Exam 3 Study Guide
A company cannot have a liability if the amount of the obligation is unknown. True or False
False
A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year. True or False Depreciation expense = plant asset cost - salvage value / useful life
False
Vacation benefits is an example of a known liability. True or False
False
A liability may exist even if there is uncertainty about whom to pay, when to pay, or how much to pay. True or False
True
Capital expenditures, also called balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period. True or False
True
Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods. True or False
True
Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements. True or False
True
The cost of fees for insuring the title and any accrued property taxes are included in the cost of land. True or False
True
The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase. True or False
True
When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation. True or False
True
A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is: multiple choice: a. Debit Bond Interest Expense $22,000; credit Cash $22,000. b. Debit Bond Interest Expense $44,000; credit Cash $44,000. c. Debit Bond Interest Payable $22,000; credit Cash $22,000. d. Debit Bond Interest Expense $550,000; credit Cash $550,000. e. No entry is needed, since no interest is paid until the bond is due.
a
A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a: multiple choice: a. $0 gain or loss. b. $20,000 gain. c. $20,000 loss. d. $40,000 loss. e. $60,000 gain.
a
Amortizing a bond discount: multiple choice: a. Allocates a portion of the total discount to interest expense each interest period. b. Increases the market value of the Bonds Payable. c. Decreases the Bonds Payable account. d. Decreases interest expense each period. e. Increases cash flows from the bond.
a
An advantage of bonds is: multiple choice: a. Bonds do not affect owner control. b. Bonds require payment of par value at maturity. c. Bonds can decrease return on equity. d. Bond payments can be burdensome when income and cash flow are low. e. Bonds require payment of periodic interest.
a
An employee earned $100,000 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the rate for FICA Medicare 1.45% of all earnings. The employer's total FICA payroll tax for this employee is: multiple choice: a. $7,650. b. $9,830. c. $879. d. $8,950. e. $0, since the FICA tax is only deducted from an employee's pay.
a
Collateral agreements for a note or bond can: multiple choice: a. Reduce the risk of loss in comparison with unsecured debt. b. Increase the risk of loss in comparison with unsecured debt. c. Have no effect on risk. d. Reduce the issuer's assets. e. Increase total cost for the borrower.
a
Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales? multiple choice: a. Debit Cash $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680. b. Debit Sales Taxes Payable $4,680; debit Cash $73,220; credit Sales $78,000. c. Debit Cash $78,000; credit Sales $78,000; and record the taxes when paid. d. Debit Cash $78,000; credit Sales $73,320; credit Sales Taxes Payable $4,680. e. Debit Accounts Receivable $82,680; credit Sales $78,000; credit Sales Taxes Payable $4,680.
a
On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $10,087 every six months. The life of these bonds is: multiple choice: a. 15 years. b. 30 years. c. 26.5 years. d. 32 years e. 35 years.
a
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of interest expense will be included in the first annual payment? multiple choice: a. $20,000 b. $37,258 c. $25,000 d. $17,258 e. $232,742
a
Revenue expenditures: multiple choice: a. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities. b. Are known as balance sheet expenditures because they relate to plant assets. c. Extend the asset's useful life. d. Substantially benefit future periods. e. Are debited to asset accounts when incurred
a
Saffron Industries most recent balance sheet reports total assets of $42,000,000, total liabilities of $16,000,000 and stockholders' equity of $26,000,000. Management is considering using $3,000,000 of excess cash to prepay $3,000,000 of outstanding bonds. What effect, if any, would prepaying the bonds have on the company's debt-to-equity ratio? multiple choice: a. Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .50. b. Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .57. c. Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .50. d. Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .57. e. Prepaying the debt would cause the firm's debt-to-equity ratio to remain unchanged.
a
The useful life of a plant asset is: multiple choice: a. The length of time it is productively used in a company's operations. b. Never related to its physical life. c. Its productive life, but not to exceed one year. d. Determined by the FASB. e. Determined by law.
a
Which of the following statements is true? a. Interest on bonds is tax deductible. b. Interest on bonds is not tax deductible. c. Dividends to stockholders are tax deductible. d. Bonds do not have to be repaid. e. Bonds always increase return on equity.
a
A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is: multiple choice: a. $3,289.50. b. $3,500.00. c. $3,613,70. d. $6,633.70. e. $7,000.00.
a Cash interest paid: $100,000 × .07 × ½ year = $3,500 Premium amortized: ($102,105 − $100,000)/10 = $210.50 Interest expense: $3,500 − $210.50 = $3,289.50
A bond traded at 102½ means that: a. The bond pays 2.5% interest. b. The bond traded at 102.5% of its par value. c. The market rate of interest is 2.5%. d. The bonds were retired at $1,025 each. e. The market rate of interest is 2½% above the contract rate.
b
A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1? multiple choice: a. $5,000. b. $1,667. c. $1,400. d. $1,250. e. $2,067.
b
A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year? multiple choice: a. $48,133. b. $45,600. c. $22,500. d. $23,750. e. $81,600.
b
A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of: multiple choice: a. $0. b. $30,435. c. $35,000. d. $46,087. e. $100,000.
b
A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: multiple choice: a. Credit to Interest Income. b. Credit to Premium on Bonds Payable. c. Credit to Discount on Bonds Payable. d. Debit to Premium on Bonds Payable. e. Debit to Discount on Bonds Payable.
b
A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is: multiple choice: a. 0.29 b. 3.50 c. 2.50 d. 1.75 e. 0.50
b
An estimated liability: multiple choice: a. Is an unknown liability of a certain amount. b. Is a known obligation of an uncertain amount that can be reasonably estimated. c. Is a liability that may occur if a future event occurs. d. Can be the result of a lawsuit. e. Is not recorded until the amount is known for certain.
b
Athens Company's salaried employees earn two weeks of vacation per year. The company estimated and must expense $6,600 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits? multiple choice: a. Debit Vacation Benefits Expense $16,500; credit Vacation Benefits Payable $16,500. b. Debit Vacation Benefits Expense $6,600; credit Vacation Benefits Payable $6,600. c. Debit Vacation Benefits Expense $17,160; credit Vacation Benefits Payable $17,160. d. Debit Vacation Benefits Payable $6,600; credit Vacation Benefits Expense $6,600. e. Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.
b
Employees earn vacation pay at a rate of one day per month. The company estimated and must expense $1,500 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits? multiple choice: a. Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation $1,500. b. Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500. c. Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500. d. Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500. e. Debit Prepaid Benefits Payable $1,500; credit Vacation Benefits Expense $1,500.
b
Extraordinary repairs: multiple choice: a. Are revenue expenditures. b. Extend the useful life of an asset beyond its original estimate. c. Are credited to accumulated depreciation. d. Are additional costs of plants assets that do not materially increase the asset's life. e. Are expensed when incurred.
b
Gross pay is: multiple choice: a. Take-home pay. b. Total compensation earned by an employee before any deductions. c. Salaries after taxes are deducted. d. Deductions withheld by an employer. e. The amount of the paycheck.
b
If the times interest earned ratio: multiple choice: a. Increases, then risk increases. b. Increases, then risk decreases. c. Is greater than 1.5, the company is in default. d. Is less than 1.5, the company is carrying too little debt. e. Is greater than 3.0, the company is likely carrying too much debt.
b
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The amount paid to the bondholders for each semiannual interest payment is. multiple choice: a. $60,000. b. $33,750. c. $67,500. d. $30,000. e. $375,000.
b
On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.) multiple choice: a. $0 b. $75 c. $900 d. $225 e. $300
b
Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of: multiple choice: a. $10,000 b. $5,000 c. $5,500 d. $20,000 e. $9,250
b
Secured bonds: a. Are called debentures. b. Have specific assets of the issuing company pledged as collateral. c. Are backed by the issuer's bank. d. Are subordinated to those of other unsecured liabilities. e. Are the same as sinking fund bonds.
b
Salvage value is: multiple choice: a. Not a factor relevant to determining depletion. b. A factor relevant to amortizing an intangible asset with an indefinite life. c. An estimate of the asset's value at the end of its benefit period. d. A factor relevant to determining depreciation under MACRS. e. A factor relevant to determining an asset's useful life.
c
Seedly Corporation's most recent balance sheet reports total assets of $35,000,000 and total liabilities of $17,500,000. Management is considering issuing $5,000,000 of par value bonds (at par) with a maturity date of ten years and a contract rate of 7%. What effect, if any, would issuing the bonds have on the company's debt-to-equity ratio? multiple choice: a. Issuing the bonds would cause the firm's debt-to-equity ratio to improve from 1.0 to 1.3. b. Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from 1.0 to 1.3. c. Issuing the bonds would cause the firm's debt-to-equity ratio to remain unchanged. d. Issuing the bonds would cause the firm's debt-to-equity ratio to improve from .5 to .8. e. Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from .5 to .8.
b
The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $9,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages? multiple choice: a. $336.00. b. $420.00. c. $534.60. d. $594.00. e. $0.00.
b
The debt-to-equity ratio: multiple choice: a. Is calculated by dividing book value of secured liabilities by book value of pledged assets. b. Is a means of assessing the risk of a company's financing structure. c. Is not relevant to secured creditors. d. Can always be calculated from information provided in a company's income statement. e. Must be calculated from the market values of assets and liabilities.
b
Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is: multiple choice: a. $2,143. b. $1,000. c. $2,000. d. $14,000. e. $0.
b
A bondholder that owns a $1,000, 10%, 10-year bond has: multiple choice: a. Ownership rights in the issuing company. b. The right to receive $10 semiannually until maturity. c. The right to receive $1,000 at maturity. d. The right to receive $10,000 at maturity. e. The right to receive dividends of $1,000 per year.
c
A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is: multiple choice: a. $3,500.00. b. $7,000.00. c. $3,318.41. d. $6,573.90. e. $1,750.00.
c
A company issues 8% bonds with a par value of $40,000 at par on January 1. The market rate on the date of issuance was 7%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is: multiple choice: a. $3,200. b. $2,800. c. $1,600. d. $1,400. e. $0.
c
A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: multiple choice: a. 2 years. b. 4 years. c. 6 years. d. 16 years. e. 10 years.
c
An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $128,400. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is: multiple choice: a. $2,294.00. b. $536.50. c. $2,830.50. d. $1,757.50. e. $8,950.50.
c
An employee earned $43,300 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is: multiple choice: a. $8,950.50. b. $5,638.05. c. $3,312.45. d. $2,684.60. e. $0, since the FICA tax is only deducted from an employee's pay.
c
Depreciation: multiple choice: a. Measures the decline in market value of an asset. b. Measures physical deterioration of an asset. c. Is the process of allocating the cost of a plant asset to expense. d. Is an outflow of cash from the use of a plant asset. e. Is applied to land.
c
If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as: multiple choice: a. Debit Sales, credit Unearned Revenue. b. Debit Unearned Revenue, credit Sales. c. Debit Cash, credit Unearned Revenue. d. Debit Unearned Revenue, credit Cash. e. Debit Cash, credit Ticket sales payable.
c
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method? multiple choice: a. $680. b. $2,320. c. $2,720. d. $600. e. $300. Depreciation Expense = Beginning of Year Book Value × Double (Year 1, depreciation) Book value = Cost − Accumulated depreciation
c
Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record: multiple choice: a. A gain on sale of $2,000. b. A loss on sale of $2,000. c. A loss on sale of $5,000. d. A gain on sale of $5,000. e. A loss on sale of $45,000.
c
Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as: multiple choice: a. Current assets. b. Current liabilities. c. Long-term liabilities. d. Operating cycle liabilities. e. Bills.
c
On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.) multiple choice: a. No adjusting entry is required. b. Debit Interest Payable, $120; credit Interest Expense, $120. c. Debit Interest Expense, $120; credit Interest Payable, $120. d. Debit Interest Expense, $720; credit Interest Payable, $720. e. Debit Interest Payable, $240; credit Interest Expense, $240.
c
The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $2,900 in the current period and had cumulative pay for prior periods of $5,800. What is the amount of unemployment taxes the employer must pay on this employee's wages for the current period? multiple choice: a. $420.00. b. $348.00. c. $72.00. d. $174.00. e. $0.00.
c
The depreciation method that charges the same amount of expense to each period of the asset's useful life is called: multiple choice: a. Accelerated depreciation. b. Declining-balance depreciation. c. Straight-line depreciation. d. Units-of-production depreciation. e. Modified accelerated cost recovery system (MACRS) depreciation.
c
The employer should record deductions from employee pay as: multiple choice: a. Employee receivables. b. Payroll taxes. c. Current liabilities. d. Wages payable. e. Employee payables.
c
Times interest earned is calculated by: multiple choice: a. Multiplying interest expense by income. b. Dividing interest expense by income before depreciation and interest expense. c. Dividing income before interest expense and income taxes by interest expense. d. Multiplying interest expense by income before interest expense. e. Dividing income before interest expense by interest expense and income taxes.
c
Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true? multiple choice: a. Adonis must pay $200,000 at maturity and no interest payments. b. Adonis must pay $206,948 at maturity and no interest payments. c. Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each. d. Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each. e. Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
c $200,000 × 8% × ½ = $8,000 each interest payment
On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months.The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be: multiple choice: a. $132,500. b. $225,000. c. $265,174. d. $245,000. e. $224,826.
c Cash paid every six months = $3,500,000 × 7% × 6/12 = $122,500. Discount amortization every six months = $10,087 Interest Expense ($122,500 + $10,087) × 2 = $265,174.
A bond is issued at par value when: multiple choice: a. The bond pays no interest. b. The bond is not between interest payment dates. c. Straight line amortization is used by the company. d. The market rate of interest is the same as the contract rate of interest. e. The bond is callable.
d
A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is: multiple choice: a. $9,000. b. $8,000. c. $4,000. d. $4,500. e. $0.
d
A company's total liabilities divided by its total stockholders' equity is called the: multiple choice: a. Equity ratio. b. Return on total assets ratio. c. Pledged assets to secured liabilities ratio. d. Debt-to-equity ratio. e. Times secured liabilities earned ratio.
d
All of the following statements regarding uncertainty in liabilities are true except: multiple choice: a. Liabilities can involve uncertainty in whom to pay. b. A company can create a liability with a known amount even when the holder of the note may not be known until the maturity date. c. A company can have an obligation of a known amount to a known creditor but not know when it must be paid. d. A company only records liabilities when it knows whom to pay, when to pay, and how much to pay. Without all three, a liability cannot be recorded. e. A company can be aware of an obligation but not know how much will be required to settle it.
d
Belkin Co. provides medical care and insurance benefits to its retirees. In the current year, Belkin agrees to contribute 5% of the employees' $250,000 gross salaries to a retirement program. What is the amount of employee benefits expense for the current period? multiple choice: a. $25 b. $100 c. $250 d. $12,500 e. $25,000
d
Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales? multiple choice: a. Debit Cash $8,000; credit Sales $7,360; credit Sales Taxes Payable $640. b. Debit Sales Taxes Payable $640; debit Cash $7,360; credit Sales $8,000. c. Debit Cash $8,000; credit Sales $8,000; and record the taxes when paid. d. Debit Cash $8,640; credit Sales $8,000; credit Sales Taxes Payable $640. e. Debit Accounts Receivable $8,640; credit Sales $8,000; credit Sales Taxes Payable $640.
d
An asset can be disposed of by all of the following except: multiple choice: a. Discarding it. b. Selling it. c. Exchanging it for another asset. d. Donating it to charity. e. Continuing to use it after it is fully depreciated.
e
Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include: multiple choice: a. A credit to Accumulated Depreciation of $40,000. b. A credit to Gain on Sale of $2,000. c. A credit to Machinery of $47,000. d. A debit to Cash of $42,000. e. A debit to Accumulated Depreciation of $47,000.
d
On January 1, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semiannually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as: multiple choice: a. Debit Cash $2,000,000; credit Bonds Payable $2,000,000. b. Debit Cash $1,864,097; credit Bonds Payable $1,864,097. c. Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903. d. Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000. e. Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.
d
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What is the appropriate journal entry to record the issuance of the note? multiple choice: a. Debit Cash $250,000; debit Interest Expense $37,258; credit Notes Payable $287,258. b. Debit Notes Payable $250,000; credit Cash $250,000. c. Debit Cash $37,258; credit Notes Payable $37,258. d. Debit Cash $250,000; credit Notes Payable $250,000. e. Debit Cash $287,258; credit Interest Payable $37,258; credit Notes Payable $250,000.
d
On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date? multiple choice: a. Debit Notes Payable $7,500; credit Interest Expense $150; credit Cash $7,350. b. Debit Notes Payable $7,500; credit Cash $7,500. c. Debit Notes Payable $7,650; credit Cash $7,650. d. Debit Notes Payable $7,500; debit Interest Expense $150; credit Cash $7,650. e. Debit Cash $7,650; credit Interest Revenue $150; credit Notes Receivable $7,500.
d
On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company? multiple choice: a. Debit Cash $7,500; credit Accounts Payable $7,500. b. Debit Accounts Payable $7,500; credit Notes Payable $7,500. c. Debit Cash $7,650; credit Notes Payable $7,650. d. Debit Cash $7,500; credit Notes Payable $7,500. e. Debit Notes Receivable $7,500; credit Cash $7,500.
d
The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called: multiple choice: a. Accelerated depreciation. b. Declining-balance depreciation. c. Straight-line depreciation. d. Units-of-production depreciation. e. Modified accelerated cost recovery system (MACRS) depreciation.
d
Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. What is the total amount of taxes withheld from the Trey's earnings? multiple choice: a. $1,375.02 b. $746.50 c. $962.06 d. $1,027.86 e. $680.70
d
Which of the following is an example of an extraordinary repair? multiple choice: a. New tires for a truck. b. Replacement of all florescent light tubes in an office. c. Carpet cleaning and repair. d. Replacing the roof on a manufacturing warehouse. e. Routine machine maintenance.
d
A company has a selling price of $1,800 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 printers, and 400 printers were serviced under the warranty. What is the company's warranty expense for the month of November? multiple choice: a. $26,000 b. $45,000 c. $55,000 d. $60,000 e. $90,000 warranty expense = (total units * ave warranty cost)/estimated returns under warranty
e
A company's interest expense is $8,000. Its income before interest expense and income taxes is $32,000. Its net income is $9,600. The company's times interest earned ratio equals: multiple choice: a. 0.25. b. 0.30. c. 0.83. d. 3.33. e. 4.0.
e
All of the following are employer payroll taxes except: multiple choice: a. Social Security tax equal to that withheld from employees. b. Medicare tax equal to that withheld from employees. c. State unemployment tax. d. Federal unemployment tax. e. Federal income tax equal to that withheld from employees.
e
An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record: multiple choice: a. A loss on sale of $12,000. b. A gain on sale of $12,000. c. Neither a gain nor a loss is recognized on this transaction. d. A gain on sale of $3,000. e. A loss on sale of $3,000.
e
Another name for a capital expenditure is: multiple choice: a. Revenue expenditure. b. Asset expenditure. c. Long-term expenditure. d. Contributed capital expenditure. e. Balance sheet expenditure.
e
Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals): multiple choice: a. 0.56 b. 1.80 c. 0.44 d. 0.80 e. 1.25
e
Estimated liabilities commonly arise from all of the following except: multiple choice: a. Warranties. b. Vacation benefits. c. Pension benefits. d. Employee benefits. e. Unearned revenues.
e
Merchant Company purchased property for a building site. The costs associated with the property were: Purchase price$185,000 Real estate commissions 15,000 Legal fees 700 Expenses of clearing the land 2,000 Expenses to remove old building 4,000 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building? multiple choice: a. $187,700 to Land; $19,000 to Building. b. $200,700 to Land; $6,000 to Building. c. $200,000 to Land; $6,700 to Building. d. $185,000 to Land; $21,700 to Building. e. $206,700 to Land; $0 to Building.
e
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What is the journal entry to record the first annual payment? multiple choice: a. Debit Cash $250,000; debit Interest Expense $37,258; credit Notes Payable $287,258. b. Debit Interest Expense $37,258; credit Cash $37,258. c. Debit Interest Expense $20,000; credit Cash $20,000. d. Debit Interest Expense $20,000; debit Interest Payable $17,258; credit Cash $37,258. e. Debit Interest Expense $20,000; debit Notes Payable $17,258; credit Cash $37,258
e
The relevant factors in computing depreciation do not include: multiple choice: a. Cost. b. Salvage value. c. Useful life. d. Depreciation method. e. Market value.
e
Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year's depreciation is: multiple choice: a. Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143. b. Debit Depreciation Expense $2,000, credit Office Equipment $2,000. c. Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000. d. Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143. e. Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000.
e
When the contract rate is above the market rate, a bond sells at a discount. True or False
false
