Patton Company bought real estate, on which there was an old office building, for
$500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for
the remainder. It immediately had the old building razed at a net cost of $35,000.
Attorneys were paid $6,000 in connection with the land purchase and an additional
$3,000 in connection with permits and zoning variances necessary for Patton’s new
office building. $20,000 was paid for excavation for the basement of the new building,
$1,500,000 was paid for construction of the new building, and $75,000 was paid for a
parking lot and necessary walkways and driveways.
The new office building should be recorded at
a. $1,500,000.
b. $1,523,000.
c. $1,520,000.
d. $1,558,000.
Answer:
Using the percentage of receivables method for recording bad debt expense, estimated
uncollectible accounts are $14,000. If the balance of the Allowance for Doubtful
Accounts is $2,000 debit before adjustment, what is the balance after adjustment?
a. $2,000
b. $12,000
c. $14,000
d. $16,000
Answer:
The following information was available for Pete Company at December 31, 2015:
beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000;
and sales $1,350,000. Pete’s inventory turnover in 2015 was
a. 10.9 times.
b. 12.3 times.
c. 14.1 times.
d. 16.9 times.
Answer:
Determine the missing items.
Assets = Liabilities + Stockholders’ Equity
$85,000 $52,000
(a)
(b) $28,000
$34,000
$84,000 (c)
$50,000
Answer:
A coal company invests $15 million in a mine estimated to have 20 million tons of coal
and no salvage value. It is expected that the mine will be in operation for 5 years. In the
first year, 1,000,000 tons of coal are extracted and sold. What is the depletion expense
for the first year?
a. $750,000
b. $300,000
c. $75,000
d. Cannot be determined from the information provided.
Answer:
The use of computers in recording business events
a. has made the recording process more efficient.
b. does not use the same principles as manual accounting systems.
c. has greatly impacted the identification stage of the accounting process.
d. is economical only for large businesses.
Answer:
Depletion expense is computed using the
a. double-declining-balance method.
b. effective interest method.
c. straight-line method.
d. units-of-activity method.
Answer:
Revenues would not result from
a. sale of merchandise.
b. issuance of common stock.
c. performance of services.
d. rental of property.
Answer:
Which list below best describes the major services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.
Answer:
The cost of land includes all of the following except
a. real estate brokers’ commissions.
b. closing costs.
c. accrued property taxes.
d. parking lots.
Answer:
A retail store credited the Sales Revenue account for the sales price and the amount of
sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue
account amounted to $630,000, what is the amount of the sales taxes owed to the taxing
agency?
a. $600,000
b. $630,000
c. $31,500
d. $30,000
Answer:
It is not true that current assets are assets that a company expects to
a. realize in cash within one year.
b. sell within one year.
c. use up within one year.
d. acquire within one year.
Answer:
Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2015. Interest
expense for the year ended December 31, 2015 was
a. $6,000.
b. $2,500.
c. $2,000.
d. $1,500.
Answer:
Each of the following are particularly interested in the statement of cash flows except
a. creditors.
b. employees.
c. shareholders.
d. government agencies.
Answer:
In periods of rising prices, the inventory method which results in the inventory value on
the balance sheet that is closest to current cost is the
a. FIFO method.
b. LIFO method.
c. average-cost method.
d. tax method.
Answer:
Douglas Company issued a $4,500,000, 10%, 10-year mortgage note payable to finance the
construction of a building at December 31, 2015. The terms provide for semiannual installment
payments of $257,924.
Instructions
Prepare the entry to record:
(a) the mortgage loan on December 31, 2015.
(b) the first installment payment.
Answer:
Cash receipts from interest and dividends are classified as
a. financing activities.
b. investing activities.
c. operating activities.
d. either financing or investing activities.
Answer:
Under the lower-of-cost-or-market basis, market is defined as current replacement cost.
Answer:
A __________________ fund is used to pay relatively small expenditures.
Answer:
Fair Value Adjustment is a valuation _______________ account which is
_______________ to (from) the cost of the investments.
Answer:
The adjustments columns of the worksheet for Mandy Company are shown below.
Instructions
[a] Prepare the adjusting entries.
[b] Assuming the adjusted trial balance amount for each account is normal, indicate the
financial statement column to which each balance should be extended.
Answer:
The primary purpose of a trial balance is to prove the mathematical equality of the
debits and credits after posting.
Answer:
Bellingham Corporation has the following stockholders’ equity balances at December
31, 2015.
Answer:
Accumulated Depreciation is a liability account and has a normal credit account
balance.
Answer: