Exam 2 Practice Flashcards
Hoover Company had beginning inventory of $15,000 at March 1, 2012. During the month, the company made purchases of $50,000. The inventory at the end of the month is $17,300. What is cost of goods sold for the month of March?
A. $47,700
B. $50,000
C. $65,000
D. $67,300
A
Ramirez Company acquires land for $260,000 cash. Additional costs are as follow.
Removal of shed $ 2,000
Filling and grading 6,000
Salvage value of lumber of shed 1,280
Broker commission 4,520
Paving of parking lot 40,000
Closing costs 3,400
Ramirez will record the acquisition cost of the land as
A. $274,640.
B. $277,200.
C. $275,920.
D. $260,000.
A
Pearson Company bought a machine on January 1, 2012. The machine cost $108,000 and had an expected salvage value of $18,000. The life of the machine was estimated to be 5 years. The depreciation expense using the straight-line method of depreciation is
A. $30,000.
B. $21,600.
C. $18,000.
D. none of the above.
C
Which of the following is not considered an intangible asset?
A. Goodwill.
B. An oil well.
C. A franchise.
D. A patent.
B
Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be
A. $14,160.
B. $11,760.
C. $9,840.
D. $9,600.
B
All leases are classified as either
A. capital leases or long-term leases.
B. capital leases or operating leases.
C. operating leases or current leases.
D. long-term leases or current leases.
B
Which of the following is not an internal control procedure for cash?
A. Only designated personnel are authorized to handle cash.
B. The same individual receives the cash and pays the bills.
C. Surprise audits of cash on hand should be made occasionally.
D. Access to cash is limited.
B
Which of the following assets does not decline in service potential over the course of its useful life?
A. Equipment.
B. Furnishings.
C. Land.
D. Fixtures.
C
Newell Company purchased a machine with a list price of $64,000. They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Newell estimates that the machine will have a useful life of 10 years and a residual value of $20,000. If Newell uses straight-line depreciation, annual depreciation will be
A. $4,100.
B. $4,072.
C. $6,100.
D. $3,760.
A
An asset was purchased for $200,000. It had an estimated salvage value of $40,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $32,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be
A. $24,000.
B. $17,600.
C. $12,000.
D. $16,800.
B
The direct write-off method of accounting for uncollectible accounts
A. emphasizes the matching of expenses with revenues.
B. emphasizes balance sheet relationships.
C. emphasizes cash realizable value.
D. is not generally accepted as a basis for estimating bad debts.
D
Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
A. Bad Debts Expense 10,000
Allowance for Doubtful Accounts 10,000
B. Bad debts Expense 8,000
Allowance for Doubtful Accounts 8,000
C. Bad Debts Expense 8,000
Accounts receivable 8,000
D. Bad Debts Expense 10,000
Accounts Receivable 10,000
B
An overstatement of the beginning inventory results in
A. no effect on the period’s net income.
B. an overstatement of net income.
C. an understatement of net income.
D. a need to adjust purchases.
C
A $200 petty cash fund has cash of $28 and receipts of $170. The journal entry to replenish the account would include
A. debit to Cash for $170.
B. credit to Petty Cash for $170.
C. debit to Petty Cash for $172.
D. credit to Cash for $172.
D
Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?
A. Salvage value.
B. Estimated useful life.
C. Cash needed to replace the plant asset.
D. Cost.
C
You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to
A. debit Allowance for Doubtful Accounts and credit Bad Debt Expense.
B. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
C. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
D. debit Bad Debt Expense and credit Accounts Receivable.
B
Management should select the depreciation method that
A. is easiest to apply.
B. best measures the plant asset’s market value over its useful life.
C. best measures the plant asset’s contribution to revenue over its useful life.
D. has been used most often in the past by the company.
C
The lower of cost or market basis of valuing inventories is an example of
A. comparability.
B. the cost principle.
C. conservatism.
D. consistency.
C
Rosen Company receives a $3,000, 3-month, 6% promissory note from Bay Company in settlement of an open accounts receivable. What entry will Rosen Company make upon receiving the note?
A. Notes Receivable 3,045
Accounts Receivable---Bay Company 3,045
B. Notes Receivable 3,045
Accounts Receivable---Bay Company 3,000
C. Notes Receivable 3,000
Interest Receivable 45
Accounts Receivable---Bay Company 3,000
Interest Revenue 45
D. Notes Receivable 3,000
Accounts Receivable---Bay Company 3,000
D
Each of the following is a feature of internal control except
A. limited access to assets.
B. independent internal verifications.
C. authorization of transactions.
D. generic design of documents.
D
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $2,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $400 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?
A. $1,600
B. $1,552
C. $1,540
D. $1,120
B
If a company fails to record estimated bad debts expense,
A. cash realizable value is understated.
B. expenses are understated.
C. revenues are understated.
D. receivables are understated.
B
The account Allowance for Doubtful Accounts is classified as a(n)
A. liability.
B. contra account of Bad Debt Expense.
C. expense.
D. contra account to Accounts Receivable.
D
At December 31, 2012 Mohling Company’s inventory records indicated a balance of $652,000. Upon further investigation it was determined that this amount included the following:
• $112,000 in inventory purchases made by Mohling shipped from the seller 12/27/12 terms FOB destination, but not due to be received until January 2nd
• $74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th.
• $6,000 of goods received on consignment from Dollywood Company
What is Mohling’s correct ending inventory balance at December 31, 2012?
A. $540,000
B. $646,000
C. $460,000
D. $534,000
D
Nilson Company gathered the following reconciling information in preparing its August bank reconciliation:
Cash balance per books, 8/31 $ 7,000
Deposits in transit 300
Notes receivable and interest collected by bank 1,700
Bank charge for check printing 40
Outstanding checks 4,000
NSF check 340
The adjusted cash balance per books on August 31 is
A. $8,320.
B. $8,020.
C. $4,620.
D. $4,920.
A
