Accounting connect GR 3

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation, using the straight-line method, at the end of the period?

$13,000

Bina Co. purchased a vehicle on January 1st for $15,000 and estimates it will use the vehicle for eight years with a $3,000 salvage value. Using the double declining-balance depreciation method, compute the vehicle's second year depreciation expense.

$2,812.50

On December 1, Hansen Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest-bearing note. On December 31, Hansen will record an adjusting entry by debiting interest expense in the amount of

$500

Kenesha Co. reported income before interest expense and income taxes of $30,000; interest expense of $3,000; and income taxes of $4,000. Calculate the times interest earned ratio.

10

Which of the following situations will result in recognizing a gain on sale of a plant asset?

A fully depreciated asset is sold for $1,000.

are amounts owed to suppliers for products or services purchased on credit.

Accounts payable

Ironworks Co. sells a machine that cost $5,000 with a current book value of $1,500 for $2,000 cash. Ironworks will record a debit to which account and for how much?

Accumulated Depreciation - Equipment for $3,500

A company issues $75,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $69,000 for the bonds, the issuer will record the sale with a debit to which of the following accounts?

Cash and Discount on Bonds Payable

Mary's Magazine Sales sells popular magazine subscriptions. During January, Mary collected $1,200 from various customers to provide magazines over the next 12 months. At the end of February, Mary would make an adjusting entry to record one month of magazines subscriptions earned. This transaction would include which of the following entries?

Credit to Subscriptions Earned Debit to Unearned Subscriptions

A patent was purchased for $20,000 and expected to be used for the 20-year life with no salvage value. The entry to expense the patent during the second year of life will include which of the following entries? (Check all that apply.)

Debit to Amortization Expense $1,000. Credit to Accumulated Amortization $1,000.

Patel Paving collected $1,000 cash in advance from a customer to provide paving services next month. The entry to record this cash receipt would include the following entries?

Debit to Cash Credit to Unearned Paving Fees Earned

A company issues $90,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $85,000 for the bonds, the issuer will record the sale with a (debit/credit)____ to Discount on Bonds Payable in the amount of ____

Debit, 5000

the process of allocating the cost of a natural resource to the period when it is consumed.

Depletion

Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar would record potential claims in a(n) ______ account.

Estimated Warranty Liability

Keys Co. is located in Florida. An evacuation has been ordered due to Hurricane Edward, which is headed in the direction of Keys. Keys should record a contingent liability prior to the evacuation.

False

The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation

False

Which of the following situations is not a contingent liability?

Future natural disaster

Intangible assets that continue indefinitely into the future and are not amortized. The values of these assets are tested annually for

Impairment

Amortization expense is recorded on which financial statement?

Income Statement

Depreciation Expense is reported on which of the following financial statements?

Income statement

Perez Co. sells automotive supplies and warranties them for a three-month period. Perez sold $10,000 of supplies during the month and anticipates that warranty repairs for these sales will total $250. The adjusting entry that Perez will make to record the warranty expense will include which of the following? (Check all that apply.)

Credit to Estimated Warranty Liability Debit to Warranty Expense

Which of the following items would be considered a current liability?

Wages payable Notes payable, due in 3 months Accounts payable, terms n/30

A liability created by buying goods or services on credit is typically recorded to

accounts payable

The total asset turnover ratio is computed by taking net sales divided by:

avg total assets

A company issues $75,000 of 6%, 10-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If bonds are sold at par value, the issuer records the payment of principal at maturity with a credit to _____ in the amount of $____

cash, 75000

The ______ rate is the interest rate specified, sometimes referred to as the coupon rate, stated rate, or nominal rate.

contract

When the market rate is 10%, a company issues $60,000 of 12%, 10-year bonds and pay interest semiannually. When the bonds mature, the issuer records its payment of principal with a (debit/credit)______ to Cash in the amount of $_____

credit, 60000

A company issues $90,000 of 5%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $95,000 for the bonds, the issuer will record the sale with a (debit/credit) Blank______ to (Discount/Premium) Blank______ on Bonds Payable in the amount of $5,000.

credit; Premium

A (long-term/current) ______ liability is a liability due within one year or the company's operating cycle, whichever is longer.

current

A company issues $60,000 of 5%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $59,000 for the bonds, the issuer will record the sale with a (debit/credit) _________ to Discount on Bonds Payable in the amount of $________

debit, 1000

A(n)_________ on bonds payable occurs when a company issues bonds with a contract rate less than the market rate.

discount

When a bond contract rate is less than the current market rate on the date of issuance, the bond will be sold at a (premium/discount)___

discount

A company issues $50,000 of 9%, 10-year bonds dated January 1, 2027, that mature on December 31, 2036, and pay interest semiannually for $2,250. On December 31, 2031, when the bond premium is $2,500, the bonds are called for $52,000. The journal entry to record this transaction would record a (Gain/Loss) _____ on bond retirement in the amount of ______.

gain, 500

On January 8, Lee Co. borrows $100,000 cash from National Bank by signing a 90-day, 6% interest note. On April 8, Lee Co. will pay National Bank a total of $101,500. The difference between the amount paid back to National Bank of $101,500 and the amount borrowed of $100,000 (or $1,500) represents _____ expense.

interest

The straight-line bond amortization method allocates an equal portion of the total bond _____ ______ to each interest period.

interest expense

Bryne Co. sells merchandise and collects a 5% state sales tax. The tax is recorded on Bryne's general ledger as a(n) ______ account.

liability

When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) ______ account.

liability

The rate that borrowers are willing to pay and lenders are willing to accept for a particular bond at its risk level is called the bond's ______ rate.

market

Gross pay minus all deductions—including federal and state taxes, FICA and any voluntary deductions equals ____ pay.

net

A potential legal claim is recorded

only if payment for damages is probable and the amount can be reasonably estimated.

Bilos Co. purchased a patent on a newly developed technology. They will recognize the cost of this patent:

over the asset's life using amortization expense

The ______ value of a bond, also called the face amount or face value, is paid at a stated future date, known as the bond's maturity date.

par

The bond carrying value can be determined by taking the bond ________ value minus the discount on bonds payable.

par

The bond contract rate determines the annual interest paid by multiplying the bond ______ value by the contract rate.

par

In order for a contingent liability to be recorded as a journal entry in the financial statements, it must be (probable/reasonably possible/remote)_____ and reasonably estimable.

probable

A contingent liability can be ignored (not recorded in the financial statements or notes to the financial statements) if it is considered as (probable/reasonably possible/remote) _____possibility.

remote

Cadie Construction Co. signed a note promising to pay a cement supplier $1,000 60-days from now. As a result of this transaction, Cadie would record a(n) ______ on her balance sheet.

short-term note payable

The ______ bond amortization method allocates an equal portion of the total bond interest expense to each interest period

straight line

The ______ life of a plant asset is the length of time it is productively used in a company's operations

useful

Accumulated amortization is reported on which of the following financial statements?

Balance sheet

Which of the following is a disadvantage of bond financing?

Bonds require payment of periodic interest and the par value.

Which of the following asset(s) are not considered intangible assets?

Copy machine Mineral deposit

is the process of allocating the cost of a plant asset to expense while it is in use.

Depreciation

Which of the following items related to depreciating equipment would be found on a company's income statement?

Depreciation Expense - Equipment

ATZ Co. sells equipment that cost $9,000 with current accumulated depreciation of $8,000 for $2,000 cash. To record this transaction, ATZ will credit which accounts? (Check all that apply.)

Equipment Gain on Disposal of Equipment

Sangmoon Co. sells equipment for $1,000 cash. The equipment cost Sangmoon $6,500 and has accumulated depreciation of $2,000 at the time of sale. Sangmoon will record the sale with a credit to which account and for how much?

Equipment for $6500

On November 1, Lance Co. borrows $90,000 cash from First Bank by signing a 90-day, 5% interest-bearing note. On December 31, Lance will record an adjusting entry by crediting ______ in the amount of ______.

Interest Payable; $750

A bond ______ may be issued as evidence of the company's debt.

certificate

On June 1, Sawyer Co. borrowed $5,000 cash from Crystal Bank by signing a 45-day, 12% interest-bearing note. On July 16, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) Blank______ to Interest Expense in the amount of Blank______.

debit; $75

A company issues $90,000 of 5%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $95,000 for the bonds, the $5,000 premium on bonds payable will ______ total interest expense recognized over the life of the bond

decrease

A company issues $60,000 of 6%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $62,000 for the bonds, the premium on bonds payable will (increase/decrease) ______ total interest expense recognized over the life of the bond by $_________

decrease, 2000

the difference between the amount borrowed and the amount repaid.

interest

A company issues $100,000 of 5%, 10-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If bonds are sold at par value, the issuer records the first semi-annual interest payment with a debit to which of the following accounts and in what amount?

Interest Expense, $2,500

Damen's Co. sells merchandise with a list price of $500 and collects sales tax of $50. The sales tax would be recorded with a credit to which account?

Sales Tax Payable

Zion Co. sells $100 of merchandise and collects $10 sales tax. The sales tax is recorded to which account?

Sales tax payable

value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.

Salvage

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.)

Testing Shipping charges Assembling

Which of the following is a true statement concerning the employer FICA taxes:

The employer must pay FICA tax in an amount equal to that paid by the employee.

Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for $2,000 cash. The entry to record this transaction will recognize a gain or loss of how much?

There is no gain or loss.

Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this symbol is an asset called a:

Trademark

A company sells 12-month popular magazine subscriptions. During the month of May, the company sells $12,000 in magazines, which will start in June. The adjusting entry to record the $1,000 of subscriptions earned in June will include a debit to which account?

Unearned subscription revenue

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.

$1000

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for three years with a $2,000 salvage value. It expects to produce a total of 8,000 units as follows: 3,000 during year one; 2,500 during year two; and 2,500 during year three. Using the units-of-production depreciation method, compute the machine's first year depreciation expense.

$3000

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero salvage value. How much is accumulated depreciation at the end of the year?

$6,000

Jorge Lopez worked 40 hours this week and earned $1,000 in total compensation. Federal and state taxes and other withholdings totaled $350. Jorge's gross pay totals

1000

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

1400

Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the second year would be

17000

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:

235000

Boyd's Bicycle Sales and Repairs Co. offers a 6-month warranty on all new bicycle purchases. Based on history, Boyd determines that warranty repairs are equal to approximately 2% of sales. During the month, Boyd sales total $20,000. Boyd will record Warranty Expense in the amount of ______ for the month.

400

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

5000

If an intangible asset has a limited life, its cost is systematically allocated to expense over its useful life through the process of:

Amortization

Which of the following statements is not an advantage of bond financing?

Bonds require interest payments and payment of par value.

John Grey owns Grey's Snow Plowing. In October, Grey's collects $12,000 cash for 6 commercial accounts for which he will provide snowplowing for the entire season. To record this transaction, Grey will enter which of the following entries?

Debit to Cash Credit to Unearned Plowing Revenue

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a debit to ______.

Estimated Warranty Liability

is(are) the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.

Gross pay

Sanson Co. sells equipment for $1,000 cash. The equipment cost Sanson $6,500 and has accumulated depreciation of $2,000 at the time of sale. Sanson will record the sale with a debit to which account and for how much?

Loss on Sale of Equipment for $3,500.

A company issues $50,000 of 9%, 10-year bonds dated January 1, 2027, that mature on December 31, 2036, and pay interest semiannually for $2,250. On December 31, 2031, when the bond premium is $2,500, the bonds are called for $54,000. The journal entry to record this transaction would record a (Gain/Loss) ______ on Bond Retirement in the amount of ______.

Loss; $1,500

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost ______)/total units of capacity.

Minus salvage value

On January 1, Avers Co. borrowed $10,000 cash from Main St. Bank by signing a 60-day, 8% interest-bearing note. On March 1, Avers pays the amount due in full. The March 1 entry would be recorded by Avers with a debit to (Accounts Payable/Notes Payable/Cash)______ in the amount of ______.

Notes Payable; $10,000

Perez Co. sells lawn mowers and warranties them for one year. Perez made an adjusting entry at the end of last year to record the warranty expense. In February of the current year, a customer needed a $50 repair to a lawn mover. The entry to record the repair includes a credit to ______

Parts inventory

Employers must pay employee taxes in addition to those paid by the employees. Which of the following is paid only by the employer?

Unemployment

Most bonds require par value to be repaid ______ and interest to be paid _____.

at the maturity date; semiannually

A company issues $100,000 of 5%, 10-year bonds dated January 1. The bonds pay interest semiannually on June 30 and December 31 each year. If the bonds are sold at par value, the issuer records the sale with a debit to _________ in the amount of $_________

cash, 100000

The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a

copyright

A company issues $90,000 of 5%, 5-year bonds dated January 1 that pay interest semiannually on June 30 and December 31 each year. If the issuer accepts $95,000 for the bonds, the issuer will record the sale with a (debit/credit) ______ to (Discount/Premium) ______ on Bonds Payable in the amount of $5,000.

credit; Premium

Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset except:

damage done when unpacking the plant asset

Unemployment taxes are examples of ___ required taxes

employer

Ace Company borrowed $10,000 from Fair Rates Bank by signing a two-year note payable. Ace's operating cycle is 14 months. This note would be considered a ______ on the balance sheet.

long term liability

are assets used in a company's operations that have a useful life of more than one accounting period.

plant assets