accounting test 2

Equipment with a book value of $8000 is sold for $1000 cash. The statement of cash flows will report a:

1000 cash inflow in the investing activities section

On December 31, 2017, Sandy Company has a Note Receivable of $5000. The note will be collected in installments. $1000 is due on December 31, 2018 and $1000 is due every year after December 31, 2018. The classification of the note on Sandy Company's balance sheet at December 31, 2017 is:

1000 is a current asset and 4000 is a long term asset

Land, a building and equipment are acquired for a lump sum of $6,000,000. The market values of the land, building and equipment are $400,000, $800,000 and $300,000, respectively. What is the cost assigned to the equipment? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)

1200000

Clarke Company owns all of the stock of Patterson Corporation and 90% of the stock of Tyra Corporation. Clarke Company earned net income of $750,000; Patterson earned $230,000; and Tyra earned $420,000. Clarke Company's consolidated income statement would report net income of:

1358000

Tony Company sells equipment for $20,000 cash. The equipment has a historical cost of $60,000 and accumulated depreciation of $54,000. What is the gain or loss on sale of the equipment?

14000 gain

A company incurred the following costs for a new delivery truck: Purchase price $130,000 Sales tax 8200 Delivery charge from seller's location 1400 Special racks for storage 3,000 Normal repairs to the truck before it was used for the first time 1,100 Signs painted on the truck 2,000 Insurance on truck before it was used for the first time 3,000 What is the cost of the delivery truck?

148700

CBS Corporation acquired a patent for $2,000,000. The patent has a legal life of 50 years. Because of changing technology, this patent is expected to generate revenue for only 10 years and have no residual value. The annual amortization expense for the patent is: (Round your final answer to the nearest dollar.)

200000

If the quick ratio is 2, and the current liabilities are $130,000, what is the amount of quick assets? (Round your final answer to the nearest dollar.)

260000

Murphy Enterprises holds the following available-for-sale securities as long-term investments on December 31, 2017: Level 1 Stock Cost Fair Value ABC Corporation $95,000 $88,000 Turner Incorporated 115,000 145,000 Smith Company 48,000 51,000 Total $258,000 $284,000 What amount will be reported as long-term investments on Murphy's December 31, 2017 balance sheet?

284000 dollars

A company incurred the following costs: Purchase price of land $280,000 Survey fees 4000 Payment for demolition of old building on land 40,000 Back property taxes on land 3000 Paving costs for parking lot 70,000 Fence around perimeter of land 15,000 Lights in parking lot 90,000 Signs for new business 5,000 What is the cost of the land?

327000

A single amount of $4700 is to be received in 3 years. If the single amount is discounted at 6% for 3 periods, the present value is ________. The present value of $1 for 3 periods at 6% is 0.840. The present value of an ordinary annuity of $1 for 3 periods at 6% is 2.673. (Round your final answer to the nearest dollar.)

3948

Martin Company paid $500,000 for equipment. Martin uses straight-line depreciation. Currently the Accumulated Depreciation account shows a balance of $200,000. If the asset has no residual value and an estimated life of 10 years, how many years has the asset been depreciated? (Round your final answer to the nearest year.)

4

Seider Company receives a stock dividend of 110 shares from Dolhun Company. Seider previously owned 830 shares of Dolhun stock that had a cost of $4400. After the stock dividend, the cost per share of Dolhun stock is now: (Round your final answer to the nearest cent.)

4.68 dollars

Land is purchased for $400,000. Back taxes paid by the purchaser were $6900; total costs to demolish an existing building were $13,000 and the cost to clear the land was $18,000. The cost of paving the parking lot was $7200. The cost of land is ________ and the cost of land improvements is ________.

437900 7200

A company has gross revenue of $502,000; sales discounts of $2900; and sales returns and allowances of $3300. Net revenue is:

495800

If the collection period of a company is 60 days, and the average receivables are $90,000 what is the total amount of the credit sales? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)

547500

On January 1, 2017, Barry Corporation paid $750,000 for 100,000 shares of Oak Company's common stock, which represents 40% of Oak's outstanding common stock. For the year ending December 31, 2017, Oak reported net income of $190,000 and declared and paid cash dividends of $60,000. Barry should report the investment in Oak Company on its balance sheet at December 31, 2017 at:

802000

On January 4, 2017, Margaret's Cafe acquired equipment for $265,000. The estimated life of the equipment is 4 years or 42,500 hours. The estimated residual value is $10,000. What is the depreciation for 2017, if Margaret's Cafe uses the asset 14,300 hours and uses the units-of-production method of depreciation?

85800

Boston Company sells twenty items for $1100 per unit, and has a cost of goods sold percentage of 60%. The gross profit to be reported for selling 20 items is:

8800

which of the following discount rates will produce the smallest present value of a single sum of money?

9 percent

A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following: Days Outstanding Accounts Receivable Est. Percent Uncollectible 1-30 days $64,000 2% 31-60 days $45,000 5% 61-90 days $25,000 12% Over 90 days $5000 51% Before the year-end adjustment, the credit balance in Allowance for Uncollectible Accounts was $900. Under the aging-of-receivables method, the balance in the Allowance for Uncollectible Accounts will be ________ after the adjusting entry is made.

9080

a 30% gross profit percentage means that

A and B for each dollar of sales a company has a cost of goods sold of seventy cents for each dollar of sales the company has a gross profit of thirty cents

The income tax saved by using LIFO instead of FIFO is equal to the ________ times the income tax rate.

LIFO reserve

an investor receives a cash dividend from a long term available for sale investment. which journal entry is required?

a debit to cash and a credit to dividend revenue

when a company receives a cash dividend from a trading security, the journal entry includes:

a debit to cash and credit to dividend revenue

If Abby, Inc. sells items to a customer who uses a credit card for $1300, and there is a credit card fee of 2.5%, Abby will record a(n): (Round your final answer to the nearest dollar.)

a debit to credit card discount expense for 32.5

an investor receives a stock dividend from a long term available for sale investment. which journal entry is required?

a memorandum entry only

as a plant asset is used in operations:

accumulated depreciation remains the same and the book value of the asset decreases

the net realizable value of accounts receivable is the difference between gross accounts receivable and:

allowance for uncollectible accounts

investments in trading securities:

are reported at current fair values on the balance sheet

all investments in trading securities not classified as trading securities or held to maturity securities are classified as:

available for sale securities

consolidated financial statements are prepared for the:

balance sheet, income statement, statement of cash flows and statement of stockholder's equity

the cost of goods sold model is:

beginning inventory, plus purchases, less ending inventory, equals cost of good sold

A company purchased inventory for $700 per unit. The company later sold one unit of the inventory for cash of $2400. Under the perpetual inventory system, which accounts will be debited to record the sale?

cash 2400 cost of goods sold 700

unrealized gains and losses from long term available for sale investments arise from:

changes in the fair value of the investment

a company uses LIFO in one year, then switches to FIFO and then switches to average cost. this is a violation of the:

consistency principle

on the purchase date, long term available for sale equity securities are reported on the balance sheet at:

cost

Held-to-maturity investments in bonds are initially reported at ________ on the purchase date. On a subsequent balance sheet date, the bonds are reported at ________.

cost amortized cost

the cost of the inventory that a business has sold to its customers is called:

cost of goods sold

two accounts that appear on the financial statements of a merchandising company but are not needed by a service company are:

cost of goods sold and inventory

The Daisy Company had net credit sales of $850,000 for the year. Cash sales for the year were $1,170,000. Its receivables at the beginning of the year were $43,000 and at the end of the year they had increased to $86,000. The Daisy Company has credit terms of net 30 days. Compute the days' sales outstanding and evaluate the ratio as strong or weak. (Round any intermediary calculations to two decimal places and your final answer to the nearest day.)

days sales outstanding 28 days; strong

the journal entry to record depreciation expense is:

debit depreciation expense, credit accumulated depreciation

Wolverine Corporation owns 27% of Buckeye Corporation. Net income for Buckeye for the year is $300,000. The journal entry prepared by Wolverine Corporation is:

debit equity method investment for 81000 and credit equity method investment revenue for 81000

On January 1, 2017, Corbin Company purchases $170,000, 6% bonds at a price of 99 and a maturity date of January 1, 2027. Corbin Company intends to hold the bonds until their maturity date. Interest is paid semiannually, on January 1 and July 1. Corbin Company has a calendar year end and uses the straight-line amortization method for discounts and premiums. The entry to amortize the bond investment on July 1, 2017 is:

debit held to maturity investment bonds for 85 dollars and credit interest revenue for 85 dollars

A company purchased a machine for $200,000. The accumulated depreciation on the machine is now $130,000. The machine is junked. Which journal entry is prepared to record the disposal?

debit loss on disposal of machine for 70000 debit accumulated depreciation machine for 130000 and credit machine for 200000

the journal entry to record the purchase of inventory on account under the periodic inventory system is:

debit purchases and credit accounts payable

under the allowance method, the entry to write off a $3600 uncollectible account includes a:

debit to allowance for uncollectible accounts for 3600 and credit to accounts receivable for 3600

On October 1, 2017, the Early Bank lends money to a customer on a six month note. The bank accrues interest on the note at December 31, 2017. The bank's journal entry on December 31, 2017 would include a:

debit to interest receivable and a credit to interest revenue for three months of interest

in present value calculations, the process of determining the present value of a single sum of money is called:

discounting

which of the following depreciation methods best applies to those assets that generate revenue earlier in their useful lives?

double declining balance method

When an investor owns between 20% and 50% of the outstanding stock of another company, the ________ method is used to account for the stock investment.

equity

costs that do not extend a plant asset's capacity or its useful life, but merely maintain the asset or restore it to working order are recorded as:

expenses

on each balance sheet after the purchase date, investments in long term available for sale securities are reported at:

fair value

an unrealized gain occurs when a company sells a trading security

false

factoring receivables is not as expensive as retaining the receivables on the books and ultimately collecting the full amount from the customers

false

Michael Company purchased a trading investment that had a carrying amount of $35,900 when its management decided to sell it. The investment was purchased for $32,000. If Michael Company sold this investment for $45,100, Michael will have a(n):

gain on sale of trading security for 9200

which intangible asset is not amortized?

goodwill

another term for gross profit is

gross margin

which of the following is a CORRECT statement about asset impairment?

if an asset is impaired then the impairment loss is the difference between the net book value and the fair value

strategies to increase the current ratio may include:

increasing sales paying off some current liabilities before the end of the year reclassifying long term investments as short term investments based on a plan to sell the investments within the next year all of the above

Major Company purchased equipment to be used in its distribution center. All of the following should be included in the cost of the equipment EXCEPT for:

insurance costs after the equipment is up and running

WorldCom's fraudulent scheme of capitalizing telephone line costs instead of expensing them was discovered by:

internal auditors

the cost of inventory that is still on hand is called

inventory, a current asset that appears on the balance sheet

under the equity method, the equity method investment account is debited when the:

investee reports net income

the cash received upon the maturity of bonds, that are classified as a held to maturity investment is reported on the statement of cash flows as:

investing activities

the cash received when selling an investment in another company is reported on the statement of cash flows as an:

investing cash inflow

Marathon Corporation owns 500 shares of Mini Company's common stock. Mini Company has 100,000 shares of common stock outstanding. Marathon Corporation is the ________ and Mini Company is the ________.

investor investee

the inventory turnover ratio:

is determined by dividing cost of goods sold by net sales

a periodic inventory system:

is used for inexpensive goods is not expensive to maintain does not keep a running record of inventory on hand all of the above

if a company wants to increase its quick ratio, it should consider:

issuing long term debt notes payable

ABC Company purchased land with an old building. ABC plans to demolish the old building and then construct a new, modern building. The cost of demolishing the building will be part of the cost of the:

land

the long-term asset that is not depreciated or amortized is:

land

when calculating the denominator for the quick ratio, you would not include:

long term debt

under U.S. GAAP, inventories are reported on the balance sheet as:

lower of cost or market

when inventory costs are increasing, the FIFO costing method will generally yield a cost of goods sold that is:

lower than cost of goods sold under the LIFO method

Consolidated financial statements are prepared when a company owns ________ of the common stock of another company.

more than 50%

the inventory method used by a company affects:

net income on the income statement the income taxes to be paid the ending inventory on the balance sheet all of the above

Ending inventory for the year ended December 31, 2017, is understated by $8,000. How will this affect net income for 2017 and 2018?

net income will be understated by 8,000 in 2017 and overstated by 8,000 in 2018

The records of Milwaukee Sprinkler Systems report net sales of $360,000, net income of $180,000 and average total assets of $350,000. Using DuPont analysis, calculate the two ratios used for return on assets. (Round your final answer to two decimal places.)

net profit margin ratio is 50% total asset turnover is 1.03

when a company sells a trading security, the gain on the sale of the trading security is reported in the:

other revenues and gains of the income statement

goodwill occurs when a parent company:

pays more to acquire a subsidiary company than the fair market value of the subsidiary's net assets

An asset is ________ when another asset can do the job more efficiently.

physically worn

which of the following is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?

quick ratio

The ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.

relative sales value

U.S. GAAP differs from IFRS in the accounting treatment of:

research and development costs capitalization of internally generated intangible assets reversals of write downs due to the impairment of plant assets all of the above

All of the following costs would be included in the cost of inventory EXCEPT for:

sales commission paid to salesperson when the inventory is sold

which of the following is a true statement regarding sales

sales revenue recognized in a particular period must be reduced by an amount for estimated sales returns

which is the correct order for items to appear on the income statement?

sales revenue, cost of goods sold, gross profit, operating expenses

ABC Furniture Unlimited sells antique furniture. ABC will most likely use the ________ method to cost its ending inventory.

specific unit cost

a deprecation method in which an equal amount of depreciation expense is assigned to each year of the assets use is the:

straight line method

when determining the rate of return on assets:

the DuPont model calculates the rate of return on assets as the net profit margin ratio times total asset turnover

if an investor owns less than 20% of the common stock of another company as long term investment:

the investor usually has little or no influence on the investee

for accounting purposes, the method used to account for long term investments in common stock is determined by:

the investors percentage ownership of the investee's stock

which of the following statements is INCORRECT?

the rules for determining whether a cost should be expensed or capitalized are so complete and clear that judgement is not needed

realized gains and losses from long term available for sale investments arise from:

the sale of the investment

fair value is the amount for which investments in debt or equity securities can be sold

true

under the allowance method, uncollectible account expense is recorded in the same accounting period as the sale

true

under a perpetual inventory system, when a sale is made the seller needs to prepare:

two journal entries

the computation of depletion expense is most closely related to which method for computing depreciation?

units of production

Excalibur Company has calculated the following ratios: Ratio 12/31/2017 12/31/2016 Current Ratio 2.25 2.00 Quick Ratio 1.10 0.50 Collection Period 30 days 60 days Did the company's liquidity improve in 2017?

yes all the ratios improved