MGMT 200H - EXAM 2

At the beginning of year 1, ABC Corp. purchases equipment for $10,000. The equipment has a residual value of $4,000 and expected useful life of 4 years. What is double-declining-balance depreciation expense for year 2?

$1,000

Merchandise sold FOB shipping point indicates that what happens?

The seller transfers title to the buyer once the merchandise is shipped

On December 31, 2015, Larry's Used Cars had balances in Accounts Receivable andAllowance for Uncollectible Accounts of $53,600 and $1,325, respectively. During 2016, Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31, 2016. Bad debt expense for 2016 would be:

$1,420

At the beginning of year 1, ABC Corp. purchases equipment for $9,000. The equipment has a residual value of $3,000 and expected useful life of 4 years. What is straight-line depreciation expense for year 4?

$1,500

During the first two years, Supplies, Inc. drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of deprecation expense should Supplies, Inc. record in the second year using the activity-based method?

$11,000

Shasta Exploring purchases a piece of equipment for $50,000 and the equipment has an expected useful life of five years. Its residual value is estimated to be $4,000. Assuming Shasta uses the double-declining balance depreciation method, what is the depreciation expense for the equipment for the second full year?

$12,000

LeGrand Corporation reported the following amounts in its income statement: Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What was LeGrand's operating income?

$120,000

Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due, $100,000 is past due for up to 180 days, and $50,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 1% of the amount not yet due, 10% of the amount past due for up to 180 days, and 20% of the amount past due for more than 180 days.The allowance account had a debit balance of $1,000 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

$26,000

Carpenter Inc. estimates warranty expense at 2% of sales. Sales during the year were $4 million and warranty expenditures were $44,000. What was the balance in the Warranty Liability account at the end of the year?

$36,000

Capital Construction purchased a 3-acre tract of land for a building site for $350,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was $900 and attorney fees for reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered the period after the purchase date. The capitalized cost of the land is:

$364,650

Purdue Inc. had the following information taken from various accounts at the end of the year: Sales discounts $41,000 Deferred revenues $32,000 Total sales $459,000 Sales allowances $35,000 Accounts receivable $205,000 What was Purdue Inc.'s net revenues for the year?

$383,000

Universal Travel, Inc. borrowed $500,000 on November 1, 2015, and signed a twelve-month note bearing interest at 6%. Principal and interest are payable in full at maturity on October 31,2016. In connection with this note, Universal Travel, Inc. should report interest payable atDecember 31, 2015, in the amount of:

$5,000

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65%and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

$5,708

Balance Corporation sells $1,000 of goods to a customer on account. The sales tax is 5%. How much sales tax payable should be recorded?

$50

Berry Co. purchases a patent on January 1, 2015, for $40,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the amortization expense for the year ended December 31, 2016?

$8,000

ABC Inc. has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

$80,000

Purdue Inc. purchased land, a building, and equipment for $800,000. The estimated fair values of the land, building, and equipment are $100,000, $700,000, and $200,000, respectively. At what amount would the company record the land?

$80,000

Delta Airlines collects $300 for a round-trip ticket from Chicago to Los Angeles and back. How does ABC Airlines record the $300 collected in advance?

A debit to Cash of $300 and a credit to deferred revenue of $300

Aspen, Inc. developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, Aspen decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?

Assets $350,000; Expenses $250,000

The normal balance of the account "Allowance for Uncollectible Accounts" is _____ because _______.

Credit; it is a contra account to Accounts Receivable (a debit account)

On November 1, 2015, The Bagel Factory signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2016. The BagelFactory records the appropriate adjusting entry for the note on December 31, 2015. In recording the payment of the note plus accrued interest at maturity on May 1, 2016, The Bagel Factory would

Debit Interest Expense $2000

In December, 2014, Quebecor Printing received magazine subscriptions for 2015 from a customer, who paid $500 in cash. What would be the appropriate journal entry for this event?

Debit cash $500; credit deferred revenue $500

Purdue Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Purdue granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?

Debit cash for 960 Credit service revenue for 960

At the end of 2018, Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment. The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method. Murray State's adjustment on December 31, 2018, to record its estimated uncollectible accounts included a:

Debit to Bad Debt Expense of $7,500; credit to Allowance for Uncollectible Accounts of $7,500.

On July 8, Purdue Inc. sold 100 printers to Office Rental Company at $600 each and offered a 2% discount for payment within 10 days. On July 15, Office Rental Company paid the full amount in cash. What should Purdue Inc. record on July 15?

Debit to Cash for 58,800 Debit to Sales Discount for 1,200 Credit to Accounts Receivable for 60,000

On May 1, ABC Company purchased inventory costing $2,000 on account with terms 2/10, n/30. On May 18, ABC pays for this inventory and records which of the following using a perpetual inventory system?

Debit to accounts payable for 2,000 credit to cash for 2,000

The disclosure that shows the difference in the cost of inventory between LIFO and FIFIO is referred to as what?

LIFO reserve

Which of the following is true regarding FICA taxes?

FICA taxes are paid in equal amounts by the employee and the employer

In a period when inventory costs are rising, the inventory method that most likely results in the highest ending inventory is:

FIFO

Which of the following is NOT an employer payroll cost?

Federal and State income taxes

Which of the following would NOT be recorded as land improvements?

closing costs on purchasing the land

When a company collects sales tax from a customer, the event is recorded by:

a debit to cash and a credit to sales tax payable

Costello Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. Costello should record:

a loss of $1,000

The 'Sales Returns and Allowances' account is classified as what account?

contra revenue account

The distinction between the direct write-off method and the allowance method is the what?

amount of bad debt expense reported in each year

What effect would an adjustment to record inventory at the lower of cost and net realizable value have on the company's financial statements?

an increase to expense

The exclusive right to benefit from a creative work, such as a film is a:

copyright

cost of good sold equals what?

beginning inventory +net purchases - ending inventory

Cost of an asset that produce future benefits are ____, but costs that produce benefits only in the current period are_____.

capitalized; expensed

On November 10 of the current year, Flores Mills provides services to a customer for $8,000with credit terms 2/10, n/30. The customer made the correct payment on November 17. How would Flores record the collection of cash on November 17?

debit cash 7840 debit sales discount 160 credit accounts receivable 8000

Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?

debit cash 960 credit service revenue 960

On October 1, 2017, Logan Corporation signed a 6-month, 8% interest-bearing note for $10,000. The journal entry required at December 31, 2017 would include which of the following entries?

debit interest expense $200

In perpetual inventory system, at the time of a sale the cost of inventory sold is:

debited to cost of goods sold

A company collects a customer's account within the discount period. Indicate how this transaction would affect the following five financial statement items

decrease assets no effect liabilities decrease stockholders' equity decrease revenue no effect expenses

What are the financial statement effects of recording bad debt expense using the allowance method?

decrease assets and increase expenses

Taylor Company's attorney informs its client that it is possible, but not probable, that the company will lose a currently litigated lawsuit. No reliable estimate of the potential loss is currently available. How should Taylor accrue and/or disclose this potential loss?

disclose the contingency and state that the estimate cannot be made

True or False: During periods of rising cost, FIFO generally results in a higher cost of good sold

false

Productive assets that are physically used up, or depleted are:

natural resources

A company's claims to the future collection of cash, other assets, or services is what?

receivable

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order.This is an example of a

sales return

The LIFO conformity rule states that if LIFO is used for:

tax purposes, it must be used for financial reporting

When writing off an uncollectible account what happens?

total assets are unchanged

When the direct write-off method is used, an entry for bad debt expense is required when what?

when the account receivable is determined to be uncollectible