ACG2021 QUIZLET PART 2

• which of the following are not responsible for their companies debt?

  shareholders of corporation
• Which of the following is not an asset?

  accounts payable
• In which of the following sequences are these three financial statements usually prepared?

  (i) Income statement, (ii) statement of stockholders' equity, and (iii) balance sheet.
• Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders?

  Internal and external users report
• Based on the following accounts and year-end account balances for a certain corporation, determine the amount of intangible assets to be reported on its classified balance sheet.

  Intangible asses = Goodwill , Patents, Trademarks
• Which of the following would decrease the company's current ratio?

  Using excess cash to buy long-term investments.
• The effects of paying a dividend on the basic accounting equation are to

  decreases assets and decreases equity

  Remember Asses= liabilities+ Stockholders equity

  paying dividend decreases cash which is an asset and decreases retained earnings which is an equity
• The performance of services for cash

  increases the performer's assets and stockholders' equity.
• At the start of the current year, a corporation's retained earnings account had a credit balance of $280,000. During the year, the corporation had a net loss of $60,000 and paid dividends to the stockholders of $40,000. It also borrowed $8,000 by issuing a note. At December 31, the balance in retained earnings is

  Ending Retained Earnings = Begin + Revenue - expenses - dividends

  
  

  To solve : 280,000 + 0 -60,000 - 40,000 = 180,000 credit

  
  

  ( Net loss is an expense because It happens when expenses are greater than revenue )
• Which of the following is evidence that a transaction has occurred that needs to be recording in a company's accounting records?

  Source document
• In its first year, a company performed services for a customer and billed the customer $10,000. In the second year, the customer pays the company for the services rendered in the first year. In the first year, the company incurred and paid $3,000 of wage expense. If the company uses the accrual-basis of accounting, then it will report

  revenue of $10,000 and expense of $3,000 in the first year

  
  

  Since the accrual-basis of accounting says companies record revenue when the PERFORMANCE OBLIGATION IS SATISFIED and when expenses when incurred
• The difference between an asset's cost and its accumulated depreciation is called


  book valueSee an expert-written answer!We have an expert-written solution to this problem!
• A company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800, or $150 per month. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

  debit Depreciation Expense for $150 and credit Accumulated Depreciation for $150.

  
  

  It was bought on December 1st and the journal entry is dated December 31st so it only counts for that month
• Accrued revenues are revenues for services performed that have not yet been recorded. If a company fails to record a year-end adjusting entry for accrued revenues, the company's

  an understatement of assets and an understatement of revenues.
• net income


  Revenues - Expenses
• A company uses a perpetual inventory system. It purchased $10,000 of merchandise with terms of 2/10, n/30. It also must pay a $200 shipping charge. The company paid for both the merchandise and the shipping charge nine days after their invoice date. Which of the following is part of the journal entry the company records when it pays the shipping charge?

  A debit to Inventory for $200

  
  

  In perpetual system all of the cost is listed as inventory
• Gross Profit


  net sales - cost of goods sold
• Financial information about Edwards Incorporated is presented below:

  Operating expenses, $28,000

  Sales returns and allowances, $7,000

  Sales discounts, $3,000

  Sales revenue, $150,000

  Cost of goods sold, $91,000

  What is the company's gross profit?

  49,000

  
  

  net sales = revenue - sale return & allowance - discount

  (15,000-7,000-3,000)- (91,000) = 49,000
• A company's gross profit rate is lower this year compared to the prior year. Which of the following would not be a possible cause for this decline in the gross profit rate?

  The company began selling products with a higher markup.
• If goods in transit are shipped FOB destination

  the seller has legal title to the goods until they are delivered.
• At December 31, Moore Company's inventory records indicated a balance of $420,000. Upon further investigation it was determined that this amount included the following:

  (1) $54,000 in inventory purchases made by Moore shipped from the seller December 29 terms FOB destination, but not due to be received until January 2.

  (2) $25,000 in inventory purchases made by Moore shipped from the seller December 29 terms FOB shipping point, but not due to be received until January 2.

  (3) $6,000 in goods sold by Moore with terms FOB shipping point on December 29. The goods are not expected to reach their destination until January 4.

  (4) $7,000 in goods sold by Moore with terms FOB destination on December 29. The goods are not expected to reach their destination until January 5.

  (5) $15,000 of goods received on consignment from Dollywood Company.

  What is Moore's correct ending inventory balance at December 31?

  345,000

  
  

  420,000-54,000-6,000-15,000

  
  

  Don't include FOB destination purchase has yet receive, FOB shipping points goods sold and ships, or goods held on consignment
• A company has the following:

  Units Per unit price Total

  Balance, Dec. 1 200 $5.00 $1,000

  Purchase, Dec. 15 100 5.30 530

  Purchase, Dec. 28 100 5.50 550

  The company sells inventory for $10 per unit. An end of December, inventory showed that 160 units were on hand. If the company uses FIFO and a periodic inventory system, what is the gross profit for the month?1
• A company has the following::

  Category Cost Market

  A $57,000 $50,000

  B 40,000 37,000

  C 80,000 86,000

  If the company values its inventory using lower-of-cost-or-market, the value of the inventory reported on its balance sheet would be


  167,000
• On December 14, a company sold $2,000 of merchandise on account to a customer with terms 2/10, n/30. On December 20, the customer returned $800 of merchandise to the company. The company collects full payment from the customer on December 21. What is the amount of cash received by the company on December 21?

  $1,176

  
  

  $2,000 x 98 % = $1960

  $1960- $800 = $1,176
• The direct write-off method of accounting for bad debts

  does not require estimates of bad debt expense.
• At the beginning of the year, a company had accounts receivable of $700,000 and an allowance for doubtful accounts with a credit balance of $60,000. During the current year, sales on account were $195,000 and collections on account were $115,000. Also during the current year, the company wrote off $11,000 in uncollectible accounts. At year-end, an analysis of outstanding accounts receivable indicated that the allowance for doubtful accounts should have a $72,000 credit balance so the company records the appropriate year-end adjusting entry. How much did the cash realizable value change during the current year?

  57,000
• A corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (also known as the days in receivable ratio)?

  Group of answer choices

  52 days

  
  

  365/7.00
• A company purchased equipment for $60,000 on January 1 of its first year. The equipment's original estimated useful life is 8 years and its estimated salvage value is $12,000. The company uses the straight-line method of depreciation. On December 31 of its fourth year, before year-end adjusting entries have been recorded, the company decides to extend the estimated useful life 3 years giving it a total life of 11 years. The company did not change the salvage value and continues to use the straight-line method. How much depreciation expense should be recorded for the fourth year?

  3750

  
  

  60,000-12,000/ 8 =6000

  60,000-12,000- ( 3 years X 6,000) = 30,000

  30,000/8 ( 11 years- 3 years expired)
• A company sells a plant asset that originally cost $240,000 for $80,000 on December 31 of the current year. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $20,000 had been recorded. The company should recognize a

  40,000 loss on disposal

  
  

  $120,000 accumulated depreciation but sold for $80,000
• At the start of the current year, a company paid for the following in cash:

  Copyrights, $1,500,000

  Equipment, $25,000,000

  Goodwill, $4,500,000

  Inventory, $1,500,000

  Land, $15,000,000

  Patents, $2,500,000

  Research and development, $1,500,000

  Supplies, $4,000,000

  Trademarks, $1,200,000

  It amortizes its intangibles over 10 years. Determine its current year amortization expense.

  $400,000

  
  

  only patents and copyrights are amortized so 1,500,000 + 2,500,000 = 4,000,000/10 years
• Based on the following year-end account balances, what amount would the company report on its balance sheet as intangible assets?

  Trademarks $250,000

  Accounts Receivable 3,000,000

  Research and development 2,500,000

  Goodwill1 ,500,000

  Retained earnings 1,200,000

  Copyrights 2,700,000

  $4,450,000.
• On June 1, a company collected an $18,000 advance payment from a customer. The company will earn the payment over 12 months. What amount should the company report as a current liability at the end of the current calendar year?

  $7,500

  
  

  $18,000 x 5/12
• When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of


  interest paid over the life of the bond minus the amount of premium at sale point
• On January 1, a company issued $600,000 of 10-year, 8% bonds for $565,500. The bonds pay interest annually. The bond issuer uses the straight-line method of amortization. What is the amount of interest expense for the first year?

  $51,450

  
  

  $600,000 − $565,500) / 10 = $3,450;

  ($600,000 x .08) / $3,450 = $51,450See an expert-written answer!We have an expert-written solution to this problem!
• On January 1, a corporation issued $5,200,000, 12%, 3-year bonds for $5,594,882. Interest is payable annually on January 1. The effective interest rate on the bonds is 9%. Use the effective-interest method to determine the amount of interest expense for the first year.

  Group of answer choices$468,000

  $ 503,539

  
  

  5,594,882 X 9%
• A corporation issues a $600,000, 9%, 20-year mortgage note. The terms provide for annual installment payments of $65,728. What is the remaining unpaid principal balance of the mortgage payable account after the second annual payment?

  $575,489

  
  

  9% X $600,000 = 54,000

  1st annual payment is $65,728

  This 1st annual reduces the mortgage by $11,728 ($65,728- $54,000) so $600,000- $11,728 = ending 1s year balance of $588,272

  
  

  Next , 588,272 X 9% = $52944

  2nd annual payment is $ 65728

  This 2nd annual payment reduces the mortgage by $12784 ($65,728- $52,944) so $588,272-$12,784 = ending 2nd year balance of $575,489
• Which of the following is a stockholder's right?

  1. Stock holders have the right to vote in election of the cooperation's board of director

  2. Share the cooperate earnings

  3. Keep the same percentage ownership

  4. Share an asset upon liquidation

  5. The right to clear dividends
• If a company issues 4,000 shares of $5 par value common stock for $140,000, the account

  Paid-in Capital in Excess of Par Value will be credited for $120,000.

  
  

  4,000 X5 = $20,000

  $140,000- $20,000 = $120,000
• A corporation issued 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $15.00 per share. Which of the following will be recorded when the repurchase of the shares is journalized?

  Treasury Stock will be debited for $1,500.

  
  

  100 X $15
• A corporation records a dividend-related liability

  declaration date