ACCT 2401 Test 2

On December 31, 2012, Zeb Company reported the following amounts and account balances (before adjustments): Accounts Receivable $ 840,000 Allowance for Uncollectible Accounts, credit 22,050 Net Sales (all on credit) 3,850,000 7. Refer to Table 7-1. Zeb Co. estimates that its Uncollectible Account Expense is 2 ½% of net sales. The Uncollectible-Account Expense for 2012 should be:

$ 96,250.

. A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a:

$0 gain or loss

A company purchased a delivery van for $23,000 with a residual value of $3,000 on September 1, 2007. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2007?

$1,333

A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

$10,550

On January 1, 2012, Lunsford Equipment Company purchased a new computerized security system for $130,000. It expects to use the system for 5 years, after which it can be sold for $6,500. 2. Refer to Table 8-1. What is the book value of the equipment on December 31, 2012, if Lunsford uses the straight-line method of depreciation?

$105,300

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using FIFO perpetual inventory method, what is the cost of the 12 units that were sold?

$124

Acme-Jones Corporation uses weighted average perpetual inventory system. August 2, 10 units were purchased at $12 per unit August 18, 15 units were purchased at $14 per unit August 29, 12 units were sold What was the amount of the cost of goods sold for this sale?

$158.40

A company has an inventory of 15 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at $14 per unit. On August 15, it sold 30 units. Using FIFO perpetual inventory method, what is the value of the inventory at August 15 after this sale?

$210

A company purchased a rope braiding machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year? A) $25,200

$26,160

A company had an inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

$276

On January 1, 2012, Lunsford Equipment Company purchased a new computerized security system for $130,000. It expects to use the system for 5 years, after which it can be sold for $6,500.\ . If Lunsford uses the double-declining-balance method of depreciation, what is depreciation expense for 2013?

$31,200

Thomas Enterprises purchased a depreciable asset on January 1, 2007 at a cost of $100,000. The asset is expected to have a residual value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, 2008 will be:

$36,000

Adams Company purchased a tract of land, an office building, and some manufacturing equipment for $775,000. The appraised value of the land, building, and equipment were $373,100, $427,700, and $109,200, respectively. What was the debit to the Building account to record the purchase?

$364,250

Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method. June 1 Beginning inventory, 15 units at $20 each June 15 Sale of 6 units for $50 each June 29 Purchase of 8 units at $25 each The cost of the ending inventory is:

$380

Nelson Company purchase equipment on July 1 for $27,500 and decided to depreciate the equipment on the straight-line method over its useful life of five years. Assuming the equipment's residual value is $3,500, the amount of monthly depreciation expense Nelson should recognize is:

$400

A company had inventory of 5 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 18 units sold

$410

Based on the information provided in question #83, Lomax Enterprises should recognize depreciation expense in 2010 in the amount of:

$5,000.00

Cash balance per company books on September 30 $6,275 Deposits in transit at month-end $1,300 Outstanding checks at month-end $ 620 Bank charges for printing new checks $ 45 Note receivable and interest collected by bank on Marks' behalf $ 770 A check given to Marks during the month by a customer is returned by the bank as NSF $ 480 The adjusted cash balance per the books on September 30 is:

$6,520

The interest due on $6,500 at 6% for 60 days is

$65

A company discarded a display case it had originally purchased for $8,000. The case had $7,200 worth of accumulated depreciation. The company should recognize a (an):

$800 loss

A company purchased a cash register on January 1 for $5,400. This register has a useful life of 10 years and a residual value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?

$864

On January 1, 2012, Lunsford Equipment Company purchased a new computerized security system for $130,000. It expects to use the system for 5 years, after which it can be sold for $6,500. Refer to Table 8-1. Lunsford uses the straight-line method of depreciation and sells the equipment for $30,000 at the end of the four years. The journal entry to record the sale will include which of the following?

$98,800 debit to Accumulated Depreciation

The amount due on the maturity date of a $6,000, 60-day 8%, note receivable is:

) $6,080

The relevant factor(s) in computing depreciation include:

) Cost B) Residual value C) Useful life D) Depreciation method

Units Unit Cost Total Cost Units Sold Beginning inventory (Jan. 1) 4 $400 $1,600 Sale (Mar. 1) 3 Purchase (Apr. 15) 4 405 1,620 Sale (June 22) 3 Purchase (Oct. 11) 2 425 850 Total Units in ending inventory 10 4 $4,070 6 Refer to Table 5-1. Assume that Hermione uses perpetual LIFO. The cost of the ending inventory is:

1,655.

. Identify whether each of the following items 1 through 10 would appear on the bank side or the book side of a bank reconciliation. _____ 1. Bank service charges _____ 2. Outstanding checks _____ 3. Deposits in transit _____ 4. NSF check _____ 5. Interest on a checking account _____ 6. The bank incorrectly recorded a check for $9.58. The company properly wrote the check for $95.80. _____ 7. The bank printed checks for the depositor for a fee _____ 8. The bank collected a $1,000 note for the depositor.

1. Book, 2. Bank, 3. Bank, 4. Book, 5. Book, 6. Bank, 7. Book, 8. Book

On July 7 a 5%, 90 day, $2,600 note receivable is accepted from a customer for the sale of farm equipment. Which of the following is correct?

10/5 $2,632.50

Lomax Enterprises purchased a depreciable asset for $22,000 on March 1, 2007. The asset will be depreciated on the straight-line method over its four-year useful life. Assuming the asset's residual value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, 2010?

19,166.67

Beginning inventory (Jan. 1) 4 $400 $1,600 Sale (Mar. 1) 3 Purchase (Apr. 15) 4 405 1,620 Sale (June 22) 3 Purchase (Oct. 11) 2 425 850 Total Units in ending inventory 10 4 $4,070 6 Refer to Table 5-1. Assume that Hermione uses perpetual FIFO. The cost of goods sold for the period is:

2410

. A company receives a 10%, 90-day note for $1,500. The total interest due on the maturity date is:

37.50

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts Receivable.............................................................. $355,000 debit Allowance for uncollectible accounts.................................. 500 credit Net Sales................................................................................... 800,000 credit All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

4,800

Beginning inventory (Jan. 1) 4 $400 $1,600 Sale (Mar. 1) 3 Purchase (Apr. 15) 4 405 1,620 Sale (June 22) 3 Purchase (Oct. 11) 2 425 850 Total Units in ending inventory 10 4 $4,070 6 Refer to Table 5-1. Assume that Hermione uses perpetual average costing. The average cost of a unit sold on June 22 is:

404

A company had sales of 695,000 and costs of goods sold of 278000. Its gross margin equals

417,000

Information on a depreciable asset owned by Wilson Engineering is as follows: Purchase date January 1, 2007 Purchase price $45,000 Residual value $5,000 Useful life 8 years Depreciation method straight-line If the asset is sold on July 1, 2011 for $10,000 cash, the journal entry to record the sale will include:

A debit to accumulated depreciation for $22,500.

A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

A gain of $25,000.

An asset's book value is $18,000 on June 30, 2007. The asset is being depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, 2008 for $15,000, the company should record:

A gain on sale of $1,500

An asset's book value is $36,000 on January 1, 2007. The asset is being depreciated at a rate of $500 per month on the straight-line method. Assuming the asset is sold on July 1, 2008 for $25,000, the company should record:

A loss on sale of $2,000.

. Salvage value is:

A) Also called residual value. B) Also called scrap value. C) An estimate of the asset's value at the end of its benefit period. D) A factor relevant to determining depreciation.

Betterments:

A) Are expenditures making a plant asset more efficient or productive. B) Are also called improvements. C) Do not always increase an asset's life. D) Are capital expenditures, if material.

Ordinary repairs:

A) Are expensed to keep an asset in normal operating condition. B) Are necessary if an asset is to perform to expectations over its useful life. C) Are treated as expenses. D) Include cleaning, lubricating, and normal adjusting.

An asset can be disposed of by:

A) Discarding it B) Selling it C) Exchanging it for another asset. D) Donating it to charity

Intangible assets include:

A) Patents B) Copyrights C) Trademarks D) Goodwill

The cost of land can include

A) Purchase price B) Assessments by local government C) Costs of removing existing buildings D) Fees for insuring the title

The December 31, 2011 balance sheet of Miller Company reported the following information: Accounts Receivable $197,400 Allowance for Uncollectible Accounts 8,600 During 2012, a $520 account receivable from Alexis Co. is written off. As a result,

A. Miller's net accounts receivable will equal $188,800.

Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. On July 10, Newton received a check for the full amount of $3,000 from Best. On July 10, the entry or entries Newton makes to record the recovery of the bad debt is:

Accounts Receivable - P. Best....................................... 3,000 Allowance for Doubtful Accounts..................................... 3,000 Cash ................................................................................... 3,000

If a check correctly written and paid by the bank for $794 is incorrectly recorded on the company's books for $749, how should this error be treated on the bank reconciliation?

Add $45 to the book balance.

A company made a bank deposit on September 30 that did not appear on the bank statement dated as of September 30. In preparing the September 30 bank reconciliation, the company should:

Add the deposit to the bank statement balance.

Deposit in transit, $400

Add to the bank statement balance

Note and interest collected by the bank for the company, $500 (plus $25 interest).

Add to the book balance

Land improvements are:

Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.

Which of the following statements is FALSE?

At the end of its useful life, the remaining book value of an asset will always equal its fair market value.

The appropriate value for inventory on the balance sheet is:

B or C, whichever is lower

On January 1, 2012, Lunsford Equipment Company purchased a new computerized security system for $130,000. It expects to use the system for 5 years, after which it can be sold for $6,500. Refer to Table 8-1. Assume that Lunsford uses straight-line depreciation. After recording two full years of depreciation, they decide the system will last a total of six years, rather than five. Residual value at the end of six years will be $8,000. What is 2014 depreciation expense?

B. $18,150

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts Receivable.............................................................. $355,000 debit Allowance for uncollectible accounts.................................. 500 credit Net Sales................................................................................... 800,000 credit All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What adjusted entry should the company make at the end of the current year to record its estimated bad debt expense?

Bad Debt Expense............................................... 4,800 Allowance for Doubtful Accounts......................... 4,800

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debt Expense................................................ 15,925 Allowance for Doubtful Accounts......................... 15,925

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Bank reconciliation

. The total cost of an asset less its accumulated depreciation is called:

Book value

On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debt Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

C) $4,884

The formula for computing annual straight-line depreciation is:

Cost less residual value divided by the useful life in years.

Check no. 662 for written for $730 was incorrectly recorded by the bank as $370

Deduct from the bank statement balance

On a bank reconciliation, an unrecorded withdrawal for printing checks is:

Deducted from the book balance of cash

On a bank reconciliation, the amount of an unrecorded bank service charge should be:

Deducted from the book balance of cash.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Direct write-off method

Extraordinary repairs:

Extend an asset's useful life beyond its original estimate.

Which of the following is (are) accounted for as intangible assets?

Goodwill

Is also called gross margin Less operating expenses equals net income Equals sales less cost of goods sold Must cover all operating expenses to yield a return for the owner of the business

Gross Profit

In a period of rising prices, which method will yield the highest net income, lowest inventory cost, and lowest amount of income taxes?

Highest net income: FIFO Lowest net income: LIFO Lowest Income taxes: LIFO

A promissory note

Is a written promise to pay a specified amount of money at a certain date.

The maturity date of a note receivable:

Is the day the note is due to be paid.

. Depreciation:

Is the process of allocating to expense the cost of a plant asset.

Amortization:

Is the systematic allocation of an intangible asset to expense over its estimated useful life.

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is

LIFO method

The inventory valuation method that results in the lowest taxation income in a period of inflation is:

LIFO method

Acceptable Inventory methods include

LIFO, FIFO, Specific identification method, Weighted-average Method

The conservatism principle:

Requires that when multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.

A method that charges the same amount of expense over each period of the asset's useful life is called:

Straight-line depreciation

A company uses FIFO in 2011, switches to LIFO in 2012 and switches back to FIFO in 2013. Which accounting principle or concept has been violated?

The consistency principle

The matching principle requires

The use of the allowance method of accounting for bad debts.

Which of the following statements is FALSE?

Under the last-in, first-out method, the cost of goods sold is based on the oldest purchases.

. A method that allocates an equal portion of the total depreciation cost for a plant asset to each unit produced is called:

Units-of-production depreciation

Outstanding checks refer to checks that have been:

Written, then recorded on the company books and sent to the customer, but have not yet been paid by the bank.

If a bank reconciliation includes an NSF check for $45, the journal entry to record this reconciling item would include:

a credit to Cash

Beginning inventory (Jan. 1) 4 $400 $1,600 Sale (Mar. 1) 3 Purchase (Apr. 15) 4 405 1,620 Sale (June 22) 3 Purchase (Oct. 11) 2 425 850 Total Units in ending inventory 10 4 $4,070 6 Refer to Table 5-1. Assume that Hermione uses perpetual FIFO. The entry to record the March 1 credit sale at a sale price of $800 per unit would include all of the following EXCEPT a:

credit to inventory , 2400