Identify the internal control procedures applicable to cash receipts for Colorado
Company in each of the following situations.
Financial information is presented below:
The amount of net sales on the income statement would be
a.$154,000.
b.$150,000.
c.$160,000.
d.$156,000.
Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit
terms of 2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged,
along with a check to settle the account within the discount period. What is the amount
of the check?
a.$4,900
b.$4,920
c.$4,000
d.$3,920
Dobler Company purchased factory equipment with an invoice price of $78,000. Other
costs incurred were freight costs, $1,300; installation wiring and foundation, $2,200;
material and labor costs in testing equipment, $700; oil lubricants and supplies to be
used with equipment, $500; fire insurance policy covering equipment, $1,500. The
equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful
service life.
Instructions
(a)Compute the acquisition cost of the equipment. Clearly identify each element of cost.
(b)If the straight-line method of depreciation was used, the annual rate applied to the
depreciable cost would be __________.
Determine the interest on the following notes:
Assume that the Quinn Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, income taxes paid would be classified on the statement of cash
flows.
a.Operating activities section.
b.Investing activities section.
c.Financing activities section.
d.Does not represent a cash flow.
A plant asset was purchased on January 1 for $75,000 with 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
a.15 years.
b.12 years.
c.5 years.
d.7 years.
Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest
annually. Assuming straight-line amortization, what is the total interest cost of the
bonds?
a.$240,000
b.$256,000
c.$224,000
d.$232,000
Machinery was purchased for $170,000 on January 1, 2013. Freight charges amounted
to $7,000 and there was a cost of $20,000 for building a foundation and installing the
machinery. It is estimated that the machinery will have a $30,000 salvage value at the
end of its 5-year useful life. What is the amount of accumulated depreciation at
December 31, 2014, if the straight-line method of depreciation is used?
a.$66,800.
b.$33,400.
c.$28,600.
d.$57,200.
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 value of Heineken’s inventory at May 31, 2014 is
a.$1,400
b.$1,500
c.$1,600
d.$9,000
Haxen Company’s records show the following for the month of January:
How much are total expenses for January?
a.$2,002,000
b.$2,318,000
c.$1,984,000
d.None of the answer choices are correct.
Which of the following describes shipping terms of FOB shipping point?
a.The purchaser is responsible for the shipping charges.
b.The shipping charges are debited to Delivery Expense by the buyer.
c.At the end of the year, any items in transit should be included as part of the seller’s
inventory.
d.The seller must absorb the cost of shipping the items.