MGMT 200 EXAM #2
Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?
$0.
Express Jet borrows $100 million on October 1, 2021, for one year at 6% interest. For what amount does Express Jet report interest payable for the year ended December 31, 2021?
$1.5 million. interest = face val. * annual interest * frac. of yr
17. On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What is the amount of net revenues (sales minus sales discounts) as of March 23?
$11,760 =12,000 - (12,000*2%) =12,000 - 240 2% sales discount bc. she paid before w/ in 10 days . if after then no discount Net Revenue= sales - sales discount
CH.6 Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000 and has cost of goods sold equal to $233,000. Tyler's ending inventory equals:
$15,000. ((Beg. inventory + purchased inventory) - cost of goods sold) 18,000 + 230,000 - 233,000= $15,000
4.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. we want the % of 900,000 that represents land. land fair value/ All added fair values = 200,000/ 1,000,000 = 20% 900,000 *20%= $180,000
14. On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of:
$2,000 (100,000 x 8% x 3/12) Interest= face val. * annual interest rate * fraction of the yr (3 months from Dec. 31 to Mar. 31)
Rock Adventures has 15 employees each working 40 hours per week and earning $30 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?
$2,061 15*40*30
4. At the beginning of the year, Johnson Supply has beg. inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining end inventory of $3,000. What amount will Bennett report for cost of goods sold?
$22,200. beg. inv. + purchases - end. inv.= cost of goods sold 5,200 + 20,000 - 3,000= $22,200
27) The balance sheet of Cattleman's Steakhouse shows assets of $86,400 & liabilities of $15,000. The fair value of assets is $90,000 & the fair value of liabilities is $15,000. Longhorn paid Cattleman's $95,000 to acquire all of its assets & liabilities. Longhorn should record goodwill on this purchase of:
$23,600. asset - liabilities 86,400- 15,000= 71,400 95,000- 71,400= $23,600 Goodwill = purchase price - fair value of Identifiable Net assets fair val. of Identifiable Net assets= assets - liabilities
Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much warranty expense should the company record this year?
$30,000. 600,000 * 3%= 30,000
Garber Plumbers offers a 20% trade discount when providing $2,000 or more of plumbing services to its customers. In March 2021, Garber provided $4,000 of plumbing services to Red Oak Inc., and $1,500 of services to Cyril Inc. Each of these customers was granted credit terms of 2/10(2%), net 30. If both customers paid for the plumbing services within the discount period, what was the net revenues amount for these two transactions?
$4,606. Red Oak 4,000*20%=3,200 3,200*2%=64 3,200-64= $3,136 Cyril(does NOT qualify for discount) 1,500*2%=30 1,500-30= $1,470 3,136-1,470= $4,606
Pizza Shop sells toaster ovens with a one-year warranty to fix any defects. For the current year, 100 toaster ovens have been sold. By the end of the year 4 ovens have been fixed for an average of $80 each. Management estimates that 5 more of the 100 sold will need to be fixed next year for an estimated $80 each. For how much should Pizza Shop report warranty liability at the end of the current year?
$400. 5 * $80= $400
$If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1?
$450,000. Interest= face val. * annual interest * frac. of year 10,000,000 * 6% * (9/12)= $450,000.
5. On August 4, Sanders provides services to Fred for $5,000, terms 3/10, n/30. Fred pays for the services on August 12. What amount would Sanders record as revenue on August 4?
$5,000. bc. it was at the time of sale
On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a credit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:
$5,100 bc. 7% of the $80,000 will not be collected= 5,600 - the (- bc. its credit) $500 allowance for uncollectible account
8) At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be:
$5,250. 311,000 * 2%= 6220 6220 - 970= 5250
21) A company purchased a piece of equipment by paying $5,000 cash. Shipping cost of $400 to get the equipment to its factory was also incurred. The fair value of this equipment is $7,000. For what amount should the company record the equipment?
$5,400. 5,000 + 400 = $5,400
17. 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. 2,000,000/ 10= 200,000 Oct 1 - Dec.31 -> = 3months of 12 200,000 * (3/12)= $50,000
Allied Partners filed suit against Big Sky, Inc., seeking damages for patent infringement. Big Sky's legal counsel believes it is probable that Big Sky will settle the lawsuit for an estimated amount in the range of $500,000 to $700,000, with all amounts in the range considered equally likely. How should Big Sky report this litigation?
$500,000.
On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:
$6,100 bc. Bad debt expense is the reported expense in I.S. 7% of the $80,000 will not be collected= 5,600 + the (+ bc. its debit) $500 allowance for uncollectible account
At December 31, Gill Co. reported accounts receivable of $238,000 & an allowance for uncollectible accounts of $600 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:
$6,540. 238,000 * 3% =7,140 7,140 - 600= $6,540
At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:
$6,540. 238,000 * 3%= 7,140 7,140- 600 = 6,540
12. The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?
$60,000. if there is an annual deprecation of 20,000 then after 2 yrs the original cost (100,000) would decrease by 40,000 100,000-40,000= $60,000
29) A company purchased a delivery truck on January 1, 2021, for $100,000. The truck has an estimated life of 10 years and an estimated residual value of $10,000. If the company uses double-declining balance, what would be the book value of the truck after two years?
$64,000. Book Value = original cost - AD or = previous BV - DE DE= rate * previous BV rate= 2/10 DE= 100,000 *(2/10) = 20,000 BV= 100,000-20,000= 80,000 DE 2nd yr= 80,000*(2/10) = 16,000 BV 2nd yr= 80,000- 16,000= $64,000
CH.7 A company purchased a delivery truck on January 1, 2021 for $100,000. The truck has an estimated life of 10 years(service life) and an estimated residual value of $10,000. If the company uses double-declining balance, what would be the book value of the truck after two years?
$64,000. Book Value(BV)= asset cost DE & AD 1st yr= asset cost * Depreciation rate(DR) = 100,000 * (2/10) = $20,000 BV 1st yr= previous BV -same yr DE = 100,000- 20,000= $80,000 DE 2nd yr+ =previous BV * DR = 80,000* (2/10)= $16,000 book val. 2nd yr+ = previous Book Val.- same yr (DE) BV 2nd yr= 80,000- 16,000= $64,000
CH.6 LeGrand Corporation reported the following amounts in its income statement: Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What was LeGrand's Net Income?
$65,000. (Sales rev. - ALL expenses)
21. Bryer Co. purchases all of the assets and liabilities of Stellar Co. 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. Goodwill = purchase price - fair value of Identifiable Net assets fair val. of Identifiable Net assets= assets - liabilities =2,000,000- 1,200,000= 800,000 1,500,000- 800,000 = $700,000
On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2(Jan)?
$8,000. $200,000 * 12% * (4/12)= $8,000.
15. A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation?
$8,000. DE= miles driven * DR = 16,000 * 50% = $8,000 Deprecation Cost(DC) =original cost - residual val. DC= 60,000-10,000= $50,000 Deprecation Rate(DR)= deprecation cost/ total united(miles) expected to be produced (driven) DR= 50,000/100,000= 50%
CH.7 A company purchased land, a building, and equipment for one price of $800,000. the estimated fair values of the land, building, & equipment are $100,000, $700,000, & $200,000, respectively. At what amount would the company record the land?
$80,000. all fair values added together= $1,00,000. land fair value/ all fair values = 100,000/1,000,00 = 10% 10%* 800,000= $80,000 we are trying to find the % of the one price, $800,000 that is land.
15) A company has net sales(net revenue) of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?
$80,000. net sales(rev.) - cost of goods= gross profit 200,000 − 120,000 = $80,000
22) A company purchased land, a building, and equipment for one price of $800,000. The estimated fair values of the land, building, and equipment are $100,000, $700,000, and $200,000, respectively. At what amount would the company record the land?
$80,000. we want the % of 800,000 that represents land. fair val. of land/ all fair values added up = 100,000/1,000,000= 10% 800,000 * 10% =$80,000
20) Real Angus Steakhouse purchased land for $75,000 cash. Commissions of $4,500, property taxes of $5,000, and title insurance of $800 were also incurred. The $5,000 in property taxes(NO) includes $4,000 in back taxes paid by Real Angus on behalf of the seller and $1,000 due for the current year after the purchase date. For what amount should Real Angus Steakhouse record the land?
$84,300. 75,000+ 4,500 + 800 + 4,000 + = $84,300.
7. Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:
$96,000. bc. Allowance for Uncollectible Accounts REDUCES the bal. of account receivables
Trade Discount
% reduction in list price of product/service
2)A company collects a customer's account within the discount period. Indicate how this transaction would affect (1) assets, (2) stockholders' equity, and (3) revenues...
(1) Decrease, (2) Decrease, (3) Decrease
A) $120,000. gross profit(sales rev. - cost of goods sold) - operating expenses(advertising, salaries, rent, utilities, supplies, depreciation, etc.) = operating income (NOT interest or income tax expense) (gross profit: 440,000 - 180,000= 260,000) (operating expenses: 60,000 + 55,000 + 25,000= 140,000) 260,000- 140,000= $120,000
16) what is LeGrand's operating income?
$500. Ending inventory = 200 × $2.40 = $480.
18) Dunbar sold 700 units of inventory during the month. Ending inventory assuming FIFO would be:
$1,720. Cost of goods sold = (400 × $2.50) + (300 × $2.40) = $1,720
19) Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming LIFO would be:
$100,800. cost of land + commissions + cost of removing existing building - sale of salvaged materials do NOT use liability insurance for the first yr
2. What is the total recored cost of the land?
15. For the year, Sealy Incorporated reports net sales(rev. 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?
20%. Gross profit: 50,000-40,000 =$10,000 Gross Profit Ratio: gross profit/net sales(rev. sales) = 10,000/50,000 =1/5 = 20%
$3,900.
20. What amount would Madison report for ending inventory using FIFO?
$3,380. ( =cost of goods available for sale / # of units available ) * ending inventory (units) 6,500/25= 260 ending inventory = 25 - 12 = 13 (ending inventory= (sum of units - units of total sales to customers) 260 * 13= $3,390
21. What amount would Madison report for ending inventory using weighted-average cost?
$98,000. Land & equipment 90,000 + 8,000 = $98,000
23) What is the total amount of property, plant, and equipment assuming the accounts above reflect normal activity?
$2,050.
23. Using the lower of cost and net realizable method, for what amount would Maxwell report ending inventory?
$59,000. cost of equipment + sales tax + shipping + installation = 59,000
3. What is the total recored cost of the equipment?
$780,000. Net Revenue (net sales) =Total Rev. - sales return & allowance - sales discount 860,000- 50,000 - 30,000= $780,000
4) What is the amount of Net Revenues for the company?
$91,000. service rev.(100,000)- sales discount(2,000) - sales allowance(7,000) bc. only using service rev & the the 3Sales's (but there is only 2 in chart): sales discount & allowances (allways subtract)
4.
Union Apparel has sales including sales taxes for the month of $551,200. If the sales tax rate is 6%, what are Union Apparel's sales for the month? $500,000. $518,128. $520,000. $551,200.
551,200 /.106x
$1,800. (take from BOTTOM) Sept.8 : 400*$4.50= 1,800 we have to keep Apr.20 's 800 units bc. we want the first units purchased to equal 1,000 but only want the calc. end inv.
6. Assuming Snow sells 1,000 units, calculate ending inventory under FIFO...
15. At the beginning of the year, Dawnetta Fashions has total accounts receivable of $300,000. By the end of the year, Dawnetta reports total credit sales of $1,500,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Dawnetta Fashions?
6.0 Receivable Turnover ratio= net credit sales/average accounts receivables =1,500,000/((300,000+200,000)2)
$4,350. (take from TOP) we have to take 200 of the 800 units of Apr.20 bc. we need to have the ending inventory equal 1,000 Jan. 1 200 * 4.00 = Apr.20 200 600*$$4.25 = $2,550 2,550 + 1,800 = $4,350
7. Assuming Snow sells 1,000 units, calculate cost of goods sold under LIFO...
24. A company has a profit margin of 10% and reports net sales of $4,000,000 and average total assets of $5,000,000. Calculate the company's return on assets.
8%. Return of assets= profit margin * asset turnover = 10% * .8 = .08 or 8% Asset Turnover= Net sales/ average total assets = 4,000,000/5,000,000 = .8 Profit Margin= net income/ net sales
Receivable Turnover ratio
= net credit sales / average accounts receivables
Profit Margin
= net income / net sales
Return on Assets
= net income/ average total assets or = Profit Margin * Asset Turnover
Asset Turnover
= net sales / average total assets
Average Collection Period
=365 days / Receivable Turnover ratio
20. Return on assets is equal to:
=net income/ average total assets
2. Which of following best describes a merchandising company?
A company that purchases products that are primarily in finished form for resale to customers. BUY& RESELL inventory also called wholesalers & retailers
11. Accumulated depreciation is:
A contra-asset.
18. Using the Allowance Method, the entry to record a write-off of accounts receivable will include:
A debit to Allowance for Uncollectible Accounts. if not write off its a credit
6. The entry to record the estimate for uncollectible accounts includes:
A debit to Bad Debt Expense.
When a customer pays in advance for a product or service, the advance payment received by the company is recorded as:
A debit to an asset and a credit to a liability account.
Which of the following represents a characteristic of a liability?
A probable future sacrifice of economic benefits. Arising from present obligations to other entities. Resulting from past transactions or events.
The effect of writing off a specific account receivable is:
A reduction in the Allowance for Uncollectible Accounts.
17) The inventory cost flow assumption that generally best matches the physical flow of inventory is:
A) FIFO
1. When a company provides services on account, which of the following accounts is debited?
Accounts Receivable.
When a company provides services on account, which of the following accounts is debited?
Accounts Receivable.
19. If equipment is retired, which of the following accounts would be debited?
Accumulated depreciation.
9) The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:
Aging Method
13. Over the entire service life of an asset, which depreciation method records the highest total depreciation?
All the methods result in the same total depreciation.
8. Which of the following expenditures should be recorded as an asset?
An addition which increases future benefit. & improvements & litigations
16. Accounts receivable are best described as
Assets of the company representing the amount owed by customers.
CH.7 Aspen, Inc. developed a new horse transport device and incurred research and development (expense) costs of $250,000. Rather than continue with their own research, Aspen decided to purchase a patent(intangible asset) for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?
Assets: $350,000 Expenses: $250,000
10) A company reports a receivables turnover ratio of 14.5. The industry average is 10.7. What most likely is causing this difference?
B) The company has effective procedures related to selling goods on account.
14. The asset's cost less accumulated depreciation is called:
Book value.
25) Morgan Pharmaceutical spends $50,000 this year in research and development(expense) for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?
C) Increase Expenses.
13) A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000 and ends the year with $20,000 of inventory. The company will report cost of goods sold equal to:
C. $142,000. beg. inventory + purchased inventory - end inventory= cost of goods sold 12,000 + 150,000 -20,000= $142,000
CH.6
CH.6
CH.7
CH.7
CH.8
CH.8
2. A sales discount is recorded by the seller as a(n):
Contra Revenue
24) The exclusive right to benefit from a creative work, such as a film, is a:
Copyright
1. A long-term asset is recorded at the:
Cost of the asset + all costs necessary to the asset ready for use.
7) When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method?
D) A debit to Allowance for Uncollectible Accounts and a credit to Accounts Receivable.
17. Using a periodic inventory system, recording the sale of inventory on account would include:
Debit Accounts Receivable; credit Sales Revenue.
22. Using a perpetual inventory system, the purchase of inventory on account would be recorded as
Debit Inventory; credit Accounts Payable.
24. Using a periodic inventory system, the purchase of inventory on account would be recorded as
Debit Purchases; credit Accounts Payable.
3. On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits(pay) payment on January 25?
Debit Sales Discount for $10. bc. it was paid within 10 days they get the sales discount
On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should report the following adjusting entry at December 31, 20X1:
Debit interest expense and credit interest payable, $4,000. Interest= face val. * annual interest * frac. of year $200,000 * 12% * (2/12)= $4,000
12. Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a:
Debit to Accounts Receivable. Credit to Sales Revenue. Debit to Cost of Goods Sold.
13. The entry to write down inventory from cost to net realizable value at the end of the year includes a:
Debit to Cost of Goods Sold. & Credit to inventory
14. At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjustment to write down inventory to net realizable value?
Decrease in net income.
10. Which of the following correctly describes the nature of depreciation?
Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.
Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably likely, a contingent liability should be:
Disclosed but not reported as a liability.
9. 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.
Bad Debt Expense
Expense reported in the income statement(I.S)
Which of the following is paid by both the employee and the employer?
FICA taxes.
8. Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?
FIFO.
9. Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?
FIFO.
16. Which of the following intangible assets are not amortized?
Goodwill.
Under the Allowance method method, uncollectible accounts are recorded:
In the period before the account is estimated to be uncollectible.
13. Under the direct write-off method, uncollectible accounts are recorded:
In the period the account is determined actually uncollectible. EXACTLY WHEN IT HAPPENS
10. Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?
LIFO.
22. Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset's life?
Long service life, high residual value, and straight-line depreciation.
26) In accounting, goodwill
Must be expensed in period when acquired.
Net revenue is also referred to as...
Net Sales
8. If a company uses the Allowance Method of accounting for uncollectible accounts and writes off a specific account:
Net accounts receivable do NOTchange
Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the purchase of office supplies for cash affect each ratio?
No change to the current ratio and decrease the acid-test ratio.
7. Which of the following expenditures should be recorded as an expense?
Ordinary repairs & maintenance.
CH.6 The primary distinction btw. operating activities and nonoperating activities in a multiple-step income statement is whether the activity is:
Part of primary business operations
Allowance Uncollectible Account
REDUCES the bal. of account receivables is a contra asset reported in the Balance Sheet(B.S)
6. Which of the following is not recorded as an intangible asset in the balance sheet?
Research and development.
Contra Revenue Accounts (3)
Sales Returns, Sales Allowance, & Sales Discount
3. A multiple-step income statement provides the advantage of:
Separating revenues and expenses based on their different types of activities.
23. The balance in the Accumulated Depreciation account represents
The amount charged to depreciation expense since the acquisition of the plant asset.
1.Which of the following represents the balance of Cost of Goods Sold at the end of the year?
The cost of inventory sold during the year.
Which of the following is true in comparing the current ratio with the acid-test ratio?
The current ratio will always be at least as large as the acid-test ratio.
Interest expense is recorded in the period in which:
The interest is incurred.
16. A company's inventory turnover ratio measures:
The number of times the company sells its average inventory balance during the year. =cost of goods sold/ average inventory
18. Suppose Windell Corporation understates its ending inventory amount. What effect will this have on the reported amount of net income in the year of the error?
Understate net income.
6) Allowance for Uncollectible Accounts is:
a Contra Asset account
18. Equipment originally costing $100,000 has accumulated depreciation(AD) of $65,000. If it is sold for $40,000, the company should record:
a GAIN of $5,000. origi.cost-AD =Book Val. 100,000- 65,000= 45,000 Sale amount - Book Val.= gain or loss 40,000- 35,000= $5,000
5) Accounts receivable are normally reported at the:
amount expected to be collected.
Which of the following is not a current liability?
an used line of credit
1.During 2021, its first year of operations, Pave Construction provides services on account of $150,000. By the end of 2021, cash collections on these accounts total $105,000. Pave estimates that 20% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $8,100. Record the adjusting entry for uncollectible accounts on December 31, 2021.
bc. get the amount that is owed then * by the % of the uncollected accounts that is estimated to be uncollected 150,000-105,000=45,000 45,000*20%= 9,000
Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.
contra-asset
19. Which of the following levels of profitability in a multiple-step income statement represents revenues from the sale of inventory less the cost of that inventory?
gross profit.
CH.5When the allowance method is used, the write-off of an uncollectible account:
has NO effect on net income
Recording bad debt expense:
inc. expenses dec. net income & dec. assets
A company's average days in inventory measures:
indicates the approx. # of days the average inventory is held. = 365 days/ inventory turnover ratio
11. Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:
inventory.
12)Cost of Goods Sold (EXPENSE)
is the cost of the inventory sold reported as an EXPENSE in I.S.
Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n):
liability
5. Which of the following levels of profitability in a multiple-step income statement represents all revenues less all expenses?
net income
Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Smith's legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation?
no asset or gain is reported
In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.
one; one
3) Oswego Clay Pipe Company provides services of $46,000 to Southeast Water District #45 on April 12 of the current year with terms 1/15(1%; 15 days), n/60. What would Oswego record on April 23, assuming the customer made the correct payment on that date?
option C. 46,000*1%=460 46,000-460=45,540
5. An exclusive 20-year right to manufacture a product or to use a process is a:
patent
Fair Value
price it would sell for
The purpose of recording an Allowance for Uncollectible Accounts is to:
record accounts receivable at the net amount of cash expected to be collected
A contingent liability that is probable and can be reasonably estimated must be
recorded
Residual Value (salvage value)
the amount the company expects to receive from selling the asset at the end of its service life.
Net Realizable Value (NRV)
the estimated selling price of the inventory less costs to sell
Manufacturing company
they actually PRODUCE inventory that they sell ex: raw materials, work-in-process, & finished goods
The allowance method estimates
uncollectible accounts.
$383,000. Net Sales = Total Revenue - ALL Sales= Net Sales 469,000 - (41,000 + 35,000) = $383,000
what are Net Sales?
