Assignment
Question 1
On July 1, 2016, Spinach Company purchased for $540,000 a warehouse building and the land on which it is located. The following data was available concerning the property:
Current appraised value Seller's original cost
Land $200,000 $140,000
Warehouse building $300,000 $280,000
$500,000 $420,000
Spinach would record the land at:
A. $140,000
B. $180,000
C. $200,000
D. $216,000
Question 2
Brussels Sprouts Company acquired an asset by issuing 100 shares of its $100 par value preferred stock to the seller. The company last sold shares of its preferred stock two years ago at a price of $130 a share. While no current market value for the asset obtained is readily available, an independent appraisal placed its value at $12,000. Brussels Sprouts should record this asset at:
A. $0
B. $10,000
C. $12,000
D. $13,000
Question 3
At January 1, 2015, Turnip Co. had a credit balance of $260,000 in its allowance for uncollectible accounts. Based on past experience, 2% of Turnip's credit sales have been uncollectible. During 2015 Turnip wrote off $325,000 of uncollectible accounts. Credit sales for 2015 were $9,000,000. On its December 31, 2015 balance sheet, what amount should Turnip report as allowance for uncollectible accounts?
A. $115,000
B. $180,000
C. $245,000
D. $440,000
Question 4
Once a company purchases an asset and capitalizes its original costs, all subsequent expenditures that are related to the asset are expensed.
True or False
Question 5
Squash Co. uses the straight-line depreciation for its plant, property, and equipment, which, stated at cost, consisted of the following:
12/31/2015 12/31/2014
Land $25,000 $25,000
Buildings $195,000 $195,000
Machinery & Equipment $695,000 $650,000
$915,000 $870,000
Less accumulated depreciation ($400,000) ($370,000)
$515,000 $500,000
Squash's depreciation expense for 2015 and 2014 was $55,000 and $50,000 respectively. What amount was debited to accumulated depreciation during 2015 because of plant, property, and equipment retirements?
A. $10,000
B. $20,000
C. $25,000
D. $40,000
Question 6
In which of the following situations is the units-of-production method of depreciation most appropriate?
A. An asset incurs increasing repairs and maintenance with use.
B. An asset's service potential declines with use.
C. An asset is subject to rapid obsolescence.
D. An asset's service potential declines with the passage of time.
Question 7
An asset acquired by a deferred payment plan may be recorded at the present value of the deferred payments, which is determined by discounting the payments at an appropriate rate of interest.
True or False
Question 8
The straight-line method is always used for the amortization of capitalized intangibles.
True or False
Question 9
Which of the following is not a difference between definite lived intangible assets and goodwill?
A. Definite lived intangible assets are amortized while goodwill is not amortized.
B. Definite lived intangible assets can be internally created while goodwill cannot be internally created.
C. Definite lived intangible assets are tested at least annually for impairment while goodwill is not.
D. Definite lived intangible assets have a useful life while goodwill has an indefinite useful life.
Question 10
With regards to impaired assets that are held for sale, the FASB standard requires:
A. Recognition of loss upon impairment - Yes
Restoration of previously recognized impairment losses - Yes
B. Recognition of loss upon impairment - Yes
Restoration of previously recognized impairment losses - No
C. Recognition of loss upon impairment - No
Restoration of previously recognized impairment losses - Yes
D. Recognition of loss upon impairment - No
Restoration of previously recognized impairment losses - No
Question 11
Carrot Company was incorporated on January 1, 2015, with proceeds from the issuance of $750,000 in stock and borrowed funds of $110,000. During the first year of operations, revenues from sales and consulting amounted to $82,000, and operating costs and expenses totaled $64,000. On December 15, Carrot declared a $3,000 cash dividend, payable to stockholders on January 15, 2016. No additional activities affected owners' equity in 2015. Flip's liabilities increased to $120,000 by December 31, 2015. On Flip's December 31, 2015 balance sheet, total assets should be reported at?
A. $885,000
B. $882,000
C. $878,000
D. $875,000
Question 12
On January 1, 2012, Onion Inc. purchased a machine for $528,000 with no salvage value and depreciated it using the straight-line method using an estimated useful life of 8 years with no salvage value. On January 1, 2016, Onion determined the machine had a useful life of 6 years from the date of acquisition with a salvage value of $48,000. Therefore an accounting change was made in 2016 to reflect these revised estimations. The accumulated depreciation for this machine should have a balance at December 31, 2016 of:
A. $108,000
B. $264,000
C. $330,000
D. $372,000
Question 13
On January 1, 2014, Pepper Inc. purchased a patent for $714,000. The patent is being amortized over its remaining legal life of 15 years expiring on December 31, 2028. At the beginning of 2019, Pepper Inc. determined that the economic benefits of the patent would not last longer than ten years from the date of acquisition. What amount should be reported in on the income statement for amortization expense of this patent in 2019?
A. $47,600
B. $71,400
C. $95,200
D. None of the above
Question 14
Use the same information as Question 13. What amount should be reported on the balance sheet for the patent, net of accumulated amortization, at December 31, 2019?
A. $714,000
B. $476,000
C. $380,800
D. None of the above
Question 15
A company uses the allowance method to recognize uncollectable accounts expense. When collection is made on an account that was previously written off, what is the effect on each of the following accounts?
A. No effect to Allowance for bad debt and a decrease to bad debt expense
B. Increase to Allowance for bad debt and a decrease to bad debt expense
C. Increase to Allowance for bad debt and no effect to bad debt expense
D. No effect to Allowance for bad debt and no effect to bad debt expense
Question 16
During 2016, Tomato Company determined there has been a significant decrease in the market value of its equipment used in its manufacturing process. At December 31, 2016, Tomato compiled the information below:
Original cost of the equipment $500,000
Accumulated depreciation $300,000
Expected net future cash inflows (undiscounted) $175,000
Fair Value of the equipment $125,000
What is the amount of impairment loss that should be reported on Tomato's income statement for the year ended December 31, 2016?
A. $0
B. $25,000
C. $50,000
D. $75,000
Question 17
Celery Inc. is performing its annual impairment test for goodwill. It has determined that the fair value of the reporting unit exceeds its carrying value. Which of the following is correct concerning this test of impairment.
A. Goodwill should be retested at the entity level.
B. The assets and liabilities should be valued to determine if there has been an impairment of goodwill.
C. Goodwill should be written down as impaired.
D. Impairment is not indicated and no additional analysis is necessary.
Question 18
If the seller grants a cash discount to credit customers, it is acceptable accounting practice to record both the sale and the receivable net of the available cash discount.
True or False
Question 19
The term "non-interest-bearing note" is a misnomer because all notes do in fact contain an interest element.
True or False
Question 20
Using accrual accounting, the financial effects of transactions, events, and circumstances having cash consequences are reported in the period when they occur as opposed to the period in which the cash is received.
True or False
Question 21
Avocado Inc. presents the following financial statement information:
Income statement: 2000
Sales $2,500,000
Cost of goods sold 1,300,000
Net income 200,000
Balance sheets: 2000 1999
Accounts receivable $ 300,000 $ 200,000
Total assets 2,000,000 1,800,000
Total shareholders' equity 900,000 700,000
The accounts receivable turnover for 2000 is:
A. 4.33
B. 5.2
C. 8.33
D. 10.