Final Exam 101 -- MyAccountingLab Test 2

Question 1

Bay Back Company acquired equipment on July 1, 2011, for $210,000. The residual value is $35,000, and the estimated life is 5 years or 40,000 hours. Compute the balance in accumulated depreciation as of December 31, 2013, if Bay Back Company uses the double-declining-balance method of depreciation.

Answer 1

4 7.3

$149,520

Question 2

What are accounted fro as long-term assets when purchased or developed, and their cost is transferred to expense through a process call depletion?

Answer 2

Natural Resources

Question 3

Martson and Co. made the following journal entries:

Accounts Receivable 25,000
Sales Revenue 25,000
Cost of Goods Sold 10,000
Inventory 10,000

What is Martson’s gross profit from this sale?

Answer 3

$15,000

Question 4

What is a true statement about sales?

Answer 4

Sales discounts are offered to customers in order to speed up cash flow

Question 5

when inventory is shipped from the seller to the buyer with shipping terms of FOB destination

Answer 5

the goods will be included in the inventory of the seller until they reach their destination

Question 6

Under the Allowance Method, the entry to write of a $2,600 uncollectible account includes a

Answer 6

Debit to Allowance for Uncollectible Accounts for $2,600

Question 7

What is the proper order for assets on a balance sheet?

Answer 7

Cash
Accounts Receivable
Property
Plant and Equipment
Long-term Investment

Question 8

Hawthorne Company sold office furniture for $2,500 cash. The furniture cost $30,000 and had accumulated deprecation through the date of sale totaling $29,000. the company will recognize

Answer 8

a gain of $1,500

Question 9

An investor who owns 25% of the outstanding stock of another company should report the investment using the

Answer 9

equity method

Question 10

A company has a beginning inventory of $40,000 and purchases during the year of $110,000. The beginning inventory consisted of 3,000 units and 7,000 units were purchased during the year. the average cost per unit is

Answer 10

$13.00

40,000 / 3000

Question 11

the lower-of-cost-or-market rule is based on the accounting principle of

Answer 11

conservatism

Question 12

On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated value is $20,000. What is the book value of the asset on December 31, 2012, if KJ Corporation uses the straight-line method of depreciation?

Answer 12

$164,000

Question 13

Patents are amortized over a period

Answer 13

of 20 years or the expected useful life, whichever is less

Question 14

When goods are shipped FOB destination

Answer 14

revenue is recognized when the goods are received by the customer

Question 15

Company A has a Note Receivable of $5000. The note will be collected in installments. $1,000 is due within a year and the remainder is due after a year. The classification of the note on the balance sheet is

Answer 15

$1,000 is a current asset and

$4,000 is a long-term asset

Question 16

When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is

Answer 16

lower than the cost of goods sold under the LIFO method

Question 17

The journal entry to record the purchase of inventory on account under the periodic inventory system is

Answer 17

debit purchases and

credit accounts payable

Question 18

Other comprehensive income

Answer 18

appears on the income statement in a separate section below net income

Question 19

A separate account for each customer is kept in a(n)

Answer 19

subsidiary ledger

Question 20

Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. Only July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the purchase on January 1 would include a

Answer 20

Debit to Long-Term Investment in Bonds $42,000

Question 21

What costs are included in inventory

Answer 21

insurance while in transit
freight-in
taxes paid on the purchase price

Question 22

When a company receives a cash dividend from a trading security, the journal entry includes

Answer 22

a debit to cash and a credit to dividend revenue

Question 23

Sales revenue is based on the ___ price of inventory, while the cost of goods sold is based on the ___ of the inventory.

Answer 23

Sales revenue is based on the SALES price of inventory, while the cost of goods sold is based on the COST of the inventory.

Question 24

What is the correct order for items to appear on the income statement?

Answer 24

Sales Revenue
Cost of Goods Sold
Gross Profit
Net Income

Question 25

The process of depreciating an asset over its useful life is an application of what principle?

Answer 25

Matching

Question 26

On January 2, 2011, KJ Corporation acquired equipment for $260,000. the estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. If KJ Corporation uses the units of production method of depreciation, what will be the debit to Deprecation Expense for the year ended December 31, 2012, assuming that during this period, the asset was used 8,250 hours?

Answer 26

$49,500

Question 27

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry for the receipt of interest on July 1, 2012 would include a

Answer 27

credit to Interest Revenue $3,000

Question 28

Pat’s Pets recently paid to have the engine in its delivery van overhauled. the estimated useful life of the van was originally estimated to be 4 years. the overhaul is expected toe extend the useful life of the van to 10 years. The overhaul is regarded as a(n)

Answer 28

capital expenditure

Question 29

Toyland’s inventory records show the following data at January 31:

Beginning Inventory Jan 1 250 units at $8 per unit
Jan 10 purchase 300 units at $10 per unit
Jan 22 purchase 110 units at $11 per unit

At January 31, 2012 units are still on hand. What is the value of the ending inventory at January 31 if Toyland uses the FIFO method?

Answer 29

$2210

Question 30

Boat Company signed a 12-month, $40,000, 8% note on June 1, 2012. The mount of inetrest to be accrued on December 31, 2012, is

Answer 30

$1867

Question 31

The book value of an asset is defined as

Answer 31

Cost minus Accumulated Depreciation

Question 32

Unrealized gains and losses from available-for-sale investments arise from

Answer 32

changes in the market value of the investment

Question 33

What depreciation method best applies to those assets that generate greater revenue earlier in their useful lives?

Answer 33

Double-Declining Balance Method

Question 34

Receiving a cash dividend from an available-for-sale investment requires what journal entry?

Answer 34

a debit to Cash and

a credit to dividend revenue

Question 35

The following account balances were extracted fromteh accounting records of A and D Corporation:

Accounts Receivable $110,000
Allowance for Uncollectible Accounts $35,000
Uncollectible-Account Expense $60,000

What is the net realizable value of the accounts receivable?

Answer 35

$75,000

Question 36

A year-end review of Accounts Receivable and estimated uncolletible percentages revealed the following:

1-30 days $60,000 1%
31-60 days $40,000 3%
61-90 days $20,000 10%
over 90 days $5,000 50%

The credit balance in Allowance for Uncollectibel Accounts was $1,000. Under the aging-of-receivables method, the uncollectibel-account expense for the year is

Answer 36

$5,300

Question 37

ABC company sells goods to the XYZ Company for $1,000. It offers credit terms of 2/10, n/30. If XYZ Company pays the invoice within teh discount period, ABC Company will record a debit to cash in the amount of

Answer 37

$980

Question 38

Using a perpetual inventory system, which of the following entries would record the cost of merchandise sold on credit?

Answer 38

Cost of Goods Sold

Inventory

Question 39

the company whose more than 50% of the stock is owned by a parent company is called the

Answer 39

subsidiary company

Question 40

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Answer 40

$4,200