A plant asset was purchased on January 1 for $45,000 with an estimated salvage value
of $5,000 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.10 years.
b.8 years.
c.5 years.
d.3 years.
A company sells a plant asset that originally cost $240,000 for $80,000 on December
31, 2014. The accumulated depreciation account had a balance of $120,000 after the
current year’s depreciation of $20,000 had been recorded. The company should
recognize a
a.$40,000 loss on disposal.
b.$40,000 gain on disposal.
c.$80,000 loss on disposal.
d.$80,000 gain on disposal.
Hess Computer Store has credit sales of $450,000 in 2013 and a debit balance of $600
in the Allowance for Doubtful Accounts at year end. As of December 31, 2013,
$130,000 of accounts receivable remain uncollected. The credit manager of Hess
prepared an aging schedule of accounts receivable and estimates that $7,800 will prove
to be uncollectible.
On March 4, 2014 the credit manager authorizes a write-off of the $1,000 balance owed
by A. Myers.
Instructions
(a)Prepare the adjusting entry to record the estimated uncollectible accounts expense in
2013.
(b)Show the balance sheet presentation of accounts receivable on December 31, 2013.
(c)On March 4, before the write-off, assume the balance of Accounts Receivable
account is $145,000 and the balance of Allowance for Doubtful Accounts is a credit of
$5,000. Make the appropriate entry to record the write off of the Myers account. Also
show the balance sheet presentation of accounts receivable before and after the
write-off.
Ace Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2014. What
is the annual dividend on the preferred stock?
a.$50 per share
b.$50,000 in total
c.$5,000 in total
d.$0.50 per share
Morton’s Courier Service recorded a loss of $6,000 when it sold a van that originally
cost $56,000 for $10,000. Accumulated depreciation on the van must have been
a.$52,000.
b.$16,000.
c.$50,000.
d.$40,000.
The interest charged on a $250,000 note payable, at the rate of 6%, for a year would be
a.$15,000.
b.$7,500.
c.$3,750.
d.$1,250.
During 2014, Ronald Corporation reported net sales of $1,500,000, net income of
$900,000, and depreciation expense of $100,000. Ronald also reported beginning total
assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and
accumulated depreciation of $500,000. Ronald’s asset turnover ratio is
a.1.5 times.
b.1.2 times.
c.0.98 times.
d.0.72 times.
LKN Company reported net income of $80,000 for the year. During the year, accounts
receivable increased by $6,000, accounts payable decreased by $4,000 and depreciation
expense of $10,000 was recorded. Net cash provided by operating activities for the year
is
a.$90,000.
b.$70,000.
c.$72,000.
d.$80,000.
The following partial amortization schedule is available for Courtney Company who
sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (iv)?
a.$22,000
b.$18,000
c.$24,000
d.$16,000
If $13,000 is deposited in a savings account at the end of each year and the account
pays interest of 5% compound annually, what will be the balance of the account at the
end of 10 years?
a.$13,650
b.$211,757
c.$163,512
d.$136,500
The Hartman Boat Company’s bank statement for the month of November showed a
balance per bank of $7,000. The company’s Cash account in the general ledger had a
balance of $5,659 at November 30. Other information is as follows:
Instructions
(a)Prepare a bank reconciliation for the Hartman Boat Company at November 30.
(b)Prepare any adjusting entries necessary as a result of the bank reconciliation.
Ken Corsig invested $20,000 at 8% annual interest and left the money invested without
withdrawing any of the interest for 15 years. At the end of the 15 years, Ken withdrew
the accumulated amount of money. What amount did Ken withdraw, assuming the
investment earns simple interest?
a.$25,600
b.$44,000
c.$30,000
d.$24,000
Lindy Corporation has 1,000,000 authorized shares of $20 par value common stock. As
of June 30, 2014, there were 600,000 shares issued and outstanding. On June 30, 2014,
the board of directors declared a $0.50 per share cash dividend to be paid on August 1,
2014.
Instructions
Prepare the necessary journal entries to be recorded on (a) the date of declaration, (b)
the date of record, and (c) the date of payment.
Mergenthaler Company has just purchased machinery that requires annual payments of
$50,000 to be paid at the end of each of the next 4 years. The appropriate discount rate
is 15%. What is the present value of the payments?
a.$142,749
b.$200,000
c.$58,719
d.$225,201
Salem Company hired Kirk Construction to construct an office building for
₤8,000,000 on land costing ₤2,000,000, which Salem Company owned. The
building was complete and ready to be used on January 1, 2014 and it has a useful life
of 40 years. The price of the building included land improvements costing ₤600,000
and personal property costing ₤750,000. The useful lives of the land improvements
and the personal property are 10 years and 5 years, respectively. Salem Company uses
component depreciation, and the company uses straight-line depreciation for other
similar assets. What total amount of depreciation expense would Salem Company report
on its income statement for the year ended December 31, 2014?
a.₤335,000
b.₤200,000
c.₤426,250
d.₤376,250
Which statement about long-term investments is not true?
a.They will be held for more than one year.
b.They are not currently used in the operation of the business.
c.They include investments in stock of other companies and land held for future use.
d.They do not include long-term notes receivable.
On January 1, Sewell Corporation issues $2,000,000, 5-year, 12% bonds at 96 with
interest payable on January 1. What is the carrying value of the bonds at the end of the
third interest period?
a.$1,968,000
b.$1,952,000
c.$1,888,000
d.$1,856,000
B. Jones Corporation has issued common stock only. The company has been successful
and has a gross profit rate of 20%. The information shown below was taken from the
company’s financial statements.
Instructions
Compute the following:
(a)Accounts receivable turnover and the average number of days required to collect the
accounts receivable.
(b)The inventory turnover and the average days in inventory.
(c)Return on common stockholders€ equity.
Assume that the E-Zip Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, treasury stock purchased with cash 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.
Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of
Bathlinks’s financial statements that
a.Bathlinks is getting a 27% return on its assets.
b.there is a risk that Bathlinks cannot pay its debts as they come due.
c.73% of the assets are financed by the stockholders.
d.based on this measure, the user should not invest in Bathlinks.