Accounting Exam 2

Interest charges on notes payable may be based on a(n): a. fixed or variable interest rate b. fixed interest rate c. variable interest rate d. installment interest rate

fixed or variable interest rate

Which form of business organization is established as a legal entity separate from its owners? a. sole proprietorship b. partnership c. corporation d. None of these

corporation

which of the following is not normally a preference given to the holders of preferred stock? a. The right to receive a specified amount of dividends prior any being paid to common stockholders b. the right to vote before the common stockholders at the corporation's annual meeting c. the right to receive preference over common stockholder as the distribution of assets during a liquidation process d. All of these are preferences given to preferred stock

the right to vote before the common stockholders at the corporation's annual meeting

Which of the following would be classified as a long-term operational asset? a. Notes receivable b. trademark c. inventory d. accounts receivable

trademark

. Riley Company borrowed $36,000 on April 1, year 1 from the Titan bank. The note issues by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in year 1 and $1,400 in year 2. Assume no other transactions. The amount of cash flow from operating activities that would appear on the year 2 statement of cash flows would be: a. $770 inflow b. $1,400 inflow c. $38,530 outflow d. $1,120 outflow

$1,120 outflow

Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note. Currie agreed to repay the principle and interest by making annual payments in the amount of $8,042. Based on this information, the amount of the interest expense associated with the second payment would be: a. $730 b. $1,396 c. $2,000 d. $8,042

$1,396

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and a transportation cost was $2,000. The equipment has a five-year useful life and a $12,000 expected salvage value. At the end of Year 5, assuming the equipment has not been sold, the book value of the office equipment using straight-line depreciation and double-declining-balance depreciation, respectively would be a. $12,000 and $1,680 b. $12,000 and $12,000 c. $0 and $0 d. None of these answer choices are correct

$12,000 and $12,000

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000, Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land- $374,000 Building- $1,100,000 equipment $726,000 Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and s a salvage value of $34,000. Harding produced 265,000 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? a. $193,450 b. $125,200 c. $157, 145 d. $165, 890

$157,145

Allegheny Company ended Year 1 with balances in accounts receivable and allowance for doubtful accounts of $23,000 and $900, respectively. During year 2, Allegheny wrote off $1,500 of uncollectible accounts. After aging its accounts receivables, Allegheny estimates that the ending allowance for doubtful accounts balance should be $1,600. What will Allegheny report as uncollectible accounts expense a. $2,200 b. $1,500 c. $700 d. $1,600

$2,200

At the end of the accounting period, Houston Company had $8,000 of par value common stock issued, additional paid-in capital in excess of par value - common of $10,300, retained earning of $8,500, and $6,000 of treasury stock. The total stockholders' equity is: a. $32,800 b. $12,300 c. $24,800 d. $20,800

$20,800

On January 1, Year 2, the Accounts Receivable balance was $37,000 and the balance in the allowance for doubtful accounts was $2,800. ON January 15, Year 2 and $800 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is: a. $36,200 b. $22,400 c. $35,000 d. $34,200

$34,200

On January 1, Year 1, Freidman company purchased a truck that cost $48,000. The truck has an expected useful life of * years and an $8,000 salvage value. The company uses the double-decline balance method. The book value of the truck at the end of Year 1 is: a. $43,000 b. $38,000 c. $40,000 d. $36,000

$36,000

Riley Company borrowed $36,000 on April 1, year 1 from the Titan bank. The note issues by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in year 1 and $1,400 in year 2. Assume no other transactions. The amount of total liabilities that would appear on Riley's December 31 balance sheets for year 1 and year 2, respectively, would be: a. $36,000 and $0 b. $37,890 and $0 c. $37,890 and $38,520 d. $1,890 and $630

$37,890 and $0

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and a transportation cost was $2,000. The equipment has a five-year useful life and a $12,000 expected salvage value. Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in Year 3. Using straight-line depreciation and assuming that the office equipment was sold on December 31, Year 3 For $16,000, the amount of net income or (loss) appearing on the December, Year 3 income statement would be: a. ($6,600) b. $6,600 c. $600 d. $5,400

$600

Rosewood Company made a loan of $16,00 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, receptively, would be: a. $960 and $0 b. $0 and $960 c. $240 and $720 d. $720 and $240

$720 and $240

On January 1, Year 2, Kincaid Companies' accounts receivable and the allowance for doubtful accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote of $550 of receivables as uncollectable in year 2. Cash collections of receivables amounted to $74,550. Kincaid Estimates that it will be unable to collect 1% of credit sales. a. $310 b. $725 c. $745 d. $550

$725

Riley Company borrowed $36,000 on April 1, year 1 from the Titan bank. The note issues by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in year 1 and $1,400 in year 2. Assume no other transactions. The amount of net income on the year 2 income statement would be: a. $770 b. $630 c. $(190) d. $1,890

$770

For Year 1, the Sacramento Corporation had beginning and ending Retained Earnings balances of $173,225 and $190,900 respectively. Also during Year 1, the corporation declared and paid cash dividends of $15,700 and issued stock dividends valued at $12,500. Total expenses were $33,916. Based on this information, what was the amount of total revenue for Year 1? a. $141,284 b. $67,291 c. $79,791 d. $157,525

$79,791

Laramie Company paid $800,000 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- $100,000 Building- $740,000 Office furniture- $160,000. Based on this information the cost that would be allocated to the land is: a. $80,000 b. $70,000 c. $100,000 d. $107,000

$80,000

Blair Scott started a sole proprietorship by depositing $75,000 cash in a business checking account. During the accounting period the business borrowed $30,000 from a bank, earned $18,000 of net income, and Scott withdrew $12,000 cash from its business. Based on this information, at the end of the accounting period Scott's capital account contained a balance of: a. $93,000 b. $111,000 c. $72,000 d. $81,000

$81,000

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000, Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land- $374,000 Building- $1,100,000 equipment $726,000 What value will be recorded for the building? a. $175,000 b. $950,000 c. $800,000 d. $1,100,000

$950,000

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and a transportation cost was $2,000. The equipment has a five-year useful life and a $12,000 expected salvage value. Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year # financial statements? a. $0 and $24,000 b. $960 and $24,000 c. $8,640 and $23,040 d. $5,184 and $28,224

$960 and $24,000

Flager Corporation shows a total of $660,000 in its common stock-account and $1,600,000 in its paid-in capital in excess of par value- common stock account. The par value of Flager's common stock is $8. How many shares of Flager stock have been issued. a. 117,500 b. 200,000 c. 82,500 d. cannot be determined

82,500

Madison company owned an asset that had cost $44,000. The company sold the asset on January 1 year 4, for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Based on this information, the sale would result in: a. A $16,000 cash inflow in the investing activities section of the cash flow statement b. A $16,000 increase in total assets c. A $4,000 gain in the investing activities section of the statement of cash flows d. a $4,000 cash inflow in the financing activities section of the cash flow statement

A $16,000 cash inflow in the investing activities section of the cash flow statement

The term "retained earnings" is best explained by which of the following statements? a. Money set aside for the redemption of bonds b. the difference between total revenue and total expenses in an accounting period c. Cash retained in a separate bank account designated for emergency uses d. A measure of capital generated through earnings.

A measure of capital generated through earnings.

Benitez Company had sales of $580,000 in year 1. The company expects to incur warranty expenses amounting to 4% of sales. There were $15,400 of warranty obligations paid in cash during year 1. Based on this information: a. Warranty expenses would decrease net earnings by $23,200 in year 1 b. Cash would decrease by $15,400 as a result of the accounting events associated with warranties in year 1. c. The warranties payable account would increase by $7,800 in year 1 d. All of these answer choices are correct.

All of the above

Which of the following is a reason why a corporation may choose not to pay dividends? a. The board and management prefer to reinvest all net income for future growth b. the corporation does not have adequate cash c. the corporation does not have adequate retained earnings d. All of these are valid reasons to not pay dividends

All of these are valid reasons to not pay dividends

Which of the following represents the impact of a taxable cash sale of $1,160 on the accounting equation if the sales tax rate is 5% a. An increase to cash for $1,218, an increase to sales tax expense for $58, and an increase to sales revenue for $1,160 b. An increase to cash for $1,160, an increase to sales tax payable for $58, and an increase to sales revenue for $1,102 c. An increase to cash for $1,218, an increase to sales tax payable for $58, and an increase to sales revenue for $1,160 d. none of these answer choices is correct.

An increase to cash for $1,218, an increase to sales tax payable for $58, and an increase to sales revenue for $1,160

Which of the following correctly describes an installment note? a. An installment note requires equal interest payments with the entire principle balance paid at maturity b. An installment note requires equal payments of interest and principle in which the amount of interest decreases over the life on the note. c. An installment note requires equal payments of interest and principle in which the amount of interest increases over the life of the note d, The installment note requires decreasing payments of interest and principle in which the amount of interest remains constant over the life of the note.

An installment note requires equal payments of interest and principle in which the amount of interest decreases over the life on the note.

Where is treasury stock reported on a corporation's balance sheet? a. As an addition to total pain-in capital b. As a deduction from total stockholders' equity, following retained earnings c. As a deduction from total pain-in capital d. As a deduction from retained earnings

As a deduction from total stockholders' equity, following retained earnings

Which of the following would be classifies as a tangible asset? a. Land b. Goodwill c. Copyright d. Trademark

Land

If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? a. LIFO b. FIFO c. Weighted Average d. LIFO, FIFO, and weighted average will all produce equal amounts

FIFO

Houff Company uses the allowance method to account for uncollectible accounts. An account that had been previously written-off as uncollectible was recovered. How would the recovery affect the company's accounting equation? a. Reduce liabilities and increase stockholders' equity b. Increase total assets and increase stockholders' equity c. Have no effect on total assets, liabilities, or stockholders' equity d. Increase total assets and decrease liabilities

Have no effect on total assets, liabilities, or stockholders' equity

Ogilvie Corporation issued 12,000 shares of no-par stock for $40 per share. Ogilvie was authorized to issue 35,000 shares. What effect will this event have on the company's financial statements? a. Increase assets by $1,400,000, increase stockholders' equity by $1,400,000 b. Increase assets by $480,000, increase stockholders' equity by $480,000 c. Increase cash flow from investing activities by $480,000 d. None of the above

Increase assets by $480,000, increase stockholders' equity by $480,000

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value a. Weighted Average b. Specific identification c. LIFO d. FIFO

LIFO

When do the effects of product warranties appear on the statement of cash flows? a. When the sale of merchandise is made b. When the warranty obligation is recognized c. When there is a settlement of a warranty claim made by a customer d. None of these answer choices are correct

When there is a settlement of a warranty claim made by a customer

the term "double taxation" refers to which of the following a. corporations must pay income taxes on their net income, and their stockholders must pay income taxes on the dividends they receive from the corporation b. In a partnership, both partners are required to claim their share of net income on their tax returns c. A sole proprietorship must pay income taxes on its net income and the owner is also required to pay income taxes on withdrawals d. A sole proprietorship must pay income taxes to both the state government and the federal government

corporations must pay income taxes on their net income, and their stockholders must pay income taxes on the dividends they receive from the corporation

Hoover Company purchased two identical inventory items. The item purchased first cost $33. The item purchased second cost $35. Then Hoover sold one of the inventory items for 462. Based on this information, the amount of: a. ending inventory is $35 if Hoover uses the LIFO cost flow method b. gross margin is $28 is Hoover uses the weighted average cost flow method c. Cost of goods sold is $35 if Hoover uses the FIFO cost flow method. d. Cost of goods sold is $33 if hoover uses the LIFO cost flow method.

gross margin is $28 is Hoover uses the weighted average cost flow method

The net effect of the entries to recognize the write-off under the allowance method is to: a. increases total stockholder equity only. b. have no effect on total assets or stockholders equity. c. decreases total assets d. increase total assets and stockholders' equity

have no effect on total assets or stockholders equity

Which financial statement(s) is (are) affected when depreciation expense is recognized? a. Income statement b. balance sheet c. statement of cash flows d. Income statement and balance sheet e. Income statement, balance sheet, and statement of cash flows

income statement and balance sheet

Which of the following is not considered an advantage of the corporate form of business organization? a. ability to raise capital b. continuity of existence c. ease of transferability of ownership d. Lack of government regulation

lack of government regulation

Bonds payable are usually classifies on the balance sheet as: a. current liabilities b. long-term liabilities c. investments and funds d. other assets

long-term liabilities

Which of the following statements about business entities is true? a. for accounting purposes a sole proprietorship is not a separate entity from its owner b. ownership in a partnership is represented by having shares of capital stock c. one advantage of a corporation is ability to raise capital d. sole proprietorships are subject to double taxation

one advantage of a corporation is ability to raise capital

On January 1, Year 1, Eller Company purchased an asset that had cost $24,000. The asset had an 8-year useful life and had an estimated salvage value of $1,000. Eller Depreciates its assets on the straight-line Basis. On January 1, year 5, the company spent $6,00 to improve the quality of the assets based on this information, the recognition of depreciation expense in year 5 would: a. increases total assets by $4,375 b. reduce total stockholders' equity by $4,375 c. reduce total assets by $4,625 d. increase total stockholders' equity by $4,625

reduce total stockholders' equity by $4,375

Monthly remittance of sales tax: a. Reduces liabilities b. is a claims exchange transaction c. reduces stockholders' equity d. all of these answers are correct

reduces liabilities

Under what condition is a pending lawsuit recognizes as a liability on a company's balance sheet? a. the amount can be reasonably estimated b. the outcome is probable c. the outcome is reasonably possible d. the outcome is probable and can be reasonably estimated

the outcome is probable and can be reasonably estimated

Which of the following is a disadvantage of sole proprietorship? a. entrenched management b. double taxation c. unlimited liability d. excessive regulation

unlimited liability