs when the

sale price exceeds the BOOK VALUE of an asset sold

A retailer that collects sales taxes is acting as an agent for the

taxing authority

Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

the cash flows from operating activities = (40000-35000)+150000 = $155000

If no-par stock is issued without a stated value, then?

the entire proceeds are considered legal capital