MGMT 200 EXAM 2

Express Jet borrows $100 million on October 1, 2021, for one year at 6% interest. For what amount does Express Jet report interest payable for the year ended December 31, 2021?

$1.5 million.

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. What is the amount of net revenues (sales minus sales discounts) as of March 23?

$11,760

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

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

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

$4,350

Pizza Shop sells toaster ovens with a one-year warranty to fix any defects. For the current year, 100 toaster ovens have been sold. By the end of the year 4 ovens have been fixed for an average of $80 each. Management estimates that 5 more of the 100 sold will need to be fixed next year for an estimated $80 each. For how much should Pizza Shop report warranty liability at the end of the current year?

$400.

If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1?

$450,000

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 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

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

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2?

$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 realizable value of accounts receivable is:

$96,000.

Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?

0 dollas

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

1800

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 gross profit ratio?

20%

A local Starbucks sells gift cards of $10,000 during the year. By the end of the year, customers have redeemed $8,000 of gift cards. What will be the year-end balance in the Deferred Revenue account?

2000

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 method, for what amount would Maxwell report ending inventory?

2050

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much warranty expense should the company record this year?

30000

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

3380

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

3900

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?

5000

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)?

50000

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

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

Bryer Co. purchases all of the assets and liabilities of Stellar Co. 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?

700000

A company has a profit margin of 10% and reports net sales of $4,000,000 and average total assets of $5,000,000. Calculate the company's return on assets.

8%

Which of following best describes a merchandising company?

A company that purchases products that are primarily in finished form for resale to customers.

Accumulated depreciation is:

A contra-asset.

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

A debit to Allowance for Uncollectible Accounts

The entry to record the estimate for uncollectible accounts includes:

A debit to Bad Debt Expense.

When a customer pays in advance for a product or service, the advance payment received by the company is recorded as:

A debit to an asset and a credit to a liability account.

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.

Which of the following represents a characteristic of a liability?

A probable future sacrifice of economic benefits, Arising from present obligations to other entities, Resulting from past transactions or events

The effect of writing off a specific account receivable is:

A reduction in the Allowance for Uncollectible Accounts.

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.

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

All the methods result in the same total depreciation.

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

An addition which increases future benefit

Allied Partners filed suit against Big Sky, Inc., seeking damages for patent infringement. Big Sky's legal counsel believes it is probable that Big Sky will settle the lawsuit for an estimated amount in the range of $500,000 to $700,000, with all amounts in the range considered equally likely. How should Big Sky report this litigation?

As a liability for $500,000 with disclosure of the range

Accounts receivable are best described as

Assets of the company representing the amount owed by customers

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 % 0-60 days past due $ 40,000 10 % 61-120 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.

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

Debit Purchases; 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.

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should report the following adjusting entry at December 31, 20X1

Debit interest expense and credit interest payable, $4,000.

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

Debit to Cost of Goods Sold,Credit to Sales Revenue, Debit to Accounts Receivable.

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 adjustment 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.

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

Disclosed but not reported as a liability.

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

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

Under the direct write-off method, uncollectible accounts are recorded:

In the period the account is determined actually uncollectible

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

Inventory

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

LIFO

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.

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 levels of profitability in a multiple-step income statement represents all revenues less all expenses?

Net income

Return on assets is equal to:

Net income divided by average total assets.

Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the purchase of office supplies for cash affect each ratio?

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

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

Sales tax payable.

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities

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 is true in comparing the current ratio with the acid-test ratio?

The current ratio will always be at least as large as the acid-test ratio.

A company's inventory turnover ratio measures

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

Suppose Windell Corporation understates its ending inventory amount. What effect will this have on the reported amount of net income in the year of the error?

Understate net income.

Which of the following is not deducted from an employee's salary?

Unemployment taxes.

Which of the following is not a current liability?

an unused line of credit

Using a periodic inventory system, recording the sale of inventory on account would include

ebit Accounts Receivable; credit Sales Revenue.

Which of the following is paid by both the employee and the employer?

fica taxes

Which of the following intangible assets are not amortized?

goodwill

Which of the following is not a characteristic of a liability?

it must be payable in cash

Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n):

liability

Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Smith's legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation?

no record

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

one, one

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

A contingent liability that is probable and can be reasonably estimated must be

recorded

Which of the following is not recorded as an intangible asset in the balance sheet?

research and development

Interest expense is recorded in the period in which:

the period it is incurred