Exam 2 Practice

Snow Company has the following inventory transactions for the year: Date Transaction. Number of Units Unit Cost January 1 Beginning inventory. 200. $4.00 April 20. Purchase. 800 4.25 September 8 Purchase 400 4.50 Assuming Snow sells 1,000 units, calculate ending inventory under FIFO.

$1,800

The Open Grill incurred the following costs in acquiring a new piece of land: Purchase price. $80,000 Commissions. 4,800 Liability insurance for the first year. 1,200 Cost of removing existing building. 20,000 Sale of salvaged materials. (4,000) Total costs$102,000 What is the total capitalized cost of the land?

$100,800

Tasty Inn and Out incurred the following costs related to its purchase of equipment. Purchase price. $10,000 Sales tax (7%) 700 Annual property insurance 500 Shipping 200 Initial safety testing 1,000 Total costs$12,400 What is the total capitalized cost of the equipment?

$11,900

Equipment was purchased for $50,000. The equipment is expected to be used 15,000 hours over its useful life and then have a residual value of $10,000. In the first two years of operation, the equipment was used 2,700 hours and 3,300 hours, respectively. What is the equipment's accumulated depreciation at the end of the second year using the activity-based method?

$16,000.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

$180,000.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of:

$2,000

Maxwell Corporation has the following inventory information at the end of the year: Inventory. Quantity. Unit Cost. Unit NRV. Item A. 20 $20 $35 Item B 50 30 25 Item C 40 10 15 Using the lower of cost and net realizable value method, for what amount would Maxwell report ending inventory?

$2,050

Kidz Incorporated reports the following aging schedule of its accounts receivable with the estimated percent uncollectible. Age Group. Amount Receivable. Estimated Percent Uncollectible 0 to 60 days. $ 20,000. 2% 61 to 90 days. 6,000. 15% More than 90 days past due 2,000. 50% Total$ 28,000 At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet?

$2,300

Katie Malls has the following inventory transactions for the year: Date. Transaction. Numbers of Units. Unit Cost. Total Cost January 1. Beginning inventory. 20. $35. $700 April 8. Purchase. 50. 40. 2,000 $2,700 January 1 to December 31. Total sales to customers. 60 What amount would Katie Malls report for cost of goods sold using LIFO under a periodic inventory system?

$2,350

Madison Outlet has the following inventory transactions for the year: Date. Transaction. Numbers of Units. Unit Cost. Total Cost January 1. Beginning inventory. 10. $200. $2,000 March 14. Purchase. 15. 300. 4,500 $6,500 January 1 to December 31. Total sales to customers. 12 What amount would Madison report for cost of goods sold using FIFO?

$2,600

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$2,800

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold?

$22,200

Sandwich Express incurred the following costs related to its purchase of a new building. Purchase price. $20,000,000 Closing costs and other legal fees to purchase. 1,600,000 Renovations to prepare for use. 2,200,000 Utilities for the first year. 1,400,000 Total costs $25,200,000 At what amount should Sandwich Express record the new building?

$23,800,000.

Madison Outlet has the following inventory transactions for the year: Date. Transaction. Numbers of Units. Unit Cost. Total Cost January 1. Beginning inventory. 10. $200. $2,000 March 14. Purchase. 15. 300. 4,500 $6,500 January 1 to December 31. Total sales to customers. 12 What amount would Madison report for ending inventory using weighted-average cost?

$3,380

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$3,600

At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. Cost of goods sold for the year is $11,500. What amount will Bennett report for inventory?

$4,000

Snow Company has the following inventory transactions for the year: Date. Transaction. Number of Units. Unit Cost. January 1. Beginning inventory. 200. $4.00 April 20. Purchase. 800. 4.25 September 8 Purchase. 400. 4.50 Assuming Snow sells 1,000 units, calculate cost of goods sold under LIFO.

$4,350

Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjusting entry. The company estimates future uncollectible accounts to be $5,600. At what amount would bad debt expense be reported in the current year's income statement?

$4,800

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What is the amount of net revenues (total revenue minus sales discounts) as of August 12?

$4,850

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4?

$5,000

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

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.)

$50,000.

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Purchase price. $50,000 Sales tax (8%) 4,000 Shipping 3,000 Installation 2,000 Depreciation during the first month 1,000 Total costs$60,000 What is the total capitalized cost of the equipment?

$59,000

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of:

$6,000

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit 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:

$6,100

Nija Incorporated reports the following aging schedule of its accounts receivable with the estimated percent uncollectible. What is the total estimate of uncollectible accounts using the aging method? Age Group. Amount Receivable. Estimated Percent Uncollectible. 0 to 60 days. $ 40,000. 1% 61 to 90 days. 15,000. 20% More than 90 days past due5,000. 60% Total$ 60,000

$6,400

The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?

$60,000.

On January 1, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in eight months. Calculate the amount of interest revenue Nees will record on September 1, the date that the note is due.

$600

Bryer Company purchases all of the assets and liabilities of Stellar Company for $1,500,000. The fair value of Stellar's assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar's assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?

$700,000.

A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 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.

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year?

$8,000.

Use the information below to calculate net revenues. Service Revenue$ 100,000 Sales Discounts$ 2,000 Accounts Receivable$ 15,000 Sales Allowances$ 7,000 Cash$ 18,000

$91,000

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:

$96,000

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 the year, Dawnetta Fashions has total accounts receivable of $300,000. By the end of the year, Dawnetta reports total credit sales of $1,500,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Dawnetta Fashions?

6.0

At the beginning of the year, Clay Ventures has total accounts receivable of $100,000. By the end of the year, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the average collection period for Clay Ventures?

60.8 days

Use the information below to calculate the receivables turnover ratio: Net Credit Sales$ 200,000 Beginning Accounts Receivable$ 40,000 Ending Accounts Receivable$ 10,000 Cash$ 20,000

8

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's inventory turnover ratio?

8.0

Accumulated depreciation is:

A contra-asset.

At the end of its first year of operations, a company estimates future uncollectible accounts to be $4,500. The company's year-end adjusting entry would include

A credit to Allowance for Uncollectible Accounts for $4,500.

At the end of a reporting period, Gaston Corporation determines that its ending inventory has a cost of $6,500 and a net realizable value of $5,800. The adjusting entry to write down inventory to net realizable value would include:

A credit to inventory for $700.

The entry to record the estimate for uncollectible accounts includes:

A debit to Bad Debt Expense.

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:

A gain of $5,000.

Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record:

A loss of $10,000.

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

A loss of $10,000.

Which of the following is properly recorded as an intangible asset?

A purchased patent.

When a company provides services on account, which of the following accounts is debited?

Accounts Receivable

If equipment is retired, which of the following accounts would be debited?

Accumulated depreciation.

Net income is defined as:

All revenues minus all expenses.

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

An addition which increases future benefits.

Which of the following expenditures should be capitalized?

An improvement to a tangible asset.

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

Architecture fees during the construction period of a new building.

To capitalize an expenditure means to record the expenditure as a(n):

Asset

The book value of an asset is equal to the

Asset's cost less accumulated depreciation.

The asset's cost less accumulated depreciation is called:

Book value.

A sales discount is recorded by the seller as a(n):

Contra Revenue

A long-term asset is recorded at the:

Cost of the asset plus all costs necessary to the asset ready for use.

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible: Age Group. Amount Receivable. Estimated Percent Uncollectible. Not yet due. $ 175,000 4% 0 to 60 days past due$ 40,000 10%. 61 to 120 days past due$ 10,000 30% More than 120 days past due$ 5,000 60% Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry?

Debit Bad Debt Expense for $14,000.

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

Debit Inventory; credit Accounts Payable.

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 recorded when the customer remits payment on January 25?

Debit Sales Discount for $10.

Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a:

Debit to Accounts Receivable. Credit to Sales Revenue Debit to Cost of Goods Sold. All of the these are included to record the sale.

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

Debit to Cost of Goods Sold.

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjusting entry to write down inventory to net realizable value?

Decrease in net income.

Which of the following correctly describes the nature of depreciation?

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

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life?

Double-declining-balance method.

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

FIFO

Operating income is defined as:

Gross Profit minus Operating Expenses.

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?

LIFO

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

Net accounts receivable do not change.

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

Ordinary repairs and maintenance.

An exclusive 20-year right to manufacture a product or to use a process is a:

Patent

Return on assets is equal to:

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 is not reported as an intangible asset in the balance sheet?

Research and development.

Which of the following refers to the seller reducing the customer's balance owed because of some deficiency in the company's product or service?

Sales Allowance

Gross profit is defined as:

Sales Revenue minus Cost of Goods Sold.

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities.

A company's gross profit ratio measures:

The amount by which the sale of inventory exceeds its cost per dollar of sales.

The balance in the Accumulated Depreciation account represents

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

Which of the following represents the balance of Cost of Goods Sold at the end of the year?

The cost of inventory sold during the year.

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

The expected residual value of most intangible assets is zero.

The receivables turnover ratio is a measure of:

The number of times during a year that the average accounts receivable balance is collected.

A company's inventory turnover ratio measures:

The number of times the company sells its average inventory balance during the year.

The amount of the gain on the sale of equipment equals:

The selling price minus the book value of the equipment.

Over the entire service life of an asset, which depreciation method records the highest total depreciation?

The straight-line method. The double-declining-balance method. The activity-based method. All the methods result in the same total depreciation.

Return on assets is equal to:

net income divided by average total assets

Research and development costs

should be expensed