Accounting Final

When an account is written off using the allowance method, which of the following occurs?

Current Assets REMAIN THE SAME

To be classified as a current liability, a debt must be expected to be paid within: a. one year. b. the operating cycle. c. 2 years. d. (a) or (b), whichever is longer

d. (a) or (b), whichever is longer

Which of the following is not a contra-account?

BAD DEBTS EXPENSE

One reason why the direct write-off method is not GAAP is:

It ignores the matching principle

If at year end, company has some uncollectible accounts, but uses the direct write-off method, which of the following will result?

Net income will be overstated

Homeplate sells softball equipment. On November 14, they shipped $4,000 worth of softball uniforms to Bonita Middle School, terms 2/10, n/30. On November 21, they received an order from Vista High School for $1,500 worth of custom printed bats to be produced in December. On November 30, Bonita Middle School returned $200 of defective merchandise. Homeplate has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30? a. $3,800 b. $4,000 c. $5,300 d. $5,500

a. $3,800

The declining-balance method of depreciation produces a. a decreasing depreciation expense each period. b. an increasing depreciation expense each period. c. a declining percentage rate each period. d. a constant amount of depreciation expense each period.

a. a decreasing depreciation expense each period.

Under the allowance method, writing off an uncollectible account a. affects only balance sheet accounts. b. affects both balance sheet and income statement accounts. c. affects only income statement accounts. d. is not acceptable practice.

a. affects only balance sheet accounts.

The percentage of sales basis of estimating expected uncollectibles a. emphasizes the matching of expenses with revenues. b. emphasizes balance sheet relationships. c. emphasizes cash realizable value. d. is not generally accepted as a basis for estimating bad debts.

a. emphasizes the matching of expenses with revenues.

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is a. straight-line. b. units-of-activity. c. declining-balance. d. none of these.

a. straight-line.

Using the percentage-of-receivables basis, the uncollectible accounts for the year is estimated to be $33,000. If the balance for the Allowance for Doubtful Accounts is a $5,000 credit before adjustment, what is the amount of bad debt expense for the period? a. $5,000 b. $28,000 c. $33,000 d. $38,000

b. $28,000

On May 1, 2017, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2010. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What gain should be recognized on the sale? a. $22,500. b. $45,000. c. $47,500. d. $90,000.

b. $45,000.

The maturity value of a $60,000, 8%, 60-day note receivable dated July 3 is a. $60,000. b. $60,800. c. $64,800. d. $69,600.

b. $60,800.

Valli Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the bad debts expense? a. Bad Debt Expense 32,000 Allowance for Doubtful Accounts 32,000 b. Bad Debt Expense 25,000 Allowance for Doubtful Accounts 25,000 c. Bad Debt Expense 25,000 Accounts Receivable 25,000 d. Bad Debt Expense 32,000 Accounts Receivable 32,000

b. Bad Debt Expense 25,000 Allowance for Doubtful Accounts 25,000

The allowance method of accounting for uncollectible accounts is required if a. the company makes any credit sales. b. bad debts are significant in amount. c. the company is a retailer. d. the company charges interest on accounts receivable.

b. bad debts are significant in amount.

All of the following are reported as current liabilities except a. accounts payable. b. bonds payable. c. notes payable. d. unearned revenues.

b. bonds payable.

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense a. when the product is brought in for repairs. b. in the period in which the product was sold. c. at the end of the warranty period. d. only if the repairs are expected to be made within one year.

b. in the period in which the product was sold.

A promissory note a. is not a formal credit instrument. b. may be used to settle an accounts receivable. c. has the party to whom the money is due as the maker. d. cannot be factored to another party.

b. may be used to settle an accounts receivable.

Interest is usually associated with a. accounts receivable. b. notes receivable. c. doubtful accounts. d. bad debts.

b. notes receivable.

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the a. direct write-off method. b. percentage of receivables basis. c. percentage of sales basis. d. percentage of receivables and percentage of sales basis.

b. percentage of receivables basis.

A company purchased factory equipment on April 1, 2017 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017 is a. $16,000. b. $14,000. c. $10,500. d. $12,000.

c. $10,500.

Lulzbot.com sells 6,000 units of its product for $500 each during the year ending December 31, 2019. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31, 2019? a. $6,000 b. $9,000 c. $3,000 d. It cannot be determined.

c. $3,000

The amortization period for a patent cannot exceed a. 50 years. b. 40 years. c. 20 years. d. 10 years.

c. 20 years.

Employer payroll taxes do not include: a. Federal unemployment taxes. b. State unemployment taxes. c. Federal income taxes. d. FICA taxes.

c. Federal income taxes

Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures

c. Land

An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $700 debit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $3,300. b. debit to Bad Debt Expense for $4,000. c. debit to Bad Debt Expense for $4,700. d. credit to Allowance for Doubtful Accounts for $700.

c. debit to Bad Debt Expense for $4,700.

When an account is written off using the allowance method, accounts receivable a. is unchanged and the allowance account increases. b. increases and the allowance account increases. c. decreases and the allowance account decreases. d. decreases and the allowance account increases.

c. decreases and the allowance account decreases.

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's a. maturity value. b. market value. c. face value. d. cash realizable value.

c. face value.

A contingent liability should be recorded in the accounts when: a. it is probable the contingency will happen, but the amount cannot be reasonably estimated. b. it is reasonably possible the contingency will happen, and the amount can be reasonably estimated. c. it is probable the contingency will happen, and the amount can be reasonably estimated. d. it is reasonably possible the contingency will happen, but the amount cannot be reasonably estimated.

c. it is probable the contingency will happen, and the amount can be reasonably estimated.

Able Towing Company purchased a tow truck for $180,000 on January 1, 2016. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $36,000. On December 31, 2018, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2018) and the salvage value to $5,000. What was the depreciation expense for 2018? a. $18,000. b. $14,400. c. $45,000. d. $36,550

d. $36,550

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking area cost $25,000. Which of the following statements is true with respect to these additions? a. $40,000 should be debited to the Land account. b. $25,000 should be debited to Land Improvements. c. $65,000 should be debited to the Land account. d. $65,000 should be debited to Land Improvements.

d. $65,000 should be debited to Land Improvements.

A truck was purchased for $180,000 and it was estimated to have a $36,000 salvage value at the end of its useful life. Monthly depreciation expense of $3,000 was recorded using the straight-line method. The annual depreciation rate is a. 20%. b. 2%. c. 8%. d. 25%.

d. 25%.

A gain or loss on disposal of a plant asset is determined by comparing the a. replacement cost of the asset with the asset's original cost. * b. book value of the asset with the asset's original cost. c. original cost of the asset with the proceeds received from its sale. d. book value of the asset with the proceeds received from its sale.

d. book value of the asset with the proceeds received from its sale.

Intangible assets are the rights and privileges that result from ownership of long-lived assets that a. must be generated internally. b. are depletable natural resources. c. have been exchanged at a gain. d. do not have physical substance

d. do not have physical substance