Acct 201 WVU Final Schaupp pt 2

In a period of rising prices, the inventory costing method that will cause the company to have the lowest income tax expense is:

LIFO

Angus Company agreed to sell goods for Longhorn Company on consignment, but wasn't willing to take ownership of the goods in case they were difficult to sell. Which of the following statements is true:

Longhorn owns the inventory and should report it on its balance sheet.

Diana Olympic works 40 hours for Quartz, Inc. for $27 per hour. Required payroll deductions are: Social Security $66.96; Medicare $15.66; Federal income tax $104.40; and State income tax $18.00. The entry to record her net pay would cause which of the following to change as described?

Salaries and Wages Expense increases by $1,080.

Why can depreciation expense be a different amount each year using the units-of-production method?

The method calculates expense based on the relationship between each year's output and total estimated output.

Generally, freight costs incurred when a long-lived asset is purchased should be:

added to the cost of the asset.

Accumulated Depreciation:

appears in the asset section of a balance sheet.

Payroll deductions:

are amounts subtracted from employees' gross earnings to determine their net pay.

Grandview, Inc. uses the allowance method. At December 31, 2018, the company's balance sheet reports Accounts Receivable, Net in the amount of $27,200. On January 2, 2019, Grandview writes off a $2,400 customer account balance when it becomes clear that the customer will never pay. What is the amount of Accounts Receivable, Net after the write-off?

$27,200

Alphabet Company, which uses the periodic inventory method, purchases different letters for resale. Alphabet had no beginning inventory. It purchased A thru G in January at $4 per letter. In February, it purchased H thru L at $6 per letter. It purchased M thru R in March at $7 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year. If Alphabet Company uses the LIFO method, what is the cost of its ending inventory?

$58

When goods are sold to a customer with credit terms of 2/15, n/30, the customer will receive a:

2% discount if they pay within 15 days.

The Allowance for Doubtful Accounts account is a contra-account that offsets:

Accounts Receivable.

When preparing the balance sheet for Papago Co. for December 31, 2018, which item would not be classified as a current liability?

Note payable due March 1, 2020

Inventory is reported as a(n) ______ on the ______.

current asset; balance sheet

A company lent $10,000 to an employee who signed a 9%, 6-month promissory note. The entry made by the company to record this loan to the employee will include a:

debit to Notes Receivable for $10,000.

Dividends Payable is recorded as a credit on the:

declaration date.

Beginning inventory plus purchases equals:

goods available for sale.

If the market rate of interest is 6%, a $10,000, 10-year bond with a stated annual interest rate of 8% would be issued at an amount:

greater than face value.

On the balance sheet, the Allowance for Doubtful Accounts:

is subtracted from Accounts Receivable.

Inventory cost consists of purchase price:

plus freight-in.

The annual interest payment on bonds:

stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium.

The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method:

tells what inventory a company should have on hand at any point in time.

Inventory shipped FOB shipping point and in transit on the last day of the year should be included in:

the inventory balance of the buyer.

Liabilities are classified as current if they:

will be paid within the company's operating cycle or within 1 year, whichever is longer.

Orbit, Inc. has sales of $28,000, beginning inventory of $3,500, purchases of $17,500, and ending inventory of $4,900. The cost of goods sold is:

$16,100.

Coranado Company purchases $70,000 of inventory from a wholesaler who allows 45 days to pay. In addition, the wholesaler offers a 3% discount if payment is made within 12 days. These payment terms would be expressed as:

3/12, n/45.

Marshall Company purchases a machine for $800,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce two million units. The machine is used to make 400,000 units during the current period. If the units-of-production method is used, the depreciation rate is:

$0.38 per unit.

Rimrock, Inc. used the aging of accounts receivable method. At December 31, management determined that the net realizable value of accounts receivable was $608,000. The balance in Accounts Receivable was $768,000 and the unadjusted credit balance in Allowance for Doubtful Accounts was $32,000. What was the amount of Bad Debt Expense for the year?

$128,000

Nordic Industries uses a periodic inventory system. During its first month of operations, Nordic Industries purchased inventory as follows: Units Unit Cost Total Cost January 3 150 $ 15 $ 2,250 January 12 200 20 4,000 January 20 250 20 5,000 January 25 300 30 9,000 900 $ 20,250 There were 100 units in ending inventory on January 31. Under the LIFO cost method, what is the cost of goods sold for January?

$18,750

Avalon Industries buys equipment for $24,000, expects to use it for ten years, and then sell it for $3,000. Using the straight-line method, the company should report annual depreciation for the equipment of:

$2,100

Hardware Inc. has a periodic inventory system and uses the weighted average method. The company began the year with 150 large brass switch plates on hand at a cost of $4.00 each. Purchases of switch plates during the year were as follows: Date of Transaction Quantity Received Unit Cost May 7 200 $ 4.20 June 11 200 $ 4.40 November 22 250 $ 4.80 The switch plates sell for $7.00 each. If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold?

$2,508

A one-year, $15,000, 6% note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred?

$375

Legacy Company uses the aging of accounts receivable method. The company performed an aging of accounts receivable on December 31 and gathered the following information: Accounts Receivable $ 420,000 Unadjusted Credit balance in Allowance for Doubtful Accounts 16,000 Estimated Uncollectible Accounts Receivable 23,200 What is the amount of Accounts Receivable, Net that will be reported on the balance sheet at December 31?

$396,800

Durango, Inc. purchased a parcel of land for $450,000. It paid attorney fees of $3,000 to verify title to the land. In addition, it paid a broker's fee of $7,500 to help find a suitable parcel of land. This parcel of land should be recorded in the accounting records for:

$460,500.

Which of the following is not a characteristic of tangible long-lived assets?

Amortized over their useful lives

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 100 $ 5 June 2 Purchase 75 $ 4 November 5 Sales 125 What amounts would be reported as the cost of goods sold and ending inventory balances for the year?

Cost of goods sold $600; Ending inventory $200

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10 n/30. Payment is made to the seller 7 days after the purchase. How would the payment be recorded?

Debit Accounts Payable for $85,000 credit Cash for $82,450, and credit Inventory for $2,550.

Mitchell uses a perpetual inventory system. Mitchell sells a computer from inventory for $1,198 on credit. Mitchell originally bought the computer from IBM for $790. What journal entry (entries) will Mitchell prepare to record the sale?

Debit Accounts Receivable and credit Sales Revenue for $1,198; debit Cost of Goods Sold and credit Inventory for $790.

Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?

Debit Bad Debt Expense and credit Allowance for Doubtful Accounts.

Crown King Burgers purchased new soda machines for $900,000 and pays $100,000 for installation costs. One-half of the total cost or $500,000 is paid in cash; a note in the amount of $500,000 is signed. How should the company record this transaction?

Debit Equipment for $1,000,000, credit Cash for $500,000, and credit Notes Payable for $500,000.

Best, Inc. loaned $100,000 for three months on November 1 to one of its customers at the rate of 6%. The principal amount of the loan plus interest is due on the following February 1. Which of the following is the adjusting journal entry that will be recorded on December 31?

Debit Interest Receivable and credit Interest Revenue for $1,000.

Which inventory costing method uses the oldest cost for cost of goods sold on the income statement and the newest cost for inventory on the balance sheet?

FIFO