In 2014 Wilkinson Company had net credit sales of $1,500,000. On January 1, 2014,
Allowance for Doubtful Accounts had a credit balance of $36,000. During 2014,
$60,000 of uncollectible accounts receivable were written off. Past experience indicates
that the allowance should be 10% of the balance in receivables (percentage of
receivables basis). If the accounts receivable balance at December 31 was $400,000,
what is the required adjustment to the Allowance for Doubtful Accounts at December
31, 2014?
a.$ 40,000
b.$150,000
c.$ 64,000
d.$ 60,000
Nix Corporation sold equipment for $20,000. The equipment had an original cost of
$60,000 and accumulated depreciation of $30,000. Ignoriing the tax effect, as a result of
the sale
a.net income will increase $20,000.
b.net income will increase $10,000.
c.net income will decrease $10,000.
d.net income will decrease $20,000.
Instructions: Complete the requirements specified for each of the following
independent situations.
1)Jumpstart Deliveries acquired a truck at a cost of $64,000 on January 1, 2014. The
truck is expected to have a salvage value of $8,000 at the end of its 4-year useful life.
Jumpstart uses the straight-line method. Prepare the journal entry to record annual
depreciation for 2015.
2)DynaChrome Bumpers bought two acres of land with an old office building on it that
was deemed unusable. The cost was $480,000 of which DynaChrome paid $80,000 in
cash as a down payment and signed a 7% mortgage for the remainder. DynaChrome
immediately had the old building razed at a net cost of $8,700 and sold the salvaged
materials for $2,200. Attorneys were paid $1,100 in connection with the purchase. The
architect’s fee for drawing building plans for the new building cost $6,800.
DynaChrome paid $3,100 in connection with permits and zoning variances necessary
prior to construction of the new building. DynaChrome paid the contractor $1,420,000
for construction of the new building, along with $42,000 for a parking lot and necessary
walkways and driveways.
A.At what amount should the land be recorded?
B.At what amount should the new office building be recorded?
3)On July 1, 2014, Winslow Enterprises sold equipment with an original cost of
$86,000 for $33,000. The equipment was purchased January 1, 2011, and was
depreciated using the straight-line method over a five-year useful life with a $9,000
salvage value. Prepare the journal entry to record the sale of the equipment.
4)Sonic Company bought machinery on January 1, 2009, at a cost of $90,000. The
machinery had an estimated life of 8 years and salvage value of $16,000. On January 1,
2014, Sonic estimates that the machinery will have a life of only 2 more years from
January 1, 2014, and the salvage value is now estimated to be $4,000. Sonic uses
straight-line depreciation. Compute the annual depreciation expense for 2014.
At May 1, 2014, Heineken Company had beginning inventory consisting of 200 units
with a unit cost of $7. During May, the company purchased inventory as follows:
400 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Heineken uses the
average cost method. The average cost per unit for May is
a.$7.00.
b.$7.50.
c.$7.60.
d.$8.00.
Tomlinson Packaging Corporation began business in 2014 by issuing 30,000 shares of
$5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock
for par. At year end, the common stock had a market value of $10. On its December 31,
2014 balance sheet, Tomlinson Packaging would report
a.Common Stock of $300,000.
b.Common Stock of $150,000.
c.Common Stock of $240,000.
d.Paid-in Capital of $200,000.
The following selected amounts are available for Thomas Company.
What is its ending Retained Earnings balance?
a.$2,200.
b.$2,300.
c.$1,900.
d.$2,100.
Financial accounting ethics violations are
a.not a problem in the U.S or internationally.
b.much more common in the U.S than internationally.
c.much more common internationally than in the U.S.
d.a major problem both in the U.S and internationally.
Bluing Corporation issued a one-year 9% $300,000 note on April 30, 2014. Interest
expense for the year ended December 31, 2014 was:
a.$27,000.
b.$20,250.
c.$18,000.
d.$15,750.
Use the following data to calculate the current ratio.
a.2.34 : 1
b.2.80 : 1
c.3.31 : 1
d.1.26 : 1
N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained
earnings of $475,000. What are the creditors’ claims on their assets?
a.$2,695,000
b.$1,255,000
c.$1,745,000
d.$3,305,000
Aps Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $70,000. Aps
Company’s times interest earned was
a.5.3 times.
b.9 times.
c.7 times.
d.4.3 times.
Warner Company issued $4,000,000 of 6%, 10-year bonds on one of its interest dates
for $3,454,800 to yield an effective annual rate of 8%. The effective-interest method of
amortization is to be used. The journal entry to be recorded at the end of the second
year for the payment of interest and the amortization of discount will include a
a.debit to Bond Interest Expense for $240,000.
b.credit to Cash for $279,295.
c.credit to Discount on Bonds Payable for $36,384.
d.credit to Discount on Bonds Payable for $39,295.
The debt to assets ratio is computed by dividing
a.long-term liabilities by total assets.
b.long-term liabilities by average assets.
c.total liabilities by total assets.
d.total liabilities by average assets.
Which of the following should be classified as an extraordinary item?
a.Effects of rare, major flooding
b.Write-off of a significant amount of receivables
c.Loss from the expropriation of facilities by a foreign government
d.Loss from disposal of the service division
Use the following information for Boxter, Inc., Clifford Company, Danforth Industries,
and Evans Services to answer the question “Using the LIFO adjustment, what is
Boxter’s inventory turnover ratio for 2014 (to the closest decimal place)?”
a.12.3 times
b.9.3 times
c.7.5 times
d.6.4 times
This information is for Campo Corporation for the year ended December 31, 2014.
Instructions
Prepare the 2014 statement of cash flows for Campo Corporation.
1> One item is omitted in each of the following summaries of balance sheet and income
statement data for three different corporations, A, B, and C.
Determine the amounts of the missing items, identifying each corporation by letter.
The following information is related to December 31, 2013 balances.
During 2014 sales on account were $195,000 and collections on account were
$115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts.
An analysis of outstanding receivable accounts at year end indicated that bad debts
should be estimated at $72,000. Bad debt expense for 2014 is:
a.$23,000.
b.$12,000.
c.$72,000.
d.$ 1,000.
Which of the following describes the timing of when revenue is recognized?
a. In the period in which the related expenses are paid
b.In the period in which the performance obligation is satisfied
c.In the period in which payment is received for goods sold or work performed
d.In the period in which the costs associated with earning the revenue are incurred and
payment is received for goods sold or work performed
Hogan Industries had the following inventory transactions occur during 2014:
The company sold 102 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using FIFO?
(rounded to whole dollars)
a.$4,882
b.$4,730
c.$1,696
d.$1,544