Chapter 5 + 6

On September 1, Year 1, Western Company loaned $36,000 cash to Eastern Company. The one-year note carried a 5% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western's Year 2 financial statements would be

$1,200 interest revenue and $1,800 cash inflow from operating activities.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of depreciation expense recognized on the Year 2 income statement is

$10,000.

Corazon Company purchased an asset with a list price of $14,000. Corazon paid $500 of transportation-in cost, $800 to train an employee to operate the equipment, and $200 to insure the asset against theft after it has been set up in the factory. The asset was purchased under terms 1/20/n30 and Corazon paid for the asset within the discount period. Based on this information, Corazon would capitalize the asset on its books at

$15,160

The following information was drawn from the inventory records of Alpha Company as of December, Year 2. Beginning inventory (purchased in Year 1) : 200 Units @ $ 5 each Purchases made in Year 2 : 800 Units @ $ 8 each Units Sold : 900 Units @ $ 12 each Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a LIFO cost flow method?

$3,900

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the LIFO cost flow method, the balance in the inventory account after the sales transaction will be

$30.

Which of the following is an intangible asset? -Patent -Copyright -Trademark -All of the answers are names of intangible assets.

All of the answers are names of intangible assets.

Which of the following is not a tangible asset?

Copyright

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. When the Company sold one of the items for $40, it expensed $30 to its cost of goods sold account. Based on this information which of the following cost flow methods is the company using?

FIFO

In the video, uncollectible accounts expense is

estimated and recognized at the end of the accounting period.

T/F - All training costs associated with the purchase and continuing use of an asset should be capitalized in the asset account. This statement is

false.

Tangier Company paid cash to purchase a long-term operational asset. The cost of the asset will be expensed (depreciated)

over the useful life of the asset.

T/F - Accrued interest revenue will appear on the income statement but not on the statement of cash flows.

true.

T/F - Land is different from other tangible assets in that its utility is not diminished by its use. This statement is

true.

The revenue stream for Marino Moving Company fluctuates from year to year. Based on this information alone, Marino should use the

units-of-production method to compute depreciation expense.

In the video, recognizing the write-off of an uncollectible account receivable will

will not affect the total amount of the net realizable value of receivables.

Jefferson Company made a loan of $6,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of cash flow from operating activities that Jefferson would report in Year 1 and Year 2, respectively would be

$0, and $360.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. Marino planned to drive the truck for 100,000 miles and then to sell it. The truck was expected to have an $8,000 salvage value. The truck was actually driven 40,000 miles during Year 1; 20,000 miles during Year 2; 35,000 miles during Year 3; and 10,000 miles during Year 4. If Marino uses the units-of-production method, the amount of depreciation expense recognized on the Year 4 income statement is

$2,000.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of accumulated depreciation shown on the Year 2 balance sheet is

$20,000.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. Marino planned to drive the truck for 100,000 miles and then to sell it. The truck was expected to have an $8,000 salvage value. The truck was actually driven 40,000 miles during Year 1, 20,000 miles during Year 2, 35,000 miles during Year 3 and 10,000 miles during Year 4. If Marino uses the units-of-production method, the amount of book value shown on the Year 2 balance sheet is

$24,000.

DeKalb Company made a loan of $6,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that DeKalb would report in Year 1 and Year 2, respectively would be

$270, and $90.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of book value shown on the Year 2 balance sheet is

$28,000.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. Marino planned to drive the truck for 100,000 miles and then to sell it. The truck was expected to have an $8,000 salvage value. The truck was actually driven 40,000 miles during Year 1, 20,000 miles during Year 2, 35,000 miles during Year 3 and 10,000 miles during Year 4. If Marino uses the units-of-production method, the amount of accumulated depreciation shown on the Year 3 balance sheet is

$38,000.

At the end of the accounting period Anderson Company had $4,500 in accounts receivable and $500 in its allowance for doubtful accounts account. Based on this information the net realizable value of accounts receivable is

$4,000.

The following information was drawn from the inventory records of Alpha Company as of December, Year 2. Beginning inventory (purchased in Year 1) : 200 Units @ $ 5 each Purchases made in Year 2 : 800 Units @ $ 8 each Units Sold : 900 Units @ $ 12 each Which of the following is the amount of the gross margin shown on the Year 2 income statement assuming Alpha uses a weighted average cost flow method?

$4,140

The following information was drawn from the inventory records of Alpha Company as of December 31, Year 2. Beginning inventory (purchased in Year 1) : 200 Units @ $ 5 each Purchases made in Year 2 : 800 Units @ $ 8 each Units Sold : 900 Units @ $ 12 each Which of the following is the amount of the gross margin assuming Alpha uses a FIFO cost flow method?

$4,200

The following information was drawn from the inventory records of Preston Company. Beginning inventory (purchased in Year 1): 100 Units @ $ 10 each First purchase made in Year 2 : 400 Units @ $ 12 each Second purchase made in Year 2 : 500 Units @ $ 14 each Units Sold : 950 Units @ $ 15 each Based on this information, which of the following represents the amount of ending inventory appearing on the balance sheet assuming a LIFO cost flow?

$500

On September 1, Year 1, Western Company loaned $36,000 cash to Eastern Company. The one-year note carried a 5% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western's December 31, Year 1 financial statements would be

$600 interest revenue and zero cash flow from operating activities.

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be

$9.

Forest Beach Company experienced an event that had the following effects on its financial statements. NA = NA + NA NA − NA = NA + IA Which of the following events could have caused these effects?

Collected cash for the principal balance of a note receivable.

Which of the following cost flow methods would provide the lowest amount of net income in an inflationary environment?

LIFO

On August 1, Year 1, Hernandez Company loaned $48,000 cash to Acosta Company. The one-year note carried a 5% rate of interest. Which of the following shows how the accrual of interest revenue in Year 2 will affect Hernandez's financial statements? A. 1,400 = NA + 1,400 1,400 − NA = 1,400 NA B. 1,400 = NA + 1,400 1,400 − NA = 1,400 1,400 OA C. 1,000 = NA + 1,000 1,000 − NA = 1,000 NA D. 1,000 = NA + 1,000 1,000 − NA = 1,000 2,400 OA

Option A

On November 1, Year 1, Shelter Company loaned $7,000 cash to Cove Company. The one-year note carried a 7% rate of interest. Which of the following shows how the loan will affect Shelter's financial statements on November 1, Year 1? A. NA = NA + NA NA − NA = NA (7,000) IA B. NA = NA + NA NA − NA = NA (7,000) FA C. 7,000 = 7,000 + NA NA − NA = NA 7,000 FA D. (7,000) = (7,000) + NA NA − NA = NA (7,000) IA

Option A

Sable Co. paid $400,000 for a purchase that included land, a building, and equipment. An appraiser estimated the market value of the land to be $100,000, the building to be $350,000, and the equipment to be $50,000. Based on this information the cost that would be allocated to each of the assets is A. $80,000 $280,000 $40,000 B. $100,000 $350,000 $50,000 C. $80,000 $240,000 $50,000 D. $100,000 $280,000 $40,000

Option A

On December 31, Year 1, Kardashian Company recorded an adjusting entry to recognize $5,470 of uncollectible accounts expense. Which of the following shows how this entry will affect Kardashian's financial statements? A. (5,470) = NA + (5,470) NA − 5,470 = (5,470) (5,470) OA B. (5,470) = NA + (5,470) NA − 5,470 = (5,470) NA C. (5,470) = NA + (5,470) NA − 5,470 = (5,470) (5,470) FA D. (5,470) = (5,470) + NA NA − 5,470 = (5,470) NA

Option B

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. Marino planned to drive the truck for 100,000 miles and then to sell it. The truck was expected to have an $8,000 salvage value. The truck was actually driven 40,000 miles during Year 1, 20,000 miles during Year 2, 35,000 miles during Year 3 and 10,000 miles during Year 4. If Marino uses the units-of-production method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements? A. NA + 14,000 = NA + 14,000 NA − 14,000 = (14,000) (14,000) OA B. NA + (14,000) = NA + (14,000) NA − 14,000 = (14,000) NA C. NA + (38,000) = NA + (38,000) NA − 38,000 = (38,000) NA D. NA + 38,000 = NA + 38,000 NA − 38,000 = (38,000) (38,000) OA

Option B

Hope Company determined that an $8,000 account receivable was uncollectible. Which of the following shows how the write-off of this receivable will affect Hope's financial statements? A. NA = NA + NA NA − 8,000 = (8,000) (8,000) OA B. (8,000) = NA + (8,000) NA − 8,000 = (8,000) NA C. NA = NA + NA NA − NA = NA NA D. (8,000) = (8,000) + NA NA − 8,000 = (8,000) NA

Option C

Harbor Co. made a basket purchase. Specifically, the Company paid cash to purchase land, a building and equipment. The appraised market value of the individual items was greater that the purchase price. Which of the following shows how this purchase will affect a company's financial statements? A. + = NA + + NA − NA = NA + IA B. + = NA + + + − NA = + + OA C. NA = NA + NA NA − NA = NA − OA D. NA = NA + NA NA − NA = NA − IA

Option D

On August 1, Year 1, Hernandez Company loaned $48,000 cash to Acosta Company. The one-year note carried a 5% rate of interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will affect Hernandez's financial statements? A. 1,400 = NA + 1,400 1,400 − NA = 1,400 1,400 OA B. 1,400 = NA + 1,400 1,400 − NA = 1,400 NA C. 1,000 = NA + 1,000 1,000 − NA = 1,000 1,000 OA D. 1,000 = NA + 1,000 1,000 − NA = 1,000 NA

Option D

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements? A. NA + 30,000 = NA + 30,000 NA − 30,000 = (30,000) NA B. NA + (30,000) = NA + 10,000 NA − 10,000 = (10,000) NA C. NA + 10,000 = NA + 10,000 NA − 10,000 = (10,000) (10,000) OA D. NA + (10,000) = NA + (10,000) NA − 10,000 = (10,000) NA

Option D

Capitalizing the cash cost of a piece of equipment is

an asset exchange event

T/F - Most companies expect to collect the full balance of all of their accounts receivable. This statement is

false.

T/F - When the total estimated market value of assets acquired in a basket purchase is greater than the cost of the purchase, the company making the purchase must recognize a gain.

false.

Guac Co. paid $350,000 for a purchase that included land, a building, and equipment. An appraiser estimated the market value of the land to be $80,000, the building to be $300,000, and the equipment to be $20,000. Based on this information recording the basket purchase in the accounting records would cause

no effect on total assets or total equity.

The recovery and collection of an account receivable that had previously been written off will

not affect total assets.

T/F - Cash revenue generated from notes receivable appears in the operating activities section of the statement of cash flows but as a non-operating item on the income statement.

true.

T/F - The balance in the allowance for doubtful accounts provides an estimate of the amount of accounts receivable that is expected to be uncollectible. This statement is

true.

T/F - The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is

true.

T/F - The net realizable value of accounts receivable represents an estimate of the amount of the accounts receivable that a company realistically expects to collect. This statement is

true.