Accounting Final

A truck that cost $24,000 and on which $18,000 of accumulated depreciation has been recorded was disposed of on January 1. Assume that the truck was disposed of for $4,000 cash. The entry to record this event would include a. a debit to Cash. b. a debit to Accumulated Depreciation. c. a debit to Loss on Sale of Truck. d. all of these choices.

D. All the Above

Net Sales (Net Revenue) Equation

Net Sales = Gross Sales − Sales Returns and Allowances

Gross Margin or Gross Profit Equation

Net Sales − Cost of Goods Sold Gross margin should cover operating expenses and provide net income in the end.

A capital expenditure will result in an immediate increase in long-term assets. a. True b. False

True

An intangible asset with a determinable useful life should be amortized over that useful life. a. True b. False

True

Cash equivalents are defined as investments that carry terms of 90 days or less. a. True b. False

True

One argument in favor of accelerated depreciation is that the asset's benefit is greater in the earlier years. a. True b. False

True

Under the accounts receivable aging method, the balance in Allowance for Uncollectible Accounts must be considered prior to adjusting for estimated uncollectible accounts. a. True b. False

True

Unearned revenue arises from the acceptance of payment in advance for a service to be performed. a. True b. False

True

When a business sells an item and collects a state sales tax on it, a current liability to the state arises. a. True b. False

True

A machine that cost $13,000 and on which $9,300 of accumulated depreciation had been recorded was disposed of for $3,700. The entry to record the disposal of the machine is: a. Cash 3,700 Accumulated Depreciation—Machinery 9,300 Machinery 13,000 b. Machinery 13,000 Depreciation Expense—Machinery 13,000 c. Accumulated Depreciation—Machinery 9,300 Machinery 9,300 d. Cash 9,300 Machinery

a. Cash 3,700 Accumulated Depreciation—Machinery 9,300 Machinery 13,000

Oct. 1 ; Inventory 200 units @ $12.00 6 ; Purchase 300 units @ $13.20 13 ; Purchase 100 units @ $14.40 20 ; Purchase 200 units @ $15.60 25 ; Purchase 40 units @ $16.80 Total sales 620 units A periodic inventory system is used. Using LIFO, the cost assigned to ending inventory is a. $2,664. b. $8,928. c. $3,480. d. $8,112.

a. $2,664.

The maturity value of a 60-day, 9 percent, $4,000 note receivable is a. $4,059.18 b. $4,360.24. c. $3,641.78. d. $3,940.66.

a. $4,059.18

Dec. 1 ; Inventory 15 units @ $4.00 8 ; Purchase 60 units @ $4.40 17 ; Purchase 30 units @ $4.20 25 ; Purchase 45 units @ $4.80 Total sales 100 units A periodic inventory system is used. Cost of goods sold under the average-cost method is a. $444. b. $435. c. $222. d. $333.

a. $444.

Interest on a 180-day, 10 percent, $10,000 note receivable is a. $493.15. b. $576.76. c. $5,001.54. d. $2,001.26.

a. $493.15.

Equipment was purchased for $117,000. It had an estimated residual value of $18,000 and has a current carrying value of $75,000. Its depreciable cost must have been a. $99,000. b. $42,000. c. impossible to determine from the facts given. d. $124,000

a. $99,000.

Which of the following would not be considered a capital expenditure? a. A tune-up of a company vehicle b. The cost of installing a piece of equipment c. A complete overhaul of an air-conditioning system d. The addition of a building wing

a. A tune-up of a company vehicle

If insured goods are shipped FOB destination, the seller should file a claim for goods damaged in transit. a. True b. False

a. True

The specific identification method and the FIFO method produce the same results under both the perpetual and periodic inventory systems. a. True b. False

a. True

A check written by a company for $236 is incorrectly recorded by the company as $263. On the bank reconciliation, the error would a. appear as an addition of $27 to the balance per books. b. appear as an addition of $27 to the balance per bank. c. appear as a deduction of $263 from the balance per books and an addition of $236 to the balance per bank. d. appear as a deduction of $27 from the balance per books.

a. appear as an addition of $27 to the balance per books.

Under the allowance method, Uncollectible Accounts Expense is recorded a. for an estimated amount. b. several times during the accounting period. c. when an individual account is written off. d. for a known amount.

a. for an estimated amount.

The entry to record payment of a $3,000 purchase within the 2 percent discount period would include a(n) a. increase to Purchases Discounts for $60. b. increase to Accounts Payable for $3,000. c. decrease to Accounts Payable for $2,940. d. increase to Cash for $3,000.

a. increase to Purchases Discounts for $60.

The entry to record a $1,500 sale with terms of 2/10, n/30 would include a(n) a. increase to Sales for $1,500. b. decrease to Sales for $1,470. c. increase to Sales Discounts for $30. d. decrease to Accounts Receivable for $1,500.

a. increase to Sales for $1,500.

Income from operations is arrived at after considering all except a. interest income. b. administrative salaries. c. the cost of sales. d. sales returns and allowances.

a. interest income.

Interest paid on debt would be entered on the multistep income statement in the category called a. other revenues and expenses. b. operating expenses. c. general and administrative expenses. d. selling expenses.

a. other revenues and expenses.

Under the perpetual inventory system a. the cost of each item is recorded in the Merchandise Inventory account when it is purchased. b. when an inventory item is sold, its cost is transferred to the Sales Revenue account. c. the balance of the Merchandise Inventory account is only accurate on the balance sheet date. d. All of these choices.

a. the cost of each item is recorded in the Merchandise Inventory account when it is purchased.

A merchandiser will earn an operating income of exactly $0 when a. operating expenses equal net sales b. cost of goods sold equals gross margin. c. gross margin equals operating expenses. d. net sales equals cost of goods sold.

c. gross margin equals operating expenses.

Under the perpetual inventory system, in addition to making the entry to record a sales return by a customer, a company would a. increase Cost of Goods Sold and decrease Purchases. b. make no additional entry until the end of the period. c. increase Merchandise Inventory and decrease Cost of Goods Sold. d. increase Cost of Goods Sold and decrease Merchandise Inventory.

c. increase Merchandise Inventory and decrease Cost of Goods Sold.

Operating expenses

the expenses, other than cost of goods sold, that are incurred in running a business. Operating Expenses = Selling Expenses + General and Administrative Expenses

the amount a merchandiser paid for the merchandise it sold during a period.

Cost of Goods Sold

Balance per company books $50,000 Balance per bank statement 50,450 Deposit in transit ; 800 Outstanding checks ; 1,200 Interest income ; 100 Service charge ; 50 The adjusted book balance should be a. $50,000 b. $50,850 c. $50,050 d. $49,250

C. 50,050

A 60-day note dated December 10 is due on February 10. a. True b. False

False

Gain on Sale of Machinery is recorded as a debit. a. True b. False

False

On a bank reconciliation, interest income would be added to the balance per bank. a. True b. False

False

The cost of assets acquired for a lump sum should be allocated equally among the acquired assets. a. True b. False

False

When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off. a. True b. False

False

include accounting, personnel, credit checking, collections, and any other expenses that apply to overall operations.

General & Administrative Expenses

Include cash refunds and credits on account. They also include any discounts from selling prices made to customers who have returned defective products or products that are otherwise unsatisfactory.

Sales Returns & Allowances

include the costs of storing goods and preparing them for sale; preparing displays, advertising, and otherwise promoting sales; and delivering goods to the buyer.

Selling Expenses

On June 3, Lakeland Company sold merchandise worth $1,600 on credit, terms 2/10, n/30. The merchandise sold had cost $1,100. The customer paid the amount on June 10. What is the required journal entry to record the payment received under the periodic inventory system? a. Accounts Receivable 1,568 Sales Discounts 32 Cash 1,600 b. Cash 1,568 Sales Discounts 32 Accounts Receivable 1,600 c. Cash 1,600 Sales Discounts 32 Accounts Receivable 1,632 d. Accounts Receivable 1,600 Sales Discounts 32 Cash 1,568

b. Cash 1,568 Sales Discounts 32 Accounts Receivable 1,600

Oswald purchased land for $48,000 and paid an additional $2,000 to install parking space. The entry to record the payment for the parking space is: a. Land Improvements 50,000 Cash 50,000 b. Land Improvements 2,000 Cash 2,000 c. Land 50,000 Cash 50,000 d. Land Improvements 46,000 Cash 46,000

b. Land Improvements 2,000 Cash 2,000

A company performs the aging of accounts receivable calculation and arrives at an estimate for uncollectible accounts of $900. If Allowance for Uncollectible Accounts has a debit balance of $200 prior to the year-end adjustment, for how much should the adjustment be journalized? a. $700 b. $1,100 c. $900 d. $200

b. $1,100

Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500, how much was cost of goods sold? a. $50,500 b. $40,000 c. $52,500 d. $38,000

b. $40,000

A company would be more likely to know the amount of inventory on hand if it used the periodic inventory system rather than the perpetual inventory system. a. True b. False

b. False

Cost of Goods Sold would not be found on a single-step income statement. a. True b. False

b. False

Goods in transit shipped FOB shipping point should be included in the seller's ending inventory. a. True b. False

b. False

In general, when prices are rising, use of the FIFO method will result in a lower tax liability than the other methods. a. True b. False

b. False

The portion of cost of goods available for sale that is not assigned to ending inventory is assigned to work in process. a. True b. False

b. False

The specific identification method is well suited for a discount department store. a. True b. False

b. False

Under the periodic inventory system, the return of goods to the supplier is recorded with a debit to Purchases Returns and Allowances. a. True b. False

b. False

Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the Merchandise Inventory account to the Sales account. a. True b. False

b. False

Which of the following most likely is an example of an accrued liability? a. Current portion of long-term debt b. Interest payable c. Sales tax payable d. Accounts payable

b. Interest payable

If an asset costs $41,000, has a residual value of $3,000, and has a useful life of five years, the entry to record depreciation in the second year using the double-declining-balance method is a. debit to Accumulated Depreciation, 10,660; credit to Depreciation Expense, 10,660. b. debit to Depreciation Expense, 9,840; credit to Accumulated Depreciation, 9,840. c. debit to Depreciation Expense, 10,250; credit to Accumulated Depreciation, 10,250. d. debit to Depreciation Expense, 9,430; credit to Cash, 9,430.

b. debit to Depreciation Expense, 9,840; credit to Accumulated Depreciation, 9,840.

The primary difference between ordinary and extraordinary repairs is that extraordinary repairs a. are periodic in nature. b. extend the useful life or increase the residual value of the asset. c. are an expense of the current period. d. are necessary to maintain the asset in good operational condition.

b. extend the useful life or increase the residual value of the asset.

Positive operating income will result if gross margin exceeds a. cost of goods sold minus operating expenses. b. operating expenses. c. purchases. d. cost of goods sold.

b. operating expenses.

Assume that on December 1, a $6,000, 90-day, 10 percent note receivable was received from a customer as an extension of his past-due account. The entry that would be made to record the note is: a. Notes Receivable 6,000 Cash 6,000 b. Notes Receivable 6,000 Interest Income 6,000 c. Notes Receivable 6,000 Accounts Receivable 6,000 d. Cash 6,000 Accounts Receivable 6,000

c. Notes Receivable 6,000 Accounts Receivable 6,000

The general ledger account for Accounts Receivable shows a debit balance of $50,000. Allowance for Uncollectible Accounts has a credit balance of $1,000. Net sales for the year were $500,000. In the past, 2 percent of sales have proved uncollectible, and an aging of accounts receivable accounts results in an estimate of $11,700 of uncollectible accounts. Using the accounts receivable aging method, the Allowance for Uncollectible Accounts balance would be credited for a. $11,700. b. $12,200. c. $10,700. d. $12,700.

c. $10,700.

The general ledger account for Accounts Receivable shows a debit balance of $50,000. Allowance for Uncollectible Accounts has a credit balance of $1,000. Net sales for the year were $494,000. In the past, 2 percent of sales have proved uncollectible, and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts. Using the percentage of net sales method, the Allowance for Uncollectible Accounts balance (after adjustment) would be a. $9,880. b. $1,000. c. $10,880. d. $8,880.

c. $10,880.

Goods totaling $14,000 purchased February 2 on terms of 2/10, n/30 and on which returns of $2,000 were made on February 10 would be subject to which of the following discounts if paid for on February 12? a. $320 b. $40 c. $240 d. $280

c. $240

The balance of Accounts Receivable, net of the allowance account, is $25,000 before the write-off of a $2,000 account. What is the Accounts Receivable balance, net of the allowance account, after the write-off? a. $23,000 b. $2,000 c. $25,000 d. $27,000

c. $25,000

Use this inventory information for the month of March to answer the following question. March 1 : Beginning inventory 30 units @ $56 7 : Purchase 60 units @ $60 18 : Sale 25 units 22 : Purchase 10 units @ $66 29 : Sale 40 units Assuming that a periodic inventory system is used, what is cost of goods sold on a FIFO basis? a. $2,160 b. $5,940 c. $3,780 d. $3,861

c. $3,780

A truck is purchased for $70,000. It has a five-year life and a $10,000 residual value. Under the double-declining-balance method, what is the accumulated depreciation after two years? a. $51,200 b. $42,400 c. $44,800 d. $38,400

c. $44,800

The balance in Allowance for Uncollectible Accounts must be considered prior to end-of-period adjustment when using which of the following methods? a. Both direct charge-off method and percentage of net sales method b. Direct charge-off method c. Accounts receivable aging method d. Percentage of net sales method

c. Accounts receivable aging method

Which of the following is not a category of investments? a. Trading securities b. Available-for-sale securities c. Collateral securities d. Held-to-maturity securities

c. Collateral securities

The purchased right to reproduce and sell a computer program is covered by which intangible? a. Patent b. Franchise c. Copyright d. Trademark

c. Copyright

In a period of rising prices, which of the following inventory methods generally results in the highest gross margin figure? a. LIFO b. Average-cost c. FIFO d. Cannot tell without more information

c. FIFO

Which inventory method generally results in the most realistic balance sheet valuation? a. LIFO b. Specific identification c. FIFO d. Average-cost

c. FIFO

Which of the following categories of investments can be debt but not equity securities? a. Trading securities b. Both trading and available-for-sale securities c. Held-to-maturity securities d. Available-for-sale securities

c. Held-to-maturity securities

Which inventory method generally best follows the matching principle? a. Average-cost b. FIFO c. LIFO d. Whichever method is used for tax purposes

c. LIFO

The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules? a. Full disclosure b. Materiality c. Matching d. Conservatism

c. Matching

Under the perpetual inventory system, the entry to record a purchase return would include a credit to which account? a. Accounts Payable b. Sales c. Merchandise Inventory d. Purchases Returns and Allowances

c. Merchandise Inventory

Which of the following would be deducted from the balance per books on a bank reconciliation? a. Notes collected by the bank b. Outstanding checks c. Service charges d. Deposits in transit

c. Service charges

A jeweler probably would use which of the following inventory methods? a. LIFO b. FIFO c. Specific identification d. Average-cost

c. Specific identification

The entry to record the sale of equipment costing $40,000, with accumulated depreciation of $34,000 and sale price of $7,700, will include a. a gain on sale of equipment of 7,700. b. a loss on sale of equipment of 32,300. c. a gain on sale of equipment of 1,700. d. a loss of sale of equipment of 26,300.

c. a gain on sale of equipment of 1,700.

An overstatement of beginning inventory results in a. an overstatement of gross margin. b. a need to adjust purchases. c. an understatement of gross margin. d. no effect on the period's gross margin.

c. an understatement of gross margin.

The cost of a long-term asset is expensed a. in the period in which it is sold. b. when it is paid for. c. as the asset benefits the company. d. in the period in which it is acquired

c. as the asset benefits the company.

Each of the following companies is a merchandising business except a a. candy store. b. furniture store. c. car wash. d. wholesale parts company

c. car wash.

Salvage value is not the same as a. disposal value. b. scrap value. c. carrying value. d. residual value.

c. carrying value.

You have just received notice that Agnes Fisher, a customer of yours with an Accounts Receivable balance of $200, has gone bankrupt and will not be making any future payments. Assuming you use the allowance method, the journal entry you make is to a. debit Allowance for Uncollectible Accounts and credit Uncollectible Accounts Expense. b. debit Uncollectible Accounts Expense and credit Allowance for Uncollectible Accounts. c. debit Allowance for Uncollectible Accounts and credit Accounts Receivable. d. debit Uncollectible Accounts Expense and credit Accounts Receivable.

c. debit Allowance for Uncollectible Accounts and credit Accounts Receivable.

All of the following are classified as definitely determinable liabilities except a. the current portion of long-term debt. b. sales tax payable. c. estimated property tax payable. d. unearned revenue.

c. estimated property tax payable.

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. record an increase in inventory corresponding to the amount of the sale. b. make no additional entry until the end of the period. c. record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold. d. record an increase in inventory corresponding to the cost of the inventory.

c. record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold.

An understatement of year 1's ending inventory will a. not affect year 2's ending owner's equity. b. cause year 2's cost of goods sold to be overstated. c. result in an understatement of year 2's beginning inventory. d. have no effect on year 2's gross margin.

c. result in an understatement of year 2's beginning inventory.

Feathertouch Company sold merchandise worth $1,600 on credit, terms n/15. The merchandise sold had cost $1,100. What is the required journal entry to record the transaction and to transfer the cost of merchandise inventory to cost of goods sold under the periodic inventory system? a. Accounts Receivable 1,600 Merchandise Inventory 1,600 Cost of Goods Sold 1,100 Merchandise Inventory 1,100 b. Merchandise Inventory 1,600 Sales 1,600 Cost of Goods Sold 1,100 Merchandise Inventory 1,100 c. Sales 1,600 Accounts Receivable 1,600 Merchandise Inventory 1,100 Cost of Goods Sold 1,100 d. Accounts Receivable 1,600 Sales 1,600 No entry for transfer to cost of goods sold.

d. Accounts Receivable 1,600 Sales 1,600 No entry for transfer to cost of goods sold.

Agnes purchased a computer for $2,240. It has an estimated useful life of four years and an estimated residual value of $240. The entry to record the depreciation charge for the first year using the double-declining-balance method is: a. Depreciation Expense—Computer 1,000 Accumulated Depreciation—Computer 1,000 b. Depreciation Expense—Computer 2,000 Accumulated Depreciation—Computer 2,000 c. Computer 2,000 Cash 2,000 d. Depreciation Expense—Computer 1,120 Accumulated Depreciation—Computer 1,120

d. Depreciation Expense—Computer 1,120 Accumulated Depreciation—Computer 1,120

Use this inventory information for the month of March to answer the following question. March 1 : Beginning inventory 30 units @ $56 7 : Purchase 60 units @ $60 18 : Sale 25 units 22 : Purchase 10 units @ $66 29 : Sale 40 units Assuming that a periodic inventory system is used, what is ending inventory (rounded) under the average-cost method? a. $3,861 b. $5,940 c. $2,685 d. $2,079

d. $2,079

Land and a building on the land are purchased for $310,000. The appraised values of the land and building are $66,000 and $264,000, respectively. The cost allocated to the building should be a. $25,200. b. $109,800. c. $135,000. d. $248,000.

d. $248,000.

Oct. 1 ; Inventory 200 units @ $12.00 6 ; Purchase 300 units @ $13.20 13 ; Purchase 100 units @ $14.40 20 ; Purchase 200 units @ $15.60 25 ; Purchase 40 units @ $16.80 Total sales 620 units A periodic inventory system is used. Using the average-cost method, the cost assigned to ending inventory is a. $8,556. b. $3,384. c. $3,168. d. $3,036.

d. $3,036.

On January 1, a machine with a useful life of five years and a residual value of $4,500 is purchased for $22,500. What is the depreciation expense in year 3 under straight-line depreciation? a. $10,800 b. $13,500 c. $4,500 d. $3,600

d. $3,600

A company has net sales of $50,000 during the year. At year end (before an adjustment is made), Allowance for Uncollectible Accounts has a credit balance of $2,500. If the company estimates that 3 percent of net sales are uncollectible, what is the balance in the allowance account after the year-end adjustment has been made using the percentage of net sales method? a. $1,500 credit balance b. $1,000 debit balance c. $1,500 debit balance d. $4,000 credit balance

d. $4,000 credit balance

Use this information to answer the following question. Dec. 1 ; Inventory 15 units @ $4.00 8 ; Purchase 60 units @ $4.40 17 ; Purchase 30 units @ $4.20 25 ; Purchase 45 units @ $4.80 Total sales 100 units A periodic inventory system is used. Cost of goods sold under FIFO is a. $452. b. $426. c. $237. d. $429.

d. $429.

Oct. 1 ; Inventory 200 units @ $12.00 6 ; Purchase 300 units @ $13.20 13 ; Purchase 100 units @ $14.40 20 ; Purchase 200 units @ $15.60 25 ; Purchase 40 units @ $16.80 Total sales 620 units A periodic inventory system is used. Using LIFO, cost of goods sold is a. $2,664. b. $8,112. c. $3,480. d. $8,928. Hide Feedback

d. $8,928.

Which of the following would not be debited to the Machinery account? a. Freight charges b. Installation costs c. Cost of trial runs d. Electricity used by the machine

d. Electricity used by the machine

Which of the following would normally be included in the inventory? a. Goods sold but not yet delivered b. Goods held on consignment c. Incoming goods shipped FOB destination d. Outgoing goods shipped FOB destination

d. Outgoing goods shipped FOB destination

On a bank reconciliation, $75 interest earned on a checking account would a. appear as an addition of $75 to the balance per bank. b. appear as a deduction of $75 from the balance per books. c. not appear as an adjustment on the bank reconciliation d. appear as an addition of $75 to the balance per books.

d. appear as an addition of $75 to the balance per books.

Inventory costing methods place primary reliance on assumptions about the flow of a. goods. b. values. c. resale prices. d. costs.

d. costs.

Gomez Company purchases a piece of equipment on Jan. 2, 2014, for $30,000. The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $3,000. Gomez uses a calendar fiscal year. The entry to record the amount of depreciation for 2014, using the production method and assuming 8,000 units are produced, is a. debit to Depreciation Expense, 4,000; credit to Cash, 4,000. b. debit to Cash, 4,160; credit to Accumulated Depreciation, 4,160. c. debit to Depreciation Expense, 4,800; credit to Accumulated Depreciation, 4,800. d. debit to Depreciation Expense, 4,320; credit to Accumulated Depreciation, 4,320.

d. debit to Depreciation Expense, 4,320; credit to Accumulated Depreciation, 4,320.

Dividends Payable is an example of a(n) a. contingent liability. b. long-term liability. c. estimated liability. d. definitely determinable liability.

d. definitely determinable liability.

Under the direct charge-off method of dealing with uncollectible accounts, a. Uncollectible Accounts Expense is recorded in the period of the sale. b. revenues and expenses are properly matched. c. Accounts Receivable is shown on the balance sheet at net realizable value. d. no Allowance for Uncollectible Accounts exists.

d. no Allowance for Uncollectible Accounts exists.

If cost of goods sold is understated by $6,000 for this year, what effect will this have on income before income taxes in the following year? a. no effect b. understated by $3,000 c. overstated by $6,000 d. understated by $6,000

d. understated by $6,000

According to generally accepted accounting principles, goodwill is recorded as an asset a. when a company has superior earning power. b. under no circumstances. c. when favorable factors combine to create goodwill. d. when it is paid for as part of the purchase of a business.

d. when it is paid for as part of the purchase of a business.