I do have some answers that I have completed so far and will post here-
1. Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account
a. increases the allowance for uncollectible accounts.
b. has no effect on the allowance for uncollectible accounts.
c. has no effect on net income.
d. decreases net income.
2. The following accounts were abstracted from Todd Co.'s unadjusted trial balance at December 31, 2007:
Accounts receivable $750,000
Allowance for uncollectible accounts 8,000
Net credit sales $3,000,000
Todd estimates that 2% of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2007, the allowance for uncollectible accounts should have a credit balance of
3. On January 1, 2006, Marr Co. exchanged equipment for a $400,000 zero-interest-bearing note due on January 1, 2009. The prevailing rate of interest for a note of this type at January 1, 2006 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in Marr's 2007 income statement?
4. In preparing its August 31, 2007 bank reconciliation, Adel Corp. has available the follow-ing information:
Balance per bank statement, 8/31/07 $21,650
Deposit in transit, 8/31/07 3,900
Return of customer's check for insufficient funds, 8/30/07 600
Outstanding checks, 8/31/07 2,750
Bank service charges for August 100
At August 31, 2007, Adel's correct cash balance is
5. Sandy, Inc. had the following bank reconciliation at March 31, 2007:
Balance per bank statement, 3/31/07 $37,200
Add: Deposit in transit 10,300
Less: Outstanding checks 12,600
Balance per books, 3/31/07 $34,900
Data per bank for the month of April 2007 follow:
All reconciling items at March 31, 2007 cleared the bank in April. Outstanding checks at April 30, 2007 totaled $6,000. There were no deposits in transit at April 30, 2007. What is the cash balance per books at April 30, 2007?
6. How should the following costs affect a retailer's inventory valuation?
Freight-in Interest on Inventory Loan
a. Increase No effect
b. Increase Increase
c. No effect Increase
d. No effect No effect
7. The following information applied to Grey, Inc. for 2007:
Merchandise purchased for resale $300,000
Purchase returns 2,000
Grey's 2007 inventoriable cost was
8. Cole Corp.'s accounts payable at December 31, 2007, totaled $800,000 before any necessary year-end adjustments relating to the following transactions:
- On December 27, 2007, Cole wrote and recorded checks to creditors totaling $350,000 causing an overdraft of $100,000 in Cole 's bank account at December 31, 2007. The checks were mailed out on January 10, 2008.
- On December 28, 2007, Cole purchased and received goods for $150,000, terms 2/10, n/30. Cole records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2008.
- Goods shipped f.o.b. destination on December 20, 2007 from a vendor to Cole were received January 2, 2008. The invoice cost was $65,000.
At December 31, 2007, what amount should Cole report as total accounts payable?
9. Tysen Retailers purchased merchandise with a list price of $50,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Tysen should record the cost of this merchandise as
10. Dark Co. recorded the following data pertaining to raw material X during January 2007:
Date Received Cost Issued On Hand
1/1/07 Inventory $8.00 3,200
1/11/07 Issue 1,600 1,600
1/22/07 Purchase 4,000 $9.40 5,600
The moving-average unit cost of X inventory at January 31, 2007 is
11. During periods of rising prices, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory cost flow methods?
a. Yes No
b. Yes Yes
c. No Yes
d. No No
12. Noll Co. had 450 units of product A on hand at January 1, 2007, costing $42 each. Purchases of product A during January were as follows:
Date Units Unit Cost
Jan. 10 600 $44
18 750 46
28 300 48
A physical count on January 31, 2007 shows 600 units of product A on hand. The cost of the inventory at January 31, 2007 under the LIFO method is
13. Carr Co. adopted the dollar-value LIFO inventory method on December 31, 2007. Carr's entire inventory constitutes a single pool. On December 31, 2007, the inventory was $320,000 under the dollar-value LIFO method. Inventory data for 2008 are as follows:
12/31/08 inventory at year-end prices $440,000
Relevant price index at year end (base year 2007) 110
Using dollar value LIFO, Carr's inventory at December 31, 2008 is
14. Teel Distribution Co. has determined its December 31, 2007 inventory on a FIFO basis at $250,000. Information pertaining to that inventory follows:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Teel records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2007, the loss that Teel should recognize is
15. Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value
a. when it is below the net realizable value less the normal profit margin.
b. when it is below the net realizable value and above the net realizable value less the normal profit margin.
c. when it is above the net realizable value.
d. regardless of net realizable value.
16. The original cost of an inventory item is above the replacement cost and the net realizable value. The replacement cost is below the net realizable value less the normal profit margin. As a result, under the lower-of-cost-or-market method, the inventory item should be reported at the
a. net realizable value.
b. net realizable value less the normal profit margin.
c. replacement cost.
d. original cost.
17. Gore Company's accounting records indicated the following information:
Inventory, 1/1/07 $ 600,000
Purchases during 2007 3,000,000
Sales during 2007 3,800,000
A physical inventory taken on December 31, 2007, resulted in an ending inventory of $700,000. Gore's gross profit on sales has remained constant at 25% in recent years. Gore suspects some inventory may have been taken by a new employee. At December 31, 2007, what is the estimated cost of missing inventory?
20. On December 1, 2007, Logan Co. purchased a tract of land as a factory site for $800,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2007 were as follows:
Cost to raze old building $70,000
Legal fees for purchase contract and to record ownership 10,000
Title guarantee insurance 16,000
Proceeds from sale of salvaged materials 8,000
In Logan 's December 31, 2007 balance sheet, what amount should be reported as land?
24. On September 10, 2007, Flint Co. incurred the following costs for one of its printing presses:
Purchase of attachment $55,000
Installation of attachment 5,000
Replacement parts for renovation of press 18,000
Labor and overhead in connection with renovation of press 7,000
Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized?
25. On January 2, 2007, Renn Corp. replaced its boiler with a more efficient one. The following information was available on that date:
Purchase price of new boiler $150,000
Carrying amount of old boiler 10,000
Fair value of old boiler 4,000
Installation cost of new boiler 20,000
The old boiler was sold for $4,000. What amount should Renn capitalize as the cost of the new boiler?
26. Gant Co. purchased a machine on July 1, 2007, for $400,000. The machine has an estimated useful life of five years and a salvage value of $80,000. The machine is being depreciated from the date of acquisition by the 150% declining-balance method. For the year ended December 31, 2007, Gant should record depreciation expense on this machine of
27. A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2005. The depreciation expense for 2007 using the double-declining balance method would be original cost multiplied by
a. 90% × 40% × 40%.
b. 60% × 60% × 40%.
c. 90% × 60% × 40%.
d. 40% × 40%.
28. On April 1, 2005, Reiley Co. purchased new machinery for $240,000. The machinery has an estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method. The accumulated depreciation on this machinery at March 31, 2007, should be
29. A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods?
Straight-line Productive Output
a. Yes No
b. Yes Yes
c. No Yes
d. No No
30. A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life. How would using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset?
a. Decrease Decrease
b. Decrease Increase
c. Increase Decrease
d. Increase Increase
31. Nolan Company acquired a tract of land containing an extractable natural resource. Nolan is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows:
Estimated restoration costs 1,500,000
If Nolan maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?
32. In January 2007, Jenn Mining Corporation purchased a mineral mine for $4,200,000 with removable ore estimated by geological surveys at 2,500,000 tons. The property has an estimated value of $400,000 after the ore has been extracted. Jenn incurred $1,150,000 of development costs preparing the property for the extraction of ore. During 2007, 340,000 tons were removed and 300,000 tons were sold. For the year ended December 31, 2007, Jenn should include what amount of depletion in its cost of goods sold?
33. On June 30, 2007, Cey, Inc. exchanged 2,000 shares of Seely Corp. $30 par value common stock for a patent owned by Gore Co. The Seely stock was acquired in 2007 at a cost of $55,000. At the exchange date, Seely common stock had a fair value of $45 per share, and the patent had a net carrying value of $110,000 on Gore's books. Cey should record the patent at
34. January 2, 2004, Koll, Inc. purchased a patent for a new consumer product for $180,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2007, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product. What amount should Koll charge against income during 2007, assuming amortization is recorded at the end of each year?
35. On January 1, 2003, Unruh Company purchased a copyright for $800,000, having an estimated useful life of 16 years. In January 2007, Unruh paid $120,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2007, should be
36. Which of the following legal fees should be capitalized?
Legal fees to Legal fees to successfully
obtain a copyright defend a trademark
a. No No
b. No Yes
c. Yes Yes
d. Yes No
37. Which of the following costs of goodwill should be amortized over their estimated useful lives?
Costs of goodwill from a
business combination Costs of developing
accounted for as a purchase goodwill internally
a. No No
b. No Yes
c. Yes Yes
d. Yes No