Final Review

Employer payroll taxes do not include

Federal income taxes

A promissory note

may be used to settle an accounts receivable

Interest is usually associated with

notes receivable

A company purchased factory equipment on April 1, 2017 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017 is

$10,500

Using the percentage-of-receivables basis, the uncollectible accounts for the year is estimated to be $33,000. If the balance for the Allowance for Doubtful Accounts is a $5,000 credit before adjustment, what is the amount of bad debt expense for the period?

$28,000

Lulzbot.com sells 6,000 units of its product for $500 each during the year ending December 31, 2019. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31, 2019?

$3,000

Homeplate sells softball equipment. On November 14, they shipped $4,000 worth of softball uniforms to Bonita Middle School, terms 2/10, n/30. On November 21, they received an order from Vista High School for $1,500 worth of custom printed bats to be produced in December. On November 30, Bonita Middle School returned $200 of defective merchandise. Homeplate has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?

$3,800

Able Towing Company purchased a tow truck for $180,000 on January 1, 2016. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $36,000. On December 31, 2018, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2018) and the salvage value to $5,000. What was the depreciation expense for 2018?

$36,550

On May 1, 2017, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2010. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What gain should be recognized on the sale?

$45,000

The maturity value of a $60,000, 8%, 60-day note receivable dated July 3 is

$60,800

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking area cost $25,000. Which of the following statements is true with respect to these additions?

$65,000 should be debited to Land Improvements

The amortization period for a patent cannot exceed

20 years

A truck was purchased for $180,000 and it was estimated to have a $36,000 salvage value at the end of its useful life. Monthly depreciation expense of $3,000 was recorded using the straight-line method. The annual depreciation rate is

25%

Valli Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the bad debts expense?

Bad Debt Expense 25,000 Allowance for Doubtful Accounts 25,000

Which of the following assets does not decline in service potential over the course of its useful life?

Land

Why is the direct write-off method not allowed?

The Generally Accepted Accounting Principles (GAAP) mandates that expenses be matched with revenue during the same accounting period. But, under the direct write off method, the loss may be recorded in a different accounting period than when the original invoice was posted.

An example of a write-off using the allowance method would be

a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

Using the direct write-off method for some uncollectible involves

a debit to a bad debt expense account and a credit to the accounts receivable account.

The declining-balance method of depreciation produces

a decreasing depreciation expense each period

Some examples of contra accounts are

accumulated depreciation, owner's drawings, allowance for doubtful accounts, discount on bonds payable, sales returns and allowances, and sales discounts.

Under the allowance method, writing off an uncollectible account

affects only balance sheet accounts

The allowance method of accounting for uncollectible accounts is required if

bad debts are significant in amount

All of the following are reported as current liabilities except

bonds payable

A gain or loss on disposal of a plant asset is determined by comparing the

book value of the asset with the proceeds received from its sale

A contingent liability should be recorded in the accounts when

it is probable the contingency will happen, and the amount can be reasonably estimated

To be classified as a current liability, a debt must be expected to be paid within: a.one year. b.the operating cycle. c.2 years. d.(a) or (b), whichever is longer

d.(a) or (b), whichever is longer

An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $700 debit balance, the adjustment to record bad debts for the period will require a

debit to Bad Debt Expense for $4,700

When an account is written off using the allowance method, accounts receivable

decreases and the allowance account decreases

Intangible assets are the rights and privileges that result from ownership of long-lived assets that

do not have physical substance

The percentage of sales basis of estimating expected uncollectibles

emphasizes the matching of expenses with revenues

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's

face value

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

in the period in which the product was sold

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the

percentage of receivables basis

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

straight-line