MGMT Exam 2

Express Jet borrows $100 million on October 1 for one year at 6% interest. For what amount does Express Jet report interest payable for the year ended December 31 of the current year (three months later)?

$1.5 million.

Kansas Enterprises purchased equipment for $60,000 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $5,000 at the end of five years.Using the straight-line method, depreciation expense for 2022 and the book value at December 31, 2022, would be:

$11,000 and $38,000

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What is the amount of net revenues (sales minus sales discounts) as of March 23?

$11,760

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000 and has cost of goods sold equal to $233,000. Tyler's ending inventory equals:

$15,000

The following financial information is from Cook Company: Accounts Payable $ 55,000 Land $ 90,000 Inventory $ 10,500 Accounts Receivable $ 7,500 Equipment $ 8,000 Deferred Revenue $ 58,500 Short-Term Investments $ 20,000 Notes Receivable (due in 8 months) $ 45,500 Interest Payable $ 2,000 Patents $ 75,000 What is the total amount of long-term assets assuming the accounts above reflect normal activity?

$173,000

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

$180,000

A local Starbucks sells gift cards of $10,000 during the year. By the end of the year, customers have redeemed $8,000 of gift cards. What will be the year-end balance in the Deferred Revenue account?

$2,000

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of:

$2,000

If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1?

$450,000

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Purchase price$50,000 Sales tax (8%)4,000 Shipping $3,000 Installation $2,000 Depreciation during the first month %1,000 Total costs$60,000 What is the total capitalized cost of the equipment?

$59,000

The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?

$60,000

Equipment with a cost of $390,000 and estimated residual value of $60,000 is expected to have a useful life of 30,000 hours. During August, the equipment was operated for 700 hours. What amount should be recorded as depreciation expense for the month?

$7,700

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2?

$8,000

A company purchased land, a building, and equipment for one price of $800,000. The estimated fair values of the land, building, and equipment are $100,000, $700,000, and $200,000,respectively. At what amount would the company record the land?

$80,000

Real Angus Steakhouse purchased land for $75,000 cash. Commissions of $4,500, property taxes of $5,000, and title insurance of $800 were also incurred. The $5,000 in property taxes includes $4,000 in back taxes paid by Real Angus on behalf of the seller and $1,000 due for the current year after the purchase date. For what amount should Real Angus Steakhouse record the land?

$84,300

Use the information below to calculate net revenues. Service Revenue$ 100,000 Sales Discounts$ 2,000 Accounts Receivable$ 15,000 Sales Allowances$ 7,000 Cash$ 18,000

$91,000

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.)

50,000

Bryer Company purchases all of the assets and liabilities of Stellar Company for $1,500,000. The fair value of Stellar's assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar's assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?

700,000

A company has a profit margin of 10% and reports net sales of $4,000,000 and average total assets of $5,000,000. Calculate the company's return on assets.

8.0%

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record: Multiple Choice A gain of $70,000. A loss of $5,000. A loss of $70,000. A gain of $5,000.

A Gain of $5,000

Accumulated depreciation is: Multiple Choice A liability. An expense account. A contra-asset. An asset.

A contra-asset.

The entry to record the estimate for uncollectible accounts includes: Multiple Choice A debit to Sales Revenue. A debit to Bad Debt Expense. A credit to Accounts Receivable. A debit to Allowance for Uncollectible Accounts.

A debit to Bad Debt Expense

When a customer pays in advance for a product or service, the advance payment received by the company is recorded as:

A debit to an asset and a credit to a liability account.

The primary reason for the popularity of LIFO is that it gives:

A lower income tax obligation when inventory costs are rising

The effect of writing off a specific account receivable is: Multiple Choice An increase in the Allowance for Uncollectible Accounts. An increase in the amount of Accounts Receivable. A reduction in the Allowance for Uncollectible Accounts. An increase in the amount of Bad Debt Expense.

A reduction in the Allowance for Uncollectible Accounts

When a company provides services on account, which of the following accounts is debited? Multiple Choice Service Revenue. Accounts Payable. Accounts Receivable. Correct Cash.

Accounts receivable

If equipment is retired, which of the following accounts would be debited? Multiple Choice Equipment. Depreciation expense. Accumulated depreciation. Cash.

Accumulated Depreciation

Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a: Multiple Choice Debit to Accounts Receivable. Credit to Sales Revenue Debit to Cost of Goods Sold. All of the these are included to record the sale.

All of the these are included to record the sale.

Over the entire service life of an asset, which depreciation method records the highest total depreciation? Multiple Choice The straight-line method. The double-declining-balance method. The activity-based method. All the methods result in the same total depreciation.

All the methods result in the same total depreciation.

Using a balance sheet approach to estimate bad debts involves calculating the desired ending balance in which account?

Allowance for uncollectible accounts

Which of the following expenditures should be recorded as an asset? Multiple Choice An addition which increases future benefits. Repairs that maintain current benefits. Maintenance that maintain current benefits. Unsuccessful legal defense of an intangible asset.

An addition which increases future benefits.

Which of the following is not a current liability? Multiple Choice Notes payable due in six months. Incorrect Current portion of long-term debt. Deferred revenue with services to be provided to a customer in nine months. An unused line of credit.

An unused line of credit.

The cost of unsold inventory at the end of the year is classified as a(n) ________ in the________.

Asset; Balance sheet

Accounts receivable are best described as

Assets of the company representing the amount owed by customers

Which of the following is not a current liability? A) Accounts payable. B) A note payable due in 2 years. C) Current portion of long-term debt. D) Sales tax payable.

B) A note payable due in 2 years.

Which of the following subsequent expenditures would be capitalized? A) Ordinary repair. B) Costs that increase the service life of an asset. C) Routine maintenance. D) Ordinary repair and routine maintenance.

B) Costs that increase the service life of an asset

Which of the following is not a characteristic of a liability? A) It represents a probable, future sacrifice of economic benefits. B) It must be payable in cash. C) It arises from present obligations to other entities. D) It results from past transactions or events

B) It must be payable in cash

Which of the following is true regarding FICA taxes? A) FICA taxes are paid only by the employee. B) FICA taxes are paid only by the employer. C) FICA taxes are paid in equal amounts by the employee and the employer. D) FICA taxes are paid in different amounts by the employee and the employer.

C) FICA taxes are paid in equal amounts by the employee and the employer.

Accounts receivable are normally reported at the: A) Present value of future cash receipts. B) Current value plus accrued interest. C) Amount expected to be collected. D) Current value less expected collection costs

C)Amount expected to be collected

A sales discount is recorded by the seller as a(n):

Contra Revenue

Gross profit is calculated as net sales minus:

Cost of Goods sold

A long-term asset is recorded at the: Multiple Choice Additional costs to get the asset ready for use. Cost of the asset plus all costs necessary to the asset ready for use. Cost of the asset less all costs necessary to the asset ready for use. Cost of the asset.

Cost of the asset plus all costs necessary to the asset ready for use. Correct

The normal balance of the account "Allowance for Uncollectible Accounts" is a ________because ________.

Credit; it is a contra account to Accounts Receivable (a debit account)

A company is most likely to utilize the specific identification method if its inventory consists of: A) Unique products. B) Very expensive products. C) A relatively small number of products. D) All of the other answers are reasons to utilize the specific identification method.

D) All of the other answers are reasons to utilize the specific identification method

Which of the following intangible assets is not amortized? A) Patents. B) Copyrights. C) Franchises. D) Goodwill.

D) Goodwill

Using a periodic inventory system, recording the sale of inventory on account would include: Multiple Choice Debit Inventory; credit Accounts Receivable. Debit Sales Revenue; credit Accounts Receivable. Debit Inventory; credit Sales Revenue. Debit Accounts Receivable; credit Sales Revenue.

Debit Accounts Receivable; credit Sales Revenue.

In December 2020, Quebecor Printing received magazine subscriptions for 2021 from customers, who paid $500 in cash. What would be the appropriate journal entry for this event in December 2020?

Debit Cash, $500; credit Deferred Revenue, $500

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should record the following adjusting entry at December 31, 20X1: Multiple Choice Debit Interest Expense and credit Interest Payable, $4,000. Debit Interest Expense and credit Cash, $12,000. Debit Interest Expense and credit Cash, $4,000. Debit Interest Expense and credit Interest Payable, $12,000.

Debit Interest Expense and credit Interest Payable, $4,000

Brian Inc. borrowed $8,000 from First Bank and signed a promissory note. What entry should First Bank record?

Debit Notes Receivable, $8,000; Credit Cash, $8,000

Using a periodic inventory system, the purchase of inventory on account would be recorded as

Debit Purchases; credit Accounts Payable

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25? Multiple Choice Credit Accounts Receivable for $490. Debit Cash for $500. Debit Sales Discount for $10. Credit Service Revenue for $500.

Debit Sales Discount for $10

The entry to write down inventory from cost to net realizable value at the end of the year includes a: Multiple Choice Credit to Accounts Payable. Debit to Inventory. Debit to Cost of Goods Sold. Credit to Sales Revenue.

Debit to Cost of Goods Sold.

Which of the following correctly describes the nature of depreciation? Multiple Choice Depreciation represents the allocation of the cost of property, plant, and equipment over its service life. Depreciation represents the valuation of property, plant, and equipment over its service life. Depreciation represents the valuation of an intangible asset over its service life. Depreciation represents the allocation of the cost of an intangible asset over its service life.

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably likely, a contingent liability should be: Multiple Choice Disclosed but not reported as a liability. Reported as a liability but not disclosed. Neither disclosed or reported as a liability. Disclosed and reported as a liability.

Disclosed but not reported as a liability.

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life? Multiple Choice Each method will result in the same depreciation during the first year. Activity-based method. Double-declining-balance method. Straight-line method.

Double-declining-balance method.

Which of the following is paid by both the employee and the employer? Multiple Choice Personal income taxes. Federal unemployment taxes. FICA taxes. State unemployment taxes.

FICA taxes

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs? Multiple Choice Income will be the same under each assumption. Weighted-average. LIFO. FIFO.

FIFO

The exclusive right to use another company's name and to sell its products within a specified geographical area is a:

Franchise

Which of the following intangible assets is not amortized? Multiple Choice Copyright. Patent. Franchise. Goodwill.

Goodwill

Which of the following levels of profitability in a multiple-step income statement best represents profitability directly related to the sale of inventory? Multiple Choice Income before income taxes. Net income. Gross profit. Operating income.

Gross Profit

Under the direct write-off method, uncollectible accounts are recorded:

In the period the account is determined actually uncollectible.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

Inventory

Which of the following is not a necessary characteristic of a liability? Multiple Choice It arises from present obligations to other entities. It represents a probable, future sacrifice of economic benefits. It must be payable in cash. It results from past transactions or events.

It must be payable in cash.

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting? Multiple Choice LIFO. Any assumption can be used regardless of the tax reporting. Weighted-average. FIFO.

LIFO

Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n):

Liability

Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset's life? Multiple Choice Short service life, low residual value, and double-declining-balance depreciation. Long service life, high residual value, and straight-line depreciation. Long service life, high residual value, and double-declining-balance depreciation. Short service life, high residual value, and straight-line depreciation.

Long service life, high residual value, and straight-line depreciation.

Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000. Calculate the gain or loss to be recorded on the sale of equipment

Loss of $5,000

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account: Multiple Choice Net accounts receivable do not change. Net accounts receivable increase. The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off. Net accounts receivable decrease.

Net accounts receivable do not change

Return on assets is equal to: Multiple Choice Average total assets divided by net income. Net income divided by average total assets. Net income divided by average long-term assets. Net income divided by long-term assets.

Net income divided by average total assets.

Smith Company filed suit against Western, Incorporated, seeking damages for patent infringement. Smith's legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation? Multiple Choice As both an asset and a gain for $125,000. As an asset for $125,000. As a gain for $125,000. No asset or gain is reported.

No asset or gain is reported.

Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the purchase of office supplies for cash affect each ratio? Multiple Choice Decrease the current ratio and decrease the acid-test ratio. Increase the current ratio and increase the acid-test ratio. No change to the current ratio and decrease the acid-test ratio. Increase the current ratio and decrease the acid-test ratio.

No change to the current ratio and decrease the acid-test ratio.

Which of the following levels of profitability in a multiple-step income statement best represents profitability from primary activities of the company? Multiple Choice Income before income taxes. Operating income. Gross profit. Net income.

Operating income.

Which of the following expenditures should be recorded as an expense? Multiple Choice An addition which increases future benefits. Successful legal defense of an intangible asset. Ordinary repairs and maintenance. An improvement.

Ordinary repairs and maintenance.

An exclusive 20-year right to manufacture a product or to use a process is a:

Patent

A contingent liability that is probable and can be reasonably estimated must be Multiple Choice Not disclosed. Disclosed. Paid. Recorded.

Recorded

Which of the following is not reported as an intangible asset in the balance sheet? Multiple Choice Trademarks. Patents. Research and development. Goodwill.

Research and development

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. The price reduction is an example of a:

Sales allowance.

The seller collects sales taxes from the customer at the time of sale and reports the sales taxes as

Sales tax payable

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities.

The balance in the Accumulated Depreciation account represents Multiple Choice The amount charged to expense in the current period. The amount charged to depreciation expense since the acquisition of the plant asset. A contra expense account. A cash fund to be used to replace plant assets.

The amount charged to depreciation expense since the acquisition of the plant asset. Correct

Which of the following represents the balance of Cost of Goods Sold at the end of the year? Multiple Choice The cost of inventory not yet sold by the end of the year. The cost of inventory sold during the year. The cost of inventory purchased during the year. The cost of inventory at the beginning of the year.

The cost of inventory sold during the year.

Which of the following is true in comparing the current ratio with the acid-test ratio? Multiple Choice Sometimes the current ratio will be larger and sometimes the acid-test ratio will be larger. The current ratio will always be at least as large as the acid-test ratio. The acid-test ratio will always be at least as large as the current ratio. The denominator in the ratios will differ.

The current ratio will always be at least as large as the acid-test ratio.

A company's inventory turnover ratio measures:

The number of times the company sells its average inventory balance during the year.

Suppose Windell Corporation understates its ending inventory amount. What effect will this have on the reported amount of net income in the year of the error? Multiple Choice Understate net income. Overstate net income. Have no effect on net income. Not possible to determine with information given.

Understate net income.

Which of the following is not deducted from an employee's salary in most states? Multiple Choice Income taxes. Employee portion of insurance and retirement payments. Unemployment taxes. FICA taxes.

Unemployment Taxes

We record interest expense on a note payable in the period in which

We incur interest

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

one; one

Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?

$0

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assume the company uses the straight-line method to record amortization.What is the amortization expense for the first year?

$10,000

The Open Grill incurred the following costs in acquiring a new piece of land: Purchase price$80,000 Commissions $4,800 Liability insurance for the first year $1,200 Cost of removing existing building $20,000 Sale of salvaged materials $(4,000) Total costs $102,000 What is the total capitalized cost of the land?

$100,800

LeGrand Corporation reported the following amounts in its income statement: Sales revenue $ 440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What was LeGrand's operating income?

$120,000

On November 1, 2021, New Morning Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2022.New Morning Bakery records the appropriate adjusting entry for the note on December 31, 2021.What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1, 2022? (Do not round your intermediate calculations.)

$206,000

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold?

$22,200

On September 1, 2021, Daylight Donuts signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022. Daylight Donuts should report interest payable at December 31, 2021, in the amount of: (Do not round your intermediate calculations.)

$3,000

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much is the warranty expense reported in the income statement this year?

$30,000

A company had the following information taken from various accounts at the end of the year: Sales discounts $ 41,000 Deferred revenues $ 32,000 Total revenues $ 459,000 Purchase discounts $ 15,000 Sales allowances $ 35,000 Accounts receivable $ 205,000 What was the company's net revenues for the year?

$383,000

On September 1, 2021, Middleton Corp. lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months. How much interest revenue will Middleton Corp.report during 2021?

$40

Pizza Shop sells toaster ovens with a one-year warranty to fix any defects. For the current year, 100 toaster ovens have been sold. By the end of the year 4 ovens have been fixed for an average of $80 each. Management estimates that 5 more of the 100 sold will need to be fixed next year for an estimated $80 each. For how much should Pizza Shop report warranty liability at the end of the current year?

$400

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4?

$5,000

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a credit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:

$5,100

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of$311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments.An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be:

$5,250

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:

$6,100

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65%and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the employer's total payroll tax expense for the first week of January?

$916

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:

$96,000

At the beginning of the year, Dawnetta Fashions has total accounts receivable of $300,000. By the end of the year, Dawnetta reports total credit sales of $1,500,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Dawnetta Fashions?

6.0

A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation?

8,000

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's inventory turnover ratio?

8.0

Which of following best describes a merchandising company? Multiple Choice A company that purchases products that are primarily in finished form for resale to customers. A company whose revenues exceed expenses. A company that produces products from raw materials, labor, and overhead. A company that provides services to its customers.

A company that purchases products that are primarily in finished form for resale to customers.

Using the allowance method, the entry to record a write-off of accounts receivable will include Multiple Choice A debit to Bad Debt Expense. No entry because an allowance for uncollectible accounts was established in an earlier period. A debit to Allowance for Uncollectible Accounts. A debit to Service Revenue.

A debit to Allowance for Uncollectible Accounts

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be A) Disclosed, but not reported as a liability. B) Disclosed and reported as a liability. C) Neither disclosed nor reported as a liability. D) Reported as a liability, but not disclosed.

A) Disclosed, but not reported as a liability

Research and development costs should be: A) Expensed in the period incurred. B) Expensed in the period they are determined to be unsuccessful. C) Deferred pending determination of success. D) Expensed if unsuccessful, capitalized if successful

A) Expensed in the period incurred

Which of the following represents a characteristic of a liability? Multiple Choice A probable future sacrifice of economic benefits. Arising from present obligations to other entities. Resulting from past transactions or events. All of these are characteristics of a liability.

All of these are characteristics of a liability.

Allied Partners filed suit against Big Sky, Incorporated, seeking damages for patent infringement. Big Sky's legal counsel believes it is probable that Big Sky will settle the lawsuit for an estimated amount in the range of $500,000 to $700,000, with all amounts in the range considered equally likely. How should Big Sky report this litigation? Multiple Choice As a liability for $700,000 with disclosure of the range. As a liability for $500,000 with disclosure of the range. As a disclosure only. No liability is reported. As a liability for $600,000 with disclosure of the range.

As a liability for $500,000 with disclosure of the range.

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating ability of a company? A) Gross profit. B) Operating income. C) Income before income taxes. D) Net income.

B) Operating Income

Lail Inc. accounts for bad debts using the allowance method. On June 1, Lail Inc. wrote off Andrew Green's $2,500 account. Based on Lail's estimation, Andrew Green will never pay any portion of the balance in his account. What effect will this write-off have on Lail Inc.'s balance sheet at the time of the write-off? A) An increase to stockholders' equity and a decrease to liabilities. B) No effect. C) An increase to assets and an increase to stockholders' equity. D) A decrease to assets and a decrease to stockholders' equity.

B)No Effect

FIFO is considered a balance-sheet approach for reporting inventory because it:

Better approximates the value of ending inventory

The asset's cost less accumulated depreciation is called:

Book Value

1) Which of the following best describes credit sales? A) Cash sales to customers that are new to the company. B) Sales to customers using credit cards. C) Sales to customers on account. D) Sales with a high risk that the customer will return the product.

C) Sales to customers on account

Using a perpetual inventory system, the purchase of inventory on account would be recorded as

Debit Inventory; credit Accounts Payable

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjusting entry to write down inventory to net realizable value? Multiple Choice Increase in net income. Decrease in net income. No effect on net income or ending inventory. Increase in cost of ending inventory.

Decrease in net income.