accounting
Return on assets measures: A) how much the entity earned for each dollar of assets invested by both stockholders and creditors. B) net profit margin ratio times total asset turnover. C) profitability of a company's core business operations. D) A and B.
D) A and B. A) how much the entity earned for each dollar of assets invested by both stockholders and creditors. B) net profit margin ratio times total asset turnover.
The impairment test for long-term assets applies to: A) tangible long-term assets. B) intangible long-term assets. C) all assets. D) A and B.
D) A and B. A) tangible long-term assets. B) intangible long-term assets.
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? A) $31,875B) $43,200C) $20,000 D) $36,875
B) $43,200 Explanation: ($147,500 - $20,000) ÷ 42,500 = $3 per hour$3 × 14,400 = $43,200
If a company capitalizes a cost that should have been expensed: A) expenses and net income will be overstated in the year of the error.B) expenses and net income will be understated in the year of the error.C) expenses will be overstated and net income will be understated in the year of the error.D) expenses will be understated and net income will be overstated in the year of the error.
D) expenses will be understated and net income will be overstated in the year of the error.
If a long-term plant asset is impaired, the company is required to adjust the carrying value downward to its: A) original cost. B) present value.C) expected future cash flows.D) fair value.
D) fair value.
The carrying value of a bond immediately after the bond was issued was $225,000. The bond price was 96. The face value of the bond was: (Round your final answer to the nearest dollar.) A) $216,000.B) $225,000.C) $234,000. D) $234,375.
Answer: D Explanation: $225,000 ÷ 0.96 = $234,375
Cubs Corporation issues $550,000, 10%, 5-year bonds on January 1, 2019 for $489,000. Interest is paid annually on January 1. If Cubs Corporation uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2019 would be: A) $61,000.B) $42,800.C) $55,000. D) $67,200.
Answer: D Explanation: Discount = $550,000 - $489,000 = $61,000 ($550,000 × 10%) + ($61,000 ÷ 5) = $67,200
Scott's Boat Shop, Inc. reports total assets of $352,000 and total stockholder's equity of $120,000. What is the debt ratio? (Round your final answer to two decimal places.) A) 2.93B) 0.34C) 1.52 D) 0.66
Answer:D Explanation: L = A - SE --> Total Liabilities = 352,000 - 120,000 = 232,000 Debt ratio = 232,000/352,000 = 0.66
Cramer Company purchased equipment on May 1, 2019 for $200,000. The residual value is $20,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2019, if the company uses the straight-line method? (Round your final answer to the nearest dollar.) A) $13,333B) $12,000C) $20,000 D) $18,000
B) $12,000 Explanation: ($200,000 - $20,000) ÷ 10 = $18,000 $18,000 × 8/12 = $12,000
Michigan Bank lends Detroit Furniture Company $110,000 on December 1. Detroit Furniture Company signs a $110,000, 9%, 4-month note. The total cash paid for interest (only) at maturity of the note is: (Round your final answer to the nearest dollar.) A) $1,100.B) $3,300.C) $6,600. D) $9,900.
B) $3,300 Explanation: $110,000 × 9% × 4/12 = $3,300
CBS Corporation acquired a patent for $3,800,000. The patent has a legal life of 20 years. Because of changing technology, this patent is expected to generate revenue for only 5 years and have no residual value. The annual amortization expense for the patent is: (Round your final answer to the nearest dollar.) A) $0B) $3,800,000C) $190,000 D) $760,000
D) $760,000 Explanation: $3,800,000 ÷ 5 = $760,000
Minor Company purchased land which is being prepared for the construction of a new office building. Which of the following should be included in the cost of the land? A) cost of removing an old building B) cost of clearing and grading the land C) cost of the fence which surrounds the property D) A and B
D) A and B A) cost of removing an old building B) cost of clearing and grading the land
Major Company purchased equipment to be used in its distribution center. All of the following should be included in the cost of the equipment EXCEPT for: A) insurance while in transit. B) wages of workers who test the equipment before it is placed in service. C) employee training costs before the equipment is placed in service. D) insurance costs after the equipment is up and running.
D) insurance costs after the equipment is up and running.
Failure to record an accrued liability for wages earned by employees causes a company to: A) understate net income.B) overstate assets.C) overstate liabilities.D) overstate stockholders' equity.
D) overstate stockholders' equity.
Bonds that are secured by real estate are called: A) term bonds. B) secured bonds. C) mortgage bonds .D) B and C.
.D) B and C. B) secured bonds. C) mortgage bonds
Income before depreciation and taxes amounts to $200,000. Using straight-line depreciation, the current year's depreciation expense will be $13,500. Using double-declining-balance depreciation, the current year's depreciation expense will be $19,500. Assuming a tax rate of 30%, what is the net cash saved in income taxes by using double-declining-balance depreciation over straight-line depreciation? A) $1,800B) $4,050C) $6,000 D) $5,850
A) $1,800 Explanation: Difference in depreciation = $19,500 - $13,500 = $6,000$6,000 × 30% = $1,800 savings
On January 2, 2019, Konan Corporation acquired equipment for $900,000. The estimated life of the equipment is 5 years or 100,000 hours. The estimated residual value is $20,000. 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.) A) $576,000B) $352,000C) $216,000 D) $880,000
A) $576,000 Explanation: $900,000 × 40% = $360,000 ($900,000 - $360,000) × 40% = $216,000$360,000 + $216,000 = $576,000
A company has a pending lawsuit that has a remote possibility of being settled in favor of the plaintiff who is a former employee. What should the company do? A) Nothing.B) Make a disclosure in a financial statement footnote.C) Prepare a journal entry.D) Make a note to the financial statements and prepare a journal entry.
A) Nothing
Maturities of long-term debt due within one year of the balance sheet date are reported separately from long-term debt. A) TRUE B) FALSE
A) TRUE
Wisconsin Bank lends Local Furniture Company $110,000 on November 1. Local Furniture Company signs a $110,000, 6%, 4-month note. The fiscal year end of Local Furniture Company is December 31. The journal entry made by Local Furniture Company on December 31 is: A) debit Interest Expense and credit Interest Payable for $1,100. B) debit Interest Payable and credit Interest Expense for $1,100.C) debit Interest Expense and credit Cash for $1,100. D) debit Interest Payable and credit Cash for $1,100.
A) debit Interest Expense and credit Interest Payable for $1,100. Explanation: $110,000 × 6% × 2/12 = $1,100
If bonds are issued at a discount, it means that the: A) market interest rate is higher than the stated interest rate. B) market interest rate is lower than the stated interest rate. C) financial strength of the issuer is weak. D) bond is convertible.
A) market interest rate is higher than the stated interest rate.
The carrying amount of bonds issued at a discount is calculated by: A) subtracting Discount on Bonds Payable from Bonds Payable. B) subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable. C) subtracting Interest Payable from Bonds Payable. D) subtracting Interest Expense from Bonds Payable.
A) subtracting Discount on Bonds Payable from Bonds Payable.
All of the following are reported as current liabilities EXCEPT: A) unearned revenues for services to be provided in 16 months. B) payroll tax payable.C) accounts payable.D) notes payable due in 6 months.
A) unearned revenues for services to be provided in 16 months.
A bond with a face value of $80,000 and a quoted price of 104 has a selling price of: (Round your final answer to the nearest dollar.) A) $76,923.B) $80,000.C) $83,200. D) $88,000.
Answer: CExplanation: $80,000 × 1.04 = $83,200
First Company purchased Second Company for $20,000,000 cash. At the time of purchase, Second Company's assets had a market value of $30,000,000 and the liabilities had a market value of $14,000,000. At the time of purchase, Second Company's assets had a book value of $14,000,000 and the liabilities had a book value of $7,000,000. What amount of goodwill is recorded? A) $4,000,000B) $16,000,000C) $10,000,000 D) $14,000,000
Answer: A Explanation: Fair value of assets $30,000,000- fair value of liabilities $14,000,000 = $16,000,000 Goodwill = Cash paid $20,000,000 - $16,000,000 = $4,000,000
On January 1, 2019, Always Corporation issues $2,800,000, 5-year, 11% bonds for $2,720,000. Interest is paid semiannually on January 1 and July 1. Always Corporation uses the straight-line method of amortization. The company's fiscal year ends on December 31. The amount of discount amortized on July 1, 2019 is: A) $4,000.B) $8,000.C) $16,000. D) $80,000.
Answer: B Explanation: $2,800,000 - $2,720,000 = $80,000 discount$80,000 ÷ 5 year × 6/12 = $8,000 discount amortization per period
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.) A) $0 B) $150,000 C) $300,000 D) $800,000
Answer: B Explanation: $400,000 + $900,000 + $300,000 = $1,600,000 total market value($300,000 ÷ $1,600,000) × $800,000 = $150,000
A company incurred the following costs: Purchase price of land:$270,000 Survey fees: 4,000 Payment for demolition of old building on land: 20,000 Back property taxes on land: 2,000 Paving costs for parking lot: 60,000 Fence around perimeter of land: 15,000 Lights in parking lot: 90,000 Signs for new business: 5,000 What is the cost of the land? A) $270,000 B) $296,000 C) $356,000 D) $294,000
Answer: B Explanation: Purchase price $270,000 + Survey fees $4,000 + Demolition $20,000 + Back taxes $2,000 = $296,000
On January 1, 2019, Anthony Corporation issued $1,000,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2020? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) $980,000 B) $992,000 C) $984,000 D) $1,016,408
Answer: C Explanation: $1,000,000 × 0.98 = $980,000 $1,000,000 - $980,000 = $20,000 discount$20,000 ÷ 5 years = $4,000 $980,000 + $4,000 = $984,000
Basil Company issued $610,000, 8%, 5-year bonds for 107, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year? A) $652,700 B) $610,000 C) $644,160 D) $658,800
Answer: C Explanation: $610,000 × 1.07 = $652,700 $652,700 - $610,000= $42,700 premium$42,700 ÷ 5 years = $8,540 reduction of premium$652,700 - $8,540 = $644,160
Frank's Boat Shop, Inc. reports operating income of $80,000 and interest expense of $15,000. The average number of shares of common stock outstanding during the year was 30,000 shares. What is the times-interest-earned ratio? (Round your final answer to two decimal places.) A) 3.87B) 6.33C) 5.33 D) 10.20
Answer: C Explanation: $80,000 ÷ $15,000 = 5.33
Tom's Roadside Burger Stand has a beginning balance in the Accumulated Depreciation—Equipment account of $200,000. The depreciation expense on the equipment for the year was $50,000. At the end of the year, the balance in the Accumulated Depreciation—Equipment account was $140,000. What was the accumulated depreciation on the equipment sold during the year? A) $60,000B) $90,000C) $110,000 D) $150,000
Answer: C Explanation: Accumulated Depreciation, Beg. Balance $200,000 + Depreciation Expense $50,000 - x = Accumulated Depreciation, End. Balance $140,000x = $110,000
Doug's Boat Shop, Inc. reports operating income of $260,000 and interest expense of $31,200. The average common stockholders' equity during the year was $50,000. The beginning assets balance is $115,000 and ending assets balance is $180,000. What is the leverage ratio? (Round your final answer to two decimal places.) A) 5.90B) 9.42C) 2.95 D) 8.89
Answer: C Explanation: [($115,000 + 180,000)/2] / $50,000 = 2.95
Gengler Company acquired three pieces of equipment for $1,700,000. Equipment #1 is appraised at $470,000, equipment #2 is appraised at $630,000 and equipment #3 is appraised for $640,000. The cost of equipment #1 is: (Do not round any intermediary calculations, and round your final answer to the nearest dollar.) A) $129,941. B) $126,954. C) $459,195. D) $470,000.
Answer: C Explanation: $470,000 + $630,000 + $640,000 = $1,740,000 ($470,000 ÷ $1,740,000) × $1,700,000 = $459,195
Miscellaneous costs associated with the purchase of new equipment include:Insurance costs before the equipment is ready for use: $1,000 Maintenance costs before the equipment is ready for use: 600 Insurance costs after the equipment is placed into service:1,500 Cost of test run: 900 Training costs for employees to learn how to use equipment: 400 What is the amount assigned to the new equipment? A) $2,300 B) $2,500 C) $2,900 D) $4,400
Answer: C Explanation: Insurance costs before use $1,000 + Maintenance costs before use $600 + Cost of test run $900 + Training costs $400 = $2,900
On January 2, 2019, Kellogg Corporation acquired equipment for $700,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $40,000. What is the book value of the asset on December 31, 2020, if Kellogg Corporation uses the straight-line method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) $568,000B) $436,000C) $700,000 D) $660,000
B) $436,000 Explanation: ($700,000 - $40,000) ÷ 5 years = $132,000 depreciation expense per year$132,000 × 2 years = $264,000 accumulated depreciation at end of second year Book value = $700,000 - $264,000 = $436,000
At January 1, 2019, the Accrued Warranty Payable is $1,000. During 2019, the company recorded Warranty Expense of $19,100. During 2019, the company replaced defective products in accordance with product warranties at a cost of $12,400. What is the Accrued Warranty Payable at December 31, 2019? A) $6,700B) $7,700C) $20,100 D) $19,100
B) $7,700 Explanation: Beginning Balance $1,000 + Warranty Expense $19,100 - Warranties Met $12,400 = $7,700
Illinois Bank lends Lisle Furniture Company $90,000 on December 1. Lisle Furniture Company signs a $90,000, 10%, 4-month note. The total cash paid at maturity of the note is: (Round your final answer to the nearest dollar.) A) $90,000.B) $93,000.C) $94,500. D) $99,000.
B) $93,000 Explanation: $90,000 + ($90,000 × 10% × 4/12) = $93,000
On December 31, 2021 Cornell Company has outstanding bonds payable with a face value of $800,000, premium on bonds payable of $50,000, and interest payable of $20,000. The bonds mature on January 1, 2030, and interest is payable on a semi-annual basis. What amounts will be reported in the current liabilities section and long-term liabilities section of the balance sheet for these bonds? A) Current Liabilities: $20,000; Long-term liabilities: $800,000 B) Current Liabilities: $20,000; Long-term liabilities: $850,000 C) Current Liabilities: $20,000; Long-term liabilities: $750,000 D) Current Liabilities: $0; Long-term liabilities: $870,000
B) Current Liabilities: $20,000; Long-term liabilities: $850,000
The records of Milwaukee Sprinkler Systems report net sales of $520,000, net income of $130,000 and average total assets of $360,000. Using DuPont analysis, calculate the two ratios used for return on assets. (Round your final answer to two decimal places.) A) Net profit margin ratio is 2.77; Total asset turnover is 25%. B) Net profit margin ratio is 25%; Total asset turnover is 1.44. C) Net profit margin ratio is 36%; Total asset turnover is 4.00. D) Net profit margin ratio is 2.50; Total asset turnover is 36%.
B) Net profit margin ratio is 25%; Total asset turnover is 1.44.
Which of the following is an accurate statement regarding financial statement and income tax depreciation methods? A) Straight-line depreciation is the most popular method for income tax purposes.B) The IRS expects a company to use accelerated depreciation methods for tax purposes.C) The Modified Accelerated Cost Recovery System can be used for both financial statement and income tax purposes. D) If an accelerated depreciation method is used for income tax purposes, a company will pay more in income taxes.
B) The IRS expects a company to use accelerated depreciation methods for tax purposes.
Costs that do not extend a plant asset's capacity or its useful life, but merely maintain the asset or restore it to working order are recorded as: A) capital expenditures.B) expenses.C) extraordinary repairs. D) modification of assets.
B) expenses.
According to U.S. GAAP, ________ is not amortized because for many entities, it increases in value over time. A) research and development costsB) goodwillC) patientsD) copyrights
B) goodwill
A depreciation method in which an equal amount of depreciation expense is assigned to each year of the asset's use is the: A) units-of-production method.B) straight-line method.C) accelerated depreciation method.D) estimated residual value method.
B) straight-line method.
The interest rate that investors demand for loaning their money is referred to as: A) the coupon rate of interest. B) the market rate of interest. C) the stated rate of interest. D) the debenture rate of interest.
B) the market rate of interest.
Gary Kraen Company purchased equipment on May 1, 2019 for $800,000. The residual value is $10,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2020, if the company uses the double-declining-balance method? (Round your final answer to the nearest dollar.) A) $106,667B) $80,000C) $138,667 D) $79,000
C) $138,667 Explanation: $800,000 × 20% = $160,000 × 8/12 = $106,667 ($800,000 -$106,667) × 20% = $138,667
Mariano Corporation sells 11,000 units of inventory during the first year of operations for $500 each. Mariano provides a one-year warranty on parts. It is estimated that 4% of the units will be defective and that repair costs are estimated to be $50 per unit. In the year of sale, warranty contracts are honored on 100 units for a total cost of $5,000. What amount will be reported as Estimated Warranty Liability at the end of the year? A) $5,000B) $10,000C) $17,000 D) $22,000
C) $17,000 Explanation: 11,000 × 4% = 440 (440- 100) × $50 = $17,000
If Cost of Goods Sold is $240,000, beginning inventory is $57,000, and ending inventory is $40,000, then the purchases from suppliers (assume all on account) would be: A) $337,000.B) $257,000.C) $223,000. D) $240,000.
C) $223,000. Explanation: $240,000 + $40,000 - $57,000 = $223,000.
On January 1, 2019, a machine has a remaining book value of $5,000. The residual value of the machine is $1,500. The company uses the double-declining-balance method of depreciation. If 2019 is the last year for depreciation, what is Depreciation Expense for the year ending December 31, 2019? A) $0B) $1,500C) $3,500 D) $5,000
C) $3,500 Explanation: $5,000 - $1,500 Residual Value = $3,500
On December 31st, Datton, Inc. has cost of goods sold of $550,000, ending inventory is $102,000, beginning inventory is $120,000; and average accounts payable is $114,000. What is the accounts payable turnover? (Round your answer two decimal places.) A) 4.98B) 7.77C) 4.67 D) 2.88
C) 4.67 Explanation: $550,000 + $102,000 - $120,000 = $532,000 / $114,000 = 4.67
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? A) The $9,000 is a capital expenditure and the $8,000 is an expense.B) The $9,000 is an expense and the $8,000 is a capital expenditure.C) Both items are capital expenditures.D) Both items are expenses.
C) Both items are capital expenditures.
Madison Bank lends Neenah Paper Company $120,000 on January 1, 2017. Neenah signs a $120,000, 10%, 6-month note. The journal entry made by Neenah on January 1, 2017 will debit: A) Cash for $108,000 and credit Note Payable for $108,000.B) Interest Expense for $12,000 and credit Cash for $12,000. C) Cash for $120,000 and credit Notes Payable for $120,000. D) Interest Expense for $12,000 and credit Interest Payable for $12,000.
C) Cash for $120,000 and credit Notes Payable for $120,000.
How do you compute the purchases from suppliers: A) Cost of goods sold + ending inventory + beginning inventory.B) Cost of goods sold - ending inventory - beginning inventory.C) Cost of goods sold + ending inventory - beginning inventory.D) Cost of goods sold - ending inventory + beginning inventory.
C) Cost of goods sold + ending inventory - beginning inventory.
The journal entry to record accrued interest on a short-term note payable includes a debit to: A) Interest Payable and a credit to Cash.B) Interest Expense and a credit to Cash.C) Interest Expense and a credit to Interest Payable.D) Interest Payable and a credit to Notes Payable.
C) Interest Expense and a credit to Interest Payable
According to FASB, when should a company journalize a contingent liability? A) Journalize the contingent liability, even though you will probably win the lawsuit.B) Journalize the contingent liability only if the amount can be estimated and the probability of loss is reasonably possible.C) Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated.D) Do not journalize the contingent liability under any circumstances.
C) Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated.
Which of the following costs associated with a delivery van should NOT be capitalized? A) The van's engine is overhauled, and this will extend the useful life by five years.B) The van is modified so it can be used for multiple purposes in the business.C) The van is repainted after 4 years of use. D) All of the above items should be capitalized.
C) The van is repainted after 4 years of use.
Potential liabilities that depend on future events arising out of past events are called: A) long-term liabilities.B) estimated liabilities.C) contingent liabilities.D) current liabilities.
C) contingent liabilities.
Clausen Company recorded the month's salary expense for employees on December 31, including $150,000 of gross pay, federal tax withholding of $36,000, and FICA tax withholding of $12,000. Clausen Company will pay employees for these wages on Jan. 10 of the subsequent year. Which of the following would be included as part of the journal entry on December 31? A) debit Salary Expense for $198,000 B) debit Employee Income Tax Payable for $36,000 C) credit Salary Payable for $102,000D) credit FICA Tax Payable for $36,000
C) credit Salary Payable for $102,000 Explanation: 150,000 - 36,000 - 12,000 = 102,000
Notes payable due in six months are reported as: A) a reduction to notes receivable on the balance sheet.B) current assets on the balance sheet.C) current liabilities on the balance sheet.D) long-term liabilities on the balance sheet.
C) current liabilities on the balance sheet.
Bonds which are backed only by the good faith of the borrower are referred to as: A) junk bonds.B) uncertified bonds.C) debenture bonds.D) callable bonds.
C) debenture bonds.
Equipment with a historical cost of $70,000 and Accumulated Depreciation of $15,000 is junked. No cash is received upon disposal. Which journal entry is necessary? A) debit Accumulated Depreciation - Equipment for $70,000 and credit Equipment for $70,000 B) debit Accumulated Depreciation - Equipment for $15,000, debit Gain on Disposal of Equipment for $55,000 and credit Equipment for $70,000C) debit Accumulated Depreciation - Equipment for $15,000, debit Loss on Disposal of Equipment for $55,000 and credit Equipment for $70,000D) debit Accumulated Depreciation - Equipment for $15,000 and credit Equipment for $15,000
C) debit Accumulated Depreciation - Equipment for $15,000, debit Loss on Disposal of Equipment for $55,000 and credit Equipment for $70,000
Grogan Company purchases inventory on account with a cost of $1,700 and a retail price of $3,400. Grogan Company uses the perpetual inventory method. What journal entry is required on the date of purchase? A) debit Purchases for $1,700 and credit Accounts Payable for $1,700B) debit Purchases for $3,400 and credit Cash for $3,400 C) debit Inventory for $1,700 and credit Accounts Payable for $1,700 D) debit Accounts Receivable for $3,400 and credit Purchases for $3,400
C) debit Inventory for $1,700 and credit Accounts Payable for $1,700
Remini Company sells equipment for $20,000 cash. The equipment has a historical cost of $80,000 and accumulated depreciation of $50,000. What is the journal entry to record the sale of the equipment? A) debit Cash for $20,000 and credit Gain on Sale of Equipment for $20,000 B) debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $70,000 C) debit Loss on Sale of Equipment for $10,000, debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $80,000 D) debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000, debit Gain on Sale of Equipment $10,000 and credit Equipment for $80,000
C) debit Loss on Sale of Equipment for $10,000, debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $80,000 Explanation: Book Value = $80,000 - $50,000 = $30,000 Cash Received = $20,000Loss = Book Value $30,000 - Cash Received $20,000 = $10,000
The entry to record patent amortization expense: A) increases total assets and decreases total stockholders' equity.B) decreases total assets and increases total stockholders' equity.C) decreases both total assets and total stockholders' equity.D) increases both total assets and total stockholders' equity.
C) decreases both total assets and total stockholders' equity.
Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives? A) straight-line methodB) depletion methodC) double-declining-balance methodD) units-of-production method
C) double-declining-balance method
The market interest rate is also referred to as the: A) contractual rate. B) coupon rate. C) effective rate. D) stated rate.
C) effective rate.
If the market interest rate is 6%, a $10,000, 7%, 5-year bond, that pays interest semiannually would sell at an amount: A) less than face value. B) equal to face value. C) greater than face value. D) less than the maturity value.
C) greater than face value.
On January 1, Hanley Corporation issued $2,300,000, 10-year, 9% bonds at 103. The journal entry to record this transaction would include a: A) credit to Bonds Payable $2,369,000. B) debit to Discount on Bonds Payable $69,000. C) debit to Cash $2,300,000. D) credit to Premium on Bonds Payable $69,000.
D) credit to Premium on Bonds Payable $69,000. Explanation: $2,300,000 × 3% = $69,000
Nationwide Magazine sells 64,000 subscriptions on account in March. The subscription price is $15 each. The subscriptions start in April. The journal entry in March would include a: A) debit to Unearned Subscription Revenue for $960,000. B) debit to prepaid subscriptions for $960,000. C) credit to Cash for $960,000.D) credit to Unearned Subscription Revenue for $960,000.
D) credit to Unearned Subscription Revenue for $960,000.
At the end of the year, a company makes a journal entry to accrue the interest expense on a short-term note payable. As a result of this transaction: A) current liabilities increase and current assets increase.B) current liabilities increase and stockholders' equity increases.C) current liabilities decrease and stockholders' equity decreases.D) current liabilities increase and stockholders' equity decreases.
D) current liabilities increase and stockholders' equity decreases.
On December 31, 2019, Accrued Warranty Payable is reported on the balance sheet for White and Decker Company. The liability pertains to products sold, in 2019, with five-year warranties. The Accrued Warranty Payable should be reported on the balance sheet at December 31, 2019 as a: A) part of stockholders' equity.B) long-term liability only.C) current liability only.D) current liability and a long-term liability.
D) current liability and a long-term liability.
Kathy's Corner Store has total cash sales for the month of $40,000 excluding sales taxes. If the sales tax rate is 5%, which journal entry is needed? (Ignore Cost of Goods Sold.) A) debit Cash $42,000, credit Sales Revenue $42,000 B) debit Cash $40,000 and credit Sales Revenue $40,000 C) debit Cash $38,000, debit Sales Tax Receivable for $2,000 and credit Sales Revenue for $40,000 D) debit Cash $42,000, credit Sales Revenue $40,000 and credit Sales Tax Payable $2,000
D) debit Cash $42,000, credit Sales Revenue $40,000 and credit Sales Tax Payable $2,000
Smiley Corporation sold equipment costing $72,000 with $66,000 of accumulated depreciation for $11,000 cash. Which of the following journal entries should be prepared? A) debit Cash for $11,000 and credit Gain on Sale of Equipment for $11,000 B) debit Accumulated Depreciation - E quipment for $66,000 and credit Equipment for $66,000 C) debit Cash for $11,000, credit Equipment for $6,000 and credit Gain on Sale of Equipment for $5,000 D) debit Cash for $11,000, debit Accumulated Depreciation - Equipment for $66,000, credit Equipment for $72,000 and credit Gain on Sale of Equipment for $5,000
D) debit Cash for $11,000, debit Accumulated Depreciation - Equipment for $66,000, credit Equipment for $72,000 and credit Gain on Sale of Equipment for $5,000 Explanation: Book value of equipment = $72,000 - $66,000 = $6,000;Cash proceeds of $11,000 exceed the book value of $6,000, so there is a gain.Gain = $11,000 cash proceeds -$6,000 book value = $5,000
Sales taxes collected from customers are sent to the state at the end of each month. What journal entry is prepared? A) debit Accounts Receivable and credit SalesB) debit Sales Tax Payable and credit SalesC) debit Accounts Payable and credit CashD) debit Sales Taxes Payable and credit Cash
D) debit Sales Taxes Payable and credit Cash
Smith Corporation issues $1,800,000, 10-year, 6% bonds payable at a price of 95. The journal entry to record the issuance will include a: A) debit to Cash of $1,800,000. B) credit to Discount on Bonds Payable for $90,000. C) credit to Bonds Payable for $1,710,000. D) debit to Cash for $1,710,000.
D) debit to Cash for $1,710,000 Explanation: $1,800,000 × 0.95 = $1,710,000
Over the term of a bond, the amortization of the premium on bonds payable: A) increases the amount of cash paid to bondholders annually. B) decreases the amount of cash paid to bondholders annually. C) increases interest expense. D) decreases interest expense.
D) decreases interest expense.
