Exam 2 Accounting

A company purchased land for $400,000 cash. Real estate brokers' commission was $25,000 and $45,000 was spent for demolishing an old building on the land before construction of a new building could start. The capitalized cost of land would be

It would be 400,000 because that is what the land cost then you add the commission for the estate broker with with add 25,000 and 45,000 that was added for the work of demolishing the place. Making the capitalized cost of the land 470,000.

Salvage value

an estimate of a plant asset's value at the end of its useful life.

A plant asset was purchased some time ago on January 1 for $75,000 and had an estimated salvage value of $15,000 at the end of its useful life. The current year's depreciation expense is $5,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25,000. The remaining useful life of the plant asset is

The plant asset original purchase is 75,000 and you subtract 15,000 which is the salvage. which will result in 60,000 then you have to divide the annual depreciation expense which is 5,000. So once you do that we get 12 as the total useful life, Then you have to determine the Asset Current Age by doing the Accumulated Depreciation which is the 25,000 you then divide the the annual Depreciation Expense which is 5,000. After you divide you get 5 then you do the original 12-5 to get 7. Which 7 years is the remaining life of the plant asset.

In 20Y1, Blanchard Corporation has plant equipment that originally cost $120,000 and has accumulated depreciation of $72,000. 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?

First you are given two of the number 120,000 is equipment and the accumulated depreciation 72,000. To get the loss of disposable of plant Asset you just subtract 120,000 minus the 72,000 and you 48,000. So you pick Accumulated Depreciation – Equipment 72,000 Loss on Disposal of Plant Assets 48,000 Equipment 120,000.

Equipment that cost $144,000 and on which $120,000 of accumulated depreciation has been recorded was disposed of for $36,000 cash. The entry to record this event would include a

So first you have equipment and you subtract the accumulated depreciation so you have the book value of 24,000. But you also have cash of 36,000 and need to subtract the book value of 24,000. which this ends up being 12,000 dollars of disposal gain.

This will be the journal entry

Dr. Cash 36,000 Accumulated Depreciation 120,000 Cr. Equipment 144,000 Disposal gain

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

The Patent Account

Which of the following activities is not a component of the operating cycle?

Payment of employees’ salaries

Under a perpetual inventory system

Accounting records continuously disclose the amount of inventory

Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate (rate of return) inherent in the credit terms?

You have to do 30-10 which this equals 20 then you have to divide the 360 day years by the 20 day period which then this equals 18 periods. The you have to do the 18 day period and multiple by the percentage of the 2/10 which was multiplied by .02 and that equaled the annual interest of credit term of 36%.

Tony’s Market recorded the following events involving a recent purchase of inventory: Purchased goods for $100,000 on account, terms 2/10, n/30. Returned $2,000 of the shipment for credit. Paid $500 freight on the shipment. Paid the invoice within the discount period.

As a result of these events, the company’s inventory balance a. increased by $98,000. b. increased by $98,500. c. increased by $96,540. d. increased by $96,500.

You have listed purchase goods 100,000 and then the 2 % of interest a returned of 2,000 and freight of 500. So then you use the purchase good of 100,000 then you subtract the return of 2,000 then you subtract you create the less:Purchase discount captured on the net purchase (98,000 times the .02) that will equal 1960. So then you subtract all 100,000-2,000-1960. So then you add the 500 and that will equal the answer of 96,540.

Reeves Company is taking a physical inventory on March 31, the last day of its fiscal year. Which of the following must be included in this inventory count?

Goods that Reeves is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due

company purchased inventory as follows: 200 units at $6.00 300 units at $6.60 The weighted average unit cost for inventory is

So first you get the inventory cost flow divided by assumptions. So you do (200×6)=1200 then you do 300×6.60= 1980 so then You add both amounts of 1200+1980. After that you divide by the subtotal of 200+300. So its 3180/500 that equals 6.36.

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

nonexistent; that is, there is no such accounting requirement

Whitman Corporation sells six different products. The following information is available on December 31: Inventory Item Units Cost per unit Market value per unit Estimated Selling Price Tin 60 $ 500 $ 505 $515 Titanium 20 5,000 4,950 5,100 Stainless Steel 80 2,000 1,910 1,985 Aluminum 80 350 285 290 Iron 40 400 410 425 Fiberglass 40 300 295 310 When apply

$332,400

All of the following are examples of internal control procedures except a. using prenumbered documents. b. reconciling the bank statement. c. customer satisfaction surveys. d. insistence that employees take vacations

customer satisfaction surveys

Which of the following is not an internal control activity for cash? a. The number of persons who have access to cash should be limited. b. The functions of record keeping and maintaining custody of cash should be combined. c. Surprise audits of cash on hand should be made occasionally. d. All cash receipts should be recorded promptly.

The functions of record keeping and maintaining custody of cash should be combined

Which of the following would be added to the balance per books on a bank reconciliation? a. Outstanding checks. b. Deposits in transit. c. Notes collected by the bank. d. NSF check.

Karlin Company gathered the following reconciling information in preparing its April bank reconciliation: Cash balance per books, 4/30 $17,600 Deposits in transit 2,400 Notes receivable and interest collected by bank 5,920 Bank charge for check printing 200 Outstanding checks 12,000 NSF check 1,120 The adjusted cash balance per books on April 30 is a. $24,600. b. $23,520. c. $22,200. d. $24,440

So you need to find adjusted for the correct cash balance per book and the cash balance per book before reconciliation. So you used the balance per books then you add the notes receivable and interest collected by bank. Then you need to subtract the bank charges and subtract the NSF then that should equal the adujusted cash balance per books for April 30th.

The following information is related to December 31, 20Y1 balances. • Accounts receivable $3,150,000 • Allowance for doubtful accounts (credit) (270,000) • Net realizable value $2,880,000 During 20Y2 sales on account were $870,000 and collections on account were $516,000. Also during 20Y2 the company wrote off $48,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that $324,000 of receivables will be uncollectible. Bad debt expense for 20Y2 is a. $102,000. b. $ 54,000. c. $324,000. d. $ 6,000.

Focus on the changes in the AFDA in 20Y2. During 20Y2 the company wrote off $48,000 in uncollectible accounts. An analysis of outstanding receivable accounts at 20Y2 year end indicated that $324,000 of receivables will be uncollectible = AFDA desired 20Y2 ending balance Begin Bal + Addition = Reduction + Ending Bal 270,000 ? 48,000 324,000 Thus, to calculate the Bad debt expense for 20Y2: $102,000

An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: Accounts receivable $ 3,200,000 Allowance for doubtful accounts per books before adjustment (credit) 200,000 Total estimated uncollectible accounts at December 31 260,000 What is the net realizable value of the accounts receivable at December 31 after year-endadjustment? a. $2,740,000 b. $3,000,000 c. $3,200,000 d. $2,940,000

Notice the question asks about Accounts Receivable’s Net Realizable Value = NRV NRV = A/R balance – AFDA • AFDA target balance = Estimated uncollectible account at 12/31 Thus, NRV = $3,200,000 - $260,000 (AFDA after adjustment) = $2,940,000

In reviewing the accounts receivable, the net realizable value is $28,000 before the write-off of a $2,000 account. What is the net realizable value after the write-off? a. $28,000 b. $2,000 c. $30,000 d. $26,000