accounting final exam questions

when originally purchased, a vehicle had an estimated useful life of 8 years. the vehicle cost $23,000 and its estimated salvage value is $1,500. after 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

5,375.00 annual depreciation = (23,000-1,500)/8 =2,687.5 first four years = 2,687.5*4 - 10,750 depreciation for the 5th year = (23,000-10,750-1,500)/2 = 5,375

a company has a large debit balance in the allowance for doubtful accounts. which statement is true a. the company should consider increasing its estimation of allowance for doubtful accounts b. the company should consider decreasing its estimation of allowance for doubtful accounts c. the company uses the direct write-off method to address allowance for doubtful accounts d. the large balance in the company's allowance for doubtful account will help to reduce its bad debit expense

a. the company should consider increasing its estimation of allowance for doubtful accounts why? a large debit balance leads to a large negative balance in allowance for doubtful accounts and increases it estimation of allowance for doubtful accounts

the amount of cash owed to the company by its customers from the sale of products or services on account is known as

accounts payable

adjusting entries

always involve at least one income statement account and one balance sheet account

which of the following direct effects on fundamental accounting equation is not possible as a result of transactional analysis a. a decrease in stockholders equity and a decrease in an asset b. a decrease in a liability and an increase in an asset c. an increase in an asset and an increase in stockholders equity d. an increase in an asset and a decrease in another asset

b. a decrease in a liability and an increase in an asset

which of the following is not correct regarding return on assets a. return on assets measures the income the company earns on each dollar invested in assets b. return on assets measures the return on the investment made by the owner of the entity c. return on assets is made up of profit margin time asset turnover d. return on assets is a measure of profitability

b. return on assets measures the return on the investment made by the owner of the entity

the asset's cost less accumulated depreciation is called

book value

which one is not a long term asset a. land b. buildings c. accounts receivable d. equipments

c. accounts receivable

which one below is not a depreciable asset a. buildings b. machinery c. freehold land d. equipment

c. freehold land

dukes company borrowed $60,000 from the bank signing 6%, 3-month notes on September 1. the prickle and interest are payable to the bank on December 1. if the company prepares monthly financial statements, the adjusting entry that dukes company should make for interest on September 30, would be

debit interest expense $300; credit interest payable $300

the revenue recognition principle states that companies typically record revenue

in the period in which we provide goods and services to customers

tony's market recorded the following events involving a recent purchase of inventory: -received goods for $40,000, terms 2/10, n/30. -returned $800 of the shipment for credit. -paid $200 freight on the shipment. -paid the invoice within the discount period. as a result of these events, the company's inventory

increase by 38,616 40,000-returned 800 - 39,200 39,200 x .02 = 784 39,200 - 784 = 28,416 + 200 = 38,616

assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio

no change to the current ratio

gaga company bought a machine on January 1, 2010. the machine cost $36,000 and had an expected salvage value of $6,000. the life of the machine was estimated to be 5 years. using straight line depreciation, the book value of the machine at the beginning of the third year would be

$24,000 annual depreciation = (36,000-6,000)/5 = 6,000 accumulated depreciation after two years = 6,000 *2 =12,000 BV = 36,000-12,000

which of the following is a sign that a company can quickly turn its receivables into cash a. a low receivables turnover ratio b. a high receivables turnover ratio c. a high average collection period d. both a low receivables turnover ratio and a high average collection period

b. a high receivables turnover ratio

if a company would like to elect a deprecations method that more closely matches the amount of annual depreciation expense with the actual use of the asset, which one is the best a. straight line b. activity based depreciation c. an accelerated depreciation method d. none of the above

b. activity based depreciation

which of the following is NOT depreciated, or amortized a. copyrights b. patents c. goodwill d. land improvements

c. goodwill

which account below is on the balance sheet a. dividend b. revenue c. retained earnings d. expense

c. retained earnings

which account below is on the income statement a. retained earnings b. dividends c. revenue d. cash

c. revenue

kanas enterprises purchased equipment for $80,000 on January 1, 2021. the equipment is expected to have a five-year service life, with a residual value of $6,450 at the end of five years using the straight line method, the book value at December 31, 2021 would be

$65,290 depreciation expense = ((80,000 - 6,450) / 5 years) = $14,710 book value = $80,000 - 14,710 = 65,290

a delivery truck was purchased for $60,00 and is expected to be sued for 5 years and 100,00 miles. the truck's residual value is $10,000. by the end of the first year, the truck has been driven 16,000 miles. what is the depreciation expense in the first year using activity-based depreciation

$8,000

a company purchased land, a building, and equipment for one price of $800,000. the estimated fair values of the land, building, and equipment are $100,000, $700,000 and $200,000. at what amount would the company record the land

$80,000

at January 1, 2015 Hilton industries reported retained earnings of $130,000. during 2015, Hilton has a net loss of $30,000 and paid dividends of $20,00. at December 31, 2015, the amount of retained earnings

$80,000

the accounts payable account has a beginning balance of $11,000 and the company purchases $47,000 of supplies on account during the month. the ending balance was $19,400. how much did the company pay the creditors during the month

38,600

on November 15, meier company received $3,000 cash from a customer for services that were performed on November 1. according to the revenue recognition principle, on which dare should the revenue be reclrded

November 1

tyler company seeks to increase its inventory turnover. as Tyler's consultant, which recommendation you provide to Tyler's company

Tyler should explore ways to decrease the amount of inventory it has available for sale

williams company has a current ratio of 1.8 in 2018 and a current ratio in 2019

Williams company was more liquid in 2018 than 2019

accumulated depreciation is

a contra asset

abc company purchases $17,000 of merchandise on September 25 on term 1/10, n30. on September 27, abc returned defective merchandise worth $1,400, received full credit. the invoice was paid in full on September 30, abc's joinery entry on September 30 will include

a debit to accounts payable for $15,600

when company pays utilities of $1830 in cash, the transaction is recored as

debit utilities expense 1830, credit cash $1830

what ratio is most useful in evaluating solvency

debt to equity ratio

what is the nature of depreciation

depreciation represents the allocation of the cost of property, plant, and equipment over its service life

xyz company lends abc company $80,000 on April 1, accepting a four-month, 9% interest note. xyzzy company prepares financial statements on April 30, what adjusting entry should be made by xyz company before the financial statements can be prepared

dr. interest receivable $600 cr. interest revenue $600

in terms of debits and credits, which accounts below will have the same normal balances

expenses, assets, dividends

which of the following is paid by both the employee and the employer

fica taxes

the closing process includes which of the following? i. closing the balance of the dividends account to zero ii. closinh the balance of the revenues account to zero iii. closing the balance of the expenses account to zero iii. closing the balance of the related earning account to zero

i, ii, and iii

maxco company acquired land and buildings for $1,000,000. the land is appraised at $450,000 and the building are appraised at $800,000. the debits to the land and building accounts will be

land $360,000; building $640,000 land % = 450,000/1,250,000 = 36% buildings % = 800,000/1,250,000 = 64% land= 1,000,000 * .36 = 360,000 building= 1,000,000 * .64 = 640,000

if a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account

net accounts receivable do not change

return on asset is equal to

net income divided by average total assets

on November 10 of the current year, a company concluded that a customer's $5,500 account receivable was uncollectible and that the account should be written off. what effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts

no effect on net income; no effect on total assets

in most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

one, one

chan sports purchases one year of rent on November 1 for $12,000 ($1,000 per month), debiting prepaid rent. on December 31 chan sports would record the following year-end adjusting entry

prepaid expense 2,000 prepaid rent 2,000

return on assets equal

profit margin * asset turnover

the seller collects sales taxes from the customer at the time of sale and reports the sales taxes as:

sales tax payable

what will result in a higher depreciation expense in the first year of the asset's life

short useful life and low salvage value

kansas enterpirses ;chased equipment for $78,000 on January 1, 2020. the equipment is expected to have a five-year useful life, with a salvage value of $6,150 at the end of five years

$14,370 depreciation expense = ($78,000 - $6,150 / 5years) = $14,370

on April 1, 2020 nelsen inc. accepts $100,000, 8% note. the note receivable and interest are due on march 31, 2021 (one year later). on December 31, 2020 nelsen will accrue a interest rate of

$6,000

kanas enterprises equipment for $80,000 on January 1, 2021. the equipment is expected to have a five-year service life, with a residual value of $6,540 at the end of five-years using the straight line method, the book value on December 31, 2021, would be

$65,290 depreciation expense = (($80,000-6,450)/5 years) = $14710 book value = $80,000 - 14,710 = 65,290

on December 31, the accounts receivable ending balance is $80,000. assume that the unadjusted balance of allowance for uncollectible accounts is a credit of $500 and that the company estimates 7% of the accounts receivable will not be collected. the amount of bad debt expense recorded on December 31 will be

$5,100

a company purchases a cash register on January 1 for $5,400. this register has a useful life of 10 years and a salvage value of $400. what would be the depreciation expense for the second-year of its useful life using the double declining method

$864 straight-line depreciation rate = 100%/10 = 10% per year double declining rate = 10% * 2 = 20% first year; 5,400 * 20% = 1,080 second year (5,400-1,808) * 20% = 864

rockwell Corporation purchases a truck at the beginning of 2018 for $75,000. the truck is estimated to have a salvage value of $3,000 and to be driven for 120,000 miles. it was driven 18,000 mile in 2018 and 32,000 miles in 2019. what is the depreciation expense for 2019

19,200 depreciation per mile = (75,000-3,000)/120,000= ,06 2019= 32,000 * .6 = 19,200

a corporation purchased a $80,000 delivery truck by paying 8,000 cash and signing a $72,000 note pay;e. immediately prior to this transaction the corporation had liabilities of $104,000 and owners equity of $46,000. what is the total amount of the corporation's assets after this transaction has been recorded

222,000

consider the following transactions i. owners invested $8,000 cash to begin the business ii. the business provided services to some customers for cash $30,000 iii. the business provided services to other customers on account $17,000 iv. the business paid it employees for work performed $10,000

37,000

bcd company's account receivable account has a balance of $400,00 at the end of the year. historically, 4 percent of the accounts receivable balance is not collected. the allowance for doubtful accounts has a credit balance of $9,000 at the beginning of the current year, and during the year, the company wrote off $7,500 of accounts receivable. the year-end adjusting entry would require

a debit to bad bets expense for $14,500

which of the following describes the information reported in the statement of cash flows: a. net cash flows from operating, investing, and financing activities b. changes in stockholders equity through changes in common stock and retained earnings c. net income for the period calculated as revenues minus expenses d. equality of total assets with total liabilities plus stockholders equity

a. net cash flows from operating, investing, and financing activities

over the entire useful life of an asset, which depreciation method records the highest total depreciation a. the straight line methof b. the double declining method c. the activity bases method d. all the methods result in the same total depreciation

d. all the methods result in the same total depreciation

which of the following ratio is most useful in evaluating liquidity a. return on assets b. return on equity c. debt to equity ratio d. current ratio

d. current ratio

on January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. which of the following would be recored when the customer remits payment on January 25? a. debit cash for $500 b. credit accounts receivable for $490 c. credit service revenue for $500 d. debit sales discount for $10

d. debit sales discount

travel planners, inc borrowed $5,00 from first state ban and signed a promissory note. what entry should travel planners record

debit cash, $5,000; credit notes payable, $5,000

summer leasing received $11,800 from a customer to cover 24 months of rent in advance. how should summer record this transaction

debit cash; credit deferred revenue

on September 1, google received $28,000 cash from a customer in advance for advertisements to be posted on google's websites. assumes that one-fourth of the agree-upon advertisements have been posted by December 31. on December 31, google's year-end adjustment will

debit deferred service revenue $7,000 and credit service revenue $7,000

on November 1, William company paid $36,000 to Pittsburgh company for 6 months of insurance coverage beginning November 1 and recorded the amount as prepaid insurance. if financial statements are prepared on December 31, the adjusting entry to be made by Williams is

debit insurance expense $12,000. credit prepaid insurance $12,000