Q&A Hero

Q: bates company purchased equipment on january 1, 2011, at a total invoice cost of $800,000. the equipment has an estimated salvage value of $20,000 and an estimated useful life of 5 years. what is the amount of accumulated depreciation at december 31, 2012, if the straight-line method of depreciation is used? a.$160,000 b.$320,000 c.$156,000 d.$312,000

Q: The abbreviation FOB stands for "free on board." a. True b. False

Q: stine company purchased machinery with a list price of $32,000. they were given a 10% discount by the manufacturer. they paid $200 for shipping and sales tax of $1,500. stine estimates that the machinery will have a useful life of 10 years and a residual value of $10,000. if stine uses straight-line depreciation, annual depreciation will be a.$2,050 b.$2,036 c.$3,050 d.$1,880

Q: Estimated Returns Inventory is an account used when adjusting for expected merchandise sales in the next period. a. True b. False

Q: newell company purchased a machine with a list price of $64,000. they were given a 10% discount by the manufacturer. they paid $400 for shipping and sales tax of $3,000. newell estimates that the machine will have a useful life of 10 years and a residual value of $20,000. if newell uses straight-line depreciation, annual depreciation will be a.$4,100 b.$4,072 c.$6,100 d.$3,760

Q: In a periodic inventory system, the cost of merchandise purchased includes the cost of freight in. a. True b. False

Q: machinery was purchased for $85,000. freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the machinery. it is estimated that the machinery will have a $15,000 salvage value at the end of its 5-year useful life. depreciation expense each year using the straight-line method will be a.$19,700 b.$16,700 c.$14,300 d.$14,000

Q: Service businesses provide services for income, while merchandising businesses sell merchandise. a. True b. False

Q: machinery was purchased for $85,000 on january 1, 2011. freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the machinery. it is estimated that the machinery will have a $15,000 salvage value at the end of its 5-year useful life. what is the amount of accumulated depreciation at december 31, 2012, if the straight-line method of depreciation is used? a.$33,400 b.$16,700 c.$14,300 d.$28,600

Q: Under the periodic inventory system, the accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet. a. True b. False

Q: a change in the estimated useful life of equipment requires a.a retroactive change in the amount of periodic depreciation recognized in previous years b.that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset c.that the amount of periodic depreciation be changed in the current year and in future years d.that income for the current year be increased

Q: Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts. a. True b. False

Q: a machine that was purchased on january 1 for $15,000 has an estimated salvage value of $3,000. if the machines depreciation rate is 20%, its annual depreciation is a.$3,000 b.$12,000 c.$2,400 d.$3,600

Q: In a perpetual inventory system, the merchandise inventory account is only used to reflect the beginning inventory. a. True b. False

Q: an expenditure for which of the following items would be considered a revenue expenditure? a.plant asset b.ordinary repair c.addition d.improvements

Q: expenditures that add to the utility of plant assets for more than one accounting period are a.committed expenditures b.revenue expenditures c.current expenditures d.capital expenditures

Q: Closing entries for a merchandising business are not similar to those for a service business. a. True b. False

Q: The cost of merchandise inventory is limited to the purchase price less any purchase discounts. a. True b. False

Q: grant company has decided to change the estimate of the useful life of an asset that has been in service for 2 years. which of the following statements describes the proper way to revise a useful life estimate? a.revisions in useful life are permitted if approved by the irs b.retroactive changes must be made to correct previously recorded depreciation c.only future years will be affected by the revision d.both current and future years will be affected by the revision

Q: an asset was purchased for $200,000. it had an estimated salvage value of $40,000 and an estimated useful life of 10 years. after 5 years of use, the estimated salvage value is revised to $32,000 but the estimated useful life is unchanged. assuming straight-line depreciation, depreciation expense in year 6 would be a.$24,000 b.$17,600 c.$12,000 d.$16,800

Q: The fees associated with credit card sales are periodically recorded as expenses. a. True b. False

Q: jack's copy shop bought equipment for $90,000 on january 1, 2011. jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. on january 1, 2012, jack decides that the business will use the equipment for a total of 5 years. what is the revised depreciation expense for 2012? a.$30,000 b.$12,000 c.$15,000 d.$22,500

Q: When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period. a. True b. False

Q: ron's quik shop bought equipment for $50,000 on january 1, 2011. joe estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. on january 1, 2012, ron decides that the business will use the equipment for a total of 6 years. what is the revised depreciation expense for 2012? a.$8,000 b.$4,000 c.$6,667 d$10,000

Q: Gross profit minus selling expenses equals net income. a. True b. False

Q: equipment costing $30,000 with a salvage value of $6,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be a.$3,600 b.$8,000 c.$6,000 d.$4,800

Q: Customer Refunds Payable is an account used to record the estimated liability for amounts due to customers for cash refunds and allowances. a. True b. False

Q: The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements. a. True b. False

Q: equipment costing $40,000 with a salvage value of $8,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for year 3 would be a.$6,000 b.$5,333 c.$8,000 d.$4,000

Q: Most companies will not take a purchase discount, because 1% or 2% discounts are insignificant. a. True b. False

Q: an asset was purchased for $60,000. it had an estimated salvage value of $15,000 and an estimated useful life of 10 years. after 5 years of use, the estimated salvage value is revised to $12,000 but the estimated useful life is unchanged. assuming straight-line depreciation, depreciation expense in year 6 would be a.$9,000 b.$6,375 c.$5,100 d.$7,500

Q: which of the following is not true of ordinary repairs? a.they primarily benefit the current accounting period b.they can be referred to as revenue expenditures c.they maintain the expected productive life of the asset d.they increase the productive capacity of the asset

Q: Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded. a. True b. False

Q: The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available. a. True b. False

Q: expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally a.expensed when incurred b.capitalized as a part of the cost of the asset c.debited to the accumulated depreciation account d.not recorded until they become material in amount

Q: On the income statement in the single-step format, the total of all expenses is deducted from the total of all revenues. a. True b. False

Q: additions and improvements a.occur frequently during the ownership of a plant asset b.normally involve immaterial expenditures c.increase the companys investment in productive facilities d.typically only benefit the current accounting period

Q: Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system. a. True b. False

Q: compton inc. made a $500 ordinary repair to a piece of equipment. compton's accountant debited this amount to the asset account, equipment and credited cash. was this the correct entry and if not, why not? a.yes, this was the correct entry b.no, the correct entry would be a debit to repairs expense and a credit to cash c.no, the correct entry would be a debit to cash and a credit to repairs expense d.no, the correct entry would be a debit to service revenue and a credit to cash

Q: The statement of owner’s equity for a merchandising business is prepared in the same manner as for a service business. a. True b. False

Q: all of the following statements regarding impairments are true except a.an impairment is a permanent decline in an asset's market value b.after an impairment write-down, depreciation is generally lower in a subsequent periods c.immediate recognition of impairment write-downs is now required d.impairments are generally recorded when the book value falls below the market value

Q: On a multiple-step income statement, the dollar amount for income from operations is always the same as net income. a. True b. False

Q: jamison, inc. is a regional air cargo carrier. jamison made a $4,500 improvement to one of its airplanes. if jamison's accountant expensed this amount, which of the following statements is true? a.the entry will improperly understate net income for the year b.the entry will improperly overstate net income for the year c.the entry is the correct treatment d.the entry will overstate the balance sheet for the year

Q: In the periodic inventory system, purchases of merchandise for resale are debited to the purchases account. a. True b. False

Q: brevard corporation purchased a taxicab on january 1, 2011 for $34,000 to use for its shuttle business. the cab is expected to have a five-year useful life and no salvage value. during 2012, it retouched the cab's paint at a cost of $1,600, replaced the transmission for $4,000 (which extended its life by an additional 2 years), and tuned-up the motor for $200. if brevard corporation uses straight-line depreciation, what annual depreciation will brevard report for 2012? a.$6,800 b.$5,200 c.$5,500 d.$5,467

Q: all of the following are factors that a company should consider before a write-down impairment of an asset is recorded except a.an appraisal of the asset b.market trends c.company profits d.obsolescence of the asset

Q: For Sullivan Company, the asset turnover increased from 1.25 to 1.50. This is an unfavorable change. a. True b. False

Q: A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called a cash discount. a. True b. False

Q: in 2012, blanchard corporation has plant equipment that originally cost $75,000 and has accumulated depreciation of $30,000. a new processing technique has rendered the equipment obsolete, so it is retired. which of the following entries should blanchard use to record the retirement of the equipment?

Q: Cost of merchandise sold is the amount that a merchandising company pays for the merchandise it intends to sell. a. True b. False

Q: when an asset is sold, a gain occurs when the a.sale price exceeds the book value of the asset sold b.sale price exceeds the original cost of the asset sold c.book value exceeds the sale price of the asset sold d.sale price exceeds the depreciable cost of the asset sold

Q: Merchandise Inventory normally has a debit balance. a. True b. False

Q: a gain or loss on disposal of a plant asset is determined by comparing the a.replacement cost of the asset with the asset's original cost b.book value of the asset with the asset's original cost c.original cost of the asset with the proceeds received from its sale d.book value of the asset with the proceeds received from its sale

Q: On March 29, a customer who owes $10,500 on account to Sonic Sales Company submits a payment of $4,250. Journalize this transaction.

Q: a company sells a plant asset that originally cost $300,000 for $100,000 on december 31, 2012. the accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $30,000 had been recorded. the company should recognize a a.$200,000 loss on disposal b.$80,000 gain on disposal c.$80,000 loss on disposal d.$50,000 loss on disposal

Q: On March 3, Bluebird Sales makes $4,350 in cash sales of general merchandise that has a cost of $1,512. Bluebird uses a perpetual inventory system.(a) Journalize the sale.(b) Journalize the cost of merchandise sold.

Q: the book value of a plant asset is the difference between the a.replacement cost of the asset and its historical cost b.cost of the asset and the amount of depreciation expense for the year c.cost of the asset and the accumulated depreciation to date d.proceeds received from the sale of the asset and its original cost

Q: a company sells a plant asset that originally cost $180,000 for $60,000 on december 31, 2012. the accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $15,000 had been recorded. the company should recognize a a.$30,000 loss on disposal b.$30,000 gain on disposal c.$60,000 loss on disposal d.$60,000 gain on disposal

Q: Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies. Bargain Wholesalers uses a perpetual inventory system. Journalize the following transactions: May 4 Bargain Wholesalers sells inventory to Pet World Supplies for $8,250 with terms 1/10, n/30. The cost of the merchandise is $5,755. 7 Bargain Wholesalers sells an additional $10,985 in inventory to Pet World Supplies with terms 1/10, n/30. The cost of the merchandise is $6,925. 13 Bargain Wholesalers receives a check from Pet World Supplies paying the balance due on both invoices.

Q: Determine the amount to be paid in full settlement of each purchase invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period MerchandiseFreight Paid by SellerFreight TermsReturns and Allowances(a)$4,500 $140 FOB shipping point, 2/10, net 30$1,200 (b)7,650 $200 FOB destination, 1/10, net 45450

Q: equipment that cost $36,000 and on which $20,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. the entry to record this event would include a a.gain of $2,000 b.loss of $2,000 c.credit to the equipment account for $6,000 d.credit to accumulated depreciation for $20,000

Q: Journalize the following selected transactions, assuming a perpetual inventory method is used:(a) Sold $900 of merchandise on account, subject to 7% sales tax. The cost of the merchandise sold was $510.(b) Paid $436 to the state sales tax department for taxes collected.

Q: a truck costing $42,000 and on which $35,000 of accumulated depreciation has been recorded was discarded as having no value. the entry to record this event would include a a.gain of $7,000 b.loss of $7,000 c.credit to accumulated depreciation for $35,000 d.credit to accumulated depreciation for $42,000

Q: Journalize the following merchandise transactions:(a) Sold merchandise on account, $17,300, with terms 2/10, net 30. The cost of the merchandise sold was $12,600.(b) Received payment within the discount period.

Q: if a plant asset is retired and is fully depreciated a.a gain on disposal will be recorded b.phantom depreciation must be taken as though the asset were still on the books c.a loss on disposal will be recorded d.no gain or loss on disposal will be recorded

Q: Complete the following data taken from the condensed income statements for merchandising Companies A, B, and C. Company ACompany BCompany CIncome from operations$315 $ ? $215 Sales? 865 560 Gross profit430 ? 325 Operating expenses? 125 ? Cost of merchandise sold545 320 ?

Q: if disposal of a plant asset occurs during the year, depreciation is a.not recorded for the year b.recorded for the whole year c.recorded for the fraction of the year to the date of the disposal d.not recorded if the asset is scrapped

Q: Using the following data taken from Hsu’s Imports Inc., which uses a periodic inventory system, prepare the Cost of Merchandise Sold section of the income statement for the year ended March 31.Merchandise inventory, April 1$ 193,250Merchandise inventory, March 31180,100Purchases1,079,600Purchases returns and allowances51,200Purchases discounts18,500Sales1,860,000Freight in19,250

Q: equipment that cost $54,000 and on which $45,000 of accumulated depreciation has been recorded was disposed of for $13,500 cash. the entry to record this event would include a a.gain of $4,500 b.loss of $4,500 c.credit to the equipment account for $13,500 d.credit to accumulated depreciation for $45,000

Q: Details of invoices for purchases of merchandise are as follows: Returns and MerchandiseFreightTermsAllowances(a)$2,800$45FOB shipping point, 1/10, n/30$200(b) 7,600 60FOB destination, n/30 800(c) 1,400 55FOB shipping point, 2/10, n/30 600(d) 500 50FOB destination, 1/10, n/30 0Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Q: a truck costing $30,000 and on which $26,000 of accumulated depreciation has been re-corded was discarded as having no value. the entry to record this event would include a a.gain of $4,000 b.loss of $4,000 c.credit to accumulated depreciation for $26,000 d.credit to accumulated depreciation for $30,000

Q: Using the following data taken from Connor Inc. which uses a periodic inventory system, determine the gross profit to be reported on the income statement for the year ended May 31.Merchandise inventory, June 1$ 393,250Merchandise inventory, May 31380,100Purchases1,579,600Purchases returns and allowances81,200Purchases discounts16,500Sales2,060,000Freight in59,250

Q: a truck costing $110,000 was destroyed when its engine caught fire. at the date of the fire, the accumulated depreciation on the truck was $50,000. an insurance check for $125,000 was received based on the replacement cost of the truck. the entry to record the insurance proceeds and the disposition of the truck will include a a.gain on disposal of $15,000 b.credit to the truck account for $60,000 c.credit to the accumulated depreciation account for $50,000 d.gain on disposal of $65,000

Q: Which of the following costs would be included in the merchandise inventory of the buyer?(a)Purchase price(b)Insurance in transit FOB shipping point(c)Freight for delivery FOB shipping point(d)Repair due to negligence of receiving clerk(e)Receiving department employee salary(f)Cost of processing purchase orders

Q: the book value of an asset will equal its fair market value at the date of sale if a.a gain on disposal is recorded b.no gain or loss on disposal is recorded c.the plant asset is fully depreciated d.a loss on disposal is recorded

Q: Journalize the following transactions on the books of Monroe Sales Company, assuming a perpetual inventory system is used and adjustments for customer refunds and estimated returns inventory were made at year-end. Monroe Sales Company uses the net method to record sales.(a) On December 27, 20Y8, Monroe Sales sells $9,525 on account to Garrison Brewer with terms of 2/10, n/30. The cost of the merchandise sold was $6,905.(b) On January 2, 20Y9, a $125 credit memo is given to Garrison Brewer due to returned merchandise. The cost of the returned merchandise was $65.(c) On January 4, 20Y9, Garrison Brewer submits payment in full.

Q: a loss on disposal of a plant asset is reported in the financial statements a.in the other revenues and gains section of the income statement b.in the other expenses and losses section of the income statement c.as a direct increase to the capital account on the balance sheet d.as a direct decrease to the capital account on the balance sheet

Q: Journalize these transactions for Armour Inc. using both the periodic inventory system and the perpetual inventory system, presented in the side-by-side format of the following form.Oct.7 Sold merchandise on credit to Rondo Distributors, terms n/30. The cost of the merchandise was $720. 8 Purchased merchandise, $10,000, terms FOB shipping point, 2/15, n/30, with prepaid freight charges of $525 added to the invoice. PERIODIC INVENTORY SYSTEM PERPETUAL INVENTORY SYSTEMDateDescriptionDr.Cr.| DescriptionDr.Cr. | | | | | | |

Q: a plant asset with a cost of $180,000 and accumulated depreciation of $171,000 is sold for $21,000. what is the amount of the gain or loss on disposal of the plant asset? a.$21,000 loss b.$12,000 loss c.$12,000 gain d.$21,000 gain

Q: Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10, n/30. Journalize Conquest’s purchase and payment.