Acct 3001

. A primary source of stockholders' equity is a. income retained by the corporation. b. appropriated retained earnings. c. contributions by stockholders. d. both income retained by the corporation and contributions by stockholders.

D

24. An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at a. 8% for eight periods. b. 2% for eight periods. c. 8% for 32 periods. d. 2% for 32 periods.

D

27. What would you pay for an investment that pays you $20,000 at the end of each year for the next ten years and then returns a maturity value of $300,000 after ten years? Assume that the relevant interest rate for this type of investment is 8%. a. $138,958. b. $134,202. c. $144,936. d. $273,158.

D

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2011. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,109. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2013? a. $14,752,673 b. $14,955,466 c. $14,725,375 d. $14,747,642

D

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2012. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,109. What is interest expense for 2013, using straight-line amortization? a. $1,540,207 b. $1,170,000 c. $1,176,894 d. $1,184,845

D

An accounting record into which the essential facts and figures in connection with all transactions are initially recorded is called the a. ledger. b. account. c. trial balance. d. none of these.

D

An accrued expense can best be described as an amount a. paid and currently matched with earnings. b. paid and not currently matched with earnings. c. not paid and not currently matched with earnings. d. not paid and currently matched with earnings.

D

An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reacquisition a. any costs of issuing the bonds must be amortized up to the purchase date. b. the premium must be amortized up to the purchase date. c. interest must be accrued from the last interest date to the purchase date. d. all of these.

D

An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's a. portion of FICA taxes and unemployment taxes. b. and employer's portion of FICA taxes, and unemployment taxes. c. portion of FICA taxes, unemployment taxes, and any voluntary deductions. d. portion of FICA taxes and any voluntary deductions.

D

An expenditure made in connection with a machine being used by an enterprise should be a. expensed immediately if it merely extends the useful life but does not improve the quality. b. expensed immediately if it merely improves the quality but does not extend the useful life. c. capitalized if it maintains the machine in normal operating condition. d. capitalized if it increases the quantity of units produced by the machine.

D

Bell Inc. took a physical inventory at the end of the year and determined that $780,000 of goods were on hand. In addition, Bell, Inc. determined that $60,000 of goods that were in transit that were shipped f.o.b. shipping point were actually received two days after the inventory count and that the company had $90,000 of goods out on consignment. What amount should Bell report as inventory at the end of the year? a. $780,000. b. $840,000. c. $870,000. d. $930,000.

D

Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 2,400 units that cost $12 each. During the month, the company made two purchases: 1,000 units at $13 each and 4,000 units at $13.50 each. Checkers also sold 4,300 units during the month. Using the LIFO method, what is the ending inventory? a. $40,146. b. $37,200. c. $41,850. d. $37,900.

D

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 300 units that cost $65 each. During the month, the company made two purchases: 450 units at $68 each and 225 units at $70 each. Chess Top also sold 750 units during the month. Using the FIFO method, what is the amount of cost of goods sold for the month? a. $50,655. b. $48,750. c. $51,225. d. $50,100.

D

For Ronda Company, the following information is available: Cost of goods sold $175,000 Income tax expense 27,000 Operating expenses 105,000 Sales 500,000 Dividend revenue 12,000 In Ronda's multiple-step income statement, gross profit a. should not be reported b. should be reported at $337,000. c. should be reported at $180,000. d. should be reported at $325,000.

D

Generally, revenue from sales should be recognized at a point when a. management decides it is appropriate to do so. b. the product is available for sale to the ultimate consumer. c. the entire amount receivable has been collected from the customer and there remains no further warranty liability. d. none of these.

D

Given the acquisition cost of product Z is $64, the net realizable value for product Z is $58, the normal profit for product Z is $5, and the market value (replacement cost) for product Z is $60, what is the proper per unit inventory price for product Z? a. $64. b. $60. c. $53. d. $58.

D

If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year? a. Daily. b. Monthly. c. Quarterly. d. Annually

D

L'Orange Company's account balances at December 31, 2012 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2012 were $1,350,000. It is estimated that 2% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

D

On February 1, 2012, Nelson Corporation purchased a parcel of land as a factory site for $250,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2012. Costs incurred during this period are listed below: Demolition of old building $ 20,000 Architect's fees 35,000 Legal fees for title investigation and purchase contract 5,000 Construction costs 1,290,000 (Salvaged materials resulting from demolition were sold for $10,000.) Nelson should record the cost of the land and new building, respectively, as a. $275,000 and $1,315,000. b. $260,000 and $1,330,000. c. $260,000 and $1,325,000. d. $265,000 and $1,325,000.

D

On January 3, 2012, Boyer Corp. owned a machine that had cost $300,000. The accumulated depreciation was $180,000, estimated salvage value was $18,000, and fair value was $480,000. On January 4, 2012, this machine was irreparably damaged by Pine Corp. and became worthless. In October 2012, a court awarded damages of $480,000 against Pine in favor of Boyer. At December 31, 2012, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of Boyer's attorney, Pine's appeal will be denied. At December 31, 2012, what amount should Boyer accrue for this gain contingency? a. $480,000. b. $390,000. c. $300,000. d. $0.

D

Robertson Inc. bought a machine on January 1, 2002 for $400,000. The machine had an expected life of 20 years and was expected to have a salvage value of $40,000. On July 1, 2012, the company reviewed the potential of the machine and determined that its undiscounted future net cash flows totaled $200,000 and its discounted future net cash flows totaled $140,000. If no active market exists for the machine and the company does not plan to dispose of it, what should Robertson record as an impairment loss on July 1, 2012? a. $ 0 b. $11,000 c. $20,000 d. $71,000

D

Sodium Inc. borrowed $280,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? a. $0. b. $33,600. c. $8,400. d. $25,200.

D

Stockholders' equity is generally classified into two major categories: a. contributed capital and appropriated capital. b. appropriated capital and retained earnings. c. retained earnings and unappropriated capital. d. earned capital and contributed capital.

D

The adjusted trial balance for Lifesaver Corp. at the end of the current year, 2012, contained the following accounts. 5-year Bonds Payable 8% $2,000,000 Interest Payable 50,000 Premium on Bonds Payable 100,000 Notes Payable (3 mo.) 40,000 Notes Payable (5 yr.) 165,000 Mortgage Payable ($15,000 due currently) 200,000 Salaries and wages Payable 18,000 Income Taxes Payable (due 3/15 of 2013) 25,000 The total long-term liabilities reported on the balance sheet are a. $2,365,000. b. $2,350,000. c. $2,465,000. d. $2,450,000.

D

The current assets section of the balance sheet should include a. machinery. b. patents. c. goodwill. d. inventory.

D

Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? a. $ 532,000. b. $ 520,000. c. $1,920,000. d. $ 508,000.

D

What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory? a. Prevents understatement of the inventory value. b. Allows for a normal profit to be earned. c. Allows for items to be valued at replacement cost. d. Prevents overstatement of the value of obsolete or damaged inventories.

D

Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets? a. Assets under construction for an enterprise's own use. b. Assets intended for sale or lease that are produced as discrete projects. c. Assets financed through the issuance of long-term debt. d. Assets not currently undergoing the activities necessary to prepare them for their intended use.

D

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

D

Which of these is not a major characteristic of a plant asset? a. Possesses physical substance b. Acquired for use in operations c. Yields services over a number of years d. All of these are major characteristics of a plant asset.

D

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2012. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,109. Using effective-interest amortization, how much interest expense will be recognized in 2012? a. $585,000 b. $1,170,000 c. $1,176,374 d. $1,176,249

c

Wheeler Company issued 5,000 shares of its $5 par value common stock having a fair value of $25 per share and 7,500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $260,000. The proceeds allocated to the preferred stock is a. $232,917 b. $162,500 c. $141,818 d. $118,182

c

In a period of rising prices, the inventory method which tends to give the highest reported inventory is a. FIFO. b. moving average. c. LIFO. d. weighted-average.

A

Technique Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future. What amount (if any) should Technique report as an impairment to its equipment? a. No impairment should be reported. b. $240,000 c. $30,000 d. $270,000

A

When an item of expense is paid and recorded in advance, it is normally called a(n) a. prepaid expense. b. accrued expense. c. estimated expense. d. cash expense.

A

. In a period of rising prices, the inventory method which tends to give the highest reported net income is a. base stock. b. first-in, first-out. c. last-in, first-out. d. weighted-average.

B

Solar Products purchased a machine for $39,000 on July 1, 2012. The company intends to depreciate it over 4 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2012 is a. $19,500 b. $9,750 c. $14,625 d. $9,000

B

The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the a. net realizable value. b. net realizable value less normal profit margin. c. replacement cost. d. selling price less costs of completion and disposal.

B

Turner Corporation acquired two inventory items at a lump-sum cost of $80,000. The acquisition included 3,000 units of product LF, and 7,000 units of product 1B. LF normally sells for $24 per unit, and 1B for $8 per unit. If Turner sells 1,000 units of LF, what amount of gross profit should it recognize? a. $3,000 b. $9,000. c. $16,000. d. $19,000.

B

Vasguez Corporation had a 1/1/12 balance in the Allowance for Doubtful Accounts of $30,000. During 2012, it wrote off $21,600 of accounts and collected $6,300 on accounts previously written off. The balance in Accounts Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/12, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2012? a. $6,000. b. $21,300. c. $27,600. d. $36,000.

B

Vista newspapers sold 6,000 of annual subscriptions at $125 each on September 1. How much unearned revenue will exist as of December 31? a. $0. b. $500,000. c. $250,000. d. $750,000.

B

(use graph)25. Jose entered into a contract where he will receive $1,000,000 after twenty years. Assuming an appropriate interest rate is 5% compounded annually, what is the present value of this amount? a. $2,653,300 b. $5,306,600 c. $2,924,420 d. $376,890

C

26. Angie invested $100,000 she received from her grandmother in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually? a. $155,134 b. $161,050 c. $162,890 d. $177,156

C

AG Inc. made a $15,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $14,700. b. Debit Accounts Receivable for $14,700 and Sales Discounts for $300. c. Debit Accounts Receivable for $15,000. d. Debit Accounts Receivable for $15,000 and Sales Discounts for $300.

C

Fama Corporation reports the following information: Net income $750,000 Dividends on common stock 210,000 Dividends on preferred stock 90,000 Weighted average common shares outstanding 200,000 Fama should report earnings per share of a. $2.25. b. $2.70 c. $3.30. d. $3.75.

C

Solar Products purchased a machine for $39,000 on July 1, 2012. The company intends to depreciate it over 4 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2013 is a. $19,500 b. $9,750 c. $14,625 d. $9,000

C

The two fundamental qualities that make accounting information useful for decision making are a. comparability and timeliness. b. materiality and neutrality. c. relevance and faithful representation. d. faithful representation and comparability.

C

Elkins Corporation uses the perpetual inventory method. On March 1, it purchased $20,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost $2,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit a. purchase discounts for $400. b. inventory for $400. c. purchase discounts for $360. d. inventory for $360.

D

P37. Treasury shares are a. shares held as an investment by the treasurer of the corporation. b. shares held as an investment of the corporation. c. issued and outstanding shares. d. issued but not outstanding shares.

D

Which of these is not included in an employer's payroll tax expense? a. F.I.C.A. (social security) taxes b. Federal unemployment taxes c. State unemployment taxes d. Federal income taxes

D

Cash dividends are paid on the basis of the number of shares a. authorized. b. issued. c. outstanding. d. outstanding less the number of treasury shares.

c

Equestrain Roads sold $80,000 of goods and accepted the customer's $80,000 10% 1-year note payable in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30? a. $0. b. $2,000. c. $4,000. d. $8,000.

c

Total stockholders' equity represents a. a claim to specific assets contributed by the owners. b. the maximum amount that can be borrowed by the enterprise. c. a claim against a portion of the total assets of an enterprise. d. only the amount of earnings that have been retained in the business.

c

40. Porter Corp. purchased its own par value stock on January 1, 2012 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from a. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. b. additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein. c. retained earnings. d. net income.

a

85. Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2012: Common stock, par value $20; authorized 75,000 shares; issued and outstanding 45,000 shares $ 900,000 Paid-in capital in excess of par value 250,000 Retained earnings 300,000 $1,450,000 During 2013, the following transactions occurred relating to stockholders' equity: 3,000 shares were reacquired at $28 per share. 3,000 shares were reacquired at $35 per share. 1,800 shares of treasury stock were sold at $30 per share. For the year ended December 31, 2013, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2013, balance sheet? a. $1,765,000. b. $1,761,400. c. $1,757,800. d. $1,315,000.

A

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2012. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,109. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2012 balance sheet? a. $14,709,482 b. $15,000,000 c. $14,718,844 d. $14,706,232

A

Anders, Inc., has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2013. There were no dividends declared in 2011. The board of directors declares and pays a $90,000 dividend in 2012 and in 2013. What is the amount of dividends received by the common stockholders in 2013? a. $30,000 b. $50,000 c. $90,000 d. $0

A

At the beginning of 2013, Flaherty Company had retained earnings of $250,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a "gain" of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2013 was a. $230,000. b. $260,000. c. $266,000. d. $296,000.

A

Colson Inc. declared a $240,000 cash dividend. It currently has 9,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders? a. $114,000. b. $126,000. c. $177,000. d. None.

A

Garwood Company has the following items: write-down of inventories, $360,000; loss on disposal of Sports Division, $555,000; and loss due to an expropriation, $339,000. Ignoring income taxes, what total amount should Garwood Company report as extraordinary losses? a. $339,000 b. $555,000. c. $699,000. d. $894,000.

A

Goods in transit which are shipped f.o.b. destination should be a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these.

A

Hernandez Company has 490,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by a. $1,739,500. b. $735,000. c. $269,500. d. $245,000.

A

In order to be classified as an extraordinary item in the income statement, an event or transaction should be a. unusual in nature, infrequent, and material in amount. b. unusual in nature and infrequent, but it need not be material. c. infrequent and material in amount, but it need not be unusual in nature. d. unusual in nature and material, but it need not be infrequent.

A

Lower-of-cost-or-market as it applies to inventory is best described as the a. drop of future utility below its original cost. b. method of determining cost of goods sold. c. assumption to determine inventory flow. d. change in inventory value to market value.

A

On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available: Sales, January 1 through April 15 $360,000 Inventory, January 1 60,000 Purchases, January 1 through April 15 300,000 Markup on cost 25% The amount of the inventory loss is estimated to be a. $72,000. b. $36,000. c. $90,000. d. $60,000.

A

Which of the following concepts relates to using the allowance method in accounting for accounts receivable? a. Bad debt expense is an estimate that is based on historical and prospective information. b. Bad debt expense is based on the actual amounts determined to be uncollectible. c. Bad debt expense is an estimate that is based only on an analysis of the receivables aging. d. Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.

A

28. Stacey and Bruce want to begin saving for their baby's college education. They estimate that they will need $200,000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education? a. $6,471. b. $6,105. c. $11,111. d. $5,924.

B

AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? a. $14,700. b. $14,850. c. $15,000. d. $15,150.

B

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $1,800 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.15 each. Group 2 consists of 5,500 pieces that are expected to sell for $0.36 each. Group 3 consists of 500 pieces that are expected to sell for $0.72 each. Using the relative sales value method, what is the cost per item in Group 1? a. $0.150. b. $0.100. c. $0.120. d. $0.225.

B

Gannon Company acquired 8,000 shares of its own common stock at $20 per share on February 5, 2012, and sold 4,000 of these shares at $27 per share on August 9, 2013. The fair value of Gannon's common stock was $24 per share at December 31, 2012, and $25 per share at December 31, 2013. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2013 to record the sale of 4,000 shares? a. Treasury Stock for $108,000. b. Treasury Stock for $80,000 and Paid-in Capital from Treasury Stock for $28,000. c. Treasury Stock for $80,000 and Retained Earnings for $28,000. d. Treasury Stock for $96,000 and Retained Earnings for $12,000.

B

Gardner Corporation purchased a truck at the beginning of 2012 for $90,000. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 18,000 miles in 2012 and 32,000 miles in 2013. What is the depreciation expense for 2012? a. $13,500 b. $12,960 c. $21,600 d. $36,000

B

Glavine Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $312,000. The proceeds allocated to the common stock is a. $32,500 b. $141,818 c. $162,500 d. $170,182

B

Goods in transit which are shipped f.o.b. shipping point should be a. included in the inventory of the seller. b. included in the inventory of the buyer. c. included in the inventory of the shipping company. d. none of these.

B

Houghton Company has the following items: common stock, $900,000; treasury stock, $105,000; deferred taxes, $125,000 and retained earnings, $390,000. What total amount should Houghton Company report as stockholders' equity? a. $1,060,000. b. $1,185,000. c. $1,310,000. d. $1,395,000.

B

Kant Corporation retires its $500,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $481,250. The entry to record the redemption will include a a. credit of $18,750 to Loss on Bond Redemption. b. credit of $18,750 to Discount on Bonds Payable. c. debit of $28,750 to Gain on Bond Redemption. d. debit of $10,000 to Premium on Bonds Payable.

B

Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The following account balances are available: Inventory, March 1 $385,000 Purchases 301,000 Purchase returns 14,000 Sales during March 525,000 The estimate of the cost of inventory at March 31 would be a. $147,000. b. $252,000. c. $278,250. d. $196,000.

B

LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1. The company estimates that 60% of the boxtops will be redeemed. In 2012, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost LeMay Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2012? a. $150,000 b. $40,000 c. $60,000 d. $84,000

B

Lexington Company sells product 1976NLC for $50 per unit. The cost of one unit of 1976NLC is $45, and the replacement cost is $43. The estimated cost to dispose of a unit is $10, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market? a. $20. b. $40. c. $43. d. $45.

B

Lynch Printing Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should a. recognize an extraordinary loss for the period. b. include a credit to the equipment accumulated depreciation account. c. include a credit to the equipment account. d. not be made if the equipment is still being used.

B

On April 13, 2012, Neill Co. purchased machinery for $168,000. Salvage value was estimated to be $7,000. The machinery will be depreciated over ten years using the double-declining balance method. If depreciation is computed on the basis of the nearest full month, Neill should record depreciation expense for 2013 on this machinery of a. $29,120. b. $28,560. c. $28,770. d. $29,306.

B

On January 1, 2012, Graham Company purchased a new machine for $2,800,000. The new machine has an estimated useful life of nine years and the salvage value was estimated to be $100,000. Depreciation was computed on the sum-of-the-years'-digits method. What amount should be shown in Graham's balance sheet at December 31, 2013, net of accumulated depreciation, for this machine? a. $2,260,000 b. $1,780,000 c. $1,742,221 d. $1,659,000

B

When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at? a. Sales price b. Net realizable value c. Historical cost d. Net realizable value reduced by a normal profit margin

B

Which of the following elements of financial statements is not a component of comprehensive income? a. Revenues b. Distributions to owners c. Losses d. Expenses

B

Winter Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,600,000 to $8,000,000. However, the lawyer states that the most probable cost is $4,800,000. As a result of the above facts, Winter should accrue a. a loss contingency of $1,600,000 and disclose an additional contingency of up to $6,400,000. b. a loss contingency of $4,800,000 and disclose an additional contingency of up to $3,200,000. c. a loss contingency of $4,800,000 but not disclose any additional contingency. d. no loss contingency but disclose a contingency of $1,600,000 to $8,000,000.

B

AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $14,850. b. Debit Accounts Receivable for $14,850 and Sales Discounts for $150. c. Debit Accounts Receivable for $15,000. d. Debit Accounts Receivable for $15,000 and Sales Discounts for $150.

C

An analysis of stockholders' equity of Hahn Corporation as of January 1, 2012, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares $1,800,000 Paid-in capital in excess of par 700,000 Retained earnings 760,000 Total $3,260,000 Hahn uses the cost method of accounting for treasury stock and during 2012 entered into the following transactions: Acquired 2,500 shares of its stock for $75,000. Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury shares at $20 per share. Assuming no other equity transactions occurred during 2012, what should Hahn report at December 31, 2012, as total additional paid-in capital? a. $695,000 b. $700,000 c. $705,000

C

At December 31, 2012 the following balances existed on the books of Rentro Corporation: Bonds Payable $2,500,000 Discount on Bonds Payable 200,000 Interest Payable 60,000 Unamortized Bond Issue Costs 150,000 If the bonds are retired on January 1, 2013, at 102, what will Rentro report as a loss on redemption? a. $250,000 b. $337,500 c. $400,000 d. $460,000

C

For a nonmonetary exchange of plant assets, accounting recognition should not be given to a. a loss when the exchange has no commercial substance. b. a gain when the exchange has commercial substance. c. part of a gain when the exchange has no commercial substance and cash is paid (cash paid/received is less than 25% of the fair value of the exchange). d. part of a gain when the exchange has no commercial substance and cash is received (cash paid or received is less than 25% of the fair value of the exchange).

C

Hansen Corporation received cash of $27,000 on September 1, 2012 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2012 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $9,000. b. debit Rent Revenue and credit Unearned Rent Revenue, $18,000. c. debit Unearned Rent Revenue and credit Rent Revenue, $9,000. d. debit Cash and credit Unearned Rent Revenue, $18,000.

C

In a period of rising prices, the inventory method which tends to give the highest reported cost of goods sold is a. FIFO. b. average cost. c. LIFO. d. none of these.

C

Kohlman Corporation owns machinery with a book value of $380,000. It is estimated that the machinery will generate future cash flows of $350,000. The machinery has a fair value of $280,000. Kohlman should recognize a loss on impairment of a. $ -0-. b. $ 30,000. c. $100,000. d. $ 70,000.

C

Luther Inc., has 3,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2013, and December 31, 2012. The board of directors declared and paid a $7,500 dividend in 2012. In 2013, $36,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2013? a. $25,500 b. $18,000 c. $ 10,500 d. $ 9,000

C

Plant assets purchased on long-term credit contracts should be accounted for at a. the total value of the future payments. b. the future amount of the future payments. c. the present value of the future payments. d. none of these.

C

The cost of land does not include a. costs of grading, filling, draining, and clearing. b. costs of removing old buildings. c. costs of improvements with limited lives. d. special assessments.

C

The total payroll of Teeter Company for the month of October, 2012 was $600,000, of which $150,000 represented amounts paid in excess of $106,800 to certain employees. $500,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $150,000 of federal income taxes and $15,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to $106,800 and 1.45% in excess of $106,800. What amount should Teeter record as payroll tax expense? a. $197,700. b. $188,400. c. $38,400. d. $47,400.

C

Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $3,000 in the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? a. $12,700. b. $15,700. c. $61,000. d. $67,000.

C

What is meant by comparability when discussing financial accounting information? a. Information has predictive or confirmatory value. b. Information is reasonably free from error. c. Information that is measured and reported in a similar fashion across companies. d. Information is timely.

C

What is the normal journal entry for recording bad debt expense under the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

C

What is the objective of financial reporting? a. Provide information that is useful to management in making decisions. b. Provide information that clearly portray nonfinancial transactions. c. Provide information about the reporting entity that is useful to present and potential equity investors lenders, and other creditors. d. Provide information that excludes claims to the resources.

C

When making decisions, investors are interested in assessing? a. the company's ability to generate net cash inflows. b. management's ability to protect and enhance the capital providers' investments. c. Both a and b. d. the company's ability to generate net income.

C

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? a. Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value. b. Paid-in capital in excess of par for the purchase price. c. Treasury stock for the purchase price. d. Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value.

C

Which of the following is a characteristic of a perpetual inventory system? a. Inventory purchases are debited to a Purchases account. b. Inventory records are not kept for every item. c. Cost of goods sold is recorded with each sale. d. Cost of goods sold is determined as the amount of purchases less the change in inventory.

C

Which of the following taxes does not represent a common payroll deduction? a. Federal income taxes. b. FICA taxes. c. State unemployment taxes. d. State income taxes.

C

Worthington Chandler Company purchased equipment for $12,000. Sales tax on the purchase was $800. Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225. What is the cost of the equipment? a. $12,000 b. $12,800 c. $13,225 d. $13,575

C