ACCT - exam 2

9. A manufacturing company's weekly payroll is $100,000 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 Wednesday, December 31, on the last day of the company's reporting period?

($100,000/5) × 3 = $60,000 Credit to wages payable for $60,000

16. Clock company's balance sheet showed the following amounts: Current assets $600,000 Property, plant and equipment, net $240,000 Current liabilities $200,000 Long-term liabilities $340,000 Common stock $100,000 Additional paid on capital $300,000 Retained earnings $80,000 What is the company's debt-to-equity ratio?

($200,000 + $340,000) / ($100,000 + $300,000 + $80,000) = 1.125

4. buy equipt 500k on Jan 1, 2022, use life 8 yrs, residual value 100k how much to record as deprecation exp Dec 31, 2023?

(cost - slavage value)/useful life 500K - 100 / 8yrs = 50k

3. paid 13k for a new roof to last 7 additional years paid 275 to replace 5 widows record JE

(roof this is capitalizing) D building 13k C cash 13k (windows is exp) D maintenance exp 275 C cash 275

5. buy equipt 200k on July 1, 2022, use life 10 yrs, residual value 20k what will they record for equipment in the balance sheet on Dec 31, 2023? use straight-line depreciation

200 - 12 / 10 = 18k 18k * (6/12){July 1 to Dec 31} = 9k depreciation 2022 = 9k depreciation 2023 = 18k Equipment dec 2023 = 200-9-8 = 173k

1. Buy equipment 28K sales tax 2k delivery fee 4k installation 3 k expects to pay 10k over the 10yr useful life what will they record for equipment in the balance sheet?

28+2+4+3 = 37k

retained earnings equation

Beg RE + NI (rev - exp(cogs, sg&a)) - Divd = End RE

2. what does it mean to capitalize rather than expanse a cash expenditure?

Capitalizing is recording a cost under the belief that benefits can be derived over the long term. On the balance sheet Whereas expensing a cost implies the benefits are short-lived. on the income statement

Current Asset vs Non Current Asset

Current: can convert into cash within one year, such as short-term investments and accounts receivable. Non-current: are longer-term assets with a full value that you cannot recognize until after one year, such as property and machinery

17. XYZ Corp has decided to issue equity to raise capital to expand operations. The company has received approval from the board of directors to issue 200,000 shares of the company's common stock on May 1, 2023. On the date of issue, the common stock had a par value of $0.25 and a market value of $5. The journal entry to record the issue of stock on May 1, 2023, would include a:

DR Cash $1,000,000 CR Common stock $50,000 CR APIC - Common stock $950,000

19. On June 1, the board of directors declared a $20,000 cash dividend to be distributed to common stockholders of record on June 15. The dividend will be paid on July 1. The required journal entry on June 1 includes a:

DR retained earnings $20,000 CR div payable $20,000 DR div payable $20,000 CR cash $20,000

22. Seling an investment in Amazon stock for cash is not a ______ activity for companies. (unless you are Amazon)

Financing

10. On October 1, 2023 Bailey Company borrowed $120,000 from National Bank on a 1-year, 7% note. The adjusting entry needed on December 31, 2023 would include a

Interest expense/payable = $120,000 x 3/12 x 0.07 = $2,100 DR Interest Expense $2,100 CR Interest Payable $2,100

21. Cash received from the sale of old production equipment would appear in which section of the statement of cash flows?

Investing Section

25. How many shares of common stock are outstanding for Orange Inc.? а. 102,000 b. 100.000 c. 198.000 d. 98.000 e. None of the above.

d. 98.000 Share issued = $700,000/$7 = 100,000 Shares outstanding = 100,000 - 2,000 = 98,000

8. During 2022, XYZ Manufacturing spent $125,000 on research and development of a trademark and purchased a patent from its competitor for $50,000. What amount should XYZ record in the Intangible Assets account of its 2022 annual Balance Sheet?

Only the stuff purchased (50k). Internally developed does NOT get capitalized!

20. Cash received for interest payments from an investment purchased in 2016 appears in which section of the statement of cash flows?

Operating Section

24 & 25. Use the following information to answer the next 2 questions: The following information related to Orange Inc.'s stockholders' equity accounts: Common stock, $7 par $700,000 Additional paid in capital - Common stock $160,000 Retained earnings ? Treasury stock, 2,000 shares at cost $15,000 Total stockholders' equity $975,000

Q's on other cards

Calculate the second principal + interest payment for installment debt (Good EX) 4. Hurry Inc. borrows $25,000 from State Bank on March 1, 2023. The loan has an annual interest rate of 5%. The company will make monthly payments, starting April 1, 2023, over the next 5 years. The monthly payment is $471.78. a. What is the total amount of interest that will be paid over the life of the loan? b. What amount of the payment made May 1, 2023 will be recorded as interest expense?

TION a. Total interest over life of loan: Total payments ($471.78 x 60 months) $28,307 Total principal $25,000 Total interest paid $3,307 b. First payment - April 1, 2023 Interest expense on first payment: $25,000 x (5%/12) = $104.17 Principal reduction: $471.78 - $104.17 = $367.61 Second payment - May 1, 2023 Outstanding principal = $25,000 - $367.61 = $24,632.39 Interest expense on second payment: $24,632.39 x (5%/12) = $102.64 Formula 1 pmt interest expense = total amt borrowed * (annual in rate% / 12) principal reduction = monthly pmt - interest expense 2 pmt outstanding principl = total amt borrowed - principal reduction interest expense = outstanding principal * (annual in rate% / 12)

28. Morty Inc. Financial records Equipment, 21 $300,000 Equipment, 22 $400,000 Accum depre, 12/31/2021 $80,000 Accum depre, 12/31/2022 $60,000 During 2022, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. This was the only equipment sale during the year. What amount would be reported as an investing cash outflow from the purchase of equipment on the statement of cash flows for 2022? a. $150,000 b. $100,000 c. $130,000 d. SO e. None of the above.

a. $150,000 $300,000 + Asset purchases - $50,000 = $400,000 Beginning balance equip + Asset purchases - Assets sold = Ending balance equip

On January 1, 2022 Wander Company issued 10-year, $5,000,000 bonds with a stated Interest nite al 59 lor $4,300,000. The bonds pay interest each December 31. The market rate of interest when the bonds were issued was approximately 7%. 13. What is the amount of the cash interest payment Wander Company made on December 31, 2022 related to the bond? a. $250,000 b. $350,000 c. $215,000 d. $301,000 e. None of the above.

a. $250,000 Interest payment = $5,000,000 x 5% = $250.000

6. On December 31, 2022, XYZ Corp, decided to sell one of its production machines for $10,000 cash. The machine, which originally cost $130,000, had accumulated depreciation of $40,000 as of December 31, 2022. The journal entry to record the sale would include: a. A debit to Loss on sale for $3,500. b. A credit to Gain on sale for $3,500. c. A credit to Production machine for $11,500. d. A credit to Accumulated depreciation for $98,500. e. None of the above.

a. A debit to Loss on sale for $3,500. ($80,000 here) Journal entry: DR Cash $10,000 DR Accumulated depreciation $40,000 DR Loss on sale $80,000 CR Production machine $130,000

26. The Statement of Cash Flows includes the following Cash flows from operating activities $30,000 investing activities $80,000 financing activities ($130,000) It is likely that the company is a. using cash from operations and selling long-term assets to pay back debt. b. using cash from operations and borrowing to purchase long-term assets. c. using cash from selling long-term assets and borrowing to pay operating expenses. d. using cash from selling investments to pay operating expenses.

a. using cash from operations and selling long-term assets to pay back debt.

15. Retained earnings = ?

all the profits (minus all the losses), minus dividends paid out to owners, that have been kept in the company. Beg RE + NI - DIV = End RE

24. What is the amount of retained earnings for Orange Inc.? a. $115,000 b. $130,000 с. $100,000 d. $860,000 e. None of the above.

b. $130,000 $975,000 + $15,000 - $700,000 - $160,000 = $130,000

12. Gable Corp. planned to raise $500,000 by issuing bonds. November 1, 2022, stated an interest rate of 6%. December 34, 2022, bonds were issued at market rate of 7%. How much will the company receive from the sale of the bonds on December 31, 2022? a. Exactly $500,000 because the company would still pay interest at the stated rate. b. Less than $500,000 because the 7% market rate of interest was higher than the stated rate. c. More than $500,000 because the 6% stated rate of interest was less

b. Less than $500,000 because the 7% market rate of interest was higher than the stated rate.

11. Bonds sell at a premium when the a. The issuing company has a better reputation than other companies in the same business. b. market rate of interest is less than the stated rate of interest at the time of issue. c. market rate of interest is more than the stated rate of interest at the time of issue. d. issuing company agrees to repay the maturity before the due date.

b. market rate of interest is less than the stated rate of interest at the time of issue.

23. stockholder's equity section of the Dec 31, 2022, balance sheet: CS, $30 par, 20,000 shares issued and outstanding $600K Paid in Capital in Excess of Par-CS $240K Retained Earnings $700K Total stockholders' equity $1.540M Assume that all of the 20,000 shares were issued for $42 per share. March 1, 2023, company repurchased 4,000 shares for $50 per share. How much should be reported on the March 31, 2023, balance sheet for treasury stock? a. $128K b. $168K c. $200K d. None of the above

c. $200,000 4,000 shares x $50 = $200,000

27. When using the indirect method to determine operating cash flows, how is the issuance of stock for cash shown on the statement of cash flows? a. Operating activity b. Investing activity c. Financing activity d. Noncash investing and financing activity e. Not reported on the statement of cash flows

c. Financing activity

Earnings per share (EPS) indicates how much the company earned for each share of _______(which stock)____

common stock

be able to reconcile cash flow from operating from NI

listing the net income and adjusting it for noncash transactions and changes in the balance sheet accounts. num 8 from practice is a good ex

long term debt length

generally includes obligations that extend past 1 yr

All else equal, depreciation expense causes cash from Operating Activities to be _______(higher or lower)________ than NI.

higher

18. After a corporation declares a cash dividend, what entry takes place on the date of record?

no entry

What is good will

recorded as an asset when business pays a premium to acquire another business

7. Consider the following for XYZ Company: 2022 2021 Property, plant and equipment, net $180,000 $110,000 Depreciation expense $62,500 $47,500 Revenue $1,000,000 $900,000 Total assets $625,00 $475,0000 What is the company's fixed asset turnover ratio for 2022?

revenue / avg fixed assets $1,000,000 / (($180,000 + $110,000) / 2) = 6.90

short term vs long term

short: less than 1 yr long: more than 1 yr

the cost of treasury stock is a reduction to...

stockholders equity

Fixed Asset

used over more than 1 period to generate revenue