Mgt 213 Exam 2

Place Corp. purchased supplies at a cost of $12,000 during the year. At January 1, supplies on hand were $2,000. At December 31, supplies on hand are $1,000. Determine the amount of supplies expense for the year.

$13,000

Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $500,000 Purchases 225,000 Inventory (beginning)16,000 Inventory (ending)30,000 Operating expenses 148,000 Income tax expense 10,000 Retained earnings (beginning)53,000 Dividends 15,000 Refer to the information for Takenson Corp.Calculate the cost of goods sold

$211,000

Quan uses a periodic inventory system. The company had the following data for the month of April: April 1 On hand, 10 units @ $2 each$ 20 19 Purchased 90 units @ $3 each 270 Cost of goods available for sale $290 30 On hand, 20 units If Quan, Inc. uses the FIFO method, how much is cost of goods sold for April?

$230

Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $500,000 Purchases 225,000 Inventory(beginning)16,000 Inventory (ending)30,000 Operating expenses 148,000 Income tax expense 10,000 Retained earnings (beginning)53,000 Dividends 15,000 Refer to the information for Takenson Corp. Calculate the gross profit.

$289,000

George's Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales$200,000 Purchases 90,000 Inventory (beginning)23,000 Inventory (ending)17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 Refer to the account information for George's Department Store.Calculate cost of goods purchased.

$84,000

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Transportation-In, $650; Purchases, $10,700; Purchase Returns and Allowances, $1,950; Purchase Discounts, $330. The cost of goods purchased is equal to

$9,070.

On December 1, 2017, Vonn Corporation paid $8,000 rent in advance. The rent per month is $1,000. If Vonn's accounting period ends on December 31, 2017, what will be reported on the financial statements?

Prepaid Rent of $7,000 on its balance sheet at December 31, 2017

(Definition) By what amount would double-declining-balance depreciation exceed straight-line depreciation over the five-year life of the truck?

Total depreciation expenses under double-declining-balance and straight-line depreciation are equal.

Caruso, Inc. has an inventory turnover ratio of 8 times. If its cost of goods sold is $150,000, then

the company's average inventory is $18,750.

Cost of goods sold is

the cost of goods available for sale less ending inventory.

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

(number) By what amount would double-declining-balance depreciation exceed straight-line depreciation over the five-year life of the truck?

$0x

If Roki uses the LIFO method, the cost of goods sold for June would be

$2,272.50.

If Quan, Inc. uses the weighted average cost method, how much is cost of goods sold for April?

$232

Using the following information, what is the amount of cost of goods sold? Purchases$32,000 Merchandise inventory, September 15,700 Merchandise inventory, September 306,370 Purchase returns and allowances 1,200 Purchase discounts 960 Transportation-in 1,040 Sales 63,000 Sales returns and allowances 910

$30,210

Darrin Brown bought a pub. The purchase price was $695,000. An appraiser provided the following appraisal values: land, $320,000; building, $370,000; and equipment, $60,000. What cost should be allocated to the building?

$342,867

If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?

$800

Stockton Co. received advance payments from customers during 2017 of $6,000. At December 31, 2016, $1,300 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2016, what will the balances be in the Unearned Book Revenue and Book Revenue accounts?

Unearned Book Revenue Book Revenue $1,300 $4,700

Which one of the following is an example of an accrued liability?

Wages have been earned by employees, but have not been paid at the end of the period.

Which inventory costing method assigns the same cost to all units whether sold or left in ending inventory?

Weighted average cost

Depreciation is

an effort to achieve proper matching of the cost of operating assets.

Wind Chime Co. and Fire Hut Co. each purchased identical equipment having an estimated useful life of ten years for the same price. Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?

Fire Hut's equipment's book value will be less than Wind Chime's equipment's book value at the end of Year 2.

The effect of recording depreciation for the year is a(n)

decrease in assets and a decrease in net income.

All of the following are included in the acquisition cost of property, plant, and equipment except

maintenance costs.

The recognition of cost of goods sold as an expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

matching principle.

Plant assets are depreciated because

the accrual basis of accounting requires matching of costs to revenues.

Birken Co. purchased a building for $500,000 in 2012. At the end of 2017, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Birken rejected the offer. What amount is in Birken's records at the end of 2017 in the Building account?

$500,000

How many units did Roki Inc. sell during June?

150

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded?

Assets increase and stockholders' equity increases.

Calculator For which type of inventory would a company most likely use the specific identification method?

Custom-designed diamond rings

Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays.

Which one of the following is an example of a deferred revenue?

Cash is received prior to providing the services to customers.

Which one of the following would appear on the income statement of a merchandising company, but not on the income statement of a service company?

Cost of goods sold

Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017?

Double-declining-balance

Which inventory costing method assigns the cost of the most recent items purchased to ending inventory?

FIFO

The account a manufacturer uses to record the cost of products completed and available for sale is called

Finished Goods Inventory.

What effect does recognizing an accrued liability for utilities at the end of the accounting period have on the accounting equation?

Liabilities increase and stockholders' equity decreases.

Which one of the following types of inventory accounts would be used by a wholesaler or retailer?

Merchandise Inventory

Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service?

On the date the meals are catered

Which of the following costs related to the purchase of production equipment incurred by Newark Company during 2017 would be considered a revenue expenditure?

Repair and maintenance costs during the equipment's first year of service

Central National Bank recently acquired a new computer system. Which of the following costs associated with the computer should not be recorded in the Equipment account?

Replacement of several circuit boards damaged during installation.

Charlie Company had $1,800 of supplies on hand at January 1. During the year, supplies with a cost of $4,000 were purchased. At December 31, the actual supplies on hand amount to $1,300. After the adjustments are recorded and posted at December 31, determine the balances in the Supplies and Supplies Expense accounts.

Supplies Supplies Expense $1,300 $4,500

Calhoun, Inc. purchased equipment at the beginning of 2017 for $180,000. Calhoun decided to depreciate the equipment over a five-year period using the double-declining-balance method. Calhoun estimated the equipment's residual value at $30,000. Which of the following statements is correct concerning Calhoun's financial statements at December 31, 2017?

The book value of the equipment is $108,000.

Biglersville Corp. purchased equipment at the beginning of 2017 for $16,000. Biglersville Corp. decided to depreciate the equipment over a five-year period using the straight-line method. Biglersville Corp. estimated the equipment's residual value at $1,000. The estimated fair market value at the end of 2017 was $15,000. Which of the following statements is correct concerning Biglersville Corp.'s financial statements at December 31, 2017?

The book value of the equipment is $13,000.

Fox Auto sold merchandise to a customer for $3,000 on credit on March 10. The customer paid Fox Auto the amount due on March 31. Under the accrual basis of accounting, which of the following statements is true?

The March 31 transaction has no effect on total assets under the accrual basis.

If Roki uses the weighted average cost method, the amount assigned to the June 30 inventory would be

$1,359.90.

If Roki uses the FIFO method, the amount assigned to the June 30 inventory would be

$1,366.50.

Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales$500,000 Purchases 225,000 Inventory(beginning)16,000 Inventory (ending)30,000 Operating expenses 148,000 Income tax expense 10,000 Retained earnings(beginning)53,000 Dividends 15,000 Refer to the information for Takenson Corp. Calculate net income.

$131,000

Frank Corporation purchased supplies at a cost of $15,000 during 2017. At January 1, 2017, supplies on hand were $2,000. At December 31, 2017, supplies on hand are $2,500. Calculate supplies expense for 2017.

$14,500

Travelli Co. sold merchandise to Trapani Co. on the account, $17,000, terms 2/15, net 45. The cost of the merchandise sold is $15,400. Travelli Co. issued an allowance for $1,750 for merchandise returned that originally cost $1,400. Trapani Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?

$14,945

A building with an appraisal value of $250,000 is made available at an offer price of $180,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $65,000, and a mortgage amounting to $63,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

$163,000.

The following is from Goldman Inc.'s 2017 income statement. Purchases$172,000 Transportation-in 11,000 Inventory, January 1, 2017 26,500 Inventory, December 31, 2017 28,800 Purchase returns and allowances 8,400 How much will Goldman report as cost of goods purchased in its 2017 income statement?

$174,600

George's Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales$200,000 Purchases 90,000 Inventory (beginning)23,000 Inventory (ending)17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 Refer to the account information for George's Department Store.Calculate net sales.

$187,000

Roki Inc. uses the periodic inventory system and has the following data for the month of June: June 1 On hand, 50 units @ $15.00 each $750.00 5 Purchased 115 units @ $15.10 each 1,736.50 14 Purchased 75 units @ $15.20 each 1,140.00 Total cost of goods available for sale$3,626.50 30 On hand, 90 units If the June 30 inventory included 45 units from the June 5 purchase and 45 units from the June 14 purchase, Roki's cost of goods sold for June under the specific identification method would be

$2,263.00.

On December 1, 2017, Xeon Company bought land and an accompanying warehouse from Yen Company for $800,000. The fair market values of the land and the building at the time of purchase were $700,000 and $300,000, respectively. How much of the purchase price should Xeon Company allocate to the land, and how much should be allocated to the building?

$560,000 and $240,000, respectively

Dimension Lighting Corp. has the following data at its fiscal year-end: Net Sales $27,250 Cost of Goods Sold 19,600 Gross Profit $7,650 Determine Dimension Lighting's gross profit ratio.

28.1%

A company began the year with $150,000 in inventory and ended the year with $170,000 in inventory. Cost of goods sold for the year amounted to $960,000. Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?

60 days

Wexford is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2017?

Double-declining-balance depreciation creates both the larger expense and the larger tax savings.

A pool cleaning service signs a contract with a new customer on May 1. The pool is vacuumed and "shocked" for the customer on June 1, and the bill for the services is paid on July 1. Under the accrual basis, the business should recognize revenue on

June 1.

Which inventory costing method assigns the cost of the most recent items purchased to cost of goods sold?

LIFO

Starlight Associates, Inc. recorded salary expense of $100,000 in 2017. However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2017. After the adjustments are recorded and posted at December 31, 2017, what are the balances in the Salaries Expense and Salaries Payable accounts?

Salaries Expense Salaries Payable $105,000 $5,000

During December, Horn Inc. purchased $800 of supplies on account for use in its business. At the end of December, 20% of the supplies were still on hand, but only 75% had been paid. What amounts will appear on the company's balance sheet on December 31?

Supplies on HandAccounts Payable $160 $200

Sally's Choice sells season memberships for $200 each. Sixty season memberships were sold. The season runs for four months starting March 1, 2017. Which one of the following is an amount reported on the financial statements for the period ending March 31, 2017?

Unearned membership revenue of $9,000

Based on this information, what method of depreciation will produce the maximum depreciation expense in 2018?

Units-of-production

Assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition.

Land is not depreciated because it

has an unlimited life.

Newco Publishing Company purchased equipment at the beginning of 2017 for $200,000. The company decided to depreciate the equipment over an eight-year period using the straight-line method. The company estimated the equipment's residual value at $20,000. The adjustment for depreciation expense for 2017 will

increase Depreciation Expense and increase Accumulated Depreciation for $22,500.

In order to evaluate a company's gross profit ratio, the ratio should be compared with

those of both prior years and competitors.