Q&A Hero

Q: if an acquired franchise or license is for an indefinite time period, then the cost of the asset should not be amortized.

Q: The two most widely used methods for determining the cost of inventory are a. FIFO and LIFO b. FIFO and weighted average cost c. LIFO and weighted average cost d. gross profit and weighted average cost

Q: the cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

Q: Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method. a. $364 b. $372 c. $324 d. $320

Q: when an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired.

Q: If Beginning Inventory (BI) + Purchases (P) – Ending Inventory (EI) = Cost of Merchandise Sold (COMS), an equivalent equation can be written as a. BI + P = COMS – EI b. BI – P = COMS + EI c. BI + P = COMS + EI d. EI + P = COMS – BI

Q: franchises are classified as a plant asset.

Q: Cost flow is in the reverse order in which costs were incurred when using a. weighted average cost b. last-in, first-out c. first-in, first-out d. first-in, last-out

Q: research and development costs that result in a successful product that is patentable are charged to the patent account.

Q: salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation.

Q: Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and owner's equity? a. Net income is overstated, assets are overstated, and owner's equity is understated. b. Net income is overstated, assets are overstated, and owner's equity is overstated. c. Net income is understated, assets are understated, and owner's equity is understated. d. Net income is understated, assets are understated, and owner's equity is overstated.

Q: in the notes to the financial statements, the depreciation and amortization methods used should be described.

Q: Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the amount of sales from these transactions? a. $25,500 b. $26,010 c. $24,990 d. $16,000

Q: goodwill is recorded only when there is an exchange transaction that involves the purchase of an entire business.

Q: A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom, FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for merchandise returned of $500 (before discount) is granted prior to payment and the invoice is paid within the discount period, what amount of cash should be received by the seller? a. $12,285 b. $11,500 c. $10,480 d. $11,385

Q: a company purchased land for $210,000 cash. real estate brokers' commission was $15,000 and $21,000 was spent for demolishing an old building on the land before construction of a new building could start. under the cost principle, the cost of land would be recorded at a.$231,000 b.$210,000 c.$225,000 d.$246,000

Q: under the double-declining-balance method, the depreciation rate used each year remains constant.

Q: When comparing a retail business to a service business, the financial statement that changes the least is the a. balance sheet b. income statement c. statement of owner's equity d. statement of cash flows

Q: Under a perpetual inventory system, a. accounting records continuously disclose the amount of inventory b. increases in inventory resulting from purchases are debited to Purchases c. a physical count is required to determine cost of merchandise on hand d. the purchases returns and allowances account is credited when goods are returned to vendors

Q: a company purchased land for $72,000 cash. real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. proceeds from salvage of the demolished building was $1,200. under the cost principle, the cost of land would be recorded at a.$82,800 b.$72,000 c.$77,800 d.$84,000

Q: which of the following is not properly classified as property, plant, and equipment? a.building used as a factory b.land used in ordinary business operations c.a truck held for resale by an automobile dealership d.land improvement, such as parking lots and fences

Q: Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make for the payment for the merchandise if Isabella Co. pays within the discount period? a. Accounts Payable—Emma Co., debit $15,000; Cash, credit $15,000 b. Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450 c. Accounts Payable—Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750 d. Accounts Payable—Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050

Q: a characteristic of a plant asset is that it is a.intangible b.used in the operations of a business c.held for sale in the ordinary course of the business d.not currently used in the business but held for future use

Q: Which of the following items would not affect the cost of merchandise inventory acquired during the period? a. quantity discounts b. purchases discounts c. freight in d. sales commissions

Q: 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

Q: Determine the gross profit for Jefferson Company based on the following data:Sales $764,000Selling expenses 42,500Cost of merchandise sold 538,000 a. $495,500 b. $183,500 c. $721,500 d. $226,000

Q: which of the following would not be included in the equipment account? a.installation costs b.freight costs c.cost of trial runs d.electricity used by the machine

Q: The inventory system employing accounting records that continuously disclose the amount of inventory is called a. retail b. periodic c. physical d. perpetual

Q: which one of the following items is not considered a part of the cost of a truck purchased for business use? a.sales tax b.truck license c.freight charges d.cost of lettering on side of truck

Q: Using the following information, what is the amount of gross profit?Purchases $32,000 Selling expenses $ 960Merchandise inventory, September 1 5,700 Merchandise inventory,September 30 6,370Administrative expenses 910 Sales 63,000Rent revenue 1,200 Interest expense 1,040 a. $25,300 b. $31,670 c. $30,600 d. $62,840

Q: the four subdivisions for plant assets are a.land, land improvements, buildings, and equipment b.intangibles, land, buildings, and equipment c.furnishings and fixtures, land, buildings, and equipment d.property, plant, equipment, and land

Q: Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable? a. $260 b. $500 c. $460 d. $150

Q: the cost of land does not include a.real estate brokers' commission b.annual property taxes c.accrued property taxes assumed by the purchaser d.title fees

Q: The journal entry for the return of merchandise from a customer would include a a. debit to Sales b. credit to Sales c. debit to Customer Refunds Payable d. debit to Estimated Returns Inventory

Q: the land account would include all of the following costs except a.drainage costs b.the cost of building a fence c.commissions paid to real estate agents d.the cost of tearing down a building

Q: Which of the following accounts will only be found in the chart of accounts of a merchandising company? a. Sales b. Accounts Receivable c. Merchandise Inventory d. Accounts Payable

Q: burke company purchases land for $85,000 cash. burke assumes $2,500 in property taxes due on the land. the title and attorney fees totaled $1,000. burke has the land graded for $2,200. they paid $10,000 for paving of a parking lot. what amount does burke record as the cost for the land? a.$88,200 b.$100,700 c.$90,700 d.$85,000

Q: When goods are shipped FOB destination and the seller pays the freight charges, the buyer a. journalizes a reduction for the cost of the merchandise b. journalizes a reimbursement to the seller c. does not take a discount d. makes no journal entry for the freight

Q: whyte clinic purchases land for $240,000 cash. the clinic assumes $3,000 in property taxes due on the land. the title and attorney fees totaled $2,000. the clinic had the land graded for $4,400. what amount does whyte clinic record as the cost for the land? a.$244,400 b.$240,000 c.$249,400 d.$245,000

Q: If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. n/30 b. FOB shipping point c. FOB destination d. consigned

Q: Merchandise is purchased for $6,000 on September 2 subject to terms of 2/10, n/30, FOB destination. What is the cost of the merchandise if paid on September 12, assuming the discount is taken? a. $6,120 b. $5,940 c. $6,090 d. $5,880

Q: givens retail purchased land for a new parking lot for $50,000. the paving cost $70,000 and the lights to illuminate the new parking area cost $24,000. which of the following statements is true with respect to these additions? a.$120,000 should be debited to the land account b.$94,000 should be debited to land improvements c.$144,000 should be debited to the land account d.$144,000 should be debited to land improvements

Q: aber company buys land for $150,000 on 12/31/11. as of 3/31/12, the land has appreciated in value to $152,000. on 12/31/12, the land has an appraised value of $155,400. by what amount should the land account be increased in 2012? a.$0 b.$2,000 c.$3,400 d.$5,400

Q: Who is responsible for the freight cost when the terms are FOB destination? a. the seller b. the buyer c. the customer d. either the buyer or the seller

Q: If the physical count of inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry for inventory shrinkage? a. debit Merchandise Inventory, $158,000; credit Cost of Merchandise Sold, $158,000 b. debit Merchandise Inventory, $5,000; credit Cost of Merchandise Sold, $5,000 c. debit Cost of Merchandise Sold, $163,000; credit Merchandise Inventory, $163,000 d. debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000

Q: Shaffer Company acquires land for $56,000 cash. Additional costs are as follows.Shaffer will record the acquisition cost of the land asa.$56,000b.$57,690c.$59,610d.$59,370

Q: wesley hospital installs a new parking lot. the paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. which of the following statements is true with respect to these additions? a.$30,000 should be debited to the land account b.$12,000 should be debited to land improvements c.$42,000 should be debited to the land account d.$42,000 should be debited to land improvements

Q: Which of the following accounts has a normal credit balance? a. Accounts Receivable b. Sales c. Merchandise Inventory d. Delivery Expense

Q: Ramirez Company acquires land for $260,000 cash. Additional costs are as follow.Ramirez will record the acquisition cost of the land asa.$274,640b.$277,200c.$275,920d.$260,000

Q: Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold was $24,500. Abbey Co. issued a credit memo for $3,600 for defective merchandise, which was not returned to Abbey. Gomez Co. paid the invoice within the discount period. What is the gross profit earned by Abbey Co. on these transactions? a. $10,500 b. $30,772 c. $6,272 d. $31,400

Q: national molding is building a new plant that will take three years to construct. the construction will be financed in part by funds borrowed during the construction period. there are significant architect fees, excavation fees, and building permit fees. which of the following statements is true? a.excavation fees are capitalized but building permit fees are not b.architect fees are capitalized but building permit fees are not c.interest is capitalized during the construction as part of the cost of the building d.the capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds

Q: Using the following information, what is the amount of income from operations?Purchases $32,000 Selling expenses $ 960Merchandise inventory, September 1 5,700 Merchandise inventory,September 30 6,370Administrative expenses 910 Sales 63,000Rent revenue 1,200 Interest expense 1,040 a. $32,870 b. $31,910 c. $30,710 d. $29,800

Q: land improvements should be depreciated over the useful life of the a.land b.buildings on the land c.land or land improvements, whichever is longer d.land improvements

Q: Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry for the sale would include a a. debit to Cash for $5,000 b. debit to Sales Discounts for $100 c. credit to Sales for $4,900 d. debit to Accounts Receivable for $4,880

Q: a company purchases a remote building site for computer operations. the building will be suitable for operations after some expenditures. the wiring must be replaced to computer specifications. the roof is leaky and must be replaced. all rooms must be repainted and recarpeted and there will also be some plumbing work done. which of the following statements is true? a.the cost of the building will not include the repainting and recarpeting costs b.the cost of the building will include the cost of replacing the roof c.the cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as building improvements d.the wiring is part of the computer costs, not the building cost

Q: The journal entry for the receipt of inventory purchased for cash in a perpetual inventory system would be a. Jan. 1 Merchandise Inventory 1,500 Cash 1,500 b. Jan. 1 Office Supplies 1,500 Cash 1,500 c. Jan. 1 Purchases 1,500 Accounts Payable 1,500 d. Jan. 1 Cash 1,500 Accounts Receivable 1,500

Q: Arnold Company purchases a new delivery truck for $45,000. The sales taxes are $2,500. The logo of the company is painted on the side of the truck for $1,200. The truck’s annual license is $120. The truck undergoes safety testing for $220. What does Arnold record as the cost of the new truck?a.$49,040b.$48,920c.$47,500d.$46,920

Q: Using a perpetual inventory system, the journal entry for the return from a customer of merchandise sold on account includes a a. credit to Customer Refunds Payable b. debit to Merchandise Inventory c. credit to Merchandise Inventory d. debit to Cash

Q: Rodgers Company purchased equipment and these costs were incurred:Rodgers will record the acquisition cost of the equipment asa.$22,500b.$24,300c.$24,620d.$25,050

Q: Determine income from operations for Jonas Company based on the following data:Sales$764,000Operating expenses52,500Cost of merchandise sold538,000 a. $485,500 b. $711,500 c. $173,500 d. $226,000

Q: kathys blooms purchased a delivery van for $40,000. the company was given a $4,000 cash discount by the dealer, and paid $2,000 sales tax. annual insurance on the van is $1,000. as a result of the purchase, by how much will kathys blooms increase its van account? a.$40,000 b.$36,000 c.$39,000 d.$38,000

Q: The seller may prepay the freight costs even though the terms are FOB shipping point. a. True b. False

Q: rains company purchased equipment on january 1 at a list price of $50,000, with credit terms 2/10, n/30. payment was made within the discount period. rains paid $2,500 sales tax on the equipment, and paid installation charges of $880. prior to installation, rains paid $2,000 to pour a concrete slab on which to place the equipment. what is the total cost of the new equipment? a.$52,380 b.$54,380 c.$55,380 d.$50,500

Q: carpino company purchased equipment and these costs were incurred:what amount should be recorded as the cost of the equipment?a.$90,000b.$94,500c.$95,250d.$96,750

Q: Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made. a. True b. False

Q: ryan, inc. purchased a delivery truck for $36,000. the company was given a $3,600 cash discount by the dealer, and paid $1,800 sales tax. annual insurance on the truck is $900. as a result of the purchase, by how much will ryan, inc. increase its truck account? a.$36,000 b.$32,400 c.$35,100 d.$34,200

Q: The gross method of recording sales discounts requires an adjusting entry and a contra asset account. a. True b. False

Q: If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the general ledger. a. True b. False

Q: runge company purchased machinery on january 1 at a list price of $200,000, with credit terms 2/10, n/30. payment was made within the discount period. runge paid $10,000 sales tax on the machinery, and paid installation charges of $3,520. prior to installation, runge paid $8,000 to pour a concrete slab on which to place the machinery. what is the total cost of the new machinery? a.$209,520 b.$217,520 c.$221,520 d.$202,000

Q: Under the gross method of recording sales discounts, the journal entry for a sale of merchandise on account for $3,500, terms 2/10, n/30, would include a credit to Sales Discounts for $70. a. True b. False

Q: 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

Q: Merchandise is sold for $3,600, terms 2/10, n/30, with prepaid freight costs of $150. The amount of the sale recorded is $3,528. a. True b. False

Q: schrock company purchases a new delivery van for $55,000. the sales taxes are $4,000. the logo of the company is painted on the side of the van for $1,200. the vans annual license is $120. the van undergoes safety testing for $220. what does schrock record as the cost of the new van? a.$60,540 b.$60,420 c.$59,000 d.$58,420

Q: A sale of $750 on account subject to a sales tax of 6% would be recorded as an account receivable of $750. a. True b. False

Q: interest may be included in the acquisition cost of a plant asset a.during the construction period of a self-constructed asset b.if the asset is purchased on credit c.if the asset acquisition is financed by a long-term note payable d.if it is a part of a lump-sum purchase

Q: A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory. a. True b. False

Q: which of the following is included in the cost of constructing a building? a.cost of paving a parking lot b.cost of repairing vandalism damage incurred shortly after construction is complete c.interest incurred during construction d.cost of removing the demolished building existing on the land when it was purchased

Q: In retail businesses, inventory is reported as a current asset. a. True b. False

Q: the term applied to the periodic expiration of a plant assets cost is a.amortization b.depletion c.depreciation d.cost expiration

Q: As we compare a merchandise business to a service business, the financial statement that changes the most is the balance sheet. a. True b. False