Financial Accounting Midterm 2
Leno Company sells goods to the Fallon Company for $11,000. It offers credit terms of 3/10, n/30. If Fallon Company pays the invoice within the discount period, Leno Company will record a debit to Cash in the amount of
$10,670
the following data was extracted from the records of Today Company: Sales revenue - 400 units at $45 per unit Beginning Inventory - 100 units at $18 per unit Purchases - 400 units at $13 per unit What is the gross profit using the LIFO method?
$12,800
Land, a building and equipment are acquired for a lump sum of $800,000. The market values of the land, building and equipment are $400,000, $900,000 and $300,000, respectively. What is the cost assigned to the equipment? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
$150,000
The balance in Accounts Receivable was $ 670,000 at the beginning of the year and $ 790,000 at the end of the year. Credit sales for the year totaled $ 4,100,000. During the year, $ 410,000 in customer accounts were written off. How much cash was collected from customers during the period?
$3,570,000
Kennel Company reported the following: COGS (estimated for next period): $300,000 Ending Inventory (estimated for next period): $85,000 Beginning inventory for the period: $60,000 Based on this information, the purchase for the next period should be:
$325,000
the following data are for Steve's candy store for January: Beginning Inventory: $181,000 Net Purchases: $530,000 Net sales revenue: $610,000 Normal gross profit rate: 40% What is the company's estimated ending inventory for the month?
$345,000
An aging-of-accounts-receivable indicates that the amount of uncollectible accounts is $3,910. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $600. The Accounts Receivable balance is $44,620. The amount of the adjusting entry for uncollectible accounts should be for
$4,510
On January 4, 2019, Margaret's Cafe acquired equipment for $147,500. The estimated life of the equipment is 4 years or 42,500 hours. The estimated residual value is $20,000. What is the depreciation for 2019, if Margaret's Cafe uses the asset 14,400 hours and uses the units-of-production method of depreciation?
$43,200
A company has a beginning inventory of $ 40,000 and purchases during the year of $ 140,000. The beginning inventory consisted of 3,000 units and 8,000 units were purchased during the year. 3,480 units remain in ending inventory. The cost of the ending inventory using the average-cost method will be: (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$56,933
On January 2, 2019, Konan Corporation acquired equipment for $ 900,000. The estimated life of the equipment is 5 years or 60,000 hours. The estimated residual value is $ 10,000. What is the balance in Accumulated Depreciation on December 31, 2020, if Konan Corporation uses the double-declining-balance method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$576,000
Beck Company trades in old equipment for new equipment. The old equipment has a cost of $10,000 and accumulated depreciation of $9,000. Beck Company pays cash of $21,000. The fair value of the new equipment is $28,000. What is the gain or loss for Beck Company on the exchange of equipment?
$6,000 gain
Willis Company trades in a printing press for a newer model. The cost of the old printing press was $ 62,000, and accumulated depreciation up to the date of the trade-in is $ 45,000. The company also pays $ 44,000 cash for the newer printing press. The fair market value of the newer printing press is $ 71,000. The journal entry to acquire the new printing press will require a debit to Printing Press for:
$71,000
Given the following data, calculate cost of goods sold using the FIFO costing method. 1/1 - Beginning Inventory - 33 Units at $8 per unit 2/25 - Purchase of Inventory - 12 units at $10 per unit 5/20 - Purchase of inventory - 25 units at $14 per unit 8/15 - Purchase of Inventory - 5 units at $12 per unit 10/17 - Purchase of Inventory - 12 units at $18 per unit 12/31 - Ending Inventory - 18 units
$720
gross profit will be:
- highest in FIFO is used and inventory costs are increasing - highest if LIFO is used and inventory costs are decreasing - lowest if LIFO is used and inventory costs are increasing
Marian Company reported the following items for the month of July: Sales revenue - $478,300 Beginning Inventory - $69,400 COGS - $350,000 Ending Inventory - $80,200 Inventory turnover is:
4.68
Marian Company reported the following items for the month of July: Sales revenue - $472,300 Beginning Inventory - $67,400 COGS - $340,000 Ending Inventory - $75,200 Inventory Turnover is:
4.77
On December 2, a customer returned merchandise, with a selling price of $ 900 purchased on account, to a department store. Ignoring cost of goods sold, which journal entry should the department store prepare? Assume no discounts were offered.
Debit sales refunds payable for $900 and credit accounts receivables for $900
Roadway Company purchases inventory from Fedway Company with the shipping terms FOB destination. This means that:
Fedway Company will pay the freight on this transaction
On June 1, Roadway's Trucking Company paid $9,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years. It also paid $8,000 to change the storage capacity of the truck so that it could haul more merchandise. Which of the following statements is TRUE?
both items are capital expenditures
statement regarding the direct write-off method for uncollectible accounts
companies are required to use the direct write-off method for federal income tax purposes and a company records the uncollectible-account expense when it writes off an individual account receivable
Equipment with a historical cost of $ 105,000 and Accumulated Depreciation of $ 20,000 is junked. No cash is received upon disposal. Which journal entry is necessary?
debit Accumulated Depreciation minus Equipment for $ 20,000, debit Loss on Disposal of Equipment for $ 85,000 and credit Equipment for $ 105,000
Mariah Company has inventory at the end of the year with a historical cost of $73,000. Mariah Company uses the perpetual inventory system. Under the LCM rule, the current replacement cost is $70,600. The company uses LIFO. Under U.S. GAAP, the journal entry to record the write-down to LCM will
debit COGS for $2,400 and credit inventory for $2,400
On June 1, Nicholson Company purchased inventory on account with a cost of $1,600. Credit terms were 2/10, net 30. On June 2, Nicholson Company returned 50 percent of the inventory. Nicholson Company uses the perpetual inventory system. What journal entry did Nicholson Company prepare on June 2?
debit accounts payable for $800 and credit inventory for $800
On December 1, Macy Company sold merchandise with a selling price of $ 5,000 on account to Mrs. Jorgensen, with terms 1/10, n/30. Using the gross method and ignoring cost of goods sold, what journal entry did Macy Company prepare on December 1? Macy expects no sales returns
debit accounts receivable for $5,000 and credit sales revenue for $5,000
On December 1, Macy Company sold merchandise with a selling price of $ 2,000 on account to Mrs. Jorgensen, with terms 4/10, n/30. On December 3, Mrs. Jorgensen returned merchandise with a selling price of $ 900. Mrs. Jorgensen paid the amount due on December 9. What journal entry did Macy Company prepare on December 9 assuming the gross method is used?
debit cash for $1,056, debit sales discounts for $44, and credit accounts receivable for $1,100
Under a perpetual inventory system, the journal entry to record the purchase of inventory on account will include a:
debit inventory and a credit to accounts payable
On May 1, 2019, Mary Smith signed a $10,000 promissory note with Continental Bank. The note is due in one year with 7% interest. What journal entry should Continental Bank prepare on May 1, 2019?
debit notes receivable for $10,000 and credit cash for $10,000
If Abby, Inc. sells items to a customer who uses a credit card for $1,900, and there is a credit card fee of 2.5%, Abby will record a(n): (Round your final answer to the nearest dollar.)
debit to credit card expense for $48
On October 1, 2019, the Early Bank lends money to a customer on a six month note. The bank accrues interest on the note at December 31, 2019. The bank's journal entry on December 31, 2019 would include a:
debit to interest receivable and a credit to interest revenue for 3 months of interest
If inventory costs are rising and a company is using LIFO, large purchases of inventory near the end of the year will:
decrease income taxes paid
which of the following should be included in the cost of land improvements?
driveways, sprinkler system for the landscaping, and fencing
costs that do not extend a plant assest's capacity or its useful life, but merely maintain the asset or restore it to working order are recorded as:
expenses
Accumulated depreciation is a cash fund to be used to replace a plant asset when it wears out (t/f)
false
By having knowledge of the company's inventory method, as well as having clear, complete disclosures in the financial statements, bankers are guaranteed that the company will repay its loans (t/f)
false
If a company buys a building and the surrounding land for cash, total assets increase. (t/f)
false
if a long-term an asset is impaired, estimated future cash flows will exceed the net book value (t/f)
false
the cost of land includes fencing and paving (t/f)
false
the general ledger has a separate account receivable for each customer (t/f)
false
the inventory turnover ratio should be the same for all types of industries (t/f)
false
the two major types of receivables are accounts receivables and trade receivables (t/f)
false
under the US GAAP, the application of the lower-of-cost-or-market rule to inventories is optional (t/f)
false
another term for gross profit
gross margin
WorldCom's fraudulent scheme of capitalizing telephone line costs instead of expensing them was discovered by
internal auditors
Barbarino Corporation purchased land and a building for $1,000,000. An appraisal indicates that the land's market value is $600,000 and the building's market value is $900,000. When recording this transaction Barbarino should debit: (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
land for $400,000
Barbarino Corporation purchased land and a building for $ 1,600,000. An appraisal indicates that the land's market value is $ 1,200,000 and the building's market value is $ 800,000. When recording this transaction Barbarino should debit: (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
land for $960,000
the transaction price
may include a trade discount
Ending inventory for the year ended December 31, 2019, is understated by $23,000. How will this error affect net income in 2020?
net income will be overstated by $23,000
Ending Inventory for the year ended December 31, 2019, is understated by $8,000. How will this affect net income for 2019 and 2020?
net income will be understated by $8,000 in 2019 and overstated $8,000 in 2020
The historical cost of Jahn Company's ending inventory was less than the net realizable value. The company uses FIFO. Following U.S. GAAP, which journal entry is required?
no journal entry is needed
when journalizing for an actual sales return, there would be a debit to
sales refund payable
one way the risk of not collecting receivables can be managed is:
separate cash - handling duties from record - keeping duties
For a plant asset that generates revenue evenly over time, which depreciation method best meets the expense recognition principle?
straight-line
under the average-cost inventory method, to determine the average cost per unit:
the cost of beginning inventory plus the cost of purchases is divided by the number of units available
when a note matures
the debtor must pay the creditor the maturity value of the note
Excalibur Company sells equipment for $20,000 cash. The gain or loss on the sale of equipment equals
the difference between the cash received on sale and the book value of the equipment
When inventory is shipped from the seller to the buyer with shipping terms of FOB destination
the seller has title to the goods while they are in transit
which of the following costs associated with a delivery van should not be capitalized
the van being repainted after 4 years of use
For retailers, a way to speed up cash collections is:
to accept debit and credit card sales
In 2019, beginning inventory is overstated. What is the effect of the error on total stockholders' equity in 2020?
total stockholders' equity is correctly stated in 2020
If a long-term plant asset is impaired, generally accepted accounting principles require the owner to adjust the carrying value downward from its book value to its fair value. (t/f)
true
The multiple subsidiary ledgers for accounts receivable shows the separate accounts for each individual customer. (t/f)
true
Under the double-declining-balance method of depreciation, residual value is initially ignored. (t/f)
true
When compared to the accelerated depreciation methods, the use of the straight-line method increases a company's tax liability (t/f).
true
beginning inventory and ending inventory have opposite effects on the COGS (t/f)
true
customers usually have a right to return unsatisfactory, or damaged merchandise to seller for refund, credit, or exchange (t/f)
true
expenditures that extend a plant assest's useful life should be capitalized (t/f)
true
revenue should be recognized when it is earned, and not before (t/f)
true
the Loss on Disposal of Equipment account is reported as Other income (expense) on the income statement (t/f)
true
the cost-of-goods-sold model can be used to estimate ending inventory (t/f)
true
the maker of the note is the borrower (t/f)
true
under a perpetual inventory system, when a sale is made, the seller needs to prepare:
two journal entries
Treating a capital expenditure as an immediate expense:
understates assets and stockholders' equity in the year of the error.
Scott Walker Company reported the following data for the past year: Net sales - $ 430,000 Purchases - $ 200,000 Beginning Inventory - $ 150,000 Ending Inventory - $ 180,000 Cost of Goods Sold - $ 300,000 Industry Averages available are: Inventory Turnover - 5.00 Gross Profit Percentage - 50% How do the inventory turnover and gross profit percentage for Scott Walker Company compare to the industry averages for the same ratios? (Round inventory turnover to two decimal places. Round gross profit percentage to the nearest percent.)
walker company is inferior on both measures
