ACCT 301A Exam 2

Which of the following investments will result in the smallest future amount?

One that offers annual compounding.

Which of the following is a primary characteristic of an annuity?

The periodic rents are always equal.

When an annuity is received at the end of each period, it is called a (n):

Ordinary Annuity

Sandhill Tag makes an investment today (January 1, 2023). Sandhill will receive $40000 every December 31st for the next six years (2023 - 2028). If Sandhill wants to earn 8% on her investment, what is the most she should invest on January 1, 2023?

$184915

Cash and cash equivalents are reported as current assets and include short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Cash equivalents are readily convertible to known amounts of cash and have original maturities of three months or less.

Atmore Company sells goods on account for $10,000 with credit terms of 2/10. net 30. If the company uses the net method to record sales on account, what is the correct journal entry at the time of the sale?

Debit Accounts Receivable for $9,800; Credit Sales Revenue for $9,800.

On November 26, 20X1, Crackle Company sold goods on account to Pop Co. for $5,000 with credit terms 2/10, net 30. Crackle uses the net method to record sales on account. Pop returned half of the goods on November 30 and made payment in full on December 7. What is Crackle’s journal entry to record the collection on account on December 7?

Debit Cash $2,500; Credit Accounts Receivable $2,450; Credit Sales Discount Forfeited $50

Jerque Company uses the allowance method of accounting for bad debts. At December 31, 20X1, management estimates that 3% of accounts receivable are noncollectable. The balance in Accounts Receivable is $65,000 and the Allowance for Doubtful Accounts has a $500 debit balance prior to adjustment. What is the net (cash) realizable value of Jerque’s Accounts Receivable at December 31, 20X1.

$63,050

In the gross method of recording cash discounts, sales discounts are:

Recorded when payment is received within the discount period

On March 1, 2020, Cullumber Pasta Company assigns $1,401800 of its accounts receivable to Bank of China as collateral for a $1002800 note. Bank of China assesses a finance charge of 1 percent of the accounts receivable and interest on the note of 14 percent. Which of the following is correct regarding this transaction?

On March 1, 2020, Cullumber Pasta Company will debit Interest Expense for $14018

The minimum cash amounts that banks often require their loan customers to maintain in checking accounts is called:

Compensating Balances

Notes receivable can be classified as

All of these answer choices are correct

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and

Is so near its maturity that there is an insignificant risk of changes in interest rates

In a perpetual inventory system, which of the following transactions would typically increase and decrease the inventory account?

Increase: Freight-In; Decrease: Purchase Discounts

MedPro Corporation is conducting its year-end 20X1 inventory count. The clerk in charge of the count needs advice about whether to include or exclude the following goods:

1) A shipment of raw materials was purchased FOB shipping point on December 29, 20X1. As of December 31, the goods have not yet arrived at MedPro’s warehouse.

2) MedPro shipped finished goods to a customer FOB destination on December 30 20X1. The goods are expected to arrive at the customer’s location on January 2, 20X2.

3) MedPro is holding goods on consignment from Corian Company. The inventory is stored in MedPro’s warehouse and has not yet been sold.

Which of these items should be included in MedPro’s year-end 20X1 physical inventory count?

Both the raw materials purchased FOB shipping point and the finished goods shipped FOB destination

In a period of rising prices, the inventory method that produces the lowest ending inventory is the:

LIFO periodic method

Which cost flow assumption would be most appropriate when a relatively small number of costly, easily distinguishable items are sold?

Specific identification

If beginning inventory is overstated:

Retained earnings is understated

The ending inventory and cost of goods sold will be the same whether a perpetual or periodic system is used under the:

FIFO method

When is it justifiable to write down inventory below historical cost?

When the revenue-producing ability of the inventory drops below its historical cost.

Which of the following statements about an inventory’s net realizable value (NRV) is correct?

Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable cost of completion, selling, and disposal.

The gross profit method of estimating inventory is not acceptable for:

Annual financial statements

Sandalwood Corporation purchased a warehouse next door to its headquarters. Sandalwood plans to raze the building and use the site for an overflow parking lot. Sandalwood allocated the purchase price to the land and the warehouse based on their relative fair values. What is the correct account for the portion of the cost allocated to the warehouse?

All the purchase price is capitalized as the cost of the land.

On July 1, 20X4, Ratcliff Corporation sold manufacturing equipment to MaMuse Inc. for $75,000. The equipment cost $160,000 when purchased on January 1, 20X1. The equipment was depreciated using straight-line depreciation and has an estimated useful life of 5 years and a salvage value of $10,000. What amount of gain or loss will Ratcliff recognize on the sale?

$20,000 gain

Cayo Casta Cabins Corporation recently purchased Ship Island Resort and Casino and the land on which it is located with the plan to tear down the resort and build a new luxury hotel on the site. Cayo Casta Cabin Corporation salvaged fixtures and wood flooring from Ship Island prior to demolishing the building. The proceeds from the sale of the salvaged materials should be

Recorded as a reduction of the cost of the land

Blossom Company purchased land and a building for a lump sum cost of $433,000. The land has a fair market value of $164,000 and the building has a fair market value of $338,000. The cost assigned to the land is

$141458