ACCT final
Which of the following is not true about the discount on short-term notes payable? The Discount on Notes Payable account is a contra account to the liability, Notes Payable, and has a debit balance. The Discount on Notes Payable account should be reported as an asset on the balance sheet. When there is a discount on a note payable, the amount of cash received will be less than the face value of the note. The amortization of Discount on Notes Payable increases interest expense.
The Discount on Notes Payable account should be reported as an asset on the balance sheet.
Chelsea sells equipment to a customer. The total selling price includes installation and training services. Companies other than Chelsea also provide installation and training services, but the customer has chosen to have Chelsea perform these tasks. What is (are) Chelsea's performance obligation(s)? One performance obligation: the sale of unit (equipment, installation, training). Two separate performance obligations: one performance obligation consisting of the sale of the equipment and the sale of a second performance obligation: the sale of a separate unit (installation and training). Two separate performance obligations: the sale of a performance obligation consisting of the sale of the equipment and its installation, and a second performance obligation: the sale of a separate unit (training). Three separate performance obligations: the sale of the equipment, the sale of its installation and the sale of training services.
Three separate performance obligations: the sale of the equipment, the sale of its installation and the sale of training services.
On December 31, 2018, Appalachian Corporation paid $5,550,000 to acquire Grandview Company and recorded $1,630,000 of goodwill as a result of the purchase. On December 31, 2020, Appalachian determines that the fair value of the Grandview division is $6,500,000 and the carrying amount of Grandview's net assets on that date is $6,200,000 (the carrying value and the fair value of identifiable net assets are the same). What amount of loss on impairment of goodwill should Appalachian record at December 31, 2020? $0. $1,630,000. $1,330,000. $300,000.
$0. As the fair value of the Grandview division exceeds the carrying amount of Division's net Assets, there is no impairment on Goodwill.
A company offers a cash rebate of $2 on each $6 package of batteries sold during 2018. Historically, 10% of customers mail in the rebate form. During 2018, 5,000,000 packages of batteries are sold, and 175,000 $2 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2018 financial statements dated December 31? $1,000,000; $1,000,000 $1,000,000; $650,000 $650,000; $650,000 $350,000; $650,000
$1,000,000; $650,000z 5,000,000 x 10% = 500,000 500,000 x $2 = 1,000,000 175,000 x 2 = 350,000 1,000,000 - 350,000 = 650,000
Ultra-energy Company offers a cash rebate of $2 on each $9 package of protein powder sold during 2017. Historically, 20% of their customers mail in the rebate form. During 2017, 3,000,000 packages are sold, and 250,000 $2 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the company's 2017 financial statements? $500,000; $700,000 $1,200,000; $700,000 $1,200,000; $500,000 $500,000; $1,200,000
$1,200,000; $700,000
On August 5, 2018, Famous Furniture shipped 40 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $1,800 and was paid for by Famous Furniture. On December 30, 2018, the consignee reported the sale of 30 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $600, and installation and setup costs of $780. The total profit on units sold for the consignor is $22,590 $10,740 $12,090 $19,890
$10,740 30 * 850 = 25,500 25,500 * 6% = 1,530 30 * 350 = 10,500 30/40 *1,800 = 1,350 1,530 + 10,500 + 1,350 + 780 + 600 = 14,760 25,500 - 14,760 = 10,740
Jeff Corporation purchased a limited-life intangible asset for $375,000 on May 1, 2016. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2018? $ -0- $75,000 $100,000 $112,500
$100,000 375,000 / 10 = 37,500 / yr 2 yr x 37,500 + 8/12 x 37,500 = 100,000
Bret Company sold 3,000 Holsks during 2017 at a total price of $12,000,000, with a warranty guarantee that the product was free of any defects. The cost of Holsks sold is $7,200,000. The term of the assurance warranty is two years, with an estimated cost of $80,000. In addition, Bret sold extended warranties related to 1,100 Holsks for 3 years beyond the 2-year period for $110,000. Bret should recognize Unearned Warranty Revenue in 2017 of $ 0 $ 80,000 $110,000 $190,000
$110,000 Bret should record a Warranty Liability of $80,000 on the assurance warranty, and Unearned Warranty Revenue of $110,000 on the extended warranties.
East Corp. manufactures stereo systems that carry a two-year warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period. During 2005, stereo system sales totaled $3,000,000, and warranty costs of $67,500 were incurred. In its income statement for the year ended December 31, 2005, East should report warranty expense of: $52,500 $60,000 $67,500 $120,000
$120,000 3,000,000 x %4 = 120,000
Bella Pool Company sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation is $124,541 and $19,459 respectively $144,000 and $20,000 respectively $128,000 and $20,000 respectively $110,702 and $17,298 respectively
$124,541 and $19,459 respectively 144,000 * (128,000 / (128,000 + 20,000) = 124,541 144,000 * (20,000 / (128,000 + 20,000) = 19,459
A company gives each of its 75 employees (assume they were all employed continuously through 2017 and 2018) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2017, they made $21 per hour and in 2018 they made $24 per hour. During 2018, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2017 and 2018 balance sheets, respectively? $151,200; $210,600 $172,800; $216,000 $151,200; $216,000 $172,800; $210,600
$151,200; $216,000 2017 / 75 x 12 x 21 x 8 = 151,200 75 x (12-9) x 8 x 24 = 43,200 75 x 12 x 8 x 24 = 172,800 43, 200 + 172, 800 = 216,00
Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2017 for $5,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $400,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom's market interest rate, is $2,400,000. At what amount should the patent be carried on the December 31, 2018 balance sheet? $5,000,000 $4,000,000 $3,200,000 $2,400,000
$2,400,000 (5,000,000 - (500,000/10) * 2) = 4,000,000 Since $4,000,000 > ($400,000 × 8), patent is reported at $2,400,000 (present value of cash flows.)
On December 31, 2017, Isle Co. has $6,000,000 of short-term notes payable due on February 14, 2018. On January 10, 2016, Isle arranged a line of credit with Beach Bank which allows Isle to borrow up to $4,500,000 at one percent above the prime rate for three years. On February 2, 2018, Isle borrowed $3,600,000 from Beach Bank and used $1,500,000 additional cash to liquidate $5,100,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2017 balance sheet which is issued on March 5, 2018 is $0. $900,000. $1,500,000. $2,400,000.
$2,400,000. 6 mil - 3.6 = 2.4 mil
Truffle Inc. acquired a patent on January 1, 2018 for $7,800,000. It was expected to have a 10 year life and no residual value. Truffle uses straight-line amortization for its patents. On December 31, 2021, the expected future cash flows from the patent are $518,000 per year for the next six years. The present value of these cash flows, discounted at Truffle's market interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on Truffle's 2021 income statement? $1,340,000. $2,120,000. $2,560,000. $4,680,000.
$2,560,000. 7,800,000 / 10 x 4 years = 3,120,000 7,800,000 - 3,120,000 = 4,680,000 4,680,000 - 2,120,000 = 2,560,000
Hall Co. incurred research and development costs in 2018 as follows: The amount of research and development costs charged to Hall's 2018 income statement should be $2,000,000. $2,200,000. $2,725,000. $5,000,000.
$2,725,000. 950,000 + 500,000 + 750,000 + 300,000 + 225,000
During 2016, Rao Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) Sales Actual Warranty Expense 2016 1,600,000 39,000 2017 2,500,000 65,000 2018 2,100,000 135,000 -------------- -------------------------------- 6,200,000 239,000 What amount should Rao report as a liability at December 31, 2018? $0 $71,000 $84,000 $319,000
$319,000 6.2 mil x 9 % = 558,000 558,000 - 239,000 = 319,000
On January 1, 2017, Fullbright Company sold goods to Blue Dirt Company for $400,000 in exchange for a 4-year, zero-interest-bearing note with a face amount of $629,406 (imputed rate of 12%). The goods have an inventory cost on Fullbright's books of $240,000. What amount of Sales Revenue should Fullbright recognize in 2017? $229,406 $240,000 $400,000 $629,406
$400,000
Posner Co. is a retail store operating in a state with a 7% retail sales tax. The retailer may keep 2% of the sales tax collected. Posner Co. records the sales tax in the Sales Revenue account. The amount recorded in the Sales Revenue account during May was $754,350.The amount of sales taxes payable (to the nearest dollar) to the state for the month of May is $37,719. $48,363. $62,286. $51,750.
$48,363. Sales rev + sales rev * 7 % = 754,350 754,350 / 1 + 7% = 705,000 sales tax = 705,000 x 7% = 49,350 payable = 49,350 x 98% = 48,363
Large purchased all of Small's voting stock for $11 million when Small's total owners' equity was $4 million. The book value and market value of Small's liabilities equal $3 million. However, the market value of Small's total assets equals $9 million. What amount of goodwill is recorded by Large (in millions)? $7 $2 $5 $6
$5
The total payroll of Trolley Company for the month of October, 2017 was $960,000, of which $180,000 represented amounts paid in excess of $118,500 to certain employees. $600,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $180,000 of federal income taxes and $18,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to $118,500 and 1.45% in excess of $118,500. What amount should Trolley record as payroll tax expense? $87,360. $79,560. $68,760. $73,440.
$68,760. (960,000 - 180,000) x 6.2 medicare = 960,000 x 1.45 % F.U.T.A. = 360,000 x .8% SUTA = 360,000 x 1% Medicare + FUTA + SUTA = 68,760
The total payroll of Trolley Company for the month of October, 2020 was $960000, of which $180000 represented amounts paid in excess of $118500 to certain employees. $600000 represented amounts paid to employees in excess of the $7000 maximum subject to unemployment taxes. $180000 of federal income taxes and $18000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to $118500 and 1.45% in excess of $118500. What amount should Trolley record as payroll tax expense? $87360. $79560. $68760. $73440.
$68760.
Day Company purchased a patent on January 1, 2017 for $640,000. The patent had a remaining useful life of 10 years at that date. In January of 2018, Day successfully defends the patent at a cost of $288,000, extending the patent's life to 12/31/29. What amount of amortization expense would Day record in 2018? $64,000 $72,000 $77,000 $96,000
$72,000 640,000 / 10 = 64,000 = amortized expense 640,000 - 64,000= 576,000 576,000 + 288,000 = 864,000 new carrying value 864,000 / 12 = 72,000
Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs $4 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2017 and 2018 are as follows: 2017 2018 Bags of hot dogs sold 500,000 600,000 Leashes Purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The premium liability at December 31, 2018 is $30,000. $52,500. $60,000. $112,500.
112,500 (500,000 + 600,000) / 8 x 4 = 247,500 (120,000 + 150,000) / 8 x 4 = 135,000 247,500 - 1350,000 = 112,500
Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2018. The book value of Haeger Company's net assets, as reflected on its December 31, 2017 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2017 indicates that the fair value of Haeger's tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? $ -0- $540,000 $360,000 $225,000
225,000 goodwill = purchase price - fair value 2.4 mil fair value = Book vale + fair value adjustment = 1.86 + 180k + 135k = 2.175 mil 2.4 - 2.175 = 225k
On December 31, 2020, SoBou Co. has $5,000,000 of short-term notes payable due on February 14, 2021. On January 10, 2021, SoBou arranged a line of credit with Suntrust Bank, which allows SoBou to borrow up to $3,500,000 at one percent above the prime rate for three years. On February 3, 2021, SoBou borrowed $3,500,000 from Suntrust and used $500,000 additional cash to liquidate $4,000,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as a current liability on the December 31, 2020 balance sheet which is issued on March 2, 2021 is $0. $500,000. $4,000,000. $5,000,000.
5,000,000. No refinance has occured
Allocating a transaction price to multiple performance obligations includes which of the following steps: All of these choices are correct. Complete each performance obligation before recognizing any revenue from the contract. Consolidate the components of the contract to two performance obligations because a contract should not have more than two performance obligations. Allocate the transaction price based on relative fair values. The best measure of fair value is what the good or service could be sold for on a standalone basis (standalone selling price).
Allocate the transaction price based on relative fair values. The best measure of fair value is what the good or service could be sold for on a standalone basis (standalone selling price).
Bargain Surplus made cash sales during the month of October of $375000. The sales are subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions? Debit Accounts Receivable for $375000. Credit Sales Taxes Payable for $21226. Credit Sales Revenue for $347483. Credit Sales Taxes Payable for $22500.
Credit Sales Taxes Payable for $22500.
Xtra Processes is involved with innovative approaches to finding energy reserves. Xtra recently built a facility to extract natural gas at a cost of $12 million. However, Xtra is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $17 million (the present value of which is $6.5 million). What is the journal entry required to record the asset retirement obligation? No journal entry required. Debit Natural Gas Facility for $17000000 and credit Asset Retirement Obligation for $17000000. Debit Natural Gas Facility for $5000000 and credit Asset Retirement Obligation for $5000000. Debit Natural Gas Facility for $6500000 and credit Asset Retirement Obligation for $6500000.
Debit Natural Gas Facility for $6500000 and credit Asset Retirement Obligation for $6500000.
Qualpoint provides its employees two weeks of paid vacation per year. As of December 31, 65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $960, what is the required journal entry to accrue compensated absences? Debit Salaries and Wages Expense for $124800 and credit Salaries and Wages Payable for $124800. No journal entry required. Debit Salaries and Wages Payable for $124295 and credit Salaries and Wages Expense for $124295. Debit Salaries and Wages Expense for $62400 and credit Salaries and Wages Payable for $62400.
Debit Salaries and Wages Expense for $124800 and credit Salaries and Wages Payable for $124800.
A company reported $6 million of goodwill in last year's statement of financial position. How should the company account for the reported goodwill in the current year? Determine the current year's amortizable amount and report the current year's amortization expense. Determine whether the fair value of the reporting unit is greater than the carrying amount and report a gain on goodwill in the income statement Determine whether fair value of the reporting unit is less than the carrying amount and report an impairment loss on goodwill in the income statement. Determine whether the fair value of the reporting unit is greater than the carrying amount and report the recovery of any previous impairment in the income statement.
Determine whether fair value of the reporting unit is less than the carrying amount and report an impairment loss on goodwill in the income statement.
Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each on account. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars. What adjusting journal entry, if any, should Lavender record on December 31, 20X5, to reflect Bed, Bath, and Relax's expected sales returns? No entry required because Bed, Bath, and Relax has not returned any jars. Dr Sales Returns and Allowances Cr Accounts Receivable $50 Dr Sales Revenue Cr Accounts Receivable $50 Dr Sales Returns and Allowances Cr Allowance for Sales Returns and Allowances $50
Dr Sales Returns and Allowances Cr Allowance for Sales Returns and Allowances $50
Which of these is not included in an employer's payroll tax expense? F.I.C.A. (social security) taxes Federal unemployment taxes Federal income taxes State unemployment taxes
Federal income taxes
The recoverability test is used to determine any impairment loss on which of the following types of intangible assets? Indefinite life intangibles other than goodwill. Indefinite life intangibles. Goodwill. Limited life intangibles.
Limited life intangibles.
Grayson Co. incurred significant costs in defending its patent rights. Which of the following is the appropriate treatment of the related litigation costs? Litigation costs would be capitalized regardless of the outcome of the litigation. Litigation costs would be expensed regardless of the outcome of the litigation. Litigation costs would be capitalized if the patent right is successfully defended. Litigation costs would be capitalized only if the patent was purchased rather than internally developed.
Litigation costs would be capitalized if the patent right is successfully defended.
Which of the following is not an intangible asset? Trade name Research and development costs Franchise Copyrights
Research and development costs
Which of the following research and development costs may be capitalized? Contract services. Personnel. Indirect costs. Research and development equipment with alternative future uses in other research & development projects or otherwise.
Research and development equipment with alternative future uses in other research & development projects or otherwise.
Hendrix Inc., an equipment dealer, sells equipment on January 1, 2016, to Jimi Company for $200,000. Also, on January 1, 2016, Hendrix agrees to repurchase this equipment from Jimi Company on December 31, 2017, for a price of $233,280. At 1/1/16, Hendrix should record sales revenue of $200,000. sales revenue of $200,000 and a liability of $33,280. sales revenue of $200,000 and interest expense of $33,280. a liability of $200,000.
a liability of $200,000. Hendrix should record a liability of $200,000 because this agreement is a financing transaction and not a sale.
The cost of an intangible asset includes all of the following except purchase price. legal fees. other incidental expenses. all of these choices are included.
all of these choices are included.
Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,100 and $900, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a debit to Warranty Expense, $900. debit to Warranty Liability, $350. credit to Warranty Liability, $900. credit to Unearned Warranty Revenue, $900.
credit to Unearned Warranty Revenue, $900.
Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2020 for the purchase of $500000 of inventory. The face value of the note was $507800. Greeson used a "Discount of Note Payable" account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2020 will include a debit to Discount on Note Payable for $2600. debit to Interest Expense for $5200. credit to Discount on Note Payable for $2600. credit to Interest Expense for $5200.
debit to Interest Expense for $5200.
Botanic Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2018, a customer purchases $4,000 of products (cost $2,000). Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the actual return of $250 of merchandise includes a credit to Allowance for Sales Returns for $250. credit to Returned Inventory for $125. debit to Returned Inventory for $125. debit to Estimated Inventory Returns for $125.
debit to Returned Inventory for $125.
A purchased limited-life intangible asset ______ amortized and is impairment tested using _______________. is; the recoverability test and then the fair value test is not; the fair value test only is not; the recoverability test and then the fair value test is; the fair value test only
is; the recoverability test and then the fair value test
On January 15, 2021, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. The revenue for this contract should be recorded on January 15, 2021. recorded on March 1, 2021. recorded on March 31, 2021. recorded on April 30, 2021.
recorded on March 31, 2021.
Consideration paid or payable to customers includes volume rebates which increases the cost to the customer. includes discounts which reduces the cost of purchases to the company. reduces the consideration received and the revenue to be recognized. includes prompt settlement discount which increases revenues.
reduces the consideration received and the revenue to be recognized.
Of the following items, the only one which should not be classified as a current liability is current maturities of long-term debt. sales taxes payable. short-term obligations expected to be refinanced on a long-term basis. unearned revenues.
short-term obligations expected to be refinanced on a long-term basis.
In determining the transaction price, the company must consider: variable consideration, but not non-cash consideration. non-cash consideration, but not the time value of money. the time value of money, but not consideration payable. variable consideration, non-cash consideration, time value of money, and consideration payable.
variable consideration, non-cash consideration, time value of money, and consideration payable.