Financial Accounting Final

A building was purchased for $50,000. The asset has an expected useful life of 6 years and depreciation expense each year is $8,000 using the straight-line method. What is the residual value of the building?

# Years X Deprecation Expense each year = 6 x 8,000 = 48,000 Building Purchased - 48,000 = 50,000 - 48,000 = $2,000 Residual Value

Sooner Company has had a net income of $6,800, $4,400, $9,800, and $9,300 over the first four years of the company's existence. If the average annual amount of dividends paid over the last four years is $3,400, what is the ending retained earnings balance?

0 + (Beginning Retained Earnings + Net Income) - Dividends ( ________ X # of years) = 0 + ( 6,800 + 4,400 + 9,800 + 9,300) - (3,400 X 4) 30,300 - 13600 = $16,700 Ending Retained Earnings

The Pita Pit borrowed $205,000 on November 1, 2018, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2019. In connection with this note, The Pita Pit should report interest expense at December 31, 2018, in the amount of (Do not round your intermediate calculations):

12% = 100 / 12 = 0.12 Borrowed X Percent = _________ X 2 / 12 = 205,000 X 0.12 = 246,000 X 2 / 12 = $4,100 Interest Expense at Dec. 31 , 2018

Roberto Designers was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, Roberto had the following transactions relating to stockholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8). What is total stockholders' equity at the end of 2018?

1st Issued Shares of common stock X Par Value = 10,000 X 5 = 50,000 2nd Issued Shares of common stock X Par Value = 20,000 X 5 = 100,000 Add the answer together 50,000 + 100, 000 = 150,000 Net Income + 150,000 = 100,000 + 150, 000 = $250,000 Total Stockholders' Equity end of 2018

A company has the following transactions: 1. Pay employees' salaries for the current period. 2. Pay rent in advance. 3. Pay dividends to stockholders in the current period. 4. Receive (but do not pay) a utility bill. 5. Use supplies previously purchased. How many of these transactions result in an expense being reported in the current period using accrual-basis accounting?

3

On November 1, 2018, New Morning Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. New Morning Bakery should record which of the following adjusting entries at December 31, 2018? (Do not round your intermediate calculations.)

6% = 100 / 6 = 0.06 Signed X Percent = _________ X 2 / 12 = 200,000 X 0.06 = 12,000 X 2 / 12 = 2,000 Debit interest expense and credit interest payable, $2,000

Universal Travel, Inc. borrowed $500,000 on November 1, 2018, and signed a twelve-month note bearing interest at 6%. Principal and interest are payable in full at maturity on October 31, 2019. In connection with this note, Universal Travel, Inc. should record interest expense in 2019 in the amount of:

6% = 100 / 6 = 0.06 Borrowed X Percent = _________ X 2 / 12 = 500,000 x 0.06 = 30,000 X 2 / 12 = 5,000 6 - 1 = 5 5,000 X 5 = $25,000 Interest Expense in 2019

The accounts payable account has a beginning balance of $11,300 and the company purchased $40,000 of supplies on account during the month. The ending balance was $18,500. How much did the company pay to creditors during the month?

Accounts Payable + Purchased - Ending balance = 11,300 + 40,000 - 18,500 = $32,800 Pay The Creditors

Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of inventory costing $570 for $1,140 on account?

Accounts receivable = 1140 (Debit) Sales revenue = 1140 (Credit) Cost of goods sold = 570 (Debit) Inventory = 570 (Credit)

Liabilities are shown in which of the following statements?

Balance Sheet

Lebaron Co.'s beginning inventory is $2,000 and its ending inventory is $1,000. The inventory turnover is 6 times. Cost of goods sold for the year must equal:

Beginning Inventory + Ending Inventory = 2,000 + 1,000 = 3,000 / 2 = 1,500 X 6 times = $9,000 Cost of Goods Sold

Consider the following inventory transactions for September. Beginning Inventory = 13 units @ $2.60 Purchase on September 12 = 22 units @ $3.60 Purchased on September 23 = 12 units @ $4.00 For the month of September, the company sold 31 units. What is cost of goods sold under the weighted-average cost method? (Do not round your intermediate calculations. Round the weighted-average unit cost to four decimals if necessary. Round your answer to the nearest dollar amount.)

Beginning Inventory Units + Sept. 12 + Sept. 23 = 13 + 12 + 23 = 47 Weighted- Average Cost = (13 X 2.60) + (22 X 3.60) + ( 12 X 4.00) = 33.8 + 79.2 + 48 = 161 / 47 = 3.425531915 X Sold Units 3.425531915 X 31 = $106.1914894 $106 Rounded Weighted-Average Unit cost

The statement of stockholders' equity includes which of the following for the period?

Changes in stockholders' equity accounts.

The account "Allowance for Uncollectible Accounts" is classified as a(n):

Contra asset to accounts receivable in the balance sheet.

During the year, Cheng Company paid salaries of $23,700. In addition, $8,200 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

Credit to salaries payable for $8,200

Under the direct write-off method, what adjustment is made at the time an actual bad debt occurs?

Debit Bad Debt Expense, credit Accounts Receivable.

On July 7, Saints Inc. received $10,900 in cash from a customer for services to be provided on October 10. Which of the following describes how the transaction should be recorded on July 7?

Debit cash $10,900, credit deferred revenue $10,900

Receiving cash from customers before services are performed results in:

Deferred Revenues.

The ending retained earnings balance of Juan's Mexican Restaurant chain increased by $5.6 million from the beginning of the year. The company declared a dividend of $2.3 million during the year. What was the net income earned during the year?

Ending Retained Earnings + Dividends Declared = 5,600,000 + 2,300,000 = 7,900,000 5.6 million + 2.3 million = $7.9 million

Which of the following would result in an increase in the current ratio, but not necessarily the acid-test ratio?

Increase in current assets

Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current?

It may increase interest rates on borrowing.

From the seller's perspective ending inventory is equal to the cost of items on hand plus:

Items in transit sold FOB destination.

The accounts that represent resources owed to creditors are called:

Liabilities

During the year, Next Tec Corp. had the following cash flows: receipt from customers, $20,000; receipt from the bank for long-term borrowing, $6,100; payment to suppliers, $5,800; payment of dividends, $1,500, payment to workers, $2,500; and payment for machinery, $9,500. What amount would be reported for net financing cash flows on the Statement of Cash Flows?

Long-term Borrowing - Dividends = 6,100 - 1,500 = $4,600 Net Financing Cash Flows

Which of the following definitions describes a serial bond?

Matures in installments.

Sandburg Veterinarian reports the following information for the year: Net Credit Sales = $100,000 Average Accounts Receivables = $13,000 Cash Collections on Credit Sales = $87,000 What is Sandburg's receivables turnover ratio? (Round your answer to 1 decimal place.)

Net Credit Sales/Average Accounts Receivables = 100,000 / 13,000 = 7.692307692 7.7 Rounded Sandburg's receivables turnover ratio

Selected financial data for Company A is provided below: ($ in millions) Company A Sales $66,176 Interest Expense 676 Tax Expense 1,362 Net Income $2,620 What is the times interest earned ratio for Company A?

Net Income + Tax Expense + Interest Expense = 2,620 + 1,362 + 676 = 4,658 4,658 / Interest Expense = 4,658 / 676 = 6.890532544 6.9 times

Over the first four years of the company's life, the company earned the following net income (loss): $5,000; $3,000; $6,000, and ($2,000). If the company's ending retained earnings is $7,200 after year 4, what is the average amount of dividends paid per year?

Net Income loss : 5,000 - (2,000) + 6,000 = 5,000 - 2,000 + 3,000 = 6,000 Ending Retained Earnings - 6,000 = 7200 - 6,000 = 1,200 Dividends paid per year

Innovative Products reported net income of $219,000. Beginning and ending inventory balances were $46,000 and $48,000, respectively. Accounts Payable balances at the beginning and end of the year were $41,000 and $37,000, respectively. Assuming that all relevant information has been presented, the company would report net operating cash flows of:

Net Income of Beginning and Ending Inventory Balances: 46,000 - 48,000 = 2,000 Accounts Payable of Beginning and End of the year: 41,000 - 37,000 = 4,000 Net Income - 2,000 - 4,000 = 219,000 - 2,000 - 4,000 = $213,000 Net Operating Cash Flows

Which of the following subsequent expenditures would not be capitalized?

Ordinary repairs and maintenance.

Stimpleton Company engages in the following cash payments: Purchase equipment = $3,800 Pay Rent = $350 Repay long-term loan to the bank = $4,700 Pay worker's salaries = $1,300 What is the total amount of cash paid for operating activities?

Pay Rent + Pay Worker's Salaries = 350 + 1,300 = $1,650 Paid for Operating Activities

Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. What was the total amount of Gotebo's liabilities following these six transactions?

Purchase Land + Purchased Office Supplies = 12,000 + 300 = $12,300 Gotebo's Total Liabilities

Kansas Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, depreciation expense for 2018 would be:

Purchased Equipment - Residual Value / # Years = 60,000 - 5,000 = 55,000 / 5 = $11,000 Depreciation Expense for 2018

Bahama Catering purchased a commercial dishwasher by paying cash of $5,200. The dishwasher's fair value on the date of the purchase was $5,580. The company incurred $320 in transportation costs, $210 installation fees, and paid a $260 fine for illegal parking while the dishwasher was being delivered. For what amount will Bahama record the dishwasher?

Purchased a commercial dishwasher + Transportation Costs + Installation Fees = 5,200 + 320 + 210 = $5,730 Bahama Record The Dishwasher

On December 2, Coley Corp. acquired 2,000 shares of its $2 par value common stock for $23 each. On December 20, Coley Corp. reissued 1,600 shares for $12 each. Which of the following is correct regarding the journal entry for the reissued shares?

Reissued Shares X Common Stock $ = 1,600 X 23 = 36,800 Credit Treasury Stock $36,800

Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building: Sale price of the land = $690,000 Sale of salvaged parts already on land = $24,000 Demolition of the old building = $23,000 Ground breaking ceremony (food and supplies) $2,600 Land preparation and leveling = $7,900 What amount should be recorded for the purchase of the land?

Sale Price of the land - Sale of salvaged + Demolition + Land Preparation = 690,000 - 24,000 + 23,000 + 7,900 = $696,900 Purchase of Land

The Retained Earnings balance reported on the balance sheet typically is not affected by:

Stock splits

Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?

The current ratio will always be equal to or larger than the acid-test ratio for a specific company.

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. Net income and sales for the year are $100,000 and $800,000, respectively. What is Hidden Valley's return on assets?

Total Assets + Total Assets = 450,000 + 550,000 = 1,000,000 / 2 = 500,000 Net Income / 500,000 = 100,000 / 500,000 = 0.2 20% Hidden Valley's Return on Assets

On December 31, 2018, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $59,000 and $750, respectively. During 2019, Larry's wrote off $2,050 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,700 at December 31, 2019. Bad debt expense for 2019 would be:

Wrote off - _______ respectively + 2019 Uncollectible Accounts 2,050 - 750 + 5,700 = $7,000 Bad Debt Expense for 2019