Financial Accounting Final

What is the amount of net income (net loss) for the year?

($3,300)

Which of the following would be properly classified as a long-lived asset?

A car held for resale by an automobile dealership.

ABC Airlines collects $300 for a roundtrip ticket from Chicago to Los Angeles. The flights will not occur until the next accounting period. How does ABC Airlines record the $300 collected in advance?

A debit to Cash of $300 and a credit to Unearned Revenue of $300

Tax accounting and financial accounting use the same depreciation calculations and there are no differences in the results between the two accounting systems.

False

The decision to sell to extend credit to customers will decrease wage costs

False

Trademarks and goodwill are intangible assets that are not amortized.

False

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

Texable, Inc. is required to match $45,900 for its portion of FICA and $4,700 for federal and state unemployment taxes. The entry to record Texable's payroll taxes includes:

debit to Payroll Tax Expense for $50,600.

On January 1, Charlie Co. purchased a truck for $50,000 which has an estimated productive life of 100,000 miles. Its residual value is $5,000. During the first full year of its useful life, the company drove the truck 25,000 miles. Its depreciation expense for the year using the units of production method is

$11,250

During 2014, a company provided services for cash of $21,000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income (loss) for the year is:

$13,300.

Assume the Murtha Company reported the following adjusted account balances at year-end

$14,400

During one pay period, your company distributes $130,500 to employees as net pay. The income tax withholdings were $19,000 and the FICA withholdings were $5,000. Total payroll costs to the company for this pay period, excluding any unemployment taxes, was:

$159,500.

B. Darin Company purchased a truck and trailer for $54,000. The appraised values of the truck and trailer are $38,000 and $19,000, respectively. What is the amount of the cost that should be assigned to the trailer?

$18,000

Samuel, Inc. has Accounts Receivable of $200,000 and an Allowance for Doubtful Accounts of $10,000. If it writes-off a customer account balance of $1,000, what is the amount of its net accounts receivable?

$190,000

Hardware Inc periodic inventory system and use weighted average method

$2,508

ABC Co. purchased a parcel of land for $300,000. It paid attorney fees of $2,000 to verify title to the land. In addition, it paid a broker's fee of $5,000 to help find a suitable parcel of land. This parcel of land should be recorded in the accounting records for

$307,000

Engstrom Company makes a sale and collects a total of $378, which includes an 8% sales tax. What is the amount that will be credited to the Sales Revenue account?

$350

The following items are taken from the adjusted trial balance prepared as of December 31, 2015. All accounts have normal balances. What is the total of the credit column of the adjusted trial balance?

$37,450

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate. Interest payments are to be made twice a year. Each interest payment will be for

$4,500

Wadsworth Corp. has the following information:No recoveries were recorded during the year. What was the amount of accounts written off during the year?

$4,500

Acme Enterprises began the year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts Payable balance of:

$6,000.

If a $40,000, 6%, note receivable with a two year maturity date was signed three months ago, how much interest has been earned?

$600

Accumulated Depreciation is classified as an expense.

False

Which of the following groups of accounts contains only those that normally have credit balances?

Accounts Payable; Retained Earnings; Service Revenue.

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

Accounts Receivable

Which of the following statements regarding the balance sheet is true?

Any item on a balance sheet labeled payable is a liability of that company.

Bolster Soda had an accounts receivable turnover ratio of 9.9 this year and 11.0 last year. Castor Soda had a turnover ratio of 9.3 this year and 9.3 last year. This implies:

Bolster's receivables turnover ratios were better than Castor's for both years.

If a company factors its receivables, its receivables turnover ratio will be lower than it would have been if the receivables had not been factored

False

Which of the following statements about an adjusted trial balance is true?

Debits will equal credits after adjustments are made but not necessarily before.

Which of the following statements about the tradeoffs of extending credit is not correct?

Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase additional costs beyond the increased revenue from the credit sales

Which of the following statements regarding revenues and expenses is true?

Expenses decrease the amount of stockholders' equity.

If inventory costs have been falling during the year, which cost method results in the highest gross profit for the year?

FIFO

Generally, which inventory costing method approximates most closely the current cost for each of the following?

FIFO LIFO

Which of the following will occur when inventory costs are decreasing?

FIFO will result in a lower net income but a higher ending inventory than will LIFO.

Which of the following statements about payroll is correct?

Gross earnings are computed by multiplying the time worked by the pay rate promised by the employer.

When interest is calculated for periods shorter than a year, the formula to calculate interest is

I = P × R × T, where I = interest calculated, P = principal, R = annual interest rate, and T = number of months

IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest. IBM would record this loan as

Notes Receivable

Which of the following terms does not mean the same as the others?

Property, plant, and equipment

Which of the following is not an example of an asset?

Retained Earnings

Which of the following would not be affected by the choice of an inventory costing method (that is, choosing between FIFO, LIFO, weighted average, and specific identification)?

Sales Revenue

At the maturity date, the carrying value of a bond should always be equal to the face value

True

Depreciation is an allocation method, not a valuation method.

True

Long-lived assets found on a company's balance sheet may include some assets that have no physical substance.

True

The aging of accounts receivable method is based upon the principle that the longer an account is overdue, the higher the risk of nonpayment

True

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

True

The principal of a loan does not include any interest charges

True

When a company routinely sells on credit, it is inevitable that some of its customers will not pay the amount owed

True

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset, prior years' financial statements should be restated

True

A 6-month note is issued on November 1. If no previous accruals have been made, how many months of interest should be accrued at December 31?

Two

A company would most likely choose the double-declining balance depreciation method for which of the following long-lived tangible assets?

Vehicles

An increasing inventory turnover ratio indicates

a shorter time span between the ordering and receiving of inventory

Generally, freight costs incurred when a long-lived asset is purchased should be: A) expensed in the period incurred

added to the cost of the asset.

Your company has 500 units in inventory that were purchased for $12 each. These units have a current market value of $15 each. Your supplier has just announced a price increase to $16.50 that will go into effect at the beginning of next year. Management should:

adjust the inventory account using the cost, which is $12.00.

Current liabilities could include all of the following except:

any part of long-term debt due during the current period.

The cost of a new building that is currently under construction, not for sale but for a company's own use, is reported on the balance sheet:

as an asset called Construction in Progress.

The law requires ______ to pay FICA taxes.

both employee and employer

Sunny Skys, Inc. bought a derelict hunting lodge, which it tore down at a cost of $45,000 and replaced with a new lodge. The demolition cost should be

capitalized.

At the end of the first year of an asset's life, the declining-balance depreciation

causes an asset to be carried at a lower book value than that computed using the straight-line method

If a company did not extend credit to customers

costs would decrease but so would sales revenue

If a company's gross salaries and wages are $12,000, and it withholds $1,800 for income taxes and $800 for FICA taxes, the journal entry to record the employees' pay should include a:

credit to Salaries and Wages Payable for $12,000.

A contra-asset account, such as Allowance for Doubtful Accounts or Accumulated Depreciation, has a normal balance of a ______ and causes total assets to

credit; increase

A high receivables turnover ratio is a sign of a company's:

effectiveness in granting and collecting credit

Your company buys a computer server that it expects to use for eight years and then sell when it upgrades to a more powerful model. The server would probably be used by the business that buys it at that time for another three years. The useful life of the server for your company is

eight years.

The adjusting entry to record the estimated bad debts in the period credit sales occur includes a debit to an

expense account and a credit to a contra-asset account.

Companies are concerned about the cost of extending credit for all the following reasons except the

expense of the extra goods that must be produced or purchased for resale

Extraordinary repairs:

extend an asset's life beyond the original estimate.

Interest Receivable:

is an asset reported on the balance sheet.

Intangible assets are:

long-lived assets with no physical substance.

Generally accepted accounting principles (GAAP) require that the inventory be reported at:

lower of cost or market

The days-to-collect measures the

number of days it takes to collect accounts receivable.

Countryside Corporation is owed $11,890 from a customer for landscaping. The account is overdue and the customer is having difficulty paying. Countryside might ask the customer to sign a note for the unpaid amount to

strengthen Countryside Corporation's legal right to be repaid with interest

A company typically records the amount owed to suppliers for goods or services when

the goods or services are received.

The potential advantages of extending credit to customers include all of the following except higher

wage expenses