accounting test 3 review

On October 1, 2015, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2015, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation? A. 12,000 B. 15,000 C. 13,000

A. 12,000 2 x 1/5 x 120,000 = 48,000 x 3/12 = 12,000

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge? A. 20 B. 40 C. 35

A. 20 4,000 x 6% x 30/360 = 20

farmer company reports the following amounts for 2015: net income = 135,000 average stockholders equity = 500,000 preferred dividends = 15,000 par value preferred stock = 100,000 the 2015 rate of return on common stockholder equity is: A. 20% B. 40% C. 12%

A. 20% 135000 - 15,000 = 120,000 500,000+ 100,000 = 600,000 500,000 divided by 600,000 = 0.833333333... x 120,000 = 100,000 divided by 500,000 = .2 = 20%

Kingston Company purchased a piece of equipment on January 1, 2015. The equipment cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000. What was the depreciation expense for the asset for 2016 under the double-declining-balance method? A. 37,500 B. 36,400 C. 35,530

A. 37,500 200,000 x 1/8 x 2 = 50,000 200,000 - 50,000 = 150,000 x .25 (1/8 x 2) = 37,500

Drago Company purchased equipment on January 1, 2015, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2016, if the straight-line method of depreciation is used? A. 468,000 B. 342,000 C. 234,000

A. 468,000 1,200,000- 30,000 divided by 5 x 2

interest on a 6000, 6% 60-day note receivable is A. 60 B. 360 C. 80

A. 60

the existing balance in allowance for doubtful accounts is considered in computing bad debt expense in the A. percentage of receivables basis B. contra revenue account C. credit side

A. Percentage of receivables basis

when preferred stock is cumulative, preferred dividends not declared in a period are A. called dividends in arrears B. called dividends error C. cumulative dividends

A. called dividends in arrears

Equipment that cost $420,000 and on which $200,000 of accumulated depreciation has been recorded was disposed of for $180,000 cash. The entry to record this event would include a A. loss of 40,000 B. gain of 40,000 C. credit equipment for 220,000

A. loss of 40,000 420,000-200,000-180,000= 40,000

bad debt expense is considered A. normal and necessary risk of doing business on credit basis B. unique and not a necessary risk of doing business on credit basis C. normal but not a necessary risk of doing business on credit basis

A. normal and necessary risk of doing business on credit basis

The acquisition of treasury stock by a corporation A. reduces the number of shares of stock outstanding regardless of the method used to account for the treasury stock B. increases the number of shares of stock outstanding regardless of the method used to account for the treasury stock C. reduces the number of shares of stock outstanding when a certain method is used to account for the treasury stock

A. reduces the number of shares of stock outstanding regardless of the method used to account for the treasury stock

stockholders of a corporation directly elect A. the board of directors B. the president C. the treasurer of the corporation

A. the board of directors

on 21 answer is

B

Randie Company lends Luann Company $10,000 on April 1, accepting a four-month, 6% interest note. Randie Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared? A. (debit) notes receivable $10,000 (credit) cash $10,000 B. (debit) Interest receivable 50 (credit) interest revenue 50 C. (debit) interest receivable 200 (credit) interest revenue 200

B. (debit interest receivable 50 (credit) interest revenue 50 10,000 x 6% x 30/360 = 50

vega corporations December 31, 2015 balance sheet showed the following 8% preferred stock, $20 par value, cumulative, 15,000 shares authorized; 10,000 shares issued = $200,000 common stock, $10 par value, 1,000,000 shares authorized 975,000 shares issued, 960,000 shares = 9,750,000 outstanding pain in capital in excess of par - preferred stock = 30,000 paid in capital in excess of par - common stock = 11,500,000 retained earnings = 3,750,000 treasury stock (15,000 shares) = 315,000 Vega's total paid in capital was A. 22,165,000 B. 21,165,000 C. 21,342,000

B. 21,165,000 200,000+9,750,000+30,000+11,500,000-315,000= 21,165,000

On December 31, 2015, Stock, Inc. has 4,000 shares of 6% $100 par value cumulative preferred stock and 60,000 shares of $10 par value common stock outstanding. On December 31, 2015, the directors declare a $20,000 cash dividend. The entry to record the declaration of the dividend would include: A. 35,000 B. 24,000 C. 21,000

B. 24,000 6% x 100 = 6 4000x 6 = 24,000 may say cash dividends as debit and dividends as credit

realistic corporations December 31, 2015 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 20,000 shares authorized; 10,000 shares issued = $200,000 common stock, $10 par value, 2,000,000 shares authorized 1,950,000 shares issued, 1,930,000 shares = 19,500,000 outstanding pain-in capital in excess of par - preferred stock = 60,000 paid-in capital in excess of par - common stock = 24, 000,000 retained earnings = 7.650,000 treasury stock (20,000 shares) = 630,000 A. 45,130,000 B. 43,130,000 C. 31,230,000

B. 43,130,000 200,000 +19,500,000 + 60,000 + 24,000,000 - 630,000 = 43,130,000

paid-in capital from treasury stock would appear on a balance sheet under the category A. accounts receivable B. additional paid in capital C. accounts payable

B. Additional paid in capital

which one of the following events would not require a formal entry on a corporation books A. 2 for 1 stock split B. authorized stock C. bad debit expense

B. authorized stock

which of the following is an incorrect statement about a corporation A. it is an entity separate and distinct from its owners B. corporation maybe formed in writing orally or implied C. has most rights and privileges like a person

B. corporation maybe formed in writing orally or implied

which one of the following is not a primary problem associated with accounts receivable A. percentage of receivables basis B. depreciating accounts receivable C. deprecating accounts payable

B. depreciating accounts receivable

if stock is issued for a non cash asset, the asset should be recorded on the books of the corporation at A. bad debt expense B. fair market value C. asset turnover

B. fair market value

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is A. units of activity method B. straight-line method C. declining balance method

B. straight-line method

Reck Company receives a $15,000, 3-month, 8% promissory note from Fey Company in settlement of an open accounts receivable. What entry will Reck Company make upon receiving the note? A. (debit) notes receivable 15,300, (credit) accounts receivable- Fey company 15,300 B. (debit) notes receivable 15,300, (credit) accounts receivable - Fey company 15,000 (credit) interest revenue 300 C. (debit) notes receivable 15,000, (credit) accounts payable - Fey company 15,000

C. (debit) notes receivable 15,000, (credit) accounts payable - Fey company 15,000

Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the units-of- activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record? A. 14,230 B. 20,000 C. 13,230

C. 13,230 171500-24500=147000 divided by 1,000,000 = .147 x 90,000 = 13,230

On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is: A. 3,120 B. 4,045 C. 3,045

C. 3,045 3,000 x 6% x 3/12 = 45 + 3000 = 3,045

A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be A. 40,400 B. 21,500 C. 40,500

C. 40,500 288,000 +36,000 = 324,000 divided by 8 = 40,500

the numerator of the return on common stockholders equity is A. total stockholders equity B. number of shares outstanding C. Net income minus preferred dividends

C. Net income minus preferred dividends

the balance in the accumulated deprecation account represents the A. total amount of depreciation the company has expensed over time B. the amount increased in the company C. amount charged to expense since the acquisition of the plant asset

C. amount charged to expense since the acquisition of the plant asset

a prior period adjustment for understatement of net income will A. will not be created to the retained earnings account B. will be created to the asset account C. will be created to the retained earnings account

C. be created to the retained earnings account

the calculation of depreciation using the declining balance method A. cost- S.V = depreciable cost divided by life B. cost divided by units of activity = deprecation cost per unit x units of activity during the year C. book value at beginning of the year x declining balance rate

C. book value at beginning of the year x declining balance rate

on a balance sheet, natural resources maybe described more specifically as all of the following except A. timber, minerals B. oil and gas C. both A and B

C. both A and B it is timber, minerals, oil and gas on test it will ask which is not a natural resource

Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the 400 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock, there will be a A. credit to treasury stock for 4,000 B. credit to paid-in capital from treasury stock for $8,000 C. credit to common stock for $10,800

C. credit to common stock for $10,800 400 x 27

when an account is written off using the allowance method accounts receivable A. increased and the allowance account increases B. increased and the allowance account decreases C. decreased and the allowance account decreases

C. decrease and the allowance account decreased

what are the significant dates with respect to dividends A. the declaration date and the record date B. the payment date C. both A and B

C. the declaration date and the record date and the payment date (on test it will say which is NOT a significant date)

book value per share is computed by dividing total A. net income by average common stockholders equity B. days in year by accounts receivable turnover C. total stockholders equity by number of common shares outstanding

C. total stockholders equity by number of common shares outstanding

identify the item below where the terms are not related

make sure you know terms