Accounting 2081- Final

A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a:

$0 gain or loss.

An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of employee earnings per calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount of total unemployment taxes the employee must pay?

$0.00

The balances in Sanchez Accounting Services' office supplies account on February 1 and February 28 were $1,200 and $375, respectively. If the office supplies expense for the month is $1,900, what amount of office supplies was purchased during February?

$1,075

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.)

$10,450

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Net income equals:

$115,000.

The adjusted cash balance should be:

$16,400

Using the information in the table, calculate Jackson Consulting's reported net income for the period.

$16,800

An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $118,500. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

$2,830.50.

On November 8, it sold 12 units for $54 each. Using the LIFO perpetual inventory method, what was the amount recorded in the cost of goods sold account for the 12 units sold?

$260

Use the following information for Meeker Corp. to determine the amount of equity to report.

$270,000.

Monarch Company uses a weighted-average perpetual inventory system, and has the following purchases and sales: What is the value of ending inventory? (Round average cost per unit to 2 decimal places, and final answer to the nearest dollar.)

$278

Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount of gain or loss on the sale.

$3,500 gain.

On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What amount of the insurance expense will be reported on the annual income statement for the year ended December 31?

$337.50

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

$4,000

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

$4,794.

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

$417,000.

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

$45,600

On December 31, there were 26 units remaining in ending inventory. Using the Perpetual FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

$5,130

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

$5,760.

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

$50.00

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The amount that Klein receives from Babson on March 20 is:

$7,065

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The machine's book value at the end of year 2 is:

$8,640.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.)

$8,670

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value of the note on March 1? (Use 360 days a year.)

$9,240

The credit terms 2/10, n/30 are interpreted as:

2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

On July 1 of the current calendar year, Plum Co. paid $7,500 cash for management services to be performed over a two-year period beginning July 1. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 of the current year for Plum would include:

A debit to an expense and a credit to a prepaid expense for $1,875.

A debit memorandum on a bank statement indicates:

A decrease in the bank's liability account.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

A note receivable.

A contingent liability is:

A potential obligation that depends on a future event arising from a past transaction or event.

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

Accounting equation.

Identify the account below that is classified as an asset in a company's chart of accounts:

Accounts Receivable

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accrual basis accounting.

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:

Accrued expenses

If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should:

Add the deposit to the bank statement balance.

Adjusting entries:

Affect only balance sheet accounts.

A trial balance prepared before any adjustments have been recorded is:

An unadjusted trial balance.

Physical counts of inventory:

Are necessary to adjust the Inventory account to the actual inventory available.

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debts Expense 15,375 Allowance for Doubtful Accounts 15,375

The total cost of an asset less its accumulated depreciation is called:

Book value

Which of the following does not require an adjusting entry at year-end?

Cash invested by stockholders.

Natural resources are:

Consumable assets such standing timber, mineral deposits, and oil and gas fields.

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. The journal entry or entries that Klein will make on March 12 is:

Correct Accounts receivable 7,800 Sales 7,800 Cost of goods sold 4,500 Merchandise Inventory 4,500

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the merchandise return on July 7 is:

Debit Accounts Payable $200; credit Merchandise Inventory $200.

On January 1, Imlay Company purchases manufacturing equipment costing $95,000 that is expected to have a five-year life and an estimated salvage value of $5,000. Imlay uses the straight-line depreciation method to allocate costs, and only prepares adjustments at year-end. The adjusting entry needed on December 31 of the first year is:

Debit Depreciation Expense, $18,000; credit Accumulated Depreciation, $18,000.

Lemming makes an $18,750, 120-day, 8% cash loan to Notions Co. on November 1. Lemming's end-of-period adjusting entry on December 31 should be:

Debit Interest Receivable $250; credit Interest Revenue $250.

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The correct journal entry to record the purchase on August 7 is:

Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750.

On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company to extend the due date on an overdue account. What is the journal entry that Indigo Company would make, when it records payment of the note on the maturity date? (Use 360 days a year.)

Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

Debit Salaries Expense $400 and credit Salaries Payable $400.

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Debit Salaries Expense and credit Salaries Payable.

On December 31, Carmack Company received a $215 utility bill for December that it will not pay until January 15. The adjusting entry needed on December 31 to accrue this expense is:

Debit Utilities Expense $215; credit Accounts Payable $215.

A credit entry:

Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts.

On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

Deducted from the book balance of cash.

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

Depreciation expense

Distributions of cash or other resources by a business to its stockholders are called:

Dividends

Extraordinary repairs:

Extend the useful life of an asset beyond its original estimate.

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Interest

Which of the following statements is true?

Interest on bonds is tax deductible.

The maturity date of a note receivable:

Is the day the note is due to be repaid.

Depreciation:

Is the process of allocating the cost of a plant asset to expense.

Intangible assets do not include:

Land held as an investment.

Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as:

Long-term liabilities.

The person who signs a note receivable and promises to pay the principal and interest is the:

Maker

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

Which of the following is not classified as plant assets?

Patent

Identify the accounts that would normally have balances in the credit column of a business's trial balance.

Revenues and liabilities.

The principles of internal control include:

Separate recordkeeping from custody of assets.

Plant assets are defined as:

Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business.

A bond traded at 102½ means that:

The bond traded at 102.5% of its par value.

When a bond sells at a premium:

The contract rate is above the market rate.

An account balance is:

The difference between the total debits and total credits for an account including the beginning balance.

The useful life of a plant asset is:

The length of time it is productively used in a company's operations.

Identify the statement below that is incorrect.

The normal balance of an expense account is a credit.

Depletion is:

The process of allocating the cost of natural resources to the period when it is consumed.

A bondholder that owns a $1,000, 10%, 10-year bond has:

The right to receive $1,000 at maturity.

Amortization is:

The systematic allocation of the cost of an intangible asset to expense over its estimated useful life.

Which of the following combinations results in a net loss reported on the income statement?

Total revenues of $70,000 and total expenses of $74,000.

Select the account below that normally has a credit balance.

Wages Payable.

Outstanding checks refer to checks that have been:

Written, recorded on the company books, sent to the payee, but not yet paid by the bank.

On December 1, Simpson Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned fees. The adjusting entry for the year ended December 31 would include:

a debit to Unearned Fees for $1,800

A report that lists a business's accounts and their balances, in which the total debit balances should equal the total credit balances, is called a(n):

trial balance