Accounting exam #3

shipping point

goods change hands when they reach this place

retailers

merchandisers that sell directly to consumers

what would be true is the current year's ending inventory amount is overstated

net income

if goods shipped FOB shipping point are in transit at the end of a period, they should be included in the ending inventory of the

purchasing company

natural resources

resources that are physically consumed as they are used by a company in the normal course of operations

organizational costs

significant costs such as legal fees, stock issue costs, accounting fees, and promotional fees that a company may incur when it is formed.

Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true?

the customer should pay $1,010 if payment is made after june 20th

book value

the difference between the cost of a depreciable asset and its related accumulated depreciation

Inventory is shown on the financial statements at cost, except when:

the inventory is damaged; the market value of the inventory falls below the cost of the inventory

Amortization

the reduction of a loan balance through payments made over a period of time

Accumulated Depreciation

the total amount of depreciation expense that has been recorded since the purchase of a plant asset

cost of goods available for sale

the total cost spent on inventory that was available to be sold during a period

LIFO method

an inventory costing method that assumes that the latest units purchased are the first to be sold

liability

an obligation to perform a service or pay for a service already received

Accrued Liabilities

expenses that have been incurred but have not been paid at the end of the accounting period

On January 1, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine for the year ended December 31?

loss of 1,500

depletion

reduction in the number or quantity of something

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment?

$0.10

Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2019.Refer to the information provided for Eli Company. If the customer pays the amount of the invoice for its purchase on March 14, 2019, how much cash will Eli Company receive?

$1980

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.Refer to Fabian Woodworks. If the company uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2020?

$2,880

On May 1, year 1, sunshine company purchased the copyright to tutorials for 150. it is estimated that the copyright will have a useful life of 5 years. the amount of amortization expense recognized for year 1 would be

$20 = (150/5*8/12)

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is?

$49,500

the interest charged on a 400 note payable, at the rate of 6%, on a 90 day not would be

$6

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2021?

$6,000

Machine purchased: 19,000; 1,000 to have machine delivered; useful life: 5 years; expected salvage value: 2,000

(20,000-2,000/5) = 3,600

straight line depreciation

(cost - salvage value) / useful life

Accumulated Depreciation

(cost of asset - salvage value) / life of asset

depreciation

(n.) a lessening in value; a belittling

Land purchased: 1440. real estate brokers' commission was 100 and 140 was spent for demolishing an old building on the land before construction of a new building could start. proceeds from salvage of the demolished building were 24. under the cost principle, the cost of land would be recorded at...

1656

5000 was received, 400 returned and credit for the return was received before payment of the invoice. terms: 2/10 and n/30. amount to be paid in full?

5000-400(.02) = 92; 4600-92 = 4508.00

a company purchased a truck for 8000, incurred 200 of sales tax, and the cost of having the company logo painted on was 600. it had a 5 year life if maintenance of 80 per year is performed on the truck. the cost of the truck's license for one year was 100 and the the cost of the yearly inspection was 50. what is the cost of the truck?

8800

sales tax

A tax on a sale of merchandise or services

Average Cost Method

An inventory costing method that uses the weighted-average unit cost to allocate the cost of goods available for sale to ending inventory and cost of goods sold.

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 will have a debit to

Depreciation Expense and a credit to Accumulated Depreciation for $45,000.

What will occur when the cost of purchasing merchandise is going down

FIFO will result in a lower net income and ending inventory than will LIFO

A manufacturing company's weekly payroll is $80,000 for a 5-day work week beginning each Monday and ending each Friday. The last time salaries and wages were recorded was Friday, December 26. What adjustment is needed on December 31, the last day of the company's fiscal period?

Increase wages expense by $48,000.

payroll taxes

Taxes based on the payroll of a business; not withheld from employee pay

warranty

a confirmation of the quality or performance of a good or service

purchase allowance

a deduction made to the selling price of merchandise, granted by the seller, so that the buyer will keep the merchandise

impairment

a permanent decline in the fair value of an asset

FIFO method

a process costing method in which equivalent units and unit costs relate only to work done during the current period

book value formula

cost - accumulated depreciation

$400 on jan 1, signs a 400, 6%, 9/mo note. the entry made by this company on jan 1 to record the proceeds and issuance of the note is

credit 400 of cash; debit 400 of notes payable

A company sold 1,000 of merchandise to a different co on credit terms 2/10 and n/15. Entry on 2nd co would be...

credit to inventory of 1,000

the inventory method under which the actual cost of a particular inventory item is used to calculate ending inventory is called

specific identification

withholding tax

sum withheld or deducted from wages for tax purposes

Gross Margin

the amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted

LIFO reserve

the amount that inventory would increase (or decrease) if the company had used FIFO.

A company purchased a patent for $100,000 at the beginning of the current year which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in the current year?

20,000

This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31.Refer to the information for Gainesville Truck Center. Which of the following statements is true regarding the entry to record wages and the related liabilities?

Medicare tax payable will be credited in the amount of $145. $10,000 × .0145 = $145

interest rate

Percentage of amount borrowed to be added to the amount loaned and paid back