201AEXAM2- (BLUE)
On January 1, 2020, Ott Co. sold goods to Flynn Company. Flynn signed a zero-interest-bearing note requiring payment of $200,000 annually for seven years. The first payment was made on January 1, 2020. The prevailing rate of interest for this type of note at date of issuance was 10%. Information on present value factors is as follows: Present Value Present Value of Ordinary Period of 1 at 10% Annuity of 1 at 10% 6 .5645 4.3553 7 .5132 4.8684 Ott should record sales revenue in January 2020 of a. $1,071,048. b. $973,680. c. $871,060. d. $714,000. (Ch.6)
a. $1,071,048. $200,000 × (4.8684 × 1.1) = $1,071,048.
In preparing its August 31, 2020 bank reconciliation, Bing Corp. has available the following information: Balance per bank statement, 8/31/20 $25,650 Deposit in transit, 8/31/20 3,900 Return of customer's check for insufficient funds, 8/30/20 600 Outstanding checks, 8/31/20 2,750 Bank service charges for August 100 At August 31, 2020, Bing's correct cash balance is a. $26,800. b. $26,200. c. $26,100. d. $24,500. (ch.7)
a. $26,800. $25,650 + $3,900 - $2,750 = $26,800.
Tresh, Inc. had the following bank reconciliation at March 31, 2020: Balance per bank statement, 3/31/20 $74,400 Add: Deposit in transit 20,600 95,000 Less: Outstanding checks 25,200 Balance per books, 3/31/20 $69,800 Data per bank for the month of April 2020 follow: Deposits $87,400 Disbursements 99,400 All reconciling items at March 31, 2020 cleared the bank in April. Outstanding checks at April 30, 2020 totaled $12,000. There were no deposits in transit at April 30, 2020. What is the cash balance per books at April 30, 2020? a. $50,400 b. $57,800 c. $62,400 d. $71,000 (Ch.7)
a. $50,400 $74,400 + $87,400 - $99,400 = $62,400 (4/30 balance per bank) $62,400 - $12,000 = $50,400.
On the December 31, 2020 balance sheet of Vanoy Co., the current receivables consisted of the following: Trade accounts receivable $ 65,000 Allowance for uncollectible accounts (2,000) Claim against shipper for goods lost in transit (November 2020) 3,000 Selling price of unsold goods sent by Vanoy on consignment at 130% of cost (not included in Vanoy 's ending inventory) 26,000 Security deposit on lease of warehouse used for storing some inventories 30,000 Total $122,000 At December 31, 2020, the correct total of Vanoy's current net receivables was a. $66,000. b. $92,000. c. $96,000. d. $122,000. (Ch.7)
a. $66,000. $65,000 - $2,000 + $3,000 = $66,000.
On December 30, 2020, AGH, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $150,000. The first payment was made on December 30, 2020, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%. Present value factors are as follows: Present Value of Ordinary Present Value of Period Annuity of 1 at 11% Annuity Due of 1 at 11% 7 4.712 5.231 8 5.146 5.712 On AGH's December 31, 2020 balance sheet, the net note payable to Grant is a. $706,800. b. $771,900. c. $785,325. d. $856,800. (ch.6)
a. $706,800. $150,000 × 4.712 = $706,800 or ($150,000 × 5.712) - $150,000 = $706,800
Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $900,000 to Arch Inc. Arch Inc. will pay $975,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue? a. $810,000. b. $877,500. c. $900,000. d. $975,000. (ch.7)
a. $810,000. ($900,000 × .90) = $810,000.
During 2020 the DLD Company had a net income of $85,000. In addition, selected accounts showed the following changes: Accounts Receivable $3,000 increase Accounts Payable 1,000 increase Buildings 4,000 decrease Depreciation Expense 1,500 increase Bonds Payable 8,000 increase What was the amount of cash provided by operating activities? a. $84,500 b. $85,000 c. $86,500 d. $94,500 (Ch.5)
a. $84,500 85,000 - $3,000 + $1,000 + $1,500 = $84,500.
Packard Corporation reports the following information: Net cash provided by operating activities $335,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends declared 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's cash debt coverage is a. 1.34. b. 2.23. c. 3.35. d. 3.05. (Ch.5)
a. 1.34. $335,000 ÷ ($150,000 + $100,000) = 1.34.
The opening balance of Accounts Receivable for George Company was $25,000. Net sales (all on account) for the year amounted to $200,000. The Company doesn't offer any cash discount. During the year $180,000 was collected on accounts receivable. Compute accounts receivable turnover for the year. a. 5.7 times b. 5.1 times c. 4.4 times d. 8.0 times (Ch.7)
a. 5.7 times $200,000 ÷ [($25,000 + $45,000) ÷ 2] = 5.7.
On July 22, Peter sold $23,500 of inventory items on credit with the terms 2/15, net 30. Payment on $15,000 sales was received on August 1 and the remaining payment was received on August 12. Assuming Peter uses the gross method of accounting for sales discounts, which one of the following entries was made on August 1 to record the cash received? a. Cash.............. 14,700 Sales Discount.............. 300 Accounts Receivable.......... 15,000 b. Cash...... 15,000 Accounts Receivable... 15,000 c. Cash............ 14,700 Accounts Receivable........ 14,700 d. Accounts Receivable..... 300 Sales Discount Forfeited.......... 300 (Ch.7)
a. Cash 14,700 (DR) Sales Discount 300 (DR) (CR)Accounts Receivable 15,000 $15,000 ×.02 = $300.
AG Inc. made a $25,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,500. b. Debit Accounts Receivable for $24,500 and Sales Discounts for $500. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $500. (ch.7)
a. Debit Accounts Receivable for $24,500. $25,000 × (1 - .02) = $24,500.
How should the following costs affect a retailer's inventory valuation? Freight-in Interest on Inventory Loan a. Increase No effect b. Increase Increase c. No effect Increase d. No effect No effect (Ch.8)
a. Increase (Freight In) No effect (Interest on Inventory Loan)
Sun Inc. factors $6,000,000 of its accounts receivables without recourse for a finance charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. What would be recorded as a gain (loss) on the transfer of receivables? a. Loss of $300,000. b. Gain of $530,000. c. Loss of $1,130,000. d. Loss of $230,000. (Ch.7)
a. Loss of $300,000. $6,000,000 × .05 = $300,000.
Farr Co. adopted the dollar-value LIFO inventory method on December 31, 2020. Farr's entire inventory constitutes a single pool. On December 31, 2020, the inventory was $960,000 under the dollar-value LIFO method. Inventory data for 2021 are as follows: 12/31/21 inventory at year-end prices $1,320,000 Relevant price index at year end (base year 2020) 110 Using dollar value LIFO, Farr's inventory at December 31, 2021 is a. $1,056,000. b. $1,224,000. c. $1,200,000. d. $1,320,000. (CH.8)
b. $1,224,000. $1,320,000 ÷ 1.1 = $1,200,000 $960,000 + ($240,000 × 1.1) = $1,224,000.
Hay Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $379,500, and the price index was 110. 12. What is Hay Company's gross profit? a. $1,245,000. b. $1,249,500. c. $1,279,500. d. $2,650,500. (Ch.8)
b. $1,249,500. $300,000 + $1,800,000 - $349,500 = $1,750,500 COGS $3,000,000 - $1,750,500= $1,249,500.
RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $430,080, and the price index was 112. What is RF Company's gross profit? a. $1,248,000. b. $1,294,080. c. $1,330,380. d. $2,605,920. (Ch.8)
b. $1,294,080. $300,000 + $1,800,000 - $394,080.= $1,705,920 COGS $3,000,000 - $1,705,920 = $1,294,080.
On January 15, 2020, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2024, at an estimated cost of $8,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2020. Future value factors are as follows: Future value of 1 at 10% for 5 periods 1.61 Future value of ordinary annuity of 1 at 10% for 4 periods 4.64 Future value of annuity due of 1 at 10% for 4 periods 5.11 Dolan should make four annual deposits of a. $1,423,234. b. $1,565,558. c. $1,724,137. d. $2,000,000. (Ch.6)
b. $1,565,558. 5.11 × R = $8,000,000; R = $8,000,000 ÷ 5.11 = $1,565,558.
At the close of its first year of operations, December 31, 2020, Ming Company had accounts receivable of $1,620,000, after deducting the related allowance for doubtful accounts. During 2020, the company had charges to bad debt expense of $270,000 and wrote off, as uncollectible, accounts receivable of $120,000. What should the company report on its balance sheet at December 31, 2020, as accounts receivable before the allowance for doubtful accounts? a. $2,010,000 b. $1,770,000 c. $1,470,000 d. $1,320,000 (ch.7)
b. $1,770,000 $1,620,000 + ($270,000 - $120,000) = $1,770,000.
In preparing its bank reconciliation for the month of April 2020, Henke, Inc. has the following information available. Balance per bank statement, 4/30/20 $102,420 NSF check returned with 4/30/20 bank statement 1,350 Deposits in transit, 4/30/20 15,000 Outstanding checks, 4/30/20 15,600 Bank service charges for April 60 What should be the correct balance of cash at April 30, 2020? a. $103,110 b. $101,820 c. $100,470 d. $100,410 (ch.7)
b. $101,820 $102,420 + $15,000 - $15,600 = $101,820.
Walsh Retailers purchased merchandise with a list price of $150,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Walsh should record the cost of this merchandise as a. $105,000. b. $108,000. c. $117,000. d. $150,000. (Ch.8)
b. $108,000. $150,000 × .8 × .9 = $108,000.
David Company uses the gross method to record sales made on credit. On June 10, 2020, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2020, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2020. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.? a. $122,500. b. $125,000. c. $250,000. d. $245,000. (Ch.7)
b. $125,000. $250,000 - $125,000 = $125,000
Packard Corporation reports the following information: Net cash provided by operating activities $335,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's free cash flow is a. $130,000. b. $165,000. c. $225,000. d. $275,000. (Ch.5)
b. $165,000. $335,000 - $60,000 - $110,000 = $165,000.
Houghton Company has the following items: common stock, $1,600,000; treasury stock, $210,000; deferred income taxes, $250,000 and retained earnings, $780,000. What total amount should Houghton Company report as stockholders' equity? a. $1,390,000. b. $2,170,000. c. $2,420,000. d. $2,590,000. (CH.5)
b. $2,170,000.
On January 4, 2020, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Kiley received $800,000 covering the first two years' rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Dodd upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Kiley's December 31, 2020 balance sheet? Current Liability Long-term Liability a. $0 $800,000 b. $200,000 $400,000 c. $400,000 $400,000 d. $400,000 $200,000 (ch.5)
b. $200,000 (Current Liabilities) $400,000 (Long Term Liabilities)
Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end of 2020 and $180,000 at the end of 2019. For the year ended December 31, 2020, Nenn reported bad debt expense of $31,000 in its income statement. What amount did Nenn debit to the appropriate account in 2020 to write off actual bad debts? a. $10,000 b. $21,000 c. $31,000 d. $41,000 (ch.7)
b. $21,000 $180,000 + $31,000 - $190,000 = $21,000.
On February 1, 2020, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February. Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is a. $0. b. $21,000. c. $35,000. d. $56,000. (Ch.7)
b. $21,000. $700,000 × .03 = $21,000.
Lohmeyer Corporation reports: Cash provided by operating activities $320,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 90,000 What is Lohmeyer's ending cash balance? a. $410,000. b. $440,000. c. $570,000. d. $660,000. (CH.5)
b. $440,000. $90,000 + $320,000 - $110,000 + $140,000 = $440,000. *Formula: (Beg Cash + Op.Cash) - (Invest + Finance)
June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 80 units that cost $20 per unit. During the current month, the company purchased 480 units at $20 each. Sales during the month totaled 360 units for $43 each. What is the cost of goods sold using the LIFO method? a. $1,600. b. $7,200. c. $9,600. d. $15,480. (Ch.8)
b. $7,200. 360 × $20/unit = $7,200.
On July 1, 2020, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods, Inc., for an initial franchise fee of $900,000. Of this amount, $300,000 was paid when the agreement was signed and the balance is payable in four equal annual payments of $150,000 beginning July 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Wynne's credit rating indicates that he can borrow money at 14% for a loan of this type. Information on present and future value factors is as follows: Present value of 1 at 14% for 4 periods 0.59 Future value of 1 at 14% for 4 periods 1.69 Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91 Wynne should record the acquisition cost of the franchise on July 1, 2020 at a. $654,000. b. $736,500. c. $900,000. d. $1,014,000. (CH.6)
b. $736,500. ($150,000 × 2.91) + $300,000 = $736,500.
Web World began using dollar-value LIFO for costing its inventory last year. The base year layer consists of $600,000. Assuming the current inventory at end of year prices equals $828,000 and the index for the current year is 1.10, what is the ending inventory using dollar-value LIFO? a. $828,000. b. $768,000. c. $752,727. d. $910,800. (Ch.8)
b. $768,000. $828,000 ÷ 1.10 = $752,727 - $600,000 = $152,727; $600,000 + ($152,727× 1.10) = $768,000.
During the year Tulip reported net sales of $960,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip's average collection period (assume 365 days a year.) a. 28.5 days b. 37.2 days. c. 45.7 days. d. 74.2 days. (Ch.7)
b. 37.2 days. $960,000 ÷ [($75,000 + $120,000) ÷ 2] = 9.8 365 ÷ 9.8 = 37.2 days.
Sun Inc. factors $6,000,000 of its accounts receivables with recourse for a finance charge of 3%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $300,000. What would be recorded as a gain (loss) on the transfer of receivables? a. Gain of $180,000. b. Loss of $480,000. c. Gain of $1,080,000. d. Loss of $300,000. (ch.7)
b. Loss of $480,000. ($6,000,000 × .03) + $300,000 = $480,000.
Jones Company has notes receivable that have a fair value of $950,000 and a carrying amount of $1,250,000. Jones decides on December 31, 2020, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2020 to record the unrealized holding gain/loss? a. Unrealized Holding Gain or Loss¾Equity......... 300,000 Notes Receivable........... 300,000 b. Unrealized Holding Gain or Loss¾Income....... 300,000 Notes Receivable............... 300,000 c. Notes Receivable................ 300,000 Unrealized Holding Gain or Loss¾Income 300,000 d. Notes Receivable............ 300,000 Unrealized Holding Gain or Loss¾Equity. 300,000 (Ch.7)
b. Unrealized Holding Gain or Loss¾Income...... 300,000 (DR) Notes Receivable......... 300,000 (CR) $1,250,000 - $950,000 = $300,000
On June 1, 2020, Yang Corp. loaned Gant $500,000 on a 12% note, payable in five annual installments of $100,000 beginning January 2, 2021. In connection with this loan, Gant was required to deposit $5,000 in a zero-interest-bearing escrow account. The amount held in escrow is to be returned to Gant after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2020. Gant made timely payments through November 1, 2020. On January 2, 2021, Yang received payment of the first principal installment plus all interest due. At December 31, 2020, Yang's interest receivable on the loan to Gant should be a. $0. b. $5,000. c. $10,000. d. $15,000. (Ch.7)
c. $10,000. $500,000 × 12% × (2 ÷ 12) = $10,000.
Morgan Manufacturing Company has the following account balances at year end: Office supplies $ 4,000 Raw materials 27,000 Work-in-process 59,000 Finished goods 97,000 Prepaid insurance 6,000 What amount should Morgan report as inventories in its balance sheet? a. $97,000. b. $101,000. c. $183,000. d. $187,000. (Ch.8)
c. $183,000. $27,000 + $59,000 + $97,000 = $183,000.
Hay Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $379,500, and the price index was 110. What is Hay Company's ending inventory? a. $330,000. b. $345,000. c. $349,500. d. $379,500. (Ch.8)
c. $349,500. $379,500 ÷ 1.10 = $345,000 - $300,000 = $45,000. $300,000 + ($45,000 × 1.10) = $349,500.
On June 1, 2020, Penny Corp. sold merchandise with a list price of $70,000 to Linn on account. Penny allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b. shipping point. Penny prepaid $1,000 of delivery costs for Linn as an accommodation. On June 12, 2020, Penny received from Linn a remittance in full payment amounting to a. $38,416. b. $39,788. c. $39,416. d. $39,186. (Ch.8)
c. $39,416. $70,000 × .7 × .8 = $39,200 ($39,200 × .98) + 1,000 = $39,416.
Kaniper Company has the following items at year-end: Cash in bank $35,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500 Postdated checks 1,400 Kaniper should report cash and cash equivalents of a. $35,000. b. $35,300. c. $40,800. d. $42,200. (Ch.7)
c. $40,800. $35,000 + $300 + $5,500 = $40,800.
The following information applied to Howe, Inc. for 2020: Merchandise purchased for resale $410,000 Freight-in 8,000 Freight-out 5,000 Purchase returns 2,000 Howe's 2020 inventoriable cost was a. $410,000. b. $413,000. c. $416,000. d. $421,000. (Ch.8)
c. $416,000. $410,000 + $8,000 - $2,000 = $416,000.
On January 1, 2020, Ball Co. exchanged equipment for a $600,000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in Ball's 2021 income statement? a. $0 b. $45,000 c. $49,500 d. $60,000 (ch.6)
c. $49,500 $600,000 × .75 = $450,000 (present value of note) $450,000 × 1.10 = $495,000; $495,000 × 0.10 = $49,500.
Steinert Company has the following items at year-end: Cash in bank $45,000 Petty cash 500 Short-term paper with maturity of 2 months 8,200 Postdated checks 2,100 Steinert should report cash and cash equivalents of a. $45,000. b. $45,500. c. $53,700. d. $55,800. (Ch.7)
c. $53,700. $45,000 + $500 + $8,200 = $53,700.
On January 1, 2020, West Co. exchanged equipment for an $800,000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in West's 2021 income statement? a. $0 b. $60,000 c. $66,000 d.$80,000 (Ch.7)
c. $66,000 $800,000 × .75 = $600,000 present value $600,000 × .10 = $60,000 (2017 interest) ($600,000 + $60,000) × .10 = $66,000 (2018 interest).
Bell Inc. took a physical inventory at the end of the year and determined that $840,000 of goods were on hand. In addition, the following items were not included in the physical count. Bell, Inc. determined that $96,000 of goods purchased were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count). The company sold $40,000 worth of inventory f.o.b. destination. What amount should Bell report as inventory at the end of the year? a. $840,000. b. $936,000. c. $880,000. d. $976,000. (Ch.8)
c. $880,000. $840,000 + $40,000 = $880,000.
Huge Cart Inc. gives you the following information pertaining to the year 2020. Net sales $850,000 Cost of goods sold 500,000 Current assets 500,000 Current liabilities 250,000 Average total assets 1,000,000 Total liabilities 550,000 Net income 150,000 The asset turnover ratio of Huge Cart Inc. is a. 0.50 b. 0.15 c. 0.85 d. 1.18 (ch.5)
c. 0.85 $850,000 ÷ $1,000,000 = 0.85.
Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies? Depreciation Method Composition a. No Yes b. Yes Yes c. Yes No d. No No (CH.5)
c. Yes (Depreciation Method) No (Composition)
Winsor Co. records purchases at net amounts. On May 5 Winsor purchased merchandise on account, $80,000, terms 2/10, n/30. Winsor returned $6,000 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. 5. By how much should the account payable be adjusted on May 31? a. $ 0. b. $1,720. c. $1,600. d. $1,480. (ch.8)
d. $1,480 ($80,000 - $6,000) × .02 = $1,480.
Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 7,200 units that cost $12 each. During the month, the company made two purchases: 3,000 units at $13 each and 12,000 units at $13.50 each. Checkers also sold 12,900 units during the month. Using the LIFO method, what is the ending inventory? a. $120,438. b. $111,600. c. $125,550. d. $113,700. (Ch.8)
d. $113,700. (7,200 + 3,000 + 12,000) - 12,900 = 9,300; (7,200 × $12) + [(9,300 - 7,200) × $13] = $113,700.
For the year ended December 31, 2020, Dent Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available: Allowance for uncollectible accounts, 1/1/20 $126,000 Uncollectible accounts written off, 11/30/20 104,000 Estimated uncollectible accounts per aging, 12/31/20 156,000 After year-end adjustment, the bad debt expense for 2020 should be a. $104,000. b. $90,000. c. $156,000. d. $134,000. (Ch.7)
d. $134,000. $156,000 - $126,000 + $104,000 = $134,000
Stine Corp.'s trial balance reflected the following account balances at December 31, 2020: Accounts receivable (net) $38,000 Trading securities 12,000 Accumulated depreciation on equipment and furniture 30,000 Cash 32,000 Inventory 60,000 Equipment 50,000 Patent 8,000 Prepaid expenses 4,000 Land held for future business site 36,000 In Stine's December 31, 2020 balance sheet, the current assets total is a. $180,000. b. $164,000. c. $154,000. d. $146,000. (ch.5)
d. $146,000. $38,000 + $12,000 + $32,000 + $60,000 + $4,000 = $146,000.
The following information is available for Naab Company for 2020: Freight-in $ 60,000 Purchase returns 150,000 Selling expenses 460,000 Ending inventory 520,000 The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale? a. $1,840,000. b. $2,300,000. c. $2,370,000. d. $2,360,000. (Ch.8)
d. $2,360,000. $520,000 + (4 × $460,000) = $2,360,000.
Ace Co. prepared an aging of its accounts receivable at December 31, 2020 and determined that the amount expected to be collected was $900,000. Additional information is available as follows: Allowance for uncollectible accounts at 1/1/20—credit balance $102,000 Accounts written off as uncollectible during 2020 69,000 Accounts receivable at 12/31/20 975,000 Uncollectible accounts recovered during 2020 15,000 For the year ended December 31, 2020, Ace's bad debt expense would be a. $75,000. b. $69,000. c. $48,000. d. $27,000. (Ch.7)
d. $27,000. Allowance for Uncollectible Acct. balance $102,000 + $15,000 - $69,000 = $48,000 (before bad debt expense) $975,000 - $900,000 - $48,000 = $27,000 (bad debt expense).
Niles Co. has the following data related to an item of inventory: Inventory, March 1 400 units @ $2.10 Purchase, March 7 1,400 units @ $2.20 Purchase, March 16 280 units @ $2.25 Inventory, March 31 520 units The value assigned to cost of goods sold if Niles uses FIFO is a. $1,160. b. $1,104. c. $3,448. d. $3,392. (Ch.8)
d. $3,392. 400 + 1,400 + 280 - 520 = 1,560 units (400 × $2.10) + (1,160 × $2.20) = $3,392.
On January 1, 2020, Haley Co. issued ten-year bonds with a face amount of $5,000,000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows: At 8% At 10% Present value of 1 for 10 periods 0.463 0.386 Present value of an ordinary annuity of 1 for 10 periods 6.710 6.145 The total issue price of the bonds was a. $5,000,000. b. $4,900,000. c. $4,600,000. d. $4,388,000. (Ch.6)
d. $4,388,000. $5,000,000 × .08 = $400,000 ($400,000 × 6.145) + ($5,000,000 × 0.386) = $4,388,000.
The following accounts were abstracted from Starr Co.'s unadjusted trial balance at December 31, 2020: Debit Credit Accounts receivable $750,000 Allowance for uncollectible accounts 8,000 Net credit sales $3,000,000 Starr estimates that 6% of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2020, the allowance for uncollectible accounts should have a credit balance of a. $180,000. b. $168,000. c. $57,000. d. $45,000. (ch.7)
d. $45,000. $750,000 × .06 = $45,000.
Willy World began using dollar-value LIFO for costing its inventory two years ago. The ending inventory for the past two years in end-of-year dollars was $300,000 and $450,000 and the year-end price indices were 1.0 and 1.2, respectively. Assuming the current inventory at end of year prices equals $645,000 and the index for the current year is 1.25, what is the ending inventory using dollar-value LIFO? a. $532,500. b. $559,200. c. $570,000. d. $566,250. (Ch.8)
d. $566,250. $645,000 ÷ 1.25 = $516,000; $516,000 - ($450,000 ÷ 1.20) = $141,000; $300,000 + [($450,000 ÷ 1.20) - $300,000) × 1.2] = $390,000 $390,000 + ($141,000 × 1.25) = $566,250.
Becky had net sales (all on account) in 2020 of $8,000,000. At December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $1,000,000 debit, and allowance for doubtful accounts $2,000 debit. Becky estimates that 3% of its accounts receivable will prove to be uncollectible. What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020? a. $32,000 b. $972,000 c. $968,000 d. $970,000 (ch.7)
d. $970,000 $1,000,000 - [($1,000,000 × .03) = $970,000.
Huge Cart Inc. gives you the following information pertaining to the year 2020. Net sales $850,000 Cost of goods sold 500,000 Current assets 500,000 Current liabilities 250,000 Average total assets 1,000,000 Total liabilities 550,000 Net income 150,000 The rate of return on assets Huge Cart Inc. is: a. 85.0%. b. 30.0%. c. 17.6%. d. 15.0%. (Ch.5)
d. 15.0%. $150,000 ÷ $1,000,000 = 15.0%.
If a petty cash fund is established in the amount of $300, and contains $180 in cash and $115 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts a. Petty Cash, $90. b. Petty Cash, $120. c. Cash, $115; Cash Over and Short, $5. d. Cash, $120. (Ch.7)
d. Cash, $120. $300 - $180 = $120.
Elkins Corporation uses the perpetual inventory and the gross method. On March 1, it purchased $50,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost $5,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit a. purchase discounts for $1,000. b. inventory for $1,000. c. purchase discounts for $900. d. inventory for $900. (Ch.8)
d. inventory for $900. [($50,000 - $5,000) × .02] = $900.
