Exam 3 PE and Review

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is? a. $1,980 b. $139,500 c. $49,500 d. $9,900

c. $49,500 $90,000 principal × 11% annual interest = $9,900 x 5 years = $49,500

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment? a. $0.12 b. $1.10 c. $0.10 d. $1.00

c. $0.10

On January 1, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine for the year ended December 31? a. gain of $5,000 b. loss of $6,500 c. loss of $1,500 d. gain of $1,500

c. loss of $1,500

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units Total cost of goods available for sale $4,361.75 30 On hand, 90 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is: a. $2,738.00 b. $2,732.50 c. $2,720.00 d. $2,722.50

b. $2,732.50 June 5: (100 x $18.20) = $1,820.00 June 24: (50 x $18.25) = $912.50 Total = $1,820 + $912.50 = $2,732.50

Klinc Company uses a perpetual inventory system and had the following inventory transactions for the month of June: June 1 On hand, 50 units at $14.00 each $700 4 Purchased 115 units at $15 each $1,725 5 Sold 100 units 10 Purchased 75 units at $16 each $1,200 24 Sold 50 units Total cost of goods available for sale $3,625 30 On hand, 90 units The June 30th inventory included 45 units from the June 4th purchase and 45 units from the June 10th purchase. Refer to the information provided for Klinc Company. What is the cost of goods sold for June under the specific identification method? a.$1,575 b.$1,450 c.$1,500 d.$2,230

d.$2,230 (50 x $14 from beginning inventory) + (70 x $15 from the June 4th purchase) + (30 x $16 from the June 10th purchase) = $2,230.00.

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each $900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units ????? 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units ????? Total cost of goods available for sale $4,361.75 30 Ending units on hand ????? Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, the amount of ending inventory reported on the balance sheet is: a. $1,629.25 b. $2,996.75 c. $1,641.75 d. $1,639.25

a. $1,629.25 (25 x $18.25) + (15 x $18.20) + (50 x $18) = $1,629.25

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 will have a debit to a. Depreciation Expense and a credit to Accumulated Depreciation for $45,000. b. Depreciation Expense and a credit to Accumulated Depreciation for $50,000. c. Accumulated Depreciation and a credit to Equipment for $50,000. d. Depreciation Expense and a credit to Equipment for $45,000.

a. Depreciation Expense and a credit to Accumulated Depreciation for $45,000. ($500,000 − $50,000) / 10 = $45,000

Klinc Company uses a perpetual inventory system and had the following inventory transactions for the month of June: June 1 On hand, 50 units at $14.00 each $700 4 Purchased 115 units at $15 each $1,725 5 Sold 100 units 10 Purchased 75 units at $16 each $1,200 24 Sold 50 units Total cost of goods available for sale $3,625 30 On hand, 90 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, the amount of ending inventory reported on the balance sheet is: a. $2,720.00 b. $1,641.75 c. $1,183.00 d. $1,810.00

b. $1,641.75 (15 x $18.20) + (75 x $18.25) = $1,641.75

Klinc Company uses a perpetual inventory system and had the following inventory transactions for the month of June: June 1 On hand, 50 units at $14.00 each $700 4 Purchased 115 units at $15 each $1,725 5 Sold 100 units 10 Purchased 75 units at $16 each $1,200 24 Sold 50 units Total cost of goods available for sale $3,625 30 On hand, 90 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, cost of goods sold for the month of June is: a. $2,520.00 b. $2,720.00 c. $2,540.00 d. $2,550.00

b. $2,720.00 June 5: (50 x $18) + (50 x $18.20) = $1,810.00 June 24: (50 x $18.20) = $910.00 Total = $1,810 + $910 = $2,720.00

A company purchased land and incurred the following costs: Purchase Price $500,000 Excavation Costs 50,000 Razing Old Building 12,500 Broker Fees 10,000 Cost of a Parking Lot 25,000 What is the cost of the land? a. $550,000 b. $572,500 c. $597,500 d. $562,500

b. $572,500

During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries? a. Accounts Receivable 636,000 Sales Revenue 636,000 b. Accounts Receivable 636,000 Sales Revenue 600,000 Sales Tax Payable 36,000 c. Accounts Receivable 600,000 Sales Revenue 564,000 Sales Tax Payable 36,000 d. Accounts Receivable 600,000 Sales Revenue 600,000

b. Accounts Receivable 636,000 Sales Revenue 600,000 Sales Tax Payable 36,000

Irwin Company counted its ending inventory as $178,000 at year-end, January 31, 2019. Upon review of the records, it was noted that the following items were in transit during the count:- Goods totaling $2,000 shipped by the supplier FOB destination on January 31 were received February 5th and were not counted by Irwin Company.- Goods totaling $5,000 shipped by the supplier FOB shipping point on January 30 were received February 2nd and were not counted by Irwin Company.- Goods totaling $6,000 shipped by Irwin Company to a customer FOB shipping point on January 31 were received by the customer on February 3rd and were counted by Irwin Company. What is Irwin Company's correct inventory balance on January 31, 2019? a. $172,000 b. $178,000 c. $177,000 d. $174,000

c. $177,000 $178,000 + 5,000 - 6,000 = $177,000.

A manufacturing company's weekly payroll is $80,000 for a 5-day work week beginning each Monday and ending each Friday. The last time salaries and wages were recorded was Friday, December 26. What adjustment is needed on December 31, the last day of the company's fiscal period? a. No adjustment is necessary since the next payday will not occur until the following year. b. Decrease wages payable by $48,000. c. Increase wages expense by $48,000. d. Decrease cash by $48,000.

c. Increase wages expense by $48,000. $80,000 / 5 = $16,000 per day x 3 days = $48,000

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2020? a. $4,800 b. $1,728 c. $2,880 d. $2,000

c.$2,880

A company purchased a patent for $100,000 at the beginning of the current year which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in the current year? a. $0 b. $100,000 c. $5,000 d. $20,000

d. $20,000 $100,000 / 5 = $20,000

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2021? a. $10,000 b. $4,000 c. $8,000 d. $6,000

d. $6,000 $12,000 − $2,000 − $2,000 − $2,000 = $6,000

This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. Refer to the information for Gainesville Truck Center. Which of the following statements is true regarding the entry to record wages and the related liabilities? a. Social security tax payable will be debited in the amount of $620. b. Federal income taxes payable will be credited in the amount of $2,100. c. FICA tax expense will be debited in the amount of $765. d. Medicare tax payable will be credited in the amount of $145.

d. Medicare tax payable will be credited in the amount of $145. $10,000 × .0145 = $145

On May 1, a company borrowed $30,000 from the First National Bank on a 1-year, 6% note. Assuming the company keeps its records on a calendar year basis, an entry is needed on December 31st to increase a. interest payable by $900. b. interest expense by $600. c. interest expense by $1,800. d. interest payable by $1,200.

d. interest payable by $1,200. $30,000 principal × .06 interest × 8/12 = $1,200

Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true? a. The customer should pay $1,000 if the invoice is paid on July 9th. b. The customer can take a 10% discount if the invoice is paid by June 30th. c. The customer must pay a $10 penalty if payment is made after July 9th. d. The customer must pay $1,010 if payment is made after June 20th.

a. The customer should pay $1,000 if the invoice is paid on July 9th.

Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2019.Refer to the information provided for Eli Company. If the customer pays the amount of the invoice for its purchase on March 14, 2019, how much cash will Eli Company receive? a. $1,400 b. $1,800 c. $1,980 d. $2,000

c. $1,980 ($20 x 100 packs) - 1%($20 x 100) = $1,980