Final Acctg Review

Richmond Company made a loan of $11,500 to one of the company's employees on April 1, 2011. The one-year note carried a 17% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be:

$1,466.25, $488.75

The balance in Accounts Receivable at the beginning of the period amounted to $6,100. During the period $7,300 of credit sales were made to customers, and uncollectible accounts expense amounted to $490. The ending balance in Accounts Receivable is $1,900, and the ending balance in the uncollectibles allowance account is $600. The amount of cash inflow from customers that would appear in the operating section of the statement of cash flows is

$11,500

Valdez Company uses the percent of receivables method to estimate uncollectible accounts expense. Valdez began 2011 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $46,750 and $3,070 (credit), respectively. During the year, the company wrote off $4,020 in uncollectible accounts. In preparation for the company's 2011 estimate, Valdez prepared the following aging schedule (Do not round your intermediate calculations. Round your final answer to two decimal places): Number of Days*** Receivables Amount *** % Likely to be Past Due Uncollectible Current $27,700 18% 0-30 $14,650 22% 31-60 $2,650 27% 61-90 $1,280 42% Over 90 $1,800 67% Total $48,080 What will Valdez record as Uncollectible Accounts Expense for 2011?

$11,618.10

On January 1, 2011, Chase Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $67,500 and $1,150 (credit), respectively. During the year Chase reported $141,500 of credit sales. Chase wrote off $2,600 of receivables as uncollectible in 2011. Cash collections of receivables amounted to $152,100. Chase estimates that it will be unable to collect two percent (2%) of credit sales.The amount of uncollectible accounts expense recognized in the 2011 income statement will be:

$141,500 x 2%= $2,830

On January 1, Year 1, the Mahoney Company borrowed $176,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $40,925. The amount of principal repayment included in the December 31, Year 1 payment is:

$176,000 × 8% = $14,080; $40,925 payment − $14,080 interest = $26,845 principal repayment $26,845

Jason Company paid $2,100 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

$2,100 × 3/12 = $525 rent expense; $2,100 payment on 10/1/15 is a cash outflow for rent $525; $2,100

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $17,500 under terms of 2/10, n/30 and FOB shipping point. 2) The company paid freight cost of $750 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $26,500 cash and delivered under terms FOB shipping point with freight cost amounting to $550. The gross margin from these transactions of Green Company is

$26,500 Sales - [($17,500 × 0.98) + $750] Cost of goods sold = $8,600 Gross margin $8,600

Sheldon Company began Year 1 with $1,800 in its supplies account. During the year, the company purchased $5,300 of supplies on account. The company paid $2,700 on accounts payable by year end. At the end of Year 1, Sheldon counted $3,100 of supplies on hand. Sheldon's financial statements for Year 1 would show:

$3,100 of supplies on hand is the supplies asset on the balance sheet; $1,800 beginning balance + $5,300 of supplies purchased − $3,100 ending balance = $4,000 supplies expense $3,100 of supplies; $4,000 of supplies expense

Flagler Corporation shows a total of $420,000 in its common stock account and $1,020,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $4. How many shares of Flagler stock have been issued?

$420,000 total par value ÷ $4 par value per share = 105,000 shares issued $105,000

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,050 cash from the issue of common stock. 2) Borrowed $520 from a bank. 3) Earned $700 of revenues cash. 4) Paid expenses of $270. 5) Paid a $70 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $425 of common stock. 2) Repaid $290 of its debt to the bank. 3) Earned revenues of $850 cash. 4) Incurred expenses of $400. 5) Paid dividends of $120. Packard Company's net cash flow from financing activities for Year 2 is:

$425 inflow from stock - $290 outflow for loan repayment - $120 outflow for dividends = $15 inflow. inflow of $15

On January 1, 2011 Grace Company had an $16,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $58,500 of service on account. The company collected $48,170 cash from account receivable. Uncollectible accounts are estimated to be 19% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the 2011 statement of cash flows is:

$48,170.

On January 1, Year 1, Missouri Co. purchased a truck that cost $49,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

$49,000 × (2 × 10%) = $9,800 depreciation expense in Year 1. ($49,000 - $9,800) × (2 × 10%) = $7,840 depreciation expense in Year 2. $7,840

Revenue on account amounted to $5,800. Cash collections of accounts receivable amounted to $5,500. Cash paid for expenses was $3,900. The amount of employee salaries accrued at the end of the year was $1,700. Cash flow from operating activities was

$5,500 collected from customers − $3,900 paid for expenses = $1,600. Revenue earned on account and accrued salaries are not cash flow activities. $1,600

Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $89,500 of revenue on account during 2011. During 2011, Hailey collected $65,900 of cash from its receivables accounts. The company estimates that it will be unable to collect 20% of revenue on account. The amount of net realizable value of receivables on the December 31, 2011 balance sheet would be:

$5,700

On January 1, Year 1, Friedman Company purchased a truck that cost $55,000. The truck had an expected useful life of 8 years and an $9,000 salvage value. The book value of the truck at the end of Year 1, assuming that Friedman uses the double-declining-balance method, is: (Do not round intermediate calculations.)

$55,000 × (2 × 12.5%) = $13,750 Depreciation expense for Year 1; $55,000 - $13,750 = $41,250 book value at the end of Year 1. $41,250

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $10,000 of common stock to stockholders. Provided $6,300 of services on account. Paid $2,600 cash for operating expenses. Collected $3,900 of cash from accounts receivable. Paid a $300 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

$6,300 revenue − $2,600 expenses = $3,700 net income $3,700

Kier Company issued $620,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 3-year term to maturity. They had a 5.50% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the December 31, Year 1 income statement and the cash flow from operating activities shown on the December 31, Year 1 statement of cash flows would be: Interest Cash Expense Outflow A.$34,100; zero B. zero; $34,100 C.$34,100; $34,100 D. zero; zero

$620,000 × 0.055 = $34,100; Payment of interest on December 31, Year 1 increases interest expense by $34,100 and is reported as a cash outflow for operating activities. Choice C. $34,100; $34,100

Laramie Co. paid $2,200,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $644,000, Building, $874,000, and Office Furniture, $782,000. Based on this information the cost that would be allocated to the land is: (Do not round intermediate calculations.)

$644,000 ÷ ($644,000 + $874,000 + $782,000) = 28% of market value; $2,200,000 purchase price × 28% = $616,000. $616,000

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $34,000; Liabilities = ?; Common Stock = $6,400; Revenue = $13,800; Dividends = $1,450; Beginning Retained Earnings = $4,450; Ending Retained Earnings = $8,400.Based on this information, the amount of expenses on Calloway's income statement was

$8,400 (whatever number is presented for RE is the answer)

Santa Fe Company was started on January 1, Year 1, when it acquired $8,500 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,250, paid cash expenses of $3,000, and paid a cash dividend of $550. Based on this information,

$8,500 cash inflow from issuing stock - $550 cash outflow for dividends = $7,950 net cash inflow from financing activities The Year 1 statement of cash flows would show net cash inflow from financing activities of $7,950

Anchor Company purchased a manufacturing machine with a list price of $92,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $3,600. Anchor paid $5,100 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $6,600 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

$92,000 list price - ($92,000 × 2% discount) + $3,600 freight + $5,100 installation and testing = $98,860. The insurance cost is not included in the cost of the machine, but is instead expensed during the first year. $98,860

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense appearing on the Year 4 income statement and the amount of accumulated depreciation appearing on the December 31, Year 4, balance sheet would be: Depreciation expense Accumulated depreciation A. $17,000 $17,000 B. $17,000 $68,000 C. $68,000 $17,000 D. $17,000 $51,000

($110,000 - $8,000) ÷ 6 years = $17,000 depreciation expense each year; $17,000 × 4 years = $68,000 accumulated depreciation expense at the end of Year 4. B. $17,000;$68,000

Dinkins Company purchased a truck that cost $39,000. The company expected to drive the truck 100,000 miles over its 5-year useful life, and the truck had an estimated salvage value of $5,500. If the truck is driven 26,500 miles in the current accounting period, what would be the amount of depreciation expense for the year? (Do not round intermediate calculations.)

($39,000 cost - $5,500 salvage value) ÷ 100,000 miles = $0.34 per mile depreciation; $0.34 per mile × 26,500 miles = $8,878 depreciation expense. $8,878

On January 1, Year 1, Friedman Company purchased a truck that cost $50,000. The truck had an expected useful life of 100,000 miles over 8 years and an $9,000 salvage value. During Year 2, Friedman drove the truck 26,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is: (Do not round intermediate calculations.)

($50,000 - $9,000) ÷ 100,000 miles = $0.410 per mile depreciation expense. 26,000 miles × $0.410 per mile = $10,660 depreciation expense in Year 2. $10,660

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,520,000. Harding paid $385,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $407,000; Building, $1,210,000 and Equipment, $803,000. (Round your intermediate percentages to the nearest whole number: i.e 0.054231 = 5%. Do not round any other intermediate calculations.) Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,060,000 units over its 5-year useful life and has salvage value of $18,000. Harding produced 271,000 units with the equipment by the end of the first year of purchase. Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year?

($501,600 cost of equipment (33% of $1,520,000 purchase price) minus $18,000 salvage value) ÷ 1,060,000 units = $0.4562 per unit; $0.4562 × 271,000 units = $123,637. $123,637

The inventory records for Radford Co. reflected the following Beginning inventory @ May 12,000units@$5.60 First purchase @ May 72,100units@$5.80 second purchase @ May 172,300units@$5.90 Third purchase @ May 231,900units@$6.00 Sales @ May 316,300units@$7.50 Determine the amount of gross margin assuming the FIFO cost flow method.

(2,000 × $5.60) + (2,100 × $5.80) + (2,200 × $5.90) = $36,360 cost of goods sold; $47,250 sales − $36,360 cost of goods sold = $10,890 $10,890

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 600 units @ $2.80 First purchase @ May 7 700 units @ $3.00 second purchase @ May 17 900 units @ $3.10 Third purchase @ May 23 500 units @ $3.20 Sales @ May 31 2,100 units @ $4.70 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

(500 × $3.20) + (900 × $3.10) + (700 × $3.00) = $6,490 $6,490

Anton Co. uses the perpetual inventory method. Anton purchased 560 units of inventory that cost $6 each. At a later date the company purchased an additional 720 units of inventory that cost $8 each. If Anton uses the FIFO cost flow method and sells 900 units of inventory, the amount of cost of goods sold will be:

(560 × $6) + (340 × $8) = $6,080 $6,080.

Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 1,350 units of inventory that cost $6.30 each. On January 10, Year 1, the company purchased an additional 1,600 units of inventory that cost $8.70 each. If Koontz uses a weighted average cost flow method and sells 1,500 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: (Round your intermediate calculations to one decimal place.)

1,350 units + 1,600 units − 1,500 units sold = 1,450 units in ending inventory; [(1,350 × $6.30) + (1,600 × $8.70)] ÷ 2,950 = $7.60 per unit;1,450 units × $7.60 = $11,020 $11,020

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 300 units @ $2.20 First purchase @ May 7 400 units @ $2.40 second purchase @ May 17 600 units @ $2.50 Third purchase @ May 23 200 units @ $2.60 Sales @ May 31 1,200 units @ $4.10 Determine the amount of ending inventory assuming the FIFO cost flow method.

1,500 units available for sale − 1,200 units sold = 300 units in ending inventory; (200 × $2.60) + (100 × $2.50) = $770 $770

On January 1, 2011 Grace Company had an $16,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $58,500 of service on account. The company collected $48,170 cash from account receivable. Uncollectible accounts are estimated to be 19% of sales on account. The amount of uncollectible accounts expense recognized on the 2011 income statement is:

19% x $58,500= $11,115

Montana Company was authorized to issue 125,000 shares of common stock. The company had issued 54,000 shares of stock when it purchased 8,500 shares of treasury stock. The number of outstanding shares of common stock was:

54,000 shares issued − 8,500 shares of treasury stock = 45,500 shares outstanding $45,500

Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

A contingent liability should be recorded in the financial statements as a liability if the outcome is considered probable and the amount owed can be reasonably estimated. If it is considered only reasonably possible, it is only disclosed in the notes to the financial statements. The outcome is probable and can be reasonably estimated.

The following balance sheet information was provided by Western Company: Assets Year 2 Year 1 Cash $3,200 $2,700 Accounts $21,000 $19,000 Receivable Inventory $36,000 $42,000 Assuming Year 2 net credit sales totaled $132,000, what was the company's average days to collect receivables? (Use 365 days in a year. Do not round your intermediate calculations.)

Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2] Accounts receivable turnover = $132,000 ÷ [($19,000 + $21,000) ÷ 2] = $132,000 ÷ $20,000 = 6.60 times Average days to collect receivables = 365 days ÷ 6.60 = 55.30 days 55.30 days

The following balance sheet information was provided by O'Connor Company: Assets Year 2 Year 1 Cash $2,300 $1,300 Accounts $7,300 $ 5,300 Receivable Inventory $23,000 $24,000 Assuming that net credit sales for Year 2 totaled $148,000, what is the company's most recent accounts receivable turnover?

Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2] Accounts receivable turnover = $148,000 ÷ [($5,300 + $7,300) ÷ 2] = $148,000 ÷ $6,300 = 23.49 times 23.49 times

Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business? Assets=Liab.+EquityRev.-Exp.=Net Inc.Cash Flow A.NA=++---+=NANA B.NA=NA++/-NA-NA=NANA C. NA=++-NA-+=-NA D. +=++NANA-+=--OA

Accruing salary expense increases liabilities (salaries payable) and increases expenses, which decreases net income and equity (retained earnings). It does not affect cash flows. Option C

The Miller Company reported gross sales of $920,000, sales returns and allowances of $5,700 and sales discounts of $5,700. The company has average total assets of $570,000, of which $285,000 is property, plant, and equipment. What is the company's asset turnover ratio?

Asset turnover = Net sales ÷ Average assets Asset turnover = ($920,000 − $5,700 − $5,700) ÷ $570,000 = $908,600 ÷ $570,000 = 1.59 times 1.59 times

On January 12, Year 1, Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, Year 1 transaction? Assets=Liab.+Com. Stk.+Pd-in ExcessRev.−Exp.=Net Inc.Cash Flow A. 6,600=NA+6,600+NANA−NA=NA6,600 FA B. 8,250=NA+8,250+NANA−NA=NA8,250 FA C. 8,250=NA+6,600+1,650NA−NA=NA8,250 FA D. 8,250=NA+6,600+1,650NA−NA=NA8,250 IA

Assets (cash) increase by $8,250 (550 × $15), common stock increases by $6,600 (= 550 shares × $12 par value), and paid-in excess of par value − common increases by $1,650 (= $8,250 − $6,600). The cash inflow is a financing activity. Choice C. 8,250=NA+6,600+1,650NA−NA=NA8,250 FA

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $29,000; Liabilities = ?; Common Stock = $5,900; Revenue = $12,800; Dividends = $1,200; Beginning Retained Earnings = $4,200; Ending Retained Earnings = $7,900.The amount of liabilities reported on the end-of-period balance sheet was:

Assets = Liabilities + Common Stock + Ending Retained Earnings $29,000 = Liabilities + $5,900 + $7,900 Liabilities = $15,200 $15,200***

Jackson Company had a net increase in cash from operating activities of $9,500 and a net decrease in cash from financing activities of $3,250. If the beginning and ending cash balances for the company were $4,500 and $14,000, then net cash change from investing activities was:

Beginning cash balance + Increase from operating activities - Decrease from financing activities +/- Increase or decrease from investing activities = Ending cash balance $4,500 + $9,500 - $3,250 +/- Increase or decrease from investing activities = $14,000 $3,250 ***= Increase in investing activities an inflow or increase of $3,250.

Retained Earnings at the beginning and ending of the accounting period was $650 and $1,400, respectively. If revenues were $2,500 and dividends paid to stockholders were $550, expenses for the period must have been:

Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings $650 + $2,500 - Expenses - $550 = $1,400 Expenses = $1,200 $1200***

Which of the following items is an example of revenue?

Cash received from customers at the time services were provided

Ix Company issued 44,000 shares of $10 par value common stock at a market price of $35. As a result of this accounting event, the amount of stockholders' equity would:

Common stock will increase by $440,000, the par value, and paid-in capital in excess of par value will increase by $1,100,000, for a total increase in stockholders' equity of $1,540,000. increase by $1,540,000.

Which form of business organization is established as a legal entity separate from its owners?

Corporation

Assume the perpetual inventory method is used. 1) The company purchased $12,200 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,700 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,400 cash. The amount of gross margin from the four transactions is:

Cost of goods sold = ($12,200 - $1,700) × 0.98 = $10,290 Sales revenue $18,400 - Cost of goods sold $10,290 = $8,110 $8,110

Milton Company has total current assets of $52,000, including inventory of $13,500, and current liabilities of $28,000. The company's current ratio is:

Current ratio = Current assets ÷ Current liabilities Current ratio = $52,000 ÷ $28,000 = 1.86 1.86

The following balance sheet information is provided for Santana Company for Year 2: Assets Cash$4,800 Accounts receivable 10,950 Inventory 14,400 Prepaid expenses 1,200 Plant and equipment, net of depreciation 19,100 Land 13,000 Total assets $63,450 Liabilities and Stockholders' Equity Accounts payable$2,550 Salaries payable 8,630 Bonds payable (Due in ten years) 10,000 Common stock, no par 18,500 Retained earnings 23,770 Total liabilities and stockholders' equity$63,450 What is the company's debt to equity ratio?

Debt to equity = Total liabilities ÷ Total stockholders' equity Debt to equity = ($2,550 + $8,630 + $10,000) ÷ ($18,500 + $23,770) = $21,180 ÷ $42,270 = 50.11% 50.11%

Addison Company experienced an accounting event that affected its financial statements as indicated below: Assets = Liab. + Equity Rev. - Exp. =Net Inc. Cash Flow + NA + + NA + NA Which of the following accounting events could have caused these effects on Addison's statements?

Earning revenue on account increases assets (accounts receivable) and increases revenue, which increases net income and equity (retained earnings). It does not affect cash flows. Earned revenue on account.

The Abel Company provided the following information from its financial records: Net income $215,000 Common shares outstanding 1/1 230,000 Common stock dividends $13,000 Common shares outstanding 12/31 330,000 Preferred stock dividends $21,500 Preferred shares outstanding 1/1 13,000 Sales $830,000 Preferred shares outstanding 12/31 9,000 What is the amount of the company's earnings per share?

Earnings per share = (Net income − Preferred stock dividends) ÷ Average shares outstanding Earnings per share = (Net income − Preferred stock dividends) ÷ [(Beginning shares outstanding + ending shares outstanding) ÷ 2] Earnings per share = ($215,000 − $21,500) ÷ [(230,000 shares outstanding + 330,000 shares outstanding) ÷ 2] = $193,500 ÷ 280,000 shares = $0.69 per share $0.69

Blake Company purchased two identical inventory items. The item purchased first cost $27.00, and the item purchased second cost $28.00. Blake sold one of the items for $50.00. Which of the following statements is true?

If Blake uses weighted average, ending inventory will be $27.50. If the company uses FIFO, ending inventory will be $28.00. Ending inventory will be lower if Blake uses weighted average than if FIFO were used.

Hoover Company purchased two identical inventory items. The item purchased first cost $39.50. The item purchased second cost $43.75. Then Hoover sold one of the inventory items for $70. Based on this information, the amount of:

If Hoover uses LIFO, cost of goods sold will be $43.75 (most recent purchase) and ending inventory will be $39.50, not 43.75. If Hoover uses weighted average, the weighted average cost per unit is $41.62. Therefore, gross margin will be $28.38 ($70 Sales − $41.62 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $39.50 (earliest purchase), not $43.75. gross margin is $28.38 if Hoover uses the weighted average cost flow method.

Stosch Company's balance sheet reported assets of $112,000, liabilities of $29,000 and common stock of $26,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $74,000 and Stosch paid a $28,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

If assets on December 31, Year 1 totaled $112,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been $112,000. If liabilities were $29,000 and common stock was $26,000, retained earnings on December 31, Year 1 must have been $57,000. At the end of Year 2, the company reported $74,000 in retained earnings, a $17,000 increase. During Year 2, Stosch paid a $28,000 cash dividend, which reduced retained earnings. Therefore, Year 2 net income must have been $17,000 greater than the dividend paid. $28,000 + $17,000 = $45,000***

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,805,000. Harding paid $490,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $518,000; Building, $1,540,000 and Equipment, $1,022,000. What value will be recorded for the building?

In a basket purchase, the cost of each asset in the "basket" is determined as a percentage of the basket's total appraised value. $1,540,000 ÷ ($518,000 + $1,540,000 + $1,022,000) = 50%; $1,805,000 × 50% = $902,500 $902,500

Currie Company borrowed $16,000 from the Sierra Bank by issuing a 10% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $4,621. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.)

Interest expense in year 1: $16,000 × 10% = $1,600; Principal reduction in year 1: $4,621 − $1,600 = $3,021; Principal balance at beginning of year 2: $16,000 − $3,021 = $12,979; Interest expense in year 2: $12,979 × 10% = $1,298. $1,298

The following balance sheet information is provided for Gaynor Company: Assets Year 2 Year 1 Cash $4,250 $3,500 Accounts $17,000 15,000 Receivable Inventory $44,500 $52,000 Assuming Year 2 cost of goods sold is $130,000, what is the company's inventory turnover?

Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2 Inventory turnover = $130,000 ÷ [($52,000 + $44,500) ÷ 2] = $130,000 ÷ $48,250 = 2.69 times 2.69 times

The following balance sheet information is provided for Patton Company: Assets Year 2 Year 1 Cash $4,300 $3,900 Accounts $13,800 $15,800 Receivable Inventory $39,500 $46,500 Assuming Year 2 cost of goods sold is $383,000, what are the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2] Inventory turnover = $383,000 ÷ [($46,500 + $39,500) ÷ 2] = 383,000 ÷ $43,000 = 8.91 times Average days to sell inventory = 365 days ÷ Inventory turnover Average days to sell inventory = 365 days ÷8.91 times = 40.98 days 40.98 days

Which of the following is not considered an advantage of the corporate form of business organization?

Lack of government regulation

SAME PROBLEM AGAIN Which of the following answers correctly states the effect of recording the ***collection*** of the reestablished receivable on April 4, 2012?

NA NA NANA NA NA3,500 OA

On December 31, 2011, the Lincoln Corporation estimated that 13% of its credit sales of $265,000 would be uncollectible. Lincoln uses the allowance method of accounting for uncollectible accounts. In February 2012, one of Lincoln's customers failed to pay his $3,500 account and was written off. On April 4, 2012, this customer paid Lincoln the $3,500. Which of the following answers correctly states the effect of the February 2012 entry to write off the customer's account? Assets=Liab.+EquityRevenue−Expenses=Net Inc. Cash Flow

NA NA NANA NA NANA

SAME PROBLEM AS ABOVE Which of the following answers correctly states the effect of recording the ***reestablishment*** of the receivable on April 4, 2012?

NA NA NANA NA NANA (again)

The following balance sheet information is provided for Greene Company for Year 2: Assets Cash$4,800 Accounts receivable 10,950 Inventory 14,400 Prepaid expenses 1,200 Plant and equipment, net of depreciation 19,100 Land 13,000 Total assets $63,450 Liabilities and Stockholders' Equity Accounts payable $2,550 Salaries payable 8,630 Bonds payable (Due in ten years) 10,000 Common stock, no par 18,500 Retained earnings 23,770 Total liabilities and stockholders' equity$63,450 What is the company's quick (acid-test) ratio? (Round your answer to 2 decimal places.)

Quick ratio = Quick assets ÷ Current liabilitiesQuick ratio = (Cash + Receivables + Current marketable securities) ÷ Current liabilitiesQuick ratio = ($4,800 + $10,950 + $0) ÷ ($2,550 + $8,630 ) = $15,750 ÷ $11,180 = 1.41 1.41

On January 1, 2011, the Accounts Receivable balance was $27,500 and the credit balance in the Allowance for Doubtful Accounts was $1,590. On January 15, 2011 a $590 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

Receivable balance of $27,500 - Doubtful Accounts of $1,590= $25,910 $25,910

The recognition of an expense may be accompanied by which of the following?

Recognizing an expense may be accompanied by an increase in liabilities (i.e. accounts payable, salaries payable) or a decrease in assets (i.e. cash, prepaid rent or insurance). An increase in liabilities

Monthly remittance of sales tax:

Remittance of sales tax reduces assets (cash) and reduces liabilities (sales tax payable). Reduces liabilities.

Revenue on account amounted to $6,600. Cash collections of accounts receivable amounted to $4,250. Expenses for the period were $3,400. The company paid dividends of $1,100. Net income for the period was

Revenue $6,600 − Expenses $3,400 = $3,200 Net Income $3,200

Ballard Company uses the perpetual inventory system. The company purchased $9,800 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $430 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,600 cash. The amount of gross margin for this merchandise is:

Sales $18,600 - Cost of goods sold ($9,800 × 0.98 + $430) = $8,566 Gross margin $8,566

SX Company sold merchandise on account for $17,800. The merchandise had cost the company $6,800. What is the effect of the sale on the income statement?

Selling merchandise on account will increase revenue by $17,800. It will increase expenses by $6,800 and increase net income by $11,000. Revenue - Expenses = Net income. $17,800 − $6,800 = $11,000. Expenses increase by $6,800

Madison Company issued an interest-bearing note payable with a face amount of $9,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term. The amount of cash flow from operating activities on the Year 1 statement of cash flows would be:

The $9,000 borrowed is classified as a financing activity, not an operating activity. No interest was paid in Year 1, so there is no cash flow related to the interest. zero

Curtain Co. paid dividends of $6,000; $8,000; and $8,900 during Year 1, Year 2, and Year 3, respectively. The company had 1,800 shares of 4.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

The annual preferred dividends each year = $100 × 1,800 shares × 4.0% = $7,200. In Year 1, there were $1,200 of dividends in arrears ($7,200 preferred dividends − $6,000 paid). In Year 2, there were $400 in arrears ($1,200 beginning + $7,200 preferred dividends − $8,000 paid). In Year 3, the preferred dividends was $7,200 + $400 in arrears = $7,600. The remaining $1,300 was paid to common shareholders. $1,300

On January 2, Year 1, Torres Corporation issued 18,000 shares of $12 par-value common stock for $20 per share. Which of the following statements is true?

The cash account will increase by $360,000 (18,000 × $20), the common stock account will increase by $216,000 (18,000 × $12 par value), and the paid-in capital in excess of par value account will increase by $144,000 (18,000 × $8). The paid-in capital in excess of par value account will increase by $144,000.

Assume the perpetual inventory method is used. 1) The company purchased $13,700 of merchandise on account under terms 3/10, n/30. 2) The company returned $3,200 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,400 cash. What effect will the return of merchandise to the supplier have on the accounting equation?

The purchase return will decrease assets (merchandise inventory) and decrease liabilities (accounts payable) by $3,200, the full invoiced amount of the merchandise returned. Assets and liabilities are reduced by $3,200.

Which of the following represents the impact of a taxable cash sale of $1,050 on the accounting equation if the sales tax rate is 4%?

The transaction is recorded as an increase to cash of $1,092, the amount of the sale, plus the 4% sales tax collected, an increase to sales tax payable of $42, the amount owed to the state, and an increase to sales revenue of $1,050, the amount of the sale. An increase to cash for $1,092, an increase to sales tax payable for $42, and an increase to sales revenue for $1,050.

The Wilson Company purchased $27,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,000 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

When the perpetual system is used, the inventory account is increased when inventory is purchased; that account is also increased when the company (as the buyer of the merchandise) pays the transportation costs. Total increases to the inventory account would be $29,000.

Abbott Company purchased $7,700 of merchandise inventory on account. Advent uses the perpetual inventory method. How does this transaction affect the financial statements?

When the perpetual system is used, the purchase of inventory on account increases inventory and increases accounts payable. Increase inventory and increase accounts payable.

Darden Company has cash of $28,000, accounts receivable of $38,000, inventory of $20,000, and equipment of $58,000. Assuming current liabilities of $28,000, this company's working capital is:

Working capital = Current assets − Current liabilitiesWorking capital = ($28,000 + $38,000 + $20,000) - $28,000 = $58,000 $58,000

The following balance sheet information is provided for Apex Company for Year 2: Assets Cash$5,400 Accounts receivable 11,550 Inventory 14,700 Prepaid expenses 1,500 Plant and equipment, net of depreciation 19,400 Land 13,300 Total assets$65,850 Liabilities and stockholders' equity Accounts payable$2,730 Salaries payable 8,330 Bonds payable (due in ten years) 11,500 Common stock, no par 17,000 Retained earnings 26,290 Total liabilities and stockholders' equity $65,850 What is the company's working capital?

Working capital = Current assets − Current liabilitiesWorking capital = ($5,400 + $11,550 + $14,700 + $1,500) − ($2,730 + $8,330) = $33,150 − $11,060 = $22,090 $22,090

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1900units@$3.40 First purchase @ May 71,000units@$3.60 second purchase @ May 171,200units@$3.70 Third purchase @ May 23800units@$3.80 Sales @ May 313,000units@$5.30 Determine the amount of gross margin assuming the weighted average cost flow method

[(900 × $3.40) + (1,000 × $3.60) + (1,200 × $3.70) + (800 × $3.80)] ÷ 3,900 units = $3.63 per unit.(3,000 × $5.30) − (3,000 × $3.63) = $5,010. $5,010

Jack's Snow Removal Company received a cash advance of $10,200 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

increase equity by $3,400

Li Company paid cash to purchase land. As a result of this accounting event:

total assets were unaffected.

Richmond Company made a loan of $10,500 to one of the company's employees on April 1, 2011. The one-year note carried a 15% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be:

$1,181.25, $393.75