Accounting Exam #2

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay a. $49,500 b. $50,000 c. $53,000 d. $50,500

B. $50,000

The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is a. $40,000 b. $43,600 c. $44,000 d. $40,400

D. 40,400

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds. True False

False

Most employers are levied a tax on payrolls for a. ​federal unemployment compensation tax b. ​sales tax c. ​medical insurance premiums d. ​union dues

A. federal unemployment compensation tax

When referring to a note receivable or promissory note a. the maker is the party to whom the money is due b. the note may be used to settle an account receivable c. the note cannot be factored to another party d. the note is not considered a formal credit instrument

B. the note may be used to settle an account receivable

Interest payments on 12% bonds with a face value of $20,000 and interest paid semiannually would be $2,400 every 6 months. True False

False

An equal stream of periodic payments is called an annuity. True False

True

In valuing merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal. True False

True

It is not necessary for a company to use the same depreciation method for financial statements and for determining income taxes. True False

True

Under the allowance method of uncollectible accounts, the entry to write off a customer's account affects the accounting equation by a. decreasing a liability and increasing stockholders' equity (revenue) b. increasing a liability and decreasing a liability c. increasing an asset and decreasing an asset d. decreasing an asset and decreasing stockholders' equity (expense)

not sure

Federal income taxes are subject to a maximum amount per employee per year. True False

not sure I think false

Bonds with a face amount of $1,000,000 are sold at 98. The entry to record the issuance is a. Cash 980,000 Discount on Bonds Payable 20,000 Bonds Payable 1,000,000 b. Cash 1,000,000 Premium on Bonds Payable 20,000 Bonds Payable 980,000 c. Cash 980,000 Premium on Bonds Payable 20,000 Bonds Payable 1,000,000 d. Cash 980,000 Bonds Payable 980,000

A

Sadie White receives an hourly rate of $30, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $300; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to White? a. $1,143 b. $1,260 c. $1,443 d. $1,560

A. $1,143

Stevens Company started the year with an inventory cost of $145,000. During the month of January, Stevens purchased inventory that cost $53,000. January sales totaled $140,000. Estimated gross profit is 35%. The estimated ending inventory as of January 31 is a. $107,000 b. $69,300 c. $58,000 d. $91,000

A. $107,000

The Levi Company issued $200,000 of 12% bonds on January 1 of the current year at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, and mature in five years, on January 1. The total interest expense related to these bonds for the current year ending on December 31 is a. $24,000 b. $2,000 c. $6,000 d. $18,000

A. $24,000

On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of a. $450 b. $1,800 c. $900 d. $0

A. $450

The Weber Company purchased a mining site for $1,600,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. During the first year, the company extracted 6,500 tons of ore. The depletion expense is a. $26,000 b. $17,500 c. $15,000 d. $16,000

A. 26,000

Mathai Company has sales of $4,800,000 for the current year. The book value of its fixed assets at the beginning of the year was $1,450,000 and at the end of the year was $1,600,000. The fixed asset turnover ratio for Mathai is a. 3.0 b. 3.1 c. 3.3 d. 3.2

A. 3.0

Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct the new warehouse. What is the cost of the land to be reported on the balance sheet? a. $486,775 b. $443,200 c. $450,000 d. $493,575

A. 486,775

Balance sheet and income statement data indicate the following: Bonds payable, 6% (this is year 4 of 20 years) $1,200,000 Income before income tax for year 340,000 Income tax for year 80,000 Interest payable 9,000 Interest receivable 26,000 ​ Based on the data presented above, what is the times interest earned ratio? (Round to two decimal places.) a.5.72b.4.72c.4.83d.6.83

A. 5.72

The Merchant Company issued 10-year bonds on January 1. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (round to the nearest dollar) of a. $7,032 b. $7,500 c. $14,065 d. $8,790

A. 7032

Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for the pay period of January 15-31. Use this information to answer the questions that follow. Gross payroll $10,000 Federal income tax withheld $1,800 Social security rate 6% Federal unemployment tax rate 0.8% Medicare rate 1.5% State unemployment tax rate 5.4% ​ ​ Salaries Payable would be recorded in the amount of a. $7,450 b. $8,630 c. $8,200 d. $6,830

A. 7450

Determine the total value of the merchandise using net realizable value. Item Quantity Selling Price Commission Doll 10 $7 $2 Horse 5 9 3 a. $80 b. $115 c. $25 d. $35

A. 80

If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Goods Sold (COGS), an equivalent equation can be written as a.BI + P = COGS + EI b.EI + P = COGS - BI c.BI + P = COGS - EI d.BI - P = COGS + EI

A. BI + P = COGS + EI

If Beginning Inventory (BI) + Purchases (P) - Ending Inventory (EI) = Cost of Goods Sold (COGS), an equivalent equation can be written as a. BI + P = COGS + EI b. BI + P = COGS - EI c. BI - P = COGS + EI d. EI + P = COGS - BI

A. Bi + P = COGS + EI

On June 8, Smith Technologies issued a $75,000, 6%, 140-day note payable to Johnson Company. What is the due date of the note? a. October 26 b. October 27 c. October 25 d. October 28

A. October 26

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true? a. Rodriguez is the borrower and debits Accounts Payable b. Wilson is the borrower and credits Accounts Payable c. Rodriguez is the creditor and credits Accounts Receivable d. Wilson is the creditor and debits Accounts Receivable

A. Rodriguez is the borrower and debits accounts payable

The accumulated depletion of a natural resource is reported on the a. balance sheet as a deduction from the cost of the resource b. income statement as a deduction from revenues c. income statement as an increase in revenue d. balance sheet as depreciation from the cost of the resource

A. balance sheet as a deduction from the cost of the resource

The following totals for the month of April were taken from the payroll register of Magnum Company: ​ Salaries $10,000 FICA taxes withheld 750 Income taxes withheld 2,000 Medical insurance deductions 450 Unemployment taxes 420 ​ The entry to record accrual of employer's payroll taxes would include a a. ​debit to Payroll Tax Expense for $1,170 b. ​credit to Payroll Tax Expense for $420 c. ​debit to Payroll Tax Expense for $1,620 d. ​debit to FICA Taxes Payable for $1,500

A. debit to payroll tax expense for $1,170

The calculation for annual depreciation using the units-of-output method is a. (Depreciable cost / Estimated output) × Actual yearly output b. Depreciable cost / Yearly output c. (Depreciable cost / Yearly output) × Estimated output d. (Initial cost / Estimated output) × Actual yearly output

A. depreciable cost/ estimated out x actual yearly output

The total earnings of an employee for a payroll period is referred to as a. gross pay b. pay net of taxes c. net pay d. take-home pay

A. gross pay

The total earnings of an employee for a payroll period is referred to as a.gross pay b.take-home pay c.pay net of taxes d.net pay

A. gross pay

Ending inventory is made up of the oldest purchases when a company uses a. last-in, first-out b. average cost c. retail method d. first-in, first-out

A. last in first out

Current assets are usually listed in order a. of liquidity b. alphabetically c. of the size d. of the due date

A. liquidity

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the a. manufacturer b. shipper c. consignee d. retailer

A. manufacturer

Inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? a. net income is understated b. cost of goods sold is understated c. inventory reported on the balance sheet is overstated d. net income is overstated

A. net income is understated

Which document establishes an initial record of the receipt of the inventory?​ a.​receiving report b.​purchase order c.​petty cash voucher d.​vendor's invoice

A. receiving report

Which of the following is true? a. Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same. b. If using the double-declining-balance method, the total amount of depreciation expense during the life of the asset will be the highest. c. If using the units-of-output method, it is possible to depreciate more than the depreciable cost. d. If using the straight-line method, the amount of depreciation expense during the first year is higher than that of the double-declining-balance.

A. regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same

When the maturities of a bond issue are spread over several dates, the bonds are called a. serial bonds b. term bonds c. bearer bonds d. debenture bonds

A. serial bonds

When the maturities of a bond issue are spread over several dates, the bonds are called a. serial bonds b. term bonds c. debenture bonds d. bearer bonds

A. serial bonds

Present Value of $1 at Compound Interest Periods 5% 6% 7% 10% 12% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 0.90703 0.89000 0.87344 0.82645 0.79719 3 0.86384 0.83962 0.81630 0.75132 0.71178 4 0.82270 0.79209 0.76290 0.68301 0.63552 5 0.78353 0.74726 0.71299 0.62092 0.56743 6 0.74622 0.70496 0.66634 0.56447 0.50663 7 0.71068 0.66506 0.62275 0.51316 0.45235 8 0.67684 0.62741 0.58201 0.46651 0.40388 9 0.64461 0.59190 0.54393 0.42410 0.36061 10 0.61391 0.55840 0.50835 0.38554 0.32197 ​ a. $60,000 b. $56,604 c. $3,396 d. $63,396

B 56,504

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 2 carrying amount in the allocation of periodic payments table for this installment note will be equal to a. $26,000 b. $27,635 c. $21,642 d. $28,402 ​

B. $27,635

Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90-day, discounted note payable of $100,000 is a. $500 b. $1,500 c. $6,000 d. $3,000

B. 1,500

Excom sells radios and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 100 radios for $50 each. One radio is actually replaced during September. For what amount in September would Excomdebit Product Warranty Expense? a.$120 b.$250 c.$30 d.$50

B. 250

The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 5 $20 10 Sale 3 17 Purchase 10 $24 20 Sale 6 23 Sale 3 30 Purchase 10 $30 ​ ​ Assuming that the company uses the perpetual inventory system, determine the May 31 inventory balance using the FIFO inventory cost method. ​ a. $320 b. $372 c. $364 d. $324

B. 372

The following lots of Commodity Z were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 10 units at $30 First purchase 25 units at $32 Second purchase 30 units at $34 Third purchase 10 units at $35 ​ ​ The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year according to the LIFO method? a. $655 b. $620 c. $690 d. $659

B. 620

Addison, Inc. uses a perpetual inventory system. Below is information about one inventory item for the month of September. Use this information to answer the questions that follow. Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 ​ ​ If Addison uses FIFO, the September 30 inventory is a. $750 b. $800 c. $650 d. $700

B. 800

On June 8, Williams Company issued an $80,000, 5%, 120-day note payable to Brown Industries. Assuming a 360-day year, what is the maturity value of the note? When required, round your answer to the nearest dollar. a. $84,000 b. $81,333 c. $88,200 d. $82,600

B. 81,333

​The journal entry a company uses to record pension rights that have not been funded for its salaried employees at the end of the year is a. ​debit Pension Expense; credit Unfunded Pension Liability and Cash b. ​debit Pension Expense; credit Unfunded Pension Liability c. ​debit Salary Expense; credit Cash d. ​debit Pension Expense; credit Cash

B. Debit Pension Expense; credit Unfunded Pension Liability

The inventory costing method that reports the most current prices in ending inventory is a. LIFO b. FIFO c. specific identification d. average cost

B. Fifo

Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categories a. salvage and functional b. physical and functional c. functional and residual d. residual and salvage

B. Physical and functional

Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write off this account, Dalton should debit a. Bad Debt Expense and credit Accounts Receivable b. Allowance for Doubtful Accounts and credit Accounts Receivable c. Bad Debt Expense and credit Allowance for Doubtful Accounts d. Accounts Receivable and credit Allowance for Doubtful Accounts

B. allowance for doubtful accounts and credit accounts receivable

Any unamortized premium should be reported on the balance sheet of the issuing corporation as a. as paid-in capital b. an addition to the face amount of the bonds in the liabilities section c. a direct deduction from the face amount of the bonds in the liabilities section d. a direct deduction from retained earnings

B. an addition to the face amount of the bonds in the liabilities section

According to a summary of the payroll of Scotland Company, total salaries were $500,000. Assume that social security taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate with no maximum earnings. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. The journal entry to record accrued salaries would include a ​ a. credit to Salaries Expense of $365,250 b. credit to Salaries Payable of $364,500 c. debit to Salaries Expense of $364,500 d. debit to Salaries Payable of $365,250

B. credit to salaries payable of 364,500

The following totals for the month of April were taken from the payroll register of Magnum Company: ​ Salaries $10,000 FICA taxes withheld 750 Income taxes withheld 2,000 Medical insurance deductions 450 Unemployment taxes 420 ​ The entry to record accrual of employer's payroll taxes would include a a. ​debit to FICA Taxes Payable for $1,500 b. ​debit to Payroll Tax Expense for $1,170 c. ​debit to Payroll Tax Expense for $1,620 d. ​credit to Payroll Tax Expense for $420

B. debit fo payroll tax expense for $1,170

Miles uses the allowance method and wrote off the account of James. Miles then received $559 as partial payment on the account of James. The journal entry to record the initial write-off includes a a. credit to Cash b. debit to Allowance for Doubtful Accounts c. debit to Accounts Receivable, James d. credit to Bad Debt Expense

B. debit to allowance for doubtful accounts

The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is a. debit Salary Expense; credit Cash b. debit Vacation Pay Expense; credit Vacation Pay Payable c. debit Vacation Pay Payable; credit Vacation Pay Expense d. debit Salary Expense; credit Salaries Payable

B. debit vacation pay expense credit vacation pay payable

If a company borrows money from a bank as an installment note, the interest portion of each annual payment will a. increase over the term of the note b. equal the interest rate on the note times the carrying amount of the note at the beginning of the period c. remain constant over the term of the note d. equal the interest rate on the note times the face amount

B. equal the interest rate on the note times the carrying amount of the note at the beginning of the period

Expected useful life is a. calculated when the asset is sold b. estimated at the time that the asset is placed in service c. determined each year that the depreciation calculation is made d. none of these

B. estimated at the time that the asset is placed in service

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using a. last-in, first-out b. first-in, first-out c. first-in, last-out d. average cost

B. first in first out

Ending inventory is made up of the oldest purchases when a company uses a. average cost b. last-in, first-out c. first-in, first-out d. retail method

B. last in, first out

The receivable that is usually evidenced by a formal, written instrument of credit is a(n) a. income tax receivable b. note receivable c. accounts receivable d. trade receivable

B. note receivable

The balance in Discount on Bonds Payable a. should be reported on the balance sheet as an asset because it has a debit balance b. would be subtracted from the related bonds payable on the balance sheet c. should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method d. would be added to the related bonds payable to determine the carrying amount of the bonds

B. would be subtracted from the related bonds payable on the balance sheet

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. May 1 Purchased 500 units @ $25.00 each ​ 4 Purchased 300 units @ $24.00 each ​ 6 Sold 400 units @ $38.00 each ​ 8 Purchased 700 units @ $23.00 each ​ 13 Sold 450 units @ $37.50 each ​ 20 Purchased 250 units @ $25.25 each ​ 22 Sold 275 units @ $36.00 each ​ 27 Sold 300 units @ $37.00 each ​ 28 Purchased 550 units @ $26.00 each ​ 30 Sold 100 units @ $39.00 each Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the FIFO perpetual inventory method. a. Total sales: $56,975.00 Cost of goods sold: $36,587.50 Gross profit: $20,387.50 Ending inventory: $19,825.00 b. Total sales: $56,975.00 Cost of goods sold: $37,312.50 Gross profit: $19,662.50 Ending inventory: $19,573.25 c. Total sales: $56,975.00 Cost of goods sold: $36,431.25 Gross profit: $20,543.75 Ending inventory: $19,981.2 d. Total sales: $56,975.00 Cost of goods sold: $37,401.75 Gross profit: $19,573.25 Ending inventory: $19,010.75

C

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, of the first year, for each of the next five years. After the final payment, the carrying amount on the note will be a. $1,263 b. $21,053 c. $0 d. $22,315

C. $0

Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The markup is 100% of cost. Determine the ending inventory at its estimated cost. ​ a. $80,000 b. $45,000 c. $40,000 d. $160,000

C. $40,000

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of credit sales. If credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivable is a. $8,500 b. $9,500 c. $9,000 d. Cannot be determined

C. $9,000

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption? a. $7,000 gain b. $7,000 loss c. $3,000 loss d. $3,000 gain

C. 3,000 loss

QUESTION 25 The Young Company has the following assets and liabilities: ​ ASSETS Cash $35,000 Accounts receivable 15,000 Inventory 30,000 Equipment 50,000 LIABILITIES Current portion of long-term debt 10,000 Accounts payable 2,000 Long-term debt 25,000 ​ Determine the quick ratio (rounded to one decimal point). a.3.5 b.6.7 c.4.2 d.13.0

C. 4.2

Balance sheet and income statement data indicate the following: Bonds payable, 6% (due in 15 years) $1,200,000 Income before income tax for year 320,000 Income tax for year 80,000 Interest payable 33,000 Interest receivable 19,000 ​ Based on the data presented above, what is the times interest earned ratio? (Round to two decimal places.) a.4.00 b.5.00 c.5.44 d.4.33

C. 5.44

If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is a. $15 b. $135 c. $60 d. $75

C. 60

A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of a. $85,000 b. $82,000 c. $93,000 d. $90,000

C. 93,000

An unfunded pension liability is reported on the balance sheet as a. current liability b. long-term liability c. current liability or long-term liability, depending upon when the pension liability is to be paid d. owner's equity

C. Current liability or long-term liability, depending upon when the pension liability is to be paid

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with which of the following entries (assuming the exchange was considered to have commercial substance)? a. debit Cash and Machinery; credit Accumulated Depreciation and Machinery b. debit Cash and Machinery; credit Accumulated Depreciation c. debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Exchange of Machinery d. debit Machinery and Accumulated Depreciation; credit Machinery and Cash

C. Debit Machinery; credit accumulated depreciation

Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the following entries records the proper adjusting entry for bad debt expense? ​ a. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400 b. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600 c. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600 d. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600

C. Debit bad debt expense $13,600, credit allowance for doubtful accounts

During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory? a. average cost method b. LIFO method c. FIFO method d. cannot tell without more information

C. Fifo method

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using a. last-in, first-out b. first-in, last-out c. first-in, first-out d. average cost

C. First in-first out

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the a. consignee b. shipper c. manufacturer d. retailer

C. Manufacturer

If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. financial strength of the issuer is suspect c. market interest rate is higher than the contractual interest rate d. market interest rate is lower than the contractual interest rate

C. Market interest rate is higher than the contractual interest rate

FIFO reports higher gross profit and net income than the LIFO method when a. prices are decreasing b. prices are reduced by 50% c. prices are increasing d. prices remain stable

C. Prices are increasing

All of the following are reasons to use an estimated method of costing inventory except ​ a. Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period. b. Perpetual inventory records are not maintained. c. Purchase records are not maintained. d. A disaster has destroyed the inventory records and the inventory.

C. Purchase records are not maintained

The following information was taken from the financial records of Sodigaz, Inc. Year 1 Year 2 Sales $285,000 $278,500 Accounts receivable: Beginning of year 29,600 18,900 End of year 41,000 29,600 ​ The accounts receivable turnover for each year is a. Year 1: 11.5; Year 2: 8.1 b. Year 1: 14.7; Year 2: 9.6 c. Year 1: 8.1; Year 2: 11.5 d. Year 1: 9.4; Year 2: 7.0

C. Year 8.1; year 2 11.5 The answer is not C

If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true? a. Annual interest expense will decrease over the life of the bonds with the amortization of bond discount. b. Annual interest expense will increase over the life of the bonds with the amortization of bond premium. c. Annual interest expense will remain the same over the life of the bonds with the amortization of bond discount. d. Annual interest expense will increase over the life of the bonds with the amortization of bond discount.

C. annual interest expense will remain the same over the life of the bonds with the amortization of bond discount

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? ​ a.Bad Debt Expense 22,000 Allowance for Doubtful Accounts 22,000 b.Bad Debt Expense 19,500 Allowance for Doubtful Accounts 19,500 c.Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000 d.Bad Debt Expense 65,000 Allowance for Doubtful Accounts 65,000

C. bad debt expense 17,000 allowance for doubtful accounts 17,000

When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be found in the general journal? a. Cash 300 Allowance for Doubtful Accounts 200 Accounts Receivable, Bob Smith 500 b. Bad Debt Expense 500 Allowance for Doubtful Accounts 500 c. Bad Debt Expense 500 Accounts Receivable, Bob Smith 500 d. Cash 500 Accounts Receivable, Bob Smith 500

C. bad debt expense 500 accounts receivable 500

Which of the following is included in the cost of land? a. fences on the land b. outdoor parking lot lighting attached to the land c. brokerage commission d. cost of paving a parking lot

C. brokerage commission

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to a. debit Cash and Discount on Bonds Payable, credit Bonds Payable b. debit Cash, credit Premium on Bonds Payable and Bonds Payable c. debit Cash, credit Bonds Payable d. debit Bonds Payable, credit Cash

C. debit cash credit bonds payable

The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be a. debit Cash and Discount on Bonds Payable, credit Bonds Payable b. debit Bonds Payable, credit Cash c. debit Cash, credit Premium on Bonds Payable and Bonds Payable d. debit Cash, credit Bonds Payable

C. debit cash, credit premium on bonds payable and bond bonds payable

The journal entry a company uses to record the estimated product warranty liability expense is a. debit Product Warranty Payable; credit Cash b. debit Product Warranty Payable; credit Product Warranty Expense c. debit Product Warranty Expense; credit Product Warranty Payable d. debit Product Warranty Expense; credit Cash

C. debit product warranty expense; credit product warranty payable

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a ​ a.debit to Bad Debt Expense for $6,400 b.debit to Bad Debt expense for $5,100 c.debit to Bad Debt Expense for $7,700 d.credit to Allowance for Doubtful Accounts for $1,300

C. debit to bad debt expense for 7,700

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. their maturity value b. their face value c. a discount d. a premium

C. discount

The depreciation method that does not use residual value in calculating the first year's depreciation expense is a. straight-line b. units-of-output c. double-declining-balance d. sum-of-the-digits

C. double-declining balance

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000. The entry to record the redemption would include a a. loss on bond redemption of $4,000 b. loss on bond redemption of $3,000 c. gain on bond redemption of $4,000 d. gain on bond redemption of $3,000

C. gain on bond redemption of $4,000

On December 31, Strike Company sold one of its batting cages for $20,000. The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. What is the amount of the gain or loss on this transaction? a. loss of $20,000 b. gain of $20,000 c. loss of $30,000 d. gain of $30,000

C. loss of 30,000

The cost of a product warranty should be included as an expense in the a. future period when the cost of repairing the product is paid b. period the cash is collected for a product sold on account c. period of the sale of the product d. future period when the product is repaired or replaced

C. period of sale of the product

The primary objectives of control over inventory are a. reporting inventory in the financial statements b. maintaining constant observation of the inventory and reporting inventory in the financial statements c. safeguarding inventory from damage and reporting inventory in the financial statements d. safeguarding the inventory from damage and maintaining constant observation of the inventory

C. safeguarding inventory from damage and reporting inventory in the financial statements

A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? a. The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. b. The amount of the annual interest expense gradually decreases over the life of the bonds. c. The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. d. The bonds will be issued at a premium.

C. the amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity

On the balance sheet after adjusting entries are made, the amount shown for the Allowance for Doubtful Accounts is equal to the a. sum of all accounts that are past due b. uncollectible accounts expense for the year c. total estimated uncollectible accounts as of the end of the year d. total of the accounts receivable written off during the year

C. total estimated uncollectible accounts as of the end of the year

When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is a. straight-line method b. MACRS c. units-of-output method d. double-declining-balance method

C. units of output method

A current liability is a debt that is reasonably expected to be paid a. between 6 months and 18 months b. out of currently recognized revenues c. within one year d. out of cash currently on hand

C. within one year

Scott Company sells merchandise with a one-year warranty. Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales. Similarly, 30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales. In the Year 3 income statement, how much of the warranty expense shown will be due to Year 1 sales? a. $6,000 b. $14,000 c. $20,000 d. $0

D. $0

Eddie Industries issues $1,500,000 of 8% bonds at 105. The amount of cash received from the sale is a. $1,080,000 b. $1,000,000 c. $1,425,000 d. $1,575,000

D. $1,575,000

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 2 carrying amount in the allocation of periodic payments table for this installment note will be equal to a. $28,402 ​ b. $26,000 c. $21,642 d. $27,635

D. $27,635

Which of the following is the most desirable quick ratio? a. 1.20 b. 0.50 c. 0.95 d. 1.00

D. 1.00

A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is a. $10,000 b. $10,900 c. $9,100 d. $10,150

D. 10,150

The following data were taken from Castle, Inc. Cost of goods sold $894,000 Inventory, end of year 78,000 Inventory, beginning of the year 92,000 What is (1) the inventory turnover ratio and (2) the number of days' sales in inventory for Castle Inc. a. (1) 11.46 times (2) 31.85 days b. (1) 10.53 times (2) 34.56 days c. (1) 9.72 times (2) 37.56 days d. (1) 10.52 times (2) 34.70 days

D. 10.52 times 34.70 days

The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 5 $20 10 Sale 3 17 Purchase 10 $24 20 Sale 6 23 Sale 3 30 Purchase 10 $30 ​ ​ Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method. a. $72 b. $180 c. $120 d. $108

D. 108

Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be a. $21,000 b. $1,000 c. $250 d. $20,250

D. 20,250

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption? a. $7,000 gain b. $7,000 loss c. $3,000 gain d. $3,000 loss

D. 3,000 loss

An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the first week of the calendar year are as follows: hours worked, 46; federal income tax withheld, $110; Social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment tax, 5.4% on the first $7,000; federal unemployment tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee? If required, round your answers to the nearest cent. a. $544.88 b. $625.00 c. $539.00 d. $569.87

D. 569.87

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the goods sold for November if the company uses FIFO? a. $610 b. $590 c. $600 d. $580

D. 580

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books? a. $54,000 b. $59,500 c. $60,500 d. $60,000

D. 60,000

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books? a. $60,500 b. $54,000 c. $59,500 d. $60,000

D. 60,000

A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased January 1. Compute the yearly depreciation expense using straight-line depreciation. a. $10,800 b. $9,500 c. $11,400 d. $9,000

D. 9,000

Which of the following should be included in the acquisition cost of a piece of equipment? a. transportation costs b. installation costs c. testing costs prior to placing the equipment into production d. all of these

D. All of these

Accumulated Depreciation a. is the same as Depreciation Expense b. is used to show the amount of cost expiration of natural resources c. is used to show the amount of cost expiration of intangibles d. is a contra asset account

D. Contra Asset account

Allowance for Doubtful Accounts is classified as a(n) ______ account and has a normal ______ balance. a. contra asset, debit b. stockholders' equity, debit c. stockholders' equity, credit d. contra asset, credit

D. Contra asset, credit

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a a. credit to Cash for $1,920,000 b. debit to Cash of $2,000,000 c. credit to Bonds Payable for $1,920,000 d. debit to Discount on Bonds Payable for $80,000

D. Debit to discount on bonds payable for $80,000

If inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is a. LIFO b. average cost c. periodic d. FIFO

D. Fifo

The inventory costing method that reports the most current prices in ending inventory is a. average cost b. specific identification c. LIFO d. FIFO

D. Fifo

Estimating and recording product warranty expense in the period of the sale best follows the a. business entity concept b. materiality concept c. cost concept d. matching concept

D. Matching Concept

Under the _____ inventory method, accounting records maintain a continuously updated inventory value. a. physical b. retail c. periodic d. perpetual

D. Perpetual

On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true? a. Rodriguez is the creditor and credits Accounts Receivable b. Wilson is the borrower and credits Accounts Payable c. Wilson is the creditor and debits Accounts Receivable d. Rodriguez is the borrower and debits Accounts Payable

D. Rodriguez is the borrower and debits accounts payable

Which of the following statements is true? a. The fixed asset ratio is not useful for comparing different companies. b. A smaller fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments. c. The fixed asset ratio cannot be compared across time for an individual company. d. A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments.

D. a larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments

Under a periodic inventory system a. accounting records continuously disclose the amount of inventory b. inventory is debited when goods are returned to vendors c. a separate account for each type of merchandise is maintained in a subsidiary ledger d. a physical inventory is taken at the end of the period

D. a physical inventory is taken at the end of the period

The operating expense recorded from uncollectible receivables can be called all of the following except a. uncollectible accounts expense b. bad debt expense c. doubtful accounts expense d. accounts receivable

D. accounts receivable

When an account receivable is written off under the direct write-off method, the accounting equation is kept in balance because a. equity both increases and decreases by the same amount. b. assets both increase and decrease by the same amount. c. assets and equity both increase by the same amount. d. assets and equity both decrease by the same amount.

D. assets and equity both decrease by the same amount

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? ​ a. Bad Debt Expense 19,500 Allowance for Doubtful Accounts 19,500 b. Bad Debt Expense 65,000 Allowance for Doubtful Accounts 65,000 c. Bad Debt Expense 22,000 Allowance for Doubtful Accounts 22,000 d. Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000

D. bad debt expense 17,000 allowance for doubtful accounts 17,000

The accumulated depletion of a natural resource is reported on the a. income statement as an increase in revenue b. balance sheet as depreciation from the cost of the resource c. income statement as a deduction from revenues d. balance sheet as a deduction from the cost of the resource

D. balance sheet as a deduction from the cost of resource

If bonds payable are not callable, the issuing corporation a.must get special permission from the SEC to repurchase them b.is more likely to repurchase them if the interest rates increase c.can exchange them for common stock d.can repurchase them in the open market

D. can repurchase them in the open market

Quick assets include a. cash, cash equivalents, receivables, and inventory b. cash, cash equivalents, receivables, prepaid expenses, and inventory c. cash, cash equivalents, receivables, and prepaid expenses d. cash, cash equivalents, and receivables

D. cash, cash equivalents and receivables

Selling the bonds at a premium has the effect of a. raising the effective interest rate above the stated interest rate b. causing the interest expense to be higher than the bond interest paid c. attracting investors that are willing to pay a lower rate of interest than on similar bonds d. causing the interest expense to be lower than the bond interest paid

D. causing the interest expense to be lower than the bond interest paid

If collection of an other receivable is expected beyond one year, it is classified as a a. noncurrent asset and reported under Other Receivables b. current asset and reported under Other Receivables c. current asset and reported under Investments d. noncurrent asset and reported under Investments

D. concurrent asset and reported under investments

Which of the following will be the same amount regardless of the cost flow assumption adopted? a. gross profit b. ending inventory c. number of items ordered d. cost of goods sold

D. cost of goods sold

Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year? a. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600 b. debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600 c. debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200 d. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200

D. debit bad debt expense 34,200; credit allowance for doubtful accounts 34,200

Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the year? a. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200 b. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600 c. debit Allowance for Doubtful Accounts, $43,200; credit Bad Debt Expense, $43,200 d. debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

D. debit bad debt expense 40,600, credit allowance for doubtful accounts 40,600

The journal entry used to record the issuance of a discounted note for the purpose of borrowing funds for the business is a. debit Notes Payable; credit Cash b. debit Accounts Payable; credit Notes Payable c. debit Cash and Interest Payable; credit Notes Payable d. debit Cash and Interest Expense; credit Notes Payable

D. debit cash and interest expense, credit notes payable

The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is a. debit Accounts Payable; credit Notes Payable b. debit Cash and Interest Expense; credit Notes Payable c. debit Notes Payable; credit Cash d. debit Cash; credit Notes Payable

D. debit cash; credit notes payable

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include a a. credit to Bad Debt Expense b. credit to Allowance for Doubtful Accounts c. debit to Allowance for Doubtful Accounts d. debit to Bad Debt Expense

D. debit to bad debt expense

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles ​ a. will decrease net income in the period it is collected b. will increase net income in the period it is collected c. requires a correcting entry for the period in which the account was written off d. does not affect net income in the period it is collected

D. does not affect net income in the period it is collected

The market interest rate related to a bond is also called the a. stated interest rate b. straight-line rate c. contract interest rate d. effective interest rate

D. effective interest rate

Notes may be issued a. when assets are purchased b. to creditors to temporarily satisfy an account payable created earlier c. when borrowing money d. for all of these

D. for all of these

An aid in internal control over payrolls that indicates employee attendance is a. fringe benefits b. voucher system c. special payroll bank account d. time card

D. time card

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct? a. Uncollectible accounts are estimated to be $55,500. b. Bad debt expense is estimated to be $5,550. c. Bad debt expense is estimated to be $11,100. d. Uncollectible accounts are estimated to be $111,000.

D. uncollectible accounts are. estimated to be 111,000

An alternative name for Bad Debt Expense is a. credit loss expense b. collection expense c. deadbeat expense d. uncollectible accounts expense

D. uncollectible accounts expense

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited a. when a credit sale is past due b. whenever a predetermined amount of credit sales have been made c. at the end of each accounting period d. when an account is determined to be worthless

D. when an account is determined to be worthless

A current liability is a debt that is reasonably expected to be paid a. out of currently recognized revenues b. out of cash currently on hand c. between 6 months and 18 months d. within one year

D. within one year

Long-lived assets held for sale are classified as fixed assets. True False

FALSE

Only callable bonds can be purchased by the issuing corporation before maturity. True False

FALSE

The price of a bond is equal to the sum of the interest payments and the face amount of the bonds. True False

FALSE

"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by the company. True False

False

A bond is usually divided into a number of individual bonds of $500 each. True False

False

A defined contribution plan promises employees a fixed annual pension benefit. True False

False

A disadvantage of factoring is that the company selling its receivables immediately receives cash. True False

False

All property, plant, and equipment assets are depreciated over time. True False

False

Allowance for Doubtful Accounts is a liability account. True False

False

Amounts withheld from each employee for social security and Medicare vary by state. True False

False

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange. True False

False

At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500. Credit sales for the period total $800,000. If bad debt expense is estimated at 1% of credit sales, the amount of bad debt expense to be recorded in the adjusting entry is $8,500. True False

False

Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds. True False

False

Direct disposal costs do not include special advertising or sales commissions. True False

False

During construction of a building, the cost of interest on a construction loan should be charged to an expense account. True False

False

During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method. True False

False

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits. True False

False

FICA tax is a payroll tax that is paid only by employers. True False

False

Federal income taxes are subject to a maximum amount per employee per year. True False

False

For income tax purposes, most companies use an accelerated deprecation method called double declining balance. True False

False

If ending inventory for the year is overstated, stockholders' equity reported on the balance sheet at the end of the year is understated. True False

False

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the semiannual straight-line amortization of the premium is $1,416. True False

False

If the straight-line method of amortization of discount on bonds payable is used, the amount of yearly interest expense will increase as the bonds approach maturity. True False

False

In the retail inventory method, the cost to retail ratio is equal to the cost of goods sold divided by the retail price of the goods sold. True False

False

Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets. True False

False

Minerals removed from the earth are classified as intangible assets. True False

False

No allowance account is used with the direct write-off method. True False

False

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods. True False

False

The accounts receivable turnover measures the length of time in days it takes to collect a receivable. True False

False

The accounts receivable turnover ratio is computed by dividing total gross sales by the average net receivables during the year. True False

False

The amortization of a premium on bonds payable decreases bond interest expense. True False

False

The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-output method during a period when the asset was used for 4,500 hours. True False

False

The amount of interest expense reported on the income statement will be more than the interest paid to bondholders if the bonds were originally sold at a discount. True False

False

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000, with an estimated residual value of $5,000 and a useful life of 4 years, is $25,000 by the double-declining-balance method. True False

False

The balance in Allowance for Doubtful Accounts at the end of the year includes the total of all accounts written off since the beginning of the year. True False

False

The balance of Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet. True False

False

The book value of a fixed asset reported on the balance sheet represents its market value on that date. True False

False

The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years. True False

False

The cost of replacing an engine in a truck is an example of ordinary maintenance. True False

False

The interest on a 6%, 60-day note for $5,000 is $300. True False

False

The maturity value of a 12%, 60-day note for $5,000 is $5,600. True False

False

The maturity value of a note receivable is always the same as its face value. True False

False

The method used to calculate the depletion of a natural resource is the straight-line method. True False

False

The normal balance of the accumulated depreciation account is a debit. True False

False

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30. Use the following table, if needed. ​ Present Value of $1 at Compound Interest Periods 5% 6% 7% 10% 12% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 0.90703 0.89000 0.87344 0.82645 0.79719 3 0.86384 0.83962 0.81630 0.75132 0.71178 4 0.82270 0.79209 0.76290 0.68301 0.63552 5 0.78353 0.74726 0.71299 0.62092 0.56743 6 0.74622 0.70496 0.66634 0.56447 0.50663 7 0.71068 0.66506 0.62275 0.51316 0.45235 8 0.67684 0.62741 0.58201 0.46651 0.40388 9 0.64461 0.59190 0.54393 0.42410 0.36061 10 0.61391 0.55840 0.50835 0.38554 0.32197 True False

False

The use of a separate payroll bank account is not an advantageous control, because it creates more complexity in reconciliation functions for a company and invites theft. True False

False

Though a piece of equipment is still being used, the equipment should be removed from the accounts if it has been fully depreciated. True False

False

To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond. True False

False

Unsold consigned merchandise should be included in the consignee's inventory. True False

False

When a plant asset is traded for another similar asset, losses on the asset traded are not recognized. True False

False

When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated. True False

False

When exchanging equipment, if the trade-in allowance is greater than the book value a loss results. True False

False

When the effective interest rate method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period. True False

False

When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold. True False

False

The interest on a 6%, 60-day note for $5,000 is $300. True False

False 50

Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000. Assume 1,200 hours were used the first year and 2,250, the second year. What is the first-year depreciation for straight-line (SL), double-declining balance (DDB) and units-of-output (UOO) methods? a. SL: $70,000, DDB: $144,000; UOO: $30,000 b. SL: $70,000; DDB: $140,000; UOO: $30,000 c. SL: $72,000; DDB: $144,000; UOO: $30,000 d. SL: $72,000; DDB: $140,000; UOO: $56,250

If not B then D

On the basis of the following data, what is the estimated cost of the inventory on May 31 using the retail method? Cost Retail May 1 Inventory $125,000 $166,667 May 1-31 Purchases 235,000 313,333 May 1-31 Sales 230,000 ​ a. $360,000 b. $187,500 c. $250,000 d. $172,500

N. 187,500

The journal entry a company uses to record fully funded pension rights for its salaried employees at the end of the year is a. debit Pension Expense; credit Cash b. debit Pension Expense; credit Unfunded Pension Liability c. debit Pension Expense; credit Unfunded Pension Liability and Cash d. debit Salary Expense; credit Cash

NOT B debit pension expense; credit unfunded pension liability

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. May 1 Purchased 500 units @ $25.00 each ​ 4 Purchased 300 units @ $24.00 each ​ 6 Sold 400 units @ $38.00 each ​ 8 Purchased 700 units @ $23.00 each ​ 13 Sold 450 units @ $37.50 each ​ 20 Purchased 250 units @ $25.25 each ​ 22 Sold 275 units @ $36.00 each ​ 27 Sold 300 units @ $37.00 each ​ 28 Purchased 550 units @ $26.00 each ​ 30 Sold 100 units @ $39.00 each Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the average cost periodic inventory method. Round the average to the nearest cent. a. Total sales: $56,975.00 Cost of goods sold: $36,431.25 Gross profit: $20,543.75 Ending inventory: $19,981.2 b. Total sales: $56,975.00 Cost of goods sold: $36,587.50 Gross profit: $20,387.50 Ending inventory: $19,825.00 c. Total sales: $56,975.00 Cost of goods sold: $37,401.75 Gross profit: $19,573.25 Ending inventory: $19,010.75 d. Total sales: $56,975.00 Cost of goods sold: $37,312.50 Gross profit: $19,662.50 Ending inventory: $19,573.25

NOT THE ANSWER Total sales: $56,975.00 Cost of goods sold: $36,431.25 Gross profit: $20,543.75 Ending inventory: $19,981.2

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $22 ​ Use the information in the table to answer this question. Using a perpetual system, what is the cost of the goods sold for November if the company uses the weighted average cost method? ​ a. $585 b. $590 c. $575 d. $610

Not sure I think a 585

The following lots of a Commodity P were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 5 units at $61 First purchase 15 units at $63 Second purchase 10 units at $74 Third purchase 10 units at $77 ​ The firm uses the periodic system, and there are 20 units of the commodity on hand at the end of the year. ​ ​ What is the amount of cost of goods sold for the year according to the LIFO method? a. $1,510 b. $1,380 c. $1,375 d. $1,250

THE ANSWER IS NOT 1380

To determine the six-month interest payment amount on a bond, you would take one-half of the market rate times the face value of the bond. True False

TRUE

The balance in Premium on Bonds Payable a. should be reported on the balance sheet as a deduction from the related bonds payable b. would be added to the related bonds payable on the balance sheet c. should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the effective interest rate method d. should be reported in the paid-in capital section of the balance sheet

The answer is not A

When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method a. uses a percentage of sales method to estimate uncollectible accounts b. uses an allowance account c. is used primarily by large companies with many receivables d. is used primarily by small companies with few receivables

The answer is not A

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,000,at what cost will the new equipment be recorded in the books? a. $45,000 b. $50,000 c. $54,000 d. $51,000

The answer is not A, 45,000

Blast sells portable CD players and each unit carries a one-year replacement warranty. The cost of repair defects under the warranty is estimated at 10% of the sales price. During May, Blast sells 650 portable CD players for $50 each. For what amount in May would Blast debit Product Warranty Expense? a. $650 b. $3,250 c. $1,625 d. $1,300

The answer is not B

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. May 1 Purchased 500 units @ $25.00 each ​ 4 Purchased 300 units @ $24.00 each ​ 6 Sold 400 units @ $38.00 each ​ 8 Purchased 700 units @ $23.00 each ​ 13 Sold 450 units @ $37.50 each ​ 20 Purchased 250 units @ $25.25 each ​ 22 Sold 275 units @ $36.00 each ​ 27 Sold 300 units @ $37.00 each ​ 28 Purchased 550 units @ $26.00 each ​ 30 Sold 100 units @ $39.00 each Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the average cost periodic inventory method. Round the average to the nearest cent. a. Total sales: $56,975.00 Cost of goods sold: $36,431.25 Gross profit: $20,543.75 Ending inventory: $19,981.2 b. Total sales: $56,975.00 Cost of goods sold: $36,587.50 Gross profit: $20,387.50 Ending inventory: $19,825.00 c. Total sales: $56,975.00 Cost of goods sold: $37,401.75 Gross profit: $19,573.25 Ending inventory: $19,010.75 d. Total sales: $56,975.00 Cost of goods sold: $37,312.50 Gross profit: $19,662.50 Ending inventory: $19,573.25

The answer is not B

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations. May 1 Purchased 500 units @ $25.00 each ​ 4 Purchased 300 units @ $24.00 each ​ 6 Sold 400 units @ $38.00 each ​ 8 Purchased 700 units @ $23.00 each ​ 13 Sold 450 units @ $37.50 each ​ 20 Purchased 250 units @ $25.25 each ​ 22 Sold 275 units @ $36.00 each ​ 27 Sold 300 units @ $37.00 each ​ 28 Purchased 550 units @ $26.00 each ​ 30 Sold 100 units @ $39.00 each Using the table provided, calculate total sales, cost of goods sold, gross profit, and ending inventory using each of the average cost periodic inventory method. Round the average to the nearest cent. a. Total sales: $56,975.00 Cost of goods sold: $37,312.50 Gross profit: $19,662.50 Ending inventory: $19,573.25 b. Total sales: $56,975.00 Cost of goods sold: $36,431.25 Gross profit: $20,543.75 Ending inventory: $19,981.2 c. Total sales: $56,975.00 Cost of goods sold: $36,587.50 Gross profit: $20,387.50 Ending inventory: $19,825.00 d. Total sales: $56,975.00 Cost of goods sold: $37,401.75 Gross profit: $19,573.25 Ending inventory: $19,010.75

The answer is not B

To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a a. debit to Loss on Credit Sales and a credit to Accounts Receivable b. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable d. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts

The answer is not B

A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe. Assuming that the book value of the lathe traded in is $36,000, what is the gain or loss on the exchange? a. gain of $12,000 b. gain of $9,000 c. loss of $9,000 d. loss of $12,000

The answer is not C

Current liabilities are a. due, but not payable for more than one year b. due and to be paid out of current assets within one year c. due and receivable within one year d. payable if a possible subsequent event occurs

The answer is not C

Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,100 hours? a. $30,000 b. $22,000 c. $19,000 d. $21,000

The answer is not C

The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow. Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. ​ What is the ending inventory balance at the end of the year using the LIFO method? ​ a. $1,575 b. $1,805 c. $1,685 d. $3,815

The answer is not C

Under the direct write-off method of uncollectible accounts, if a written off account is later collected, the effect on the accounting equation is a. a decrease in assets and an increase in stockholders' equity (expense) b. a decrease in assets and a decrease in stockholders' equity (expense) c. an increase in assets and an increase in liabilities d. an increase in liabilities and a decrease in stockholders' equity (expense)

The answer is not C

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. ​ Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts, respectively. ​ a. $19,500 and $25,000 b. $30,500 and $25,000 c. $19,500 and $525,000 d. $30,500 and $525,000

The answer is not C, it might be A

Addison, Inc. uses a perpetual inventory system. Below is information about one inventory item for the month of September. Sep. 1 Inventory 20 units at $20 ​ 4 Sold 10 units ​ 10 Purchased 30 units at $25 ​ 17 Sold 20 units ​ 30 Purchased 10 units at $30 Use the information in the table to answer this question. If Addison uses FIFO, the September 17 entry for cost of goods sold would be: ​ a. Sales 450 Cost of Goods Sold 450 b. Cost of Goods Sold 450 Inventory 450 c. Cost of Goods Sold 450 Sales 450 d. Inventory 450 Cost of Goods Sold 450

The answer is not Cost of Goods Sold 450 Sales 450

Payroll taxes levied against employees become liabilities a. at the end of an accounting period b. the first of the following month c. when the payroll is paid to employees d. when data are entered in a payroll register

The answer is not D

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled a. long-term liabilities b. intangible assets c. current assets d. investments

The answer is not investments it might be intangible assets

A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor. True False

True

A perpetual inventory system is an effective means of control over inventory. True False

True

Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period. True False

True

At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of $5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $50,000. The amount to be recorded in the adjusting entry for the Bad Debt Expense is $45,000. True False

True

Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash. True False

True

Both the initial cost of the asset and the accumulated depreciation will be taken off the books with the disposal of the asset. True False

True

Capital expenditures are costs that improve a fixed asset or extend its useful life. True False

True

Discount on Bonds Payable is a contra liability account. True False

True

During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method. True False

True

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. True False

True

During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce. True False

True

For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets. True False

True

Generally accepted accounting principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts. True False

True

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements. True False

True

If a fire destroys the inventory, the gross profit method can be used to estimate the cost of merchandise destroyed. True False

True

If bonds are sold for a discount, the carrying amount of the bonds is equal to the face value less the unamortized discount. True False

True

In a defined benefits plan, the employer bears the investment risks in funding a future retirement income benefit. True False

True

Land acquired as a speculation is reported under Investments on the balance sheet. True False

True

Notes payable may be issued to creditors to satisfy previously created accounts payable. True False

True

Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance for uncollectible receivables. True False

True

One negative effect of carrying too much inventory is risk that customers will change their buying habits. True False

True

Patents are exclusive rights to produce and sell goods with one or more unique features. True False

True

Receivables not currently collectible are reported in the investments section of the balance sheet. True False

True

Receiving payment prior to delivering goods or services causes a current liability to be incurred. True False

True

Receiving payment prior to delivering goods or services causes a current liability to be incurred. True False

True

Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same. True False

True

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation. True False

True

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods. True False

True

Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory. True False

True

Small companies can use either the direct write-off method or the allowance method. True False

True

Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant, and equipment on the balance sheet. True False

True

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. True False

True

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. True False

True

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value. True False

True

The face value of a term bond is payable at a single specific date in the future. True False

True

The higher the times interest earned ratio, the better the creditors' protection. True False

True

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory. True False

True

The party promising to pay a note at maturity is the maker. True False

True

The present value of an annuity is the sum of the present values of each cash flow. True False

True

The three inventory costing methods will normally each yield different amounts of net income. True False

True

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization. True False

True

Under the periodic inventory system, the inventory account continuously discloses the amount of inventory on hand. True False

True

When a portion of a bond issue is redeemed, a related proportion of the unamortized premium or discount must be written off. True False

True

An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a ​ a. debit to Bad Debt Expense for $7,200 b. credit to Allowance for Doubtful Accounts for $700 c. debit to Bad Debt Expense for $7,900 d. debit to Bad Debt Expense for $8,600

a. Debit to bad debt expense for 7,200

Cost flow is in the order in which costs were incurred when using a. first-in, first-out b. last-in, first-out c. weighted average d. average cost

a. First-in, first-out

Thomas Martin receives an hourly wage rate of $40, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin? a.$1,574 b.$2,080 c.$449 d.$1,730

b. 2080

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a a. debit to Cash of $2,000,000 b. debit to Discount on Bonds Payable for $80,000 c. credit to Cash for $1,920,000 d. credit to Bonds Payable for $1,920,000

b. Debit to discount on bonds payable for 80,000

On December 31, Strike Company sold one of its batting cages for $55,000. The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. What is the amount of the gain or loss on this transaction? a. loss of $5,000 b. gain of $5,000 c. gain of $55,000 d. loss of $55,000

b. Gain of 5,000

A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? a. The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. b. The amount of the annual interest expense gradually decreases over the life of the bonds. c. The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. d. The bonds will be issued at a premium.

c. The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity

The depreciation method that does not use residual value in calculating the first year's depreciation expense is a. straight-line b. units-of-output c. double-declining-balance d. sum-of-the-digits

double declining balance

The method used to calculate the depletion of a natural resource is the straight-line method. True False

false

Current liabilities are a. due, but not payable for more than one year b. due and to be paid out of current assets within one year c. payable if a possible subsequent event occurs d. due and receivable within one year

the answer IS NOT due and receivable within one year IT MIGHT BE B

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is a. weighted average b. average cost c. LIFO d. FIFO

the answer is NOT fifo

Callable bonds are redeemable by the issuing corporation within the period of time and at the price stated in the bond indenture. True False

true

The higher the times interest earned ratio, the better the creditors' protection. True False

true