exam 4 ACC220

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

$180,000 (200,000/1,000,000) X 900,000=180,000

Equipment was purchased for $50,000. The equipment is expected to be used 15,000 hours over its useful life and then have a residual value of $10,000. In the first two years of operation, the equipment was used 2,700 hours and 3,300 hours, respectively. What is the equipment's accumulated depreciation at the end of the second year using the activity-based method?

16,000

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)?

50,000. (1/10) =.1 2,000,000X0.1X (3/12) = 50,000

Bryer Company purchases all of the assets and liabilities of Stellar Company for $1,500,000. The fair value of Stellar's assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar's assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?

700,000 2,000,000-1,200,000= 800,000 then 1,500,000-800,000= 700,000

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year?

8,000

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's gross profit ratio?

8.0 (50, 000-40, 000) /5, 000

Which of the following is not a current liability?

A note payable due in 2 years.

the acid-test ratio equals

Cash, short-term investments, and accounts receivable divided by current liabilities.

a long-term asset is recorded at the

Cost of the asset plus all costs necessary to the asset ready for use.

On November 1, 2024, New Morning Bakery signed a $203,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2025. New Morning Bakery should record which of the following adjusting entries at December 31, 2024?

Debit Interest Expense and credit Interest Payable, $2,030

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

FIFo

which cost flow assumptiom must be used for financial reporting if it is also used for tax reporting?

LIFO

When a company delivers a product or service for which a customer has previously paid, the company records a debit to a(n):

Liability account and a credit to a revenue account.

The current portion of long-term debt should be:

Reported as a current liability in the balance sheet.

a company's gross profit ratio measures

The amount by which the sale of inventory exceeds its cost per dollar of sales.

accumulated depreciation is

a contra-asset

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:

a gain of 5,000 book value is 35,000 and we sold it for 40,000 so therefore we gained 5,000

Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record:

a loss of 10,000

Over the entire service life of an asset, which depreciation method records the highest total depreciation?

all methods result in the same total depreciation

Given a choice, most companies would prefer to report a liability as long-term rather than current because:

all of these answer choices are correct

Which of the following expenditures should be capitalized?

an improvement to a tangible asset

The asset's cost less accumulated depreciation is called:

book value

When a company collects sales tax from a customer, the event is recorded by a debit to:

cash and a credit to sales tax payable

the current ratio equals

current assets divided by current liabilities

In January, 2024, Summit Department Store sells a gift card for $50 and receives cash. In February 2024, the customer comes back and spends $20 of the gift card to purchase a water bottle. What would be the appropriate journal entry for the customer's purchase of the water bottle in February?

debit referred revenue 20; credit sales revenue 20

Using a perpetual inventory system. The purchase of inventory on accounts would be recorded as?

debit to inventory; credit to accounts payable

at the end of the year, marline corporation determines that it's ending inventory has cost of $2,000 and a net realizavle value of $1,900. what would be the effect of the adjusting entry to write down inventory to net realizable value?

decrease in net income

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life?

double-declining balance method

Which of the following are employer payroll costs? FICA taxes Federal and state unemployment taxes Federal and state income taxes Employer contributions to a retirement plan

fica taxes, federad snd state unemployement, employer contribution to retirement plan

operating income is defined as

gross profit minus operating expenses

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

inventory

Return on Assets is equal to

net income divided by average total assets

Which of the following expenditures should be recorded as an expense?

ordinary repairs and maintenance

return on assets is equal to

profit margin times asset turnover

the total capotalized cost of equipment includes?

purchase price + sales tax+ shipping+ initial safety testing

Fan Company purchases inventory on account. The entry to record this purchase using a periodic inventory system would include a debit to:

purchases

gross profit is defined as

sales revenue minus cost of goods sold

company's turnover ratio measures

the number of times the company sells it's average inventory balance during the year