acc210 exam 3

Which of the following ratios measures how many sales dollars are generated per dollar of assets invested?

asset turnover

True or False: All else being equal, a decrease in a company's profit margin will result in an increase in its return on assets.

false

True or False: Different types of current assets are equally liquid.

false

True or False: For a particular asset, a company may not use the straight-line depreciation method for financial reporting while using the double-declining-balance (DDB) method for its tax return

false

True or False: On the balance sheet date, the book value (or carrying value) of an asset should always equal the asset's fair value.

false

True or False: The total amount of depreciation taken over the life of a depreciable asset should be higher if the double-declining balance depreciation method is used than if the straight-line method is used.

false

True or False: When compared to the double-declining-balance (DDB) depreciation method, the straight-line method will yield lower depreciation expense in each year of the depreciable asset's life.

false

a contingent liability must be recorded in the balance sheet :

if it is both probably and reasonably estimated

Record the 12/31 accrual of interest expense for a 12-month N/P with a $250,000 principal balance, 8% interest rate, that was issued on 10/1.

interest expense 5000 (left) interest payable 5000 (right) 250,000 x 8% x 3/12

From the corporation's perspective, the purchase and sale of property, plant, and equipment used in its business is an example of which type of business activity?

investing

federal and state unemployment taxes are an example of payroll taxes

paid by the employer only

FICA taxes paid by the employer are recorded as

payroll taxes

At the end of a depreciable asset's useful life, the book value (or carrying value) of the asset should equal the asset's

salvage value

Interest is the cost of borrowing money.

true

NoleCo acquires Gator, Inc. for $5,000,000. The book value of Gator's net assets is $3,000,000 and the fair value of these net assets is $4,000,000. How much Goodwill should NoleCorecognize?

$1,000,000 purchase price - fair value 5,000,000 - 4,000,000

A company acquired an office building, land, and equipment in a single basket purchase. The fair values were $1,200,000, $600,000, and $200,000 for the building, land, and equipment, respectively. The company recorded the equipment for $170,000. What was the total purchase cost for all three assets?

$1,700,000 ($1,200,000 + $600,000 + $200,000). The equipment represents 10% of the fair value ($200,000/$2,000,000) So, $170,000 must equal 10% of the purchase price Price = $170,000/.10 = $1,700,000

Suppose a company spends $100,000 during Year X1 to research and develop a safety device for motorcycles. By the end of X1, the company estimates that the new safety device has an 80% chance of generating $500,000 in revenues from sales to customers over the next five years (X2 - X6). For what amount would Research and Development Expense be reported in X1?

$100,000 Research and development expenditures are recognized as expenses in the year the cash is spent. So the entire $100,000 is R&D expense in X1.

KU Enterprises purchased equipment for $60,000 on January 1, 2020. The equipment is expected to have a five-year service life, with a residual value of $5,000 at the end of five years. Using the double-declining balance method, depreciation expense for 2021 would be:

$14,400] 2020 depreciation = $60,000 BV x 2/5 = $24,000 2021 depreciation = $36,000 BV x 2/5 = $14,400

We are awarded a Patent on a process we developed over the last three years, spending $2,000,000 in research and development. The legal and patent application fees were $200,000. How much is capitalized in the Patent account?

$200,000

On January 1, 2020, BD Company purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2022, BD sold the truck for $30,000. What amount of gain or loss should BD record on December 31, 2022?

$3000 loss SL depreciation expense = ($48,000 - $8,000)/8 years = $5,000/year After three years accumulated depreciation = $15,000 The BV on the sale date = $48,000 - $15,000 = $33,000 If sold for $30,000 then LOSS = $3,000

CardCo buys an existing factory that includes land, a building, and manufacturing equipment for a lump-sum price of $800,000. Fair value estimates for the three assets are: Land, $400,000; Building, $400,000; and Equipment, $200,000. How much of the purchase price should be allocated to the Building?

$320,000 total fair value = 400,000+400,000+200,000= 1,000,000 building FV= 400,000/1,000,000 = 40% allocate 40%= 800,000x40% = 320,000

In 2022, Wolfpack Corp. bought land and incurred these costs: purchase price, $500,000; real estate commission, $25,000; land clearing, $75,000; 2022 property taxes, $5,000. How much should be capatilized in the land account?

$600,000 property taxes for current yr not included, (500,000+25,000+75,000)

A company purchased new equipment for $60,000. The company paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $3,000; and installation cost, $2,500. The correct amount to capitalize in the equipment account would be:

$66,500 All costs incurred in getting the asset ready for its intended purpose should be capitalized. Hence, all of these amounts would be debited to the equipment account: $66,500

Venice Corporation's March payroll is $500,000 (gross pay earned by employees). If the FICA tax rate is 7.65% what liability for FICA taxes will Venice report as a result of the March payroll (before sending the amount to the Treasury Department)? Assume that all employees are subject to the full tax rate in March

$76,500. Venice will withhold $500,000 x .0765 = $38,250 from the employee paychecks. They will also match that amount and recognize it as a payroll expense. The liability will be $38,250 x 2 = $76,500.

A machine is purchased on July 1, 2021 for $110,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 100,000 hours and was run for 10,000 hours in 2021 and 25,000 hours in 2022 ACTIVITY BASED

(110,000 - 10,000) / 100,000hrs = $1 an hr 2021: 10,000hrs x $1 /hr = 10,000 2022: 25,000hrs x $1 /hr = 25,000

A machine is purchased on October 1, 2021 for $160,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 75,000 hours and was run for 4,000 hours in 2021 and 20,000 hours in 2022. ACTIVITY BASED

(160,000 - 10,000) / 75,000hrs = $2 an hr 2021: 4,000hrs x $2 /hr = 8,000 2022: 20,000hrs x $2 /hr = 40,000

WP Construction issues a five-year, interest-bearing $25,000 note payable on January 1, 2022. This note specifies that each January 1, starting January 1, 2023, WP will pay $5,000 of the principal balance of the note (plus accrued interest). When the company prepares financial statements on December 31, 2022, 1.What amount of the principal balance should be reported as a current liability? __________ 2.What amount of the principal balance should be reported as a long-term liability? ________

1.) 5,000 2.) 20,000

We borrow $80,000 to be repaid in 10 equal annual payments, starting one year from today. If the interest rate is 7% what is the amount of each payment?

11,390 PV = PMT x Table 4 Factor (n=10, i=7%) PV = $80,000 = PMT x 7.02358 PMT = $80,000/7.02358 = $11,390

SFG, Inc. purchased a piece of equipment for $60,000 on January 1, 2021. The equipment has an expected useful life of six years. Its residual value is estimated to be $10,000. Assuming the company uses the double-declining-balance depreciation method, what is the depreciation expense for the equipment for the second full year (2022)?

13,333 Year 1: $60,000 BV x 2/6 = $20,000 Year 2: $40,000 BV x 2/6 = $13,333 Recall that we ignore salvage value in DDB calculations The correct answer is: $13,333

On November 1, Simran plans to make a single (lump-sum) deposit into an investment account that earns 10% compounded annually. She wants this investment to be worth $25,000 six (6) years later. Question: Rounding to the nearest whole dollar, what should be the amount of Simran's initial investment on November 1?

14112

MillCo borrowed $400,000 on 1/1/20X1 to be repaid in four annual $100,000 payments beginning on 1/1/20X2 (and each January 1 to follow until repaid). In addition to the $100,000, each payment will also include accrued interest at 12%/year. On the 12/31/20X1 balance sheet, what is the total dollar amount of current liabilities associated with this borrowing?

148,000 $400,000 x 12% x 12/12 = $48,000 , + 100,000 principal payment

SDP Corp. purchased a tractor on January 1, 2021, for $65,000. The tractor's useful life is estimated to be 25,000 miles with an expected residual value of $15,000. If the company used the tractor 5,000 miles in 2021 and 4,000 miles in 2022, what is the balance for accumulated depreciation at the end of 2022 using the activity-based method?

18,000 The depreciation rate is: ($65,000 - $15,000)/25,000 miles = $2/mile Accumulated depreciation after two years would be 9,000 miles (5,000 + 4,000) x $2 = $18,000 The correct answer is: $18,000

Siesta, Inc. manufactures and sells products and includes a one-year warranty. Based on past experience Siesta expects to spend 3% of sales revenue earned on warranty repairs. In 20X1, Siesta sold $600,000 of this product and actually spent $10,000 on warranty repairs. What warranty expense should Siesta recognize on its 20X1 income statement?

18,000 $600,000 x 3% = $18,000

WP, Inc. sells products and includes a one year warranty. WP estimates that 3% of sales will be used to honor warranty claims. In 2022 WP sold $1,000,000 of this product and spent $11,000 on repairs. What will WP report as the Warranty Liability on the 12/31/22 Balance Sheet?

19,000 1,000,000 x.03 = 30,000 30,000-11,000 = 19,000

A machine is purchased on 1/1/21 for $900,000 and is expected to have a six-year service life and a salvage value of $50,000. In 2022, how much depreciation expense should be recognized when using the double-declining balance method

200,000 2021: 900,000 x 2/6 =$300,000 2022: (900,000-300,000) = 600,000 x 2/6 = 200,000

A machine is purchased on July 1, 2021 for $110,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 100,000 hours and was run for 10,000 hours in 2021 and 25,000 hours in 2022 DOUBLE DECLINING

2021: (110,000-0 A/D) BV x 2/5 = 44,000 x 6/12 = 22,000 2022: (110,000-22,000 A/D) BV x 2/5 = 35,200

A machine is purchased on October 1, 2021 for $160,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 75,000 hours and was run for 4,000 hours in 2021 and 20,000 hours in 2022. DOUBLE DECLINING

2021: 160,000 x 2/5 =64000 x3/12 = 16,000 2022: 160,000 - 16,000= 144,000 x2/5 = 57600

OAK purchased a delivery truck on July 1, 2021. The following information is available: Cost = $100,000 Estimated service life = 5 years Estimated residual value = $20,000 Calculate the balance of accumulated depreciation on December 31, 2022, using straight-line depreciation

24,000 SL depreciation = ($100,000 - $20,000)/5 years = $16,000/year After 1.5 years, accumulated depreciation would be $24,000. 2021 depreciation = $16,000 x 6/12 = $8,000 + $16,000 for 2022

If the Current Ratio is 2.0 and Working Capital equals $125,000, Current Assets equal?

250,000 current ratio = 2.0 = CA/CL working capital = 125,000 = CA - CL so CA = 2(CL) 125,000 = 2(CL) - CL CA = 2 (CL) = 250,000

Cavalier Manufacturing is considering a rearrangement of its manufacturing operations. A consultant estimates that the rearrangement should result in after-tax cash savings of $6,000 the first year, $10,000 in year two and again in year three, and $12,000 in both years four and five. Assuming a 12% discount rate, calculate the total present value of the cash flows (savings).

34,882.26 use PV table 2 6000 x .89286 (n=1, 12%) 10000 x .79719 (n=2) 10000 x .71178 (n=3) 12000 x .63552 (n=4) 12000 x .56743 (n=5) 5,357.16 + 7971.9 + 7117.8 + 7626.24 + 6809.16 = 34,882.26

Nelson Corp. plans to make an investment today that promises to return $10,000 each year for five (5) years beginning one year from today. The investment account will earn 7% compounded annually. At the end of five years, the investment account balance will be zero.Question: Rounding to the nearest whole dollar, what should be the amount of Nelson Corp.'s original investment?

41002

Hampton Inc. purchased a machine to use in its business. The machine is estimated to have an economic life of 10 (ten) years before it becomes obsolete. The company expects to use the machine for 5 (five) years before it sells the machine to another company. Hampton uses the straight-line depreciation method. Question: How many years should Hampton depreciate this asset over?

5 years

Wolfpack, Inc. borrows $100,000 to be paid back in 12 annual payments with interest (the first payment is due one year from today). If the payment amount is $11,282.54, what is the annual interest rate?

5% use pv annuity (table 4) 100,000 PV = 11,282.53 x factor factor = 100,000/11.282.54=8.86325 in n=12 row find factor, I=5%

Fraction 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 6.2% of the first $7,000 earned per employee. What is the actual payroll payment (or Salaries Payable) for the first week of January?

5,708 Gross pay is 10 x 40 x $20 = $8,000. Deductions will be for federal and state income taxes plus FICA taxes. Those add up to 15% + 6% + 7.65% = 28.65%. Net pay will be 71.35% of $8,000 = $5,708. Employees do not pay unemployment taxes

Assume that 2022 Net Income = $500,000 and that Total Assets on the 12/31/2021 and 12/31/2022 Balance Sheets were $4,500,000 and $5,500,000, respectively. ROA = ?

500,000/5,000,000 = 10% (0.1)

TarHeelCo borrows $300,000 to be paid off in three years. The loan payments are semi-annual with the first payment due in six months, and annual interest is 6%, compounded semi-annually. What is the amount of each payment?

55,379.26 PV annuity table 4 PV= PMT Amt x factor (n=6, I=3%) 30,000 / 5.41719 = 55,379.26

At the end of each quarter, DemonDeacon Industries (DDI) deposits $500 into an account that pays 12% annual interest, compounded quarterly. How much will DDI have in the account in three years?

7096 use table 3 (Fv annuity) n= 12 periods (3 yrs x 4 quarters) I= 3% (12% / 4 quarters) FV= 500 x 14.192 =7096

At the end of each month, ODU Corp. deposits $1,000 into an account that pays 12% annual interest, compounded monthly. How much will ODU have in the account in two years? A.$26,973.50 B.$21,243.39 C.$24,000.00 D.$27,424.48

A. $26,973.50 use table 3 (FV annuity) n= 24 periods (2yrs x 12 months) I= 1% (12% / 12 mo) FV= 1000 x 26.9735 = 26,973.5

a current liability:

An obligation that will be satisfied within 12 months or the next operating cycle if longer than 12 months

What impairment loss must be recognized for a machine with a book value of $100,000 when estimated future cash flows are $90,000 and estimated fair value is $75,000?

BV= 100,000>future cash flows=90,000 loss= 25,000 (100,000BV-75,000FV)

A building we own is being tested for impairment. The current book value = $300,000. The current fair value = $275,000. The estimated future cash flows = $320,000. What impairment loss should be recognized?

BV= 300,000< future cash flows no impairment no losss

Equipment with a book value of $80,000 is forecasted to generate $110,000 of future cash flows over its remaining life. The current fair value is $90,000. Impaired? Loss to recognize?

BV= 80,000<future cash flows= 110,000 not impaired! no impairment loss

Equipment with a book value of $80,000 is forecasted to generate $70,000 of future cash flows over its remaining life. The current fair value is $60,000. Impaired? Loss to recognize?

BV= 80,000>future cash flows = 70,000 loss= 20,000 (80,000BV-60,000FV)

What PV or FV tables will we need to use to determine the price of a bond?

Both the PV of $1 (Table 2) and the PV of an annuity of $1 (Table 4

In January, MIAD Corp. sells a gift card for $500 and receives cash. In February, the customer comes back and spends $200 of the gift card to purchase team apparel. What would be the appropriate journal entry by MIAD to account for the customer's purchase of the apparel in February?

Debit Deferred Revenue, $200; Credit Sales Revenue, $200

ABO purchased a truck at the beginning of 2020 for $140,000. They sold the truck at the end of 2023 for $65,000. If the expected useful life of the truck was six years with a residual value of $20,000 and ABO uses straight-line depreciation, which of the following is true regarding the entry to record the sale of the truck?

Depreciation expense = ($140,000 - $20,000)/6 years = $20,000/year. After four years accumulated depreciation = $80,000 and book value of truck = $140,000 - $80,000 = $60,000. If sold for $65,000 then gain = $5,000. The correct answer is: Credit Gain $5,000

what does a current ratio of 1.9 indicate?

It indicates that for every $1 of current liabilities, the company has $1.90 of current assets.

HokieCo is considering two options for comparable computer software. Option A will cost $26,000 plus annual license renewals of $1,000 for three years, which includes technical support. Option B will cost $20,000 with technical support being an add-on charge. The estimated cost of technical support is $4,000 the first year, $3,000 the second year, and $2,000 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. The discount rate is 8%. Determine which option should be chosen based only on the information provided above.

Option B A: use PV annuity (table 4) n=3, I=8% PV= 26,000 + (1,000+2.5771) =28,577.1 B= use PV cash table (table 2) n=1,2 or 3; I=8%) PV= 20,000 + (4000 x .9.2593) + (3000 x .85734) + (2000 x .79383) = $27,863.40 choose option B

In an installment note payable where each payment is the same amount and consists of both interest owed and a reduction of the principal balance

Over time each payment will consist of less interest and more principal

we borrow $100,000 for six months at an annual interest rate of 6% on 9/1/20x1. interest and principal due at maturity on 3/1/20x2

Sep 1 journal entry = cash 100,000 (left) note payable 100,000 (right) interest expense/payable at 12/31 = interest expense 2000 (left) interest payable 2000 (right) [100000 x .06 x 4/12] repayment of note and interest due on 3/1 = note payable 100000 (left) interest payable 2000 (left) interest expense 1000 (left) cash 103000 (right)

We sell a machine today for $35,000 that we purchased exactly six years ago for $100,000. The machine has been depreciated straight-line over a 9-year life with a $10,000 salvage value. Gain or Loss =?

Sl depreciation: (100,000 - 10,000) /9 = 10,000/yr BV after 6 yrs: 100,000 - 60,000= 40,000 If sold for 35,000 we have a 5,000 loss.

If you won the NC Lottery and were trying to decide between the choice of receiving a single payout today or the series of payments over the next twenty years (same amount once a year) which TVM table would be most helpful?

Table Four - Present value of an Annuity of $1

Which of the following is an example of a "quick asset" for purposes of applying the acid-test or quick ratio? (Check all that apply)

accounts receivable cash current investments

The Woodson Theater sells season theater tickets for $250 each. Each ticket entitles the customer to attend 5 plays. The first play will be in December. On December 1, 20X1, 300 season tickets were sold for $250 each in cash. During December, the first play out of the five was shown. The remaining plays will be shown next year. Required: Assuming all journal entries and adjusting entries have been made in 20X1, answer the following two questions.

What should be the amount of "Ticket Revenue" the theater reports on its income statement for 20X1? $15,000 What should be the "Deferred Ticket Revenue" balance reported on the balance sheet at 12/31/X1? $60,000

You want to buy a new car that sells for $45,000. The dealer will finance it for 50 months at 12% annual interest (compounded monthly) if you make a $5,000 down payment today. solve for monthly payment amt A.Approximately $800/mo B.Approximately $1,150/mo C.Approximately $620/mo D.Approximately $1,020/mo

approx 1,020/mo 40,000 =PV (n=50, I= 1% (12%/12months) 40,000/39.19612 = 1,020.51

An agreement that permits a company to borrow up to a prearranged limit is called

a line of credit

An account whose balance is reported on the asset side of the balance sheet and reduces total assets as its balance increases is called a:

contra-asset account

The "depreciable cost" of equipment used in a company's business is equal to the asset's:

cost - residual value

Which of the following series of cash flows is an annuity? a. $5,000 to be received in one year, $6,000 to be received in two years, and $4,000 to be received in three years b. $5,000 to be received in one year, $5,000 to be received in two years, and $5,000 to be received in four years c. Both choices above are examples of annuities d. None of the choices above are correct

d. none!! must be equal amount equally over time

A machine is purchased on July 1, 2021 for $110,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 100,000 hours and was run for 10,000 hours in 2021 and 25,000 hours in 2022 STRAIGHT LINE

depreciable cost = 110,000 - 10,000 = 100,000 2021: 100,000/5 years = 20,000 x 6/12 (July to December) = 10,000 2022: 100,000/5years (using it all year) = 20,000

If Barbara Falcon invests $16,751.84 now and she will receive $30,000 at the end of 10 years, what annual rate of interest will she be earning on her investment?

6% PV = FV x Table 2 Factor (n= 10, I = ?) $16,751.84 = $30,000 x Table 2 Factor Table 2 Factor = $16,751.84/$30,000 = .55839 Look at Table 2 in n = 10 row and find factor Factor is in in 6% column

On May 1, Derek made a single deposit of $5,000 into an investment account that earns interest of 8% compounded annually. Question: Rounded to the nearest whole dollar, what will be the balance in his account at the end of nine (9) years?

9995

True or False: Land used in a company's business operations is generally not depreciated.

true

A machine is purchased on October 1, 2021 for $160,000 and is expected to last five years and have a $10,000 salvage value. The machine is expected to operate for 75,000 hours and was run for 4,000 hours in 2021 and 20,000 hours in 2022. STRAIGHT LINE

depreciation cost= 160,000-10,000 = 150,000 2021: 150,000/5 = 30000 x 3/12 =7500 2022: 150,000/5= 30000

Below are various independent scenarios with respect to a contingent liability a company has at year-end. For each scenario, indicate how the contingent liability should be treated for financial statement purposes. Possible responses are recorded and disclosed, disclosed only, and neither recorded nor disclosed. The loss is possible and reasonably estimable. The loss is probable and reasonably estimable. The loss is remote and reasonably estimable the loss is probable and not reasonably estimable.

disclosed only recorded and disclosed neither disclosed only

True or False: For financial accounting purposes, depreciation expense represents the decreasein an asset's fair market value.

false

True or False: Intangible assets can be observed to physically deteriorate over time.

false

Wolfpack, Inc. borrowed $500,000 on 1/1/2022 and will pay it back in five annual payments, the first $100,000 payment (plus interest) is due on 1/1/2023. If the interest rate on the note is 10%, what current liabilities and long-term liabilities (if any) will be recognized as a function of this borrowing on the 12/31/2022 balance sheet?

interest at 12/31/22 = 500,000 x 10% x 12/12 = 50,000 current liabilities at 12/31/22 = 100,000 (principal) + 50,000 interest payable = 150,000 long-term liabilities = 400,000 ( no interest on this ) 2023: 300,000 long term 140,000 current liability

The U, Inc. is considering buying equipment at a cost of $75,000. The equipment is expected to generate cash flows of $16,000 per year for eight years and can be sold at the end of eight years for $5,000. The discount rate is 12%. Assume the equipment would be paid for on the first day of year one, but that all other cash flows occur at the end of the year. Ignore income tax considerations. Determine if "The U" should purchase the machine.

use PV annuity (table 4) for annual cash flows and PV cash (table 2) for sale price at end PV= 16,000 x 4.96764 = 79,482 PV= 5,000 x .40388 = 2,019 so buy equipment (value exceeds 75,000 cost)

You plan to retire in exactly 30 years. You will be able to invest $25,000 at the end of each year for the 30 years. If you can earn 9% annually, how much will your retirement account balance be in 30 years?

using table 3- FV = $25,000 x 136.3075 = $3,407,688

Assuming a current ratio of 2.00 and an acid-test ratio of 1.00, how will the purchase of inventory on account affect each ratio?

Decrease the current ratio and decrease the acid-test ratio.

The present value of $5,000 to be received one year from today, if the appropriate discount rate = 8% is

less than 5000

Branson Corp. purchased a new machine for its business. The following list shows the various expenditures for the machine during its first year: Base purchase price, $50,000 Insurance costs incurred while the machine was being shipped, $300 Sales tax incurred at the time of purchase, $3,000 Installation charges for the machine, $2,000 Ordinary repairs and maintenance costs during the first year of the machine's service life, $1,200 Insurance costs for the first year of the machine's service life, $500 Question: What should be the capitalized cost of the machine?

55300

Beginning one year from today, Kaitlyn will begin investing $4,000 at the end of each year for ten (10) years at 9% interest compounded annually. Question #1: Rounded to the nearest whole dollar, how much will Kaitlyn have in her account at the end of year ten, immediately after her last payment?

60772 Rounded to the nearest whole dollar, how much in total interest did Kaitlyn earn over the entire ten years? 20772

Mason borrows $600,000 to be paid off in five years. The loan payments are semiannual with the first payment due in six months, and interest is at 6% annually (compounded semi-annually). What is the amount of each payment?

70,338 PV of Annuity = PMT x Table 4 Factor (n = 10, I = 3%) (compounded 2x/year) $600,000 = PMT x 8.53020 PMT = $600,000/8.53020 = $70.338

Assume that NoleCo records both sales and sales tax collections in a single account (Sales Revenue). If the balance in the Sales Revenue account is $200,000 and the state sales tax rate is 5%, what sales tax liability balance should be reported prior to remitting to the state?

9,524 200,000 = sales revenue + sales tax 200,000 = 1.05 sales revenue 200,000/1.05 = 190,476 = sales revenue sales tax = 200,000 - 190,476 = 9,524

Doug Shannon has been offered the opportunity of investing $154,217.32 now. The investment will earn 10% per year and at the end of its life will return $400,000 to Doug. How many years must Doug wait to receive the $400,000?

PV = FV x Table 2 Factor (n= ?, I = 10%) $154,217.32 = $400,000 x Table 2 Factor Table 2 Factor = $154,217.32/$400,000 = .38554 Look at Table 2 in I = 10% column and find factor Factor is in in n = 10 row

On November 1, Demon Deacon Training Corp. (DDTC) borrows $60,000 cash from Wolfpack Savings and Loan. DDTC signs a six-month, 8% note payable. Interest is payable at maturity. DDTC's year-end is December 31. Record the appropriate adjustment for the note by DDTC on December 31

interest expense = 60,000 x 8% x 2/12 (nov + dec) = 800 interest expense 800 (left) interest payable 800 (right)

A company which has sufficient cash, or other current assets convertible into cash in a relatively short period of time, in order to pay currently maturing debts is said to be ______.

liquid

Assume today is April 1, and you plan to invest $12,000 today in an account earning interest of 6% compounded semi-annually. You would like to calculate the amount your investment will grow to three years from now.Question: What should be the correct "n" and "i" to use for factor table purposes to answer your question?

n= 6 I= 3%

The Depreciation Conformity Rule requires that companies that use an accelerated depreciation method for tax purposes must

no such thing as depreciation conformity rule

FSU, Inc. borrows $50,000 (the principal) on January 1, 2022 to be paid back in 10 equal annual payments (first payment is due in one year) over the next ten years. If the interest rate is 6%, what is the amount of the payment? For the first payment, how much of the total payment amount is for interest? How much is for principal? For the second payment, how much of the total payment amount is for interest? How much is for principal?

pv of 50,000 = pmt X factor (n=10, I=6%) 50,000/7.36009=6,793.40 50,000 principal x 6% = 3,000 interest 6,793.40 payment - 3,000 interest = 3,793.40 for principal 50,000-3,793.40 principal x 6% = 2,772.40 interest 6,793.40 payment - 2,772.40 interest = 4,021.00 principal

A machine is purchased on 1/1/21 for $400,000 and is expected to have a 4-year service life and no salvage value. In 2022, which depreciation method (straight-line or double-declining balance) will produce the higheramount of depreciation expense?

the depreciation expense will be the same in 2022

Assume you wish to have a certain amount saved five years from today, and you plan to make a one-time deposit today in an interest-bearing account earning interest of 10%. As the compounding frequency of interest increases, the amount you need to invest today in order to achieve your goal will decrease.

true

At a given interest rate, if $2,000 is invested today for five years, the future value will be higher if interest is compounded quarterly rather than compounded annually.

true

Compound interest is a method of calculating interest for which interest is computed on the initial investment amount as well as on any previous interest.

true

Time value of money concepts are essential to understand and apply when making many business decisions.

true

True or False: A company should record an asset called "Goodwill" when it purchases another company for an amount that exceeds the fair value of the other company's identifiable net assets.

true

True or False: Companies prefer that their working capital be a positive amount rather than a negative amount.

true

True or False:A liability should be classified on the balance sheet as a "current liability" when the company expects to decrease or satisfy the liability within one year or the operating cycle, whichever is longer.

true