Accounting 2013: Final Exam

अब Quizwiz के साथ अपने होमवर्क और परीक्षाओं को एस करें!

1. The company uses supplies purchased in the previous period, $1,500. 2. The company pays cash for rent in advance, $6,000. 3. The company repays a loan to the bank, $10,000 (ignore any interest cost). The amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____.

$1,500; $6,000 REASON: USED supplies : Accrual pays CASH : Cash- basis

On May 31, FRESH TOMATO SALSA's Cash account showed a balance of $10,000 before the bank reconciliation was prepared. After examining the May bank statement and items included with it, the company's accountant found the following items: Checks outstanding $2,250 Deposits outstanding 1,900 NSF check 100 Service fees 40 Error: FRESH TOMATO SALSA wrote a check for $30 but recorded it incorrectly for $300. What is the amount of cash that should be reported in the company's balance sheet as of May 31?

$10,130 REASON: Cash acc balance = 10,000 SUBTRACT NSF AND SERVICE FEE = 9860 SUBTRACT ERROR OF 300-30= 270

PUFF ADVENTURES has 15 employees each working 40 hours per week and earning $30 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

$12,843 REASON: (15 x 40) x 30 = 18,000 Employee costs: 18,000 x .15 = 2700 18,000 x .06 = 1080 18,000 x .076 = 1377 18,000- 2700-1080-1377 = 12843 We don't use the unemployment tax b/c that is employer costs.

On January 1, 2018, WPS ENTERPRISES borrows $30,000 to purchase a new Toyota Highlander by agreeing to a 6%, 4-year note with the bank. Payments of $704.55 are due at the end of each month with the first installment due on January 31, 2018. What is the second month's interest expense?

$147.23 REASON: 1st month interest expense= 30,000 x .06 x 1/12= 150.00 Payment- interest: $704.55-$150.00 = 554.55 2nd month interest expense= (30,000 - 554.55) x .06 x 1/12 = 147.23

A company had the following cash flows for the year: (a) Purchased land, $60,000 (b) Borrowed from a local bank, $100,000 (c) Paid employee salaries, $50,000 (d) Issued common stock, $75,000 (e) Paid dividends, $20,000 (f) Sold equipment, $40,000 (g) Sold services to customers, $120,000 What amount would be reported for net financing cash flows on the Statement of Cash Flows?

$155000 REASON: Borrowed from a local bank, $100,000 + Issued common stock, $75,000 - Paid dividends, $20,000

Inventory records for CILANTRO revealed the following: Mar. 1 Beginning inventory 1,000 $7.20 Mar. 10 Purchase 600 7.25 Mar. 16 Purchase 800 7.30 Mar. 23Purchase 600 7.35 CILANTRO sold 2,300 units of inventory during the month. Ending inventory assuming LIFO would be:

$16,760 REASON: *Start from bottom 2300- 600- 800 - 600= 300 units left Mar. 1 Beginning inventory 300 X $7.20 Mar. 10 Purchase 600 x 7.25 Mar. 16 Purchase 800 x 7.30 Mar. 23Purchase 600 x 7.35

CARNITAS, Inc. had a Retained Earnings balance of $12,000 at December 31, 2018. The company had an average income of $7,500 over the next 3 years, and an ending Retained Earnings balance of $15,000 at December 31, 2019. What was the total amount of dividends paid over the last three years?

$19,500 REASON: BEG. RETAINED EARNINGS + NET INCOME - DIVIDENDS = END RETAINED EARNINGS 12000+ 7500(3) - X = 15000 12000+ 22500 - X = 15000 34500- X = 15000 (solve for x) X= 19500

CHIPOTLE HONEY VINAIGRETTE reported net income of $200,000. Beginning balances in Accounts Receivable and Accounts Payable were $15,000 and $20,000, respectively. Ending balances in these accounts were $12,000 and $22,000, respectively. Assuming that all relevant information has been presented, CHIPOTLE HONEY VINAIGRETTE's net cash flows from operating activities would be:

$205,000 REASON: A/R DECREASED by $3000 (15,000-12,000) A/P INCREASED BY $2000 (22,000-20,000) 20,000 + 3000 + 2000 = 205000 - A/R is a current asset, so when it decreases, you add to net income. - A/ P is a Current liability, so when it increases, you add to net income.

Suppose you buy dinner (at Chiptole, of course) for $23.75 that includes an 8% sales tax. How much did Chiptole charge you for the dinner (excluding any tax) and how much do they owe for sales tax?

$21.99 for dinner and $1.76 for sales tax. REASON: Total received/ 1+% = cost before tax $23.75 / 1.08= $21.99 $23.75- $21.99 = $1.76

KEEGAN purchased new equipment for $90,000. Residual value at the end of an estimated four-year service life is expected to be $10,000. During the four-year period, the company expects to use the equipment a total of 5,000 hours. What is the depreciation expense for the second year and the remaining book value of the equipment assuming the firm uses the "Double Declining Balance" method?

$22,500; $22,500 REASON: 2 / 4 years = .5 deprecation rate 1st year :BOOK VALUE X % = 90,000 x .5= 45000 2nd year: 45000 x .5= 22500 (depreciation expense and book value for 2nd year)

ALYSON CONSTRUCTION purchased a 3-acre tract of land for a building site for $350,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was $900 and attorney fees for reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered the period after the purchase date. The capitalized cost of the land is:

$364,650 REASON: 350000+ 12000 - 1500 +900 +500 +(3000-250)

CHEESE EMPORIUM was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, CHEESE EMPORIUM had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total stockholders' equity at the end of 2018?

$420,000 REASON: Ignore first paragraph 30,000 X 7= 210000 20,000 X 8 = 160000 NET INCOME = 100000 DIVIDENDS= (-50,000) = 420000

AVOCADO reported the following amounts at the end of the year: total sales = $550,000; sales discounts = $12,000; sales returns = $44,000; sales allowances = $17,000. What was the company's net revenues for the year?

$477,000 REASON: $550,000 - $12,000 - $44,000 - $17,000

Inventory records for CILANTRO revealed the following: Mar. 1 Beginning inventory 1,000 $7.20 Mar. 10 Purchase 600 7.25 Mar. 16 Purchase 800 7.30 Mar. 23Purchase 600 7.35 CILANTRO sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:

$5,140 REASON: *Start from top: 2300- 1000- 600 = 700 left, so Mar. 16 purchase turns into 100 units (800-700). Then use ending inventory Mar. 16 Purchase 100 X 7.30 = 730 Mar. 23Purchase 600 X 7.35 = 4410 730+4410 = 5140

At December 31, BELL PEPPER (BP) had account balances in Accounts Receivable of $311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments. An analysis of BP's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be:

$5,250 REASON: $311,000 X 2%= 6220 (allowance) $6220 - $970 allowance = 5250

Given the information below, what is the gross profit? Sales revenue $320,000 Accounts receivable 50,000 Ending inventory 100,000 Cost of goods sold 250,000 Sales Returns 20,000

$50,000 REASON: $320000 - $20,000 - $250000 Gross profit= revenue - returns - COGS

BARBACOA issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $100,000 in 2018. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018?

$80,000 to preferred stockholders and $20,000 to common stockholders. REASON: 2017: 5000 shares X 8% X $100 Par Value= $40,000 2018: (Same as 2017) = $40,000 40,000+40,000= $80,000 preferred stock 100,000-80,000= $20,000 to common stockholders

During the year, CHORIZO had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for investing net cash flows on the Statement of Cash Flows?

(8,000) REASON: Machinery is the only investing net cash flow

Price of Bond Equation using Table

(Issue price x PVof$1) + (Issue price x PVAnnuity x SR)

Adjusting entries:

-Always involve at least one income statement account and one balance sheet account. - NEVER include cash. - Always include revenue and expenses

When to record a loss on a contigent liability

1. Probable 2. Reasonable Estimated

CORN TORTILLA's income statement reports sales of $100,000; cost of goods sold of $46,000, operating expenses of $34,000, interest expense of $15,000, income tax expense of $2,000, and net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by

100,000 Divide by net sales

FLOUR TORTILLA reports accounts receivable of $100,000 in 2017 and $250,000 in 2018. Using horizontal analysis, what would be the percentage increase or decrease in accounts receivable?

150 % increase REASON: YEAR 2- YEAR 1/ YEAR 1 250000 - 100000/ 100000 = 1.5 = 150% increase from 2017 to 2018

double declining deprecation

2 / # of years = deprecation rate % Book value X % = deprecation expense for the year

74. ) RAZORBACKS issues $10 million in bonds on January 1, 2018. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:

6% REASON: (Cash paid/ face value) x semi-annually (300,000/10000000) x 2

On November 1, 2018, JOEL signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. The journal entry on May 1, 2019 to record the amount of cash needed to pay back the note payable plus any accrued interest would include:

A credit to cash for $206,000 REASON: Now it's asking for interest from December- May (6 months) (200000 x .06 x 6/12) = 6000 accrued interest + note payable (200000) = 206,000

Bond X and Bond Y are both issued by the same company, HOGS. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct?

Bond Y will sell for more than Bond X REASON: Cash= face value x SR BOND X :$100,000 x .08= 8000 BOND Y: $100,000 x.09 = 9000 BOND Y created more cash.

Type of cash flow: Bonds payable: Equipment: Common stock: Accounts Payable: Accounts receivable:

Bonds payable: financing Equipment: investing Common stock: financing Accounts Payable: operating Accounts receivable: operating

Resell Treasury Stock General Entry

Cash Additional paid in capital Treasury stock

Issue Common Stock Journal Entry

Cash (# of shares x selling price) Common stock (# of shares x par value) Additional paid in capital (difference)

Deferred revenue refers to:

Customers paying cash in advance of the good or service to be provided

Which of the following is correct? A. The receivables turnover ratio depicts the company's frequency of cash collections. B. The inventory turnover ratio can be used to assess the company's frequency of selling inventory. C. The current ratio reflects the company's ability to pay current debt. D. All of these

D. All of these

A company received a bill for newspaper advertising services, $400. The bill will be paid in 10 days. How would the transaction be recorded today?

Debit Advertising Expense $400, credit Accounts Payable $400.

STEAK LEASING received $12,000 for 24 months rent in advance. How should STEAK record this transaction?

Debit Cash; credit Deferred Revenue. REASON: They received cash, and deferred revenue is a liability

TORTILLA provides services of $46,000 to CHIPS WATER DISTRICT #45 on April 12 of the current year with terms 1/15, n/60. What would TORTILLA record on April 23, assuming the customer made the correct payment on that date?

Debit Credit Cash 45,540 Sales Discounts 460 Accounts Receivable 46,000 REASON: They paid before 15 days, so they get 1% discount (1/15). 46000 X 1% = 460 ; 46000 - 460 = 45540

At the beginning of December, TOMATILLO-GREEN CHILI SALSA (TGCS) had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry for TGCS?

Debit Supplies Expense $4,200, credit Supplies $4,200. REASON: 2,000 + 3,000 - 800 =4200 Selling supplies - credit supplies

On November 1, 2018, JOEL signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. JOEL should record which of the following adjusting entries at December 31, 2018?

Debit interest expense and credit interest payable $2,000 REASON: 20,000 X .06 X 2/12 (November - December ) *remember adjusting entries never include cash*

BLACK BEANS had 100,000 outstanding shares of common stock. On June 16, 2018, BLACK BEANS repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2018, BLACK BEANS resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation?

Decrease in assets and decrease in stockholders' equity. REASON: Treasury stock (reduction of SHE) Then sold shares by less $ (reduction of asset)

Stated rate < Market rate

Discount; issue price < face value

RETAINED EARNINGS Equation

Net income- dividends

Not reported in the stockholder's equity section of the balance sheet.

Sales Revenue

Liquidity

Pay current liabilities

Solvency

Pay long term liabilities

Stated rate > market rate

Premium; issue price > face value

What is the purpose of a closing entry?

Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period. - Temporary accounts Revenue, expenses, Dividends (RED IS DEAD)

"Record revenue when goods or services are provided to customers" is the definition of which principle in accounting?

Revenue recognition *Record revenue*

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

Salaries Payable increases REASON: It is a loss, therefore you ADD to net income.

financing

Stockholders equity, and long term liabilities; notes payable

Stockholder's equity means:

The amount of capital invested by stockholders plus profits retained over the life of the company

In each succeeding payment on an installment note:

The amount that goes to decreasing the carrying value of the note increases.

If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true?

The company's assets exceed liabilities by $60,000. REASON: A - L = SHE

The Act of collusion refers to:

Two or more people acting in coordination to circumvent internal controls.

Average cost equation:

Total cost/ total # of units

if a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

additional paid- in capital

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:

The value of inventory declines below cost.

Assets include

additions and improvements (capitalized)

KOURTNEY COMPANY made an ordinary repair to a delivery truck at a cost of $500. KOURTNEY's accountant debited the asset account, Equipment. Was this treatment an error, and if so, what will be the effect on KOURTNEY's financial statements?

Yes, the error overstated assets and net income.

Treasury stock is reported as...

a REDUCTION of total stockholder's equity (repurchase of own stock)

ELLARY COMPANY purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. ELLARY should record:

a loss of $1000 REASON: 10,000-0/5 = 2,000 2,000 X 2 years = 4,000 SOLD for $5000 , so 4,000-5,000 = -1,000 (loss)

A(n) ______ receivable is an informal credit arrangement with trade customers, whereas a(n) ______ receivable is a formal signed credit arrangement between a creditor and a debtor.

account; note

Deposit Outstanding is

added to bank's cash balance (left side)

Gains on the sale of long term assets for cash

are the excess of the cash received over the book value

Resource of the company

asset: accounts receivable

Net cash flows from operating, investing, and financing activities =

balance of cash reported in the balance sheet this year minus the balance of cash reported in the balance sheet last years

COGS=

beginning inventory + purchases - goods available for sale - ending inventory

Cash flows from investing do NOT include cash flows from:

borrowing (financing)

Activity based

cost - residual value / estimated # of units = depreciation for the year

Straight line deprecation

cost - residual value / useful life

book value =

cost of asset - accumulated deprecation

Operating

current assets and liabilites

Most useful equation to find solvency is

debt to equity ratio

Market Rate = stated rate

face value

repaying a bank loan is a

financing cash flow

Freight In

from suppliers - getting it to the warehouse and included in inventory

Comparing changes in net income for one company over time is an example of

horizontal analysis REASON: Equation= YEAR 2 - YEAR 1 / YEAR 1

Debit represets an

increase to assets decrease to liabilities

Purchasing Land is a

investing cash flow

investing

long term assets; notes receivable

Intangible Assets are:

long-lived assets with no physical substance

Leasing improves the balance sheet by reducing

long-term debt

Retained earnings represent a company's:

net income less dividends since the company first began operations (RED is DEAD)

The payment of salaries is classified in the statement of cash flows as an

operating activity

Reflects profitability from normal operations and a key performance measure for predicting the future profit- generating ability of a company.

operating income

smallest number of shares to largest number of shares

outstanding, issued, authorized

Cash Flow:

paying dividends to investors creates a cash outflow from financing activities.

Goodwill =

price paid- fair value

Interest expense =

principal x % x fraction of year

Example of non-cash activity

purchase of land by issuing debt (no cash involved) - note payable - investing and financing activities

expense includes

repairs and maintenance (expensed)

The purpose of recording an allowance for uncollectible accounts is to:

report accounts receivable at net realizable value.

NET INCOME Equation

revenue - expenses

Income Statement includes:

revenues and expenses

Liability examples

salaries owed taxes owed amounts owed to suppliers

gain or loss=

selling price - book value

freight out

ship to costumers - not in inventory anymore

Checks outstanding is

subtracted from bank's cash balance (left side)

Reason why corporation would prefer to issue stock instead of bonds.

the risk of going bankrupt is less.

A discontinued operation refers to:

the sale or disposal of a significant component of a company's operations

Reported in the stockholders equity section of the balance sheet.

treasury stock, common stock, retained earnings.


संबंधित स्टडी सेट्स

NEETS MODULE 22 - DIGITAL COMPUTING

View Set

Chapter 69: Caring for Clients with Mood Disorders

View Set

19D Cavalry Scout General Knowledge

View Set

Chapter 6 Financial Institutions

View Set

Chapter 25: Caring for Clients with Disorders of Coronary and Peripheral Blood Vessels

View Set

Vocab Workshop - Level B - Unit 13 - Completing the Sentence

View Set

Week 10 - Health Insurance Literacy

View Set

Ch. 8 - nutrition for childbearing

View Set