ACTG 2220- Exam #2

At the beginning of the year, Bennet Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $4,000. What amount will Bennet report for cost of goods sold?

$11,500

Refer to the information in the previous question. What is the amount of net revenues as of March 23?

$11,760

On March 17, Fox Lumber sells materials to Whitney Construction for 12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What amount would Fox record as revenue on March 17?

$12,000

Suppose the balance of Allowance for Uncollectible Accounts at the end of the current year is $400 (credit) before any adjustment. The company estimates future uncollectible accounts to be $3,200. At what amount would bad debt expense be reported in the current year's income statement?

$2,800

Suppose the balance of Allowance for Uncollectible Accounts at the end of the current year is $400 (debit) before any adjustment. The company estimates future uncollectible accounts to be $3,200. At what amount would bad debt expense be reported in the current year's income statement?

$3,600

On Jan. 1, 2018, Roberson Supply borrows $10,000 from Nees Manufacturing by signing a 9% note due in eight months. Calculate the amounts of interest revenue NEEs will record on Sept. 1, 2018, the date that the note is due.

$600

If Express Jet borrows $100 million on October 1, 2018, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 2018?

1.5 million

For the year, Simmons Incorporated reports net sales of $100,000, cost of goods sold of $80,000, and an average inventory balance of $40,000. What is Simmons' gross profit ratio?

20%

At the beginning of 2018, Clay Ventures has total accounts receivable of $100,000. By the end of 2018, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Clay Ventures?

6.0

Lincoln County retires a $50 million bond issue when the carrying value of the bond is $48 milliom, but the market value of the bonds is $54 million. Lincoln County will record the retirement as:

A debit of $6 million to Loss due to early extinguishment

Using the allowance method, the entry to record a write-off of accounts receivable will include:

A debit to Allowance for Uncollectible Accounts

Equipment originally costing $95,000 has accumulated depreciation of $30,000. If it sells the equipment for $55,000, the company should record:

A loss of $10,000

Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Western's legal counsel believes it is probable that Western will settle the lawsuit for an estimated amount in the range of $75,000 to $175,000, with all amounts in the range considered equally likely. How should Western report this litigation?

As a liability for 75,000 with disclosure range

The book value of an asset is equal to the:

Asset's cost less accumulated depreciation

Accounts receivable are best described as:

Assets of the company representing the amount owed by customers

Which of the following companies record revenues when selling inventory: a. service companies. b. Manufacturing companies. c. Merchandising companies. d. Both manufacturing and merchandising companies.

Both manufacturing and merchandising companies

When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds?

Carrying value and interest expense increase

Interest expenses on bonds payable is calculated as:

Carrying value times the market interest rate

Using a periodic inventory system, the purchase of inventory on account would be recorded as:

Debit Purchases; Credit Accounts Payable

Using a perpetual inventory system, the purchase of inventory on account would be recorded as:

Debit inventory; credit Accounts Payable

Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably possible, a contingent liability should be:

Disclosed and not reported as a liability

The direct write-off method is generally not permitted for financial reporting purposes because:

Expenses (bad debts) are not properly matched with the revenues (credit sales) they help to generate.

Which inventory cost flow assumption generally results in the lowest reported amount for cost of goods sold when inventory costs are rising?

First in, First out (FiFo)

Which of the following levels of profitability in a multiple-step income statement represents revenues from the sale of inventory less the cost of that inventory?

Gross profit

Which of the following statements regarding liabilities is not true?

Liabilities result from future transactions

Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset's life?

Long service life, high residual value, and straight-line depreciation.

Current liabilities:

May include contingent liabilities

Which of the following leases is essentially the purchase of an asset with debt financing?

Neither an operating lease and a capital lease

Assuming a current ratio of 1.00 and an acid-test ratio of 0.75, how will the purchase of inventory with cash affect each ratio?

No change to the current ratio and decrease the acid-test ratio.

Convertible bonds:

Provide potential benefits to both the issuer and the investor.

Which of the following is not a primary source of corporate debt financing?

Receivables

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

Sales tax payable

Research and development costs generated internally:

Should be expensed

The balance in the Accumulated Depreciation accounts represents:

The amount charged to depreciation expense since the acquisition of the plant asset.

Which of the following statements is true regarding the amortization of intangible assets?

The expected residual value of most intangible assets is zero.

Which of the following is true for bonds issued at a discount

The market interest rate is greater than the stated interest rate

Suppose Ajax Corporation overstates its ending inventory amount. What effect will this have on the reported amount of cost of goods sold in the year of the error?

Understate cost of goods sold

Which of the follow is NOT deducted from an employee's salary

Unemployment taxes

We record interest expense on a note payable in the period in which:

We incur interest.

Serial Bonds are:

bonds that mature in installments

The acid-test ratio is:

cash, current investments, and accounts receivable divided by current liabilities

We normally record a long- term asset at the

cost of the asset plus all costs necessary to get the asset ready for use

At the end of a reporting period, Maxwell Corporation determines that its ending inventory has a cost of $1,000 and a net realizable value of $800. What would be the effect(s) of the adjustment to write down inventory to net realizable value?

decrease total assets decrease income decrease retained earnings

The return on assets is equal to the:

profit margin times asset turnover

Which of the following expenditures should be recorded as an expense?

repairs and maintenance that maintain current benefits.

Which of the following ratios measures financial leverages?

the debt to equity ratio.

The price of a bond is equal to:

the present value of the face amount plus the present value of the stated interest payments