Exam 2 - Spring 2011

Exam 2 - Spring 2011 - ROW: Exam 2 Name Acct 2103 @The...

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Unformatted text preview: ROW: Exam 2 Name Acct 2103 @The following information pertains to Lightning, Inc. at the end of December: Credit Sales $60,000 6 n- 52;: *9; 0" ‘5?le Accounts Payable- 10000 if" 5“ "Rt?" 3’ V” “a Accounts Receivable 7,000 Allowance for Uneollec-tible Accounts $400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due, 10% ofreceivables less than 30 days past due, and 40% of receivables greater than 30 days past due. The accounts receivable balance of$7,000 consists of$3,500 not yet due, $2,000 less’than 30 days past due, and $1,500 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense? Z70 3 Sac, 7/7 A 07:93 7. we? arc.) "i. 4,520 ’7’, ° ” (7 av 2. Sandburg Veterinarian reports the following information for the year: Net credit sales $120,000 , Dr Z 3 Average accounts receivable 20,000 r 0 Z c; {3 ‘3 Z" Cb “0 Cash collections on credit sales 100,000 A D 515. Q I ,5 What is Sandburg's receivables turnover ratio? 6 7% @539 /"“‘ B. 5.0. C. 1.2. D. 0.2. 3. Trade discou ,, represent a discount offered to the purchasers for quick payment. A) True ,6 4. During periods of rising costs, LIFO generally results in a higher cost ofgoods sold. @ B) False 5. Cost ofGoods Sold is: A. An asset account. B. A revenue account. an expense account. By) D. A permanent equity account. 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 winventory equals: C. $21,000. D. $19,000. Version B 7. Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service , 8.133311 960 / .f . . . <1 “S‘érvwe Revenue 960 , ,. 960 V; K I ads Discount 240 Service Revenue 1,200 :3. Cash 1200 Sen’ice Revenue 1,200 (1. Cash 1,200 Trade Discount 240 Sen’ioe Revenue 960 “ receipt of a payment on April 7, 2012, by a" ' 8. Which of the following is recorded upo March 3, 2012, with terms 2/10,‘n/60? customer who pays a $900 invoice dated A. Debit Sales Discounts $18. B. Credit Purchase Discounts $18. , ' / WC. Credit Accounts Receivable $882. bit Cash $900. the percentage of accounts 9. Shupe lnc. estimates uncollectible accounts based on have on the accounting equation? receivable. What effect will recording bad debt expense A. Increase liabilities and decrease stockholders' equity B. Decrease assets and decrease liabilities fijfiecrease assets and decrease stockholders' equity D. Increase assets and decrease stockholders' equity 10. At December 31, Amy 10's Appliances had account balances in Accounts Receivable of $311,000 and $970 (credit) in Allowance for Uncollectible Accounts. 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: A. $6,220. B. $6,450. D. $7,196.” 11. 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, n/60. What would Oswe 0 record on April 12? Moeounts Receivable 46,000 / Sales Revenue “ 46.000 \/ b. Acccmnts Receivable 46.000 Sales Revenue 45.540 Sales Discounts 460 0. Accounts Receivable 45.540 Sales Revenue 45,540 d. Accounts Receivable 45540 Sales Discounts 460 Sales Revenue 46,000 12. Which ofthe following is recorded by a credit to Accounts Receivable? A Sale of inventory on account. / g, timating the annual allowance for uncollectible accounts. stimating annual sales returns. ' rite-offs of bad debts. 13. Collections of accounts receivable that previously have been written off are credited to: A. A Gain account. Accounts Receivable. _ . ad Debt Expense. . Retained Earnings. 14. Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting Accounts Receivable and debiting: A. Sales Revenue. B. Sales Discounts. Cost of Goods Sold.’ 5‘ D ales Returns and Allowances. an “flnrnin annqnn rnnoqlorl Han 1': IH(YDY\+I'\YW1 v-nr'nrrlo Number Unit Date Trans action of Units Cost Mar. 1 Beginning inventory 1,000 $7.20 Mar. 10 Purchase 600 7.25 Mar. 16 Purchase 800 7.30 Mar. ’23 Purchase 600 7.3 5 month. Ending inventory assuming Marvin sold 2,300 units of inventory during the ur decimals weighted—average cost would be (round weighted—average unit cost to f0 if necessary): . 5,107. C. $5,077. D. $5,005. & Company: 16. The following information pertains to Iulia l 5 a March 1 Beginning inventory = 30 units @ $5 March 3 Purchased 15 units @ $4 (3 or. March 9 Sold 25 units @ $8 71:30 What is the cost of goods sold for Julia Comp \é; 6.1.}. pl w w any assuming it uses LIFO? -. ‘ ‘3 M” ‘ , 7} L04“ 1 17. In a period when inventory costs are rising, the inventory method that most likely results in the highest ending inventory is: A. Lower—of—cost-or-market method. wted-average cost. D. LIFO. 18. The primary reason for the popularity of LIFO is that it gives: A tter matching of physical flow and cost flow. B ower income tax obligation. C. Simplified recordkeeping. D. A simpler method to apply. 10 Invrnn‘l‘nr‘r FQFOFF‘O FIN!" “my.qu Thr‘nv‘hnvdf‘nri FO‘YD’IIOI" 1‘ he following: Number Unit Date Transaction of Units Cost Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 [c O a [7 7 o Dunbar sold 700 units ofinventory during the month. Cost ofgoods sold assuming LIFO would be: A. $1,730. L? s W x A i; g B. $1,700. 300:0 : '7 '20 £634. l,720. > D. $1,710. 20. Inventory records for Dunbar Incorporated revealed the following: Number Unit Date Transaction of Units Cost Apr. 1 Br: ginning inventory 500 $2.40 ’2‘”) ’ ~ v.7 . ‘ > - r 5“. Apr. 20 Purchase 400 2.30 w l [.700 Dunbar sold 700 units ofinventory during the month. Cost ofgoods sold assuming FIFO would be: A. $1,730. m C. $1,720. D. $1,710. 21. Inventory records for Marvin Company revealed the following: Number Unit Date Transaction of Units Cost Mar. 1 Beginning inventory 1,000 $7.20 him: 10 Purchase 600 7.25 Mar. 16 Purchase 800 7.30 Mar. 23 Purchase 600 7.35 Marvin sold 2,300 units of inventory during the month. Ending inventory assuming LIFO would be: -’ B.$5,055. C.$5,075. D.$5,135. Va, 22. Anthony Corporation reported the following amounts for the year: Net sales $296,000 Cost of goods sold 138,000 Average inventory 50,000 Anthony's inventory turnover ratio is: D. 2.14. x >~~y 4B False 23. Salegreénue minus cost of goods sold is referred to as operating income. 24. If a company has ending inventory of $25,000, purchases during the year of , costfiof goods sold equals $90,000. D f V, _ . $95,000, and beinning inventory of $30,000 ‘ A True ‘ w: 7» 9, 00¢? 25. Using the first—in, first-out method (FIFO), the first units purchased are assumed to be the first ones sold. e B False \ a 26. Cost of goods sold equals: A. Beginning inventory — net purchases + ending inventory. A. B. Beginning inventory + accounts payable - net purchases. . r C. Net purchases + ending inventory — beginning inventory. ' . ,f @ginning inventory+ net purchases - ending inventory. 27. Cash received from the sale of salvaged materials increases the total cost of land. , A True 61s? 28. Bad Brads BBQ purchased a piece of equipment by paying $5,000 cash. They also incurred a shipping cost of $400 to get the equipment to its factory. The fair value of this equipment is $7,000. For what amount should Bad Brads BBQ record the equipment? a. $5.000. $5,40wa (1. $7,400. 29. Wiley Company purchased new equipment for $60,000. Wiley paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $3,000; and installation cost, $2,500. The cost recorded for the en111nmnhf H1 a. $60,000.15: I). $61,000. 0. $64,000. 30. On July 1, 2012, Landon Co. purchased a $500,000 tract ofland that is intended to be the site ofa new office complex. Landon incurred additional costs and realized salvage proceeds during 2012 as follows: Demolition of existing building on site $75,000 Legal and other fees to close escrow 15,000 Proceeds from sale of demolition scrap 10,000 What would be the capitalized cost ofthe land? A. $500,000. Bi575,000. imagdgol 31. The purchase ofa new cooling system for $150,000 to upgrade an office building owned by the company would be accounted f0??? 3. Goodwill. @ An addition in the Buildings account. a. An expense in the period incurred. d. A patent. 32. Which one of the following regarding the book value of an asset is correct? a. It is the fair value of the asset if the asset is sold. m reflects the original cost of the asset less aeeumulated depreciation. c. It is the original cost of the asset minus the depreciation expense for that asset during the year. (I. It is the original cost at which the asset was purchased. 33. The factors used to compute depreciation expense are an asset's: st, residual value, and physical life. gfist residual value, and service life. C. Fair market value, residual value, and economic life. D. Cost, replacement value, and service life. USE for the next 2 questions: Kansas Enterprises purchased equipment for $60,000 on Ianuary 1, 2012. The equipment is expected to have a five—year life, with a residual value of $5,000 at the end of five years. 34. Using the straight-line method, the book value at December 31, 2012 would be: A. 44,000. , (3. $55,000. D. $60,000. 35. Using the double-declining balance method, depreciation expense for 2012 would be: W ~ L] B. $22,000. C. $19,000. D. $20,000. 36. A machine has a cost of $15,000, an estimated residual value of $3,000, and an estimated useful life of four years. The machine is being depreciated on a straight- line basis. At the end of the second year, what amount will be reported for accumulated depreciation? a. $9,000. - 0. $7,500. (1. $3.000. 5,. 37. Bricker Enterprises purchased a machine for $100,000 on October 1, 2012. The estimated service life is ten years with a $10,000 residual value. Bricker records partial-year depreciation based on the number of months in service. Depreciation expense for 2012, using straight-line, is: A. $1,500. ; B. $7,500. fi' 00 “D D. $2,500. 759 38. Gains on the sale of fixed assets for cash: A. Are the excess of the book value over the cash received. Are recorded as a debit. C. Are reported on a net—of-tax basis if material. @Are the excess of the cash received over the book value. 39. The return on assets is calculated as: et Income divided by total assets. fiet Income divided by average total assets. C. Net Income divided by ending total assets. D. Ending total assets divided by net income. 40. Abbott Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. Abbott should record: 7 055.4; g X of $1,000. ‘ ‘ o. neither a gain nor a loss — the computer was sold at its book value. d. neither a gain nor a loss — the gain that occurred in this case would not be recognized. 41. Oregon Adventures purchased equipment at the beginning of 2012 for $80,000. 3 *1 They sold the equipment at the end of 2014 for $45,000. If the expected life of the equipment was seven years with a residual value of $10,000, and they use straight- "‘49 ’3 line depreciation, which of the following is true regarding the entry to record the v : sale ofthe eqwimpflment? ). Credit Gain $5,000. a. Credit Accumulated Depreciation $40,000. Ll. Credit Equipment $5,000. )OxCQLKpo) ...
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Exam 2 - Spring 2011 - ROW: Exam 2 Name Acct 2103 @The...

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