Chapters 5 thru 8

An accounts receivable results from the sale of:

property, plant, and equipment for cash.

goods and services to customers on account.

Goods and services to customers for cash.

The firm's common stock.

The balance sheet presentation of accounts receivable net of the allowance for bad debts has the effect of stating accounts receivable at:

Original cost.

Net realizable value.

Market value.

Lower of cost or market.

If an organization purchases $3,000 of supplies on account, with terms of 2/10, n30:

$2,880 must be paid within 10 days of the invoice date.

$2,994 must be paid within 30 days of the invoice date.

$2,940 can be paid within 10 days of the invoice date, or $3,000 must be paid within 30 days of the invoice date.

$2,940 can be paid within 10 days of the invoice date, or $3,060 must be paid within 30 days of the invoice date.

	Agrico Incorporated accepted a 10-month, 13% (annual rate), $5,250 note from one of its customers on July 15, 2022; interest is payable with the principal at maturity. Prepare the journal entry to record the interest earned by Agrico during its year ended December 31, 2022.
What is the General Journal Entry for Debit?
What is the amount for Debit?
What is the General Journal Entry for Credit?
What is the amount for Credit?

	The beginning inventory was 310 units at a cost of $11 per unit. Goods available for sale during the year were 1,330 units at a total cost of $16,060. In May, 610 units were purchased at a total cost of $7,320. The only other purchase transaction occurred during October. Ending inventory was 565 units.
What is the number of units purchased in October??
What is the cost per unit purchased in October?

	The beginning inventory was 310 units at a cost of $11 per unit. Goods available for sale during the year were 1,330 units at a total cost of $16,060. In May, 610 units were purchased at a total cost of $7,320. The only other purchase transaction occurred during October. Ending inventory was 565 units.
Assume the periodic inventory system is used. Calculate cost of goods sold using the FIFO method.
Assume the periodic inventory system is used. Calculate the ending inventory using the FIFO method.

	The beginning inventory was 310 units at a cost of $11 per unit. Goods available for sale during the year were 1,330 units at a total cost of $16,060. In May, 610 units were purchased at a total cost of $7,320. The only other purchase transaction occurred during October. Ending inventory was 565 units.
Assume the periodic inventory system is used. Calculate the cost of good sold using the LIFO method.
Assume the periodic inventory system is used. Calculate the ending inventory using LIFO method.

	A company makes the payment of a one-year insurance premium of $4,848 on April 1, 2022.
General Journal Entry for Debit:
Debit Amount:
General Journal Entry for Credit:
Credit Amount:

	A company makes the payment of a one-year insurance premium of $4,848 on April 1, 2022.
Debit Journal Entry for: Adjusting entry that will be made at the end of every month to show the amount of insurance premium "used" that month.
Debit Amount:
Credit Journal Entry for: See Debit
Credit Amount:

	A company makes the payment of a one-year insurance premium of $4,848 on April 1, 2022.
Calculate the amount of prepaid insurance that should be reported on the December 31, 2022 balance sheet with respect to this policy.

	A company makes the payment of a one-year insurance premium of $4,848 on April 1, 2022.
If the premium had been $9,696 for a two-year period, how much is the non-current asset for the prepaid amount at December 31, 2022, be reported on the balance sheet?
If the premium had been $9,696 for a two-year period, how much is the current asset for the prepaid amount at December 31, 2022, be reported on the balance sheet?

When a company buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land:

Any of the purchase cost allocated to the old building is reported as a loss.

The cost assigned to the land excludes the cost of the old building.

the total cost of the land and old building are capitalized as land cost.

Any of the purchase cost allocated to the old building is capitalized as part of the cost of the new building.

Depreciation, in accounting, is a process that results in:

Depreciable assets being reported in the balance sheet at their fair value.

accumulating cash for the replacement of the asset.

An accurate measurement of the economic usefulness of an asset.

Spreading the cost of an asset over its useful life to the entity.

Azubuike Limited purchased inventory, land, and a building for a lump-sum purchase price of $1,500,000 from a bankrupt competitor. Appraised values were as follows: inventory, $200,000; land $600,000; building, $1,200,000. The land should recorded as an asset on Azubuike’s books for:

$450,000.

$500,000.

$550,000.

$600,000.

Speedbag, Incorporated purchased equipment at a cost of $60,000 on July 1, 2023. The expected useful life is 4 years and the asset is expected to have salvage value of $10,000. Speedbag depreciates its assets using the straight-line method. What is the company's depreciation expense for the year ended December 31, 2023?

$6,250

$7,500

$15,000

Speedbag, Incorporated purchased equipment at a cost of $60,000 on July 1, 2023. The expected useful life is 4 years and the asset is expected to have salvage value of $10,000. Speedbag depreciates its assets using the straight-line method. What is the accumulated depreciation for this asset on December 31, 2024?

$12,500

$18,750

$25,000

$30,000

When a depreciable asset is sold:

A gain arises if the sales proceeds exceed the net book value.

A loss arises if the sales proceeds exceed the net book value.

Any cash received results in a gain.

Depreciation expense is adjusted so there is no gain or loss.

	In 2019, Trader Company acquired a parcel of land for a cash purchase price of $177,000 with the intention of building a retail store in the near future. In late 2020, in the midst of the COVID-19 crisis, Trader Company was unable to secure the bank financing required to begin construction of the store as planned. At the time of the loan application, the land had an appraised value of $153,000. In 2022, Trader Company eventually sold the parcel of land for a cash sales price of $187,000 after the local real estate market had fully recovered.
At what amount would land be reported in the December 31, 2019, balance sheet of Trader Company?
At what amount would land be reported in the December 31, 2020, balance sheet of Trader Company?
Will it be a gain or loww on the sale of land?
How much will said gain/ loss be reported in the December 31, 2022 income statement?

Leasehold is an example of which of the following types of assets?

Current asset

Property, plant and equipment

Goodwill

Intangible asset

Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

Depreciation.

Amortization.

Depletion.

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI:

Is less than the fair value of the net assets of the acquired company.

Is more than the fair value of the net assets of the acquired company.

Is more than the fair value of the net assets of the acquiring company.

Is less than the fair value of the net assets of the acquiring company.

	Goodwill results from the purchase of one firm by another for a price that is greater than the fair value of the net assets acquired. On January 1, 2023, Blue Grass Company purchased Red Grass Company for $2,400,000 when the net assets were valued at $2,000,000. Goodwill will be tested annually for impairment. Assume that after the first year there was an impairment of $30,000.
Compute the value of goodwill to be recorded on the books of Blue Grass Company upon the purchase of the business.
What is the impairment?
What is the Debit Journal Entry for the Impairment?
What is the Credit Journal entry for the impairment?

Interest on a Note Payable is most appropriately accrued:

When the note is signed.

As of the end of each accounting period during which the note is a liability.

When principal payments on the note are made.

When the interest is paid.

The purpose of reporting Current Maturities of Long-Term debt is to:

Report any portion of a long-term borrowing that is to be paid in the upcoming accounting period as a current liability.

Reclassify a portion of debt from the noncurrent section of the balance sheet to the current section of the balance sheet.

Properly classify liabilities.

All of these answers are correct.

An Accounts Payable normally results from which of the following transactions?

Purchasing accounts for cash

Purchasing land on credit

Purchasing goods and services from suppliers on credit

Purchasing buildings and equipment on credit

A loan discount is:

A loan used to purchase a bond at a discount, based on a discounted interest rate on a loan.

The same as a bond discount.

The interest amount that is subtracted from the loan principal (and effectively prepaid) when a loan is obtained on a discount basis.

The interest amount that is paid along with the loan principal when a loan obtained on a straight basis is paid off on the maturity date.

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is:

Cash is received from new subscribers.

Magazines are printed for the publisher.

Magazines are mailed to subscribers.

Subscriptions are sold to new subscribers.

On June 1, 2022, an advance rent payment of $8,400, representing a four-month prepayment for the months of June, July, August, and September, was received in cash from the company’s tenant. The adjusting entry that will be made at the end of each month to show the amount of rent “earned” during the month is:

Debit Cash 2,100 Credit Rent Revenue 2,100

Debit Cash 8,400 Credit Unearned Rent Revenue 8,400

Debit Unearned Rent Revenue 6,300 Credit Rent Revenue 6,300

Debit Unearned Rent Revenue 2,100 Credit Rent Revenue 2,100

For the payroll period ended on May 7, 2022, gross pay was $102,000, net pay was $78,000, and various withholdings totaled $24,000. The journal entry to show the effects of the payroll accrual on May 7, 2022 is:

Debit Cash 102,000 Credit Withholding Liabilities 24,000 Credit Wages Payable 78,000

Debit Wages Payable 78,000 Debit Withholding Liabilities 24,000 Credit Cash 102,000

Debit Wages Expense 78,000 Debit Withholding Liabilities 24,000 Credit Wages Payable 102,000

Debit Wages Expense 102,000 Credit Withholding Liabilities 24,000 Credit Wages Payable 78,000

	On May 15, 2022, Powell Incorporated obtained a six-month working capital loan from its bank. The face amount of the note signed by the treasurer was $600,000. The interest rate charged by the bank was 7%. The bank made the loan on a discount basis.
What is the amount of the current liability related to this loan to be shown in the June 30, 2022, balance sheet?

	On May 15, 2022, Powell Incorporated obtained a six-month working capital loan from its bank. The face amount of the note signed by the treasurer was $600,000. The interest rate charged by the bank was 7%. The bank made the loan on a discount basis.
Calculate the amount of interest expense applicable to this loan during the fiscal year ended June 30, 2022.

Financial leverage refers to which of the following?

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE).

The difference between the rate of return earned on current assets and the rate of return earned on retained earnings

The leverage a firm obtains from increasing production.

Decreasing fixed costs per unit by increasing production.

The largest item of the Deferred Tax Liability for most companies is caused by:

Providing the allowance for doubtful accounts for book purposes.

Differences in inventory cost flow assumptions (FIFO vs. LIFO) for tax versus financial accounting purposes.

Differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes.

amortizing bond premium or discount for tax purposes.

Which of the following is not a stockholders' equity account?

Common stock

Retained earnings

Accumulated depreciation

Additional paid-in capital

Which of the following is not usually a right or attribute of preferred stock?

Having a claim to dividends in excess of the annual dividend requirement if dividends on common stock exceed dividends on preferred stock.

Having a priority claim to dividends relative to the common stock's claim to dividends.

Having a priority claim in liquidation relative to the common stock's claim in liquidation.

Having a claim to dividends that is cumulative over time if the annual dividend requirement is not satisfied.

The declaration of a cash dividend by the directors results in:

A decrease in cash and a decrease in retained earnings.

A decrease in retained earnings and an increase in current liabilities.

A decrease in net income and a decrease in cash.

A decrease in net income and an increase in current liabilities.

Springer Company was incorporated on January 1, 2022, at which time 500,000 shares of $1 par value common stock were authorized, and 210,000 of these shares were issued for $9 per share. Net income for the year ended December 31, 2022, was $1,900,000. Springer Company’s board of directors declared dividends of $1.40 per share of common stock on December 31, 2022, payable on January 27, 2023. The entry to record the payment of dividends on January 27, 2023 is:

Debit Retained Earnings 294,000 Credit Dividends Payable 294,000

Debit Cash 294,000 Credit Dividends Payable 294,000

Debit Retained Earnings 294,000 Credit Cash 294,000

Debit Dividends Payable 294,000 Credit Cash 294,000

The principal reason for a company having a common stock split is to:

Increase the total cash dividends paid to stockholders.

Capitalize retained earnings.

Decrease total stockholders' equity.

Decrease the market value per share of common stock.

On May 24, 2022, ARCC, Limited purchased 700 shares of its own $10 par value common stock in the market for $58 per share. On July 17, 2022, the company sold 600 of these shares in the open market at a price of $63 per share. The entry to record the purchase of the treasury stock on May 24, 2022 is:

Debit Treasury Stock 40,600 Credit Retained Earnings 40,600

Debit Treasury Stock 40,600 Credit Cash 40,600

Debit Common Stock 7,000 Credit Cash 7,000

Debit Common Stock 7,000 Debit Treasury Stock 33,600 Credit Cash 40,600

"Noncontrolling interest":

Is a component of the parent company's net income and reported on the income statement.

Is a component of stockholders' equity attributable to the parent company and reported on the balance sheet.

Is the portion of equity in a subsidiary not attributable, directly or indirectly, to the parent company, and reported on the balance sheet within equity, but separate from the parent company's equity.

Is not reported within the parent company's consolidated financial statements, but instead reported within the minority stockholders' financial statements.

	The balance sheet caption for common stock is the following: Common stock, $10 par value, 500,000 shares authorized, 417,500 shares issued, 383,000 shares outstanding $ ?
Calculate the dollar amount that will be presented opposite this caption.
Calculate the total amount of a cash dividend of $0.80 per share.
What accounts for the difference between issued shares and outstanding shares?

	Assume that an investor owns 600 shares of $10 par value common stock and the company has a 5-for-1 stock split when the market price per share is $17.50.
How many shares of common stock will the investor own after the stock split?
What will probably happen to the market price per share of the stock? Note: Round your answer to 2 decimal places.

The noncurrent Deferred Tax Liability account arises because:

Some book income will never be subject to income tax.

Some expenses are deducted for tax purposes before they are deducted for book purposes.

income tax rates change from year to year.

The company has not paid income taxes currently due.

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