ACC 131 Exam (Chapters 7, 8, 9) Thomas

Chapman Inc. punches a piece of equipment in 2018. Chapman depreciated the equipment on a straight line basis over a useful life of 10 years and used a residual value of $12,000. Chapman's depreciation expense for 2019 was $11,000. What was the original cost of the building?

$122,000

Heston Company acquired a patent on January 1, 2013 for $75,000. The patent has a remaining legal life of 15 years, but Heston expects to receive benefits from the patent for only 5 years. What amount of amortization expense does Heston record in 2013 related to the patent?

$15,000

Jerabek Inc. decided to sell one of its fixed assets that had a cost of $55,000 and accumulated depreciation of $35,000 on July 1, 2013. On that date, Jerabek sold the fixed asset for $15,000. What was the resulting gain or loss from the sale of the asset?

$5,000 loss

Bradley Company purchased a machine for $34,000 on January 1, 2017. It depreciates the machine using the straight-line method over a useful life of 8 years and a $2,000 residual value. On January 1, 2019, Bradley revised its estimate of residual value to $1,000 and shortened the machine's useful life to 4 or more years. Depreciation expense for 2019 is:

$6,250

Which of the following is not an example of an accrued liability?

Accounts Payable

What of the following is not a current liability?

Bonds payable due in 5 years

Kramerica Inc. sold 350 oil drums to Thompson Manufacturing for $75 each. In addition to the $75 sale price per drum, there is a $1 per drum federal excise tax and a 7% state sales tax. What journal entry should be made to record this sale?

Debit Accounts Receivable 28,438; credit Excise Taxes Payable (Federal) 350; credit Sales Taxes Payable (State) 1,838; credit Sales Revenue 26,250

When depreciation is recorded each period, what account is debited?

Deprecation Expense

The cost principle requires that companies record fixed assets at:

Market Value

Payroll taxes typically include all of the following except

Medicare taxes

Which of the following transactions would cause the current ration to increase (assuming the current ratio is currently greater than 1)

Paid off a payable

When reporting liabilities on a balance sheet, in theory, what measurement should be used?

Present value of the future outflow

Which of the following is an intangible asset?

Research and Development

Normal repair and maintenance of an asset is an example of what?

Revenue expedinture

Which of the following statements regarding bonds payable is true?

The entire principle amount of most bonds mature on a single date

Which of the following statements is true regarding depreciation methods?

The use of higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement

All of the following represent taxes commonly collected by businesses from customers except

Unemployment taxes

When a credit is made to federal income taxes withholding payable account related to taxes withheld from an employee, the corresponding debit is made to

Wages Expense

If bonds are issued at 101.25, this means that

a $1,000 bond sold for $1,012.50

To record warranties, the adjusting journal entry would be

a debit to Warranty Liability and a credit to Warrant Expense

The premium on bonds payable account is shown on the balance sheet as

addition from a long-term liability

Bonds are a popular source of financing because

bond interest expense is deductible for tax purposes, while dividends paid on stock are not

Liabilities are recognized in exchange for

borrowing money, services, goods

What best describes the discount on bonds payable account?

contra asset

When bonds are issued by a company, the accounting entry typically shows an

increase in assets and an increase in liabilities

Bonds are sold at a premium if the

market rate of interest was less than the stated rate at the time of issue

When bonds are issued at premium, the interest expense for the period is the amount of interest payments for the period

minus the premium amortization for the period

When bonds are issued at discount, the interest expense for the period is the amount of interest payments for the period

plus the discount amortization for the period

Installment bonds differ from typical bonds in what way?

portion of each installment bond payment pays down the principle balance

Warranty expense is

recorded in the period of sale

When should a contingent liability be recognized?

when a reasonable estimation can be made and when the contingent liability is probable