BUA Final – Flashcards

A characteristic of a plant asset is that it is a. intangible. b. used in the operations of a business. c. held for sale in the ordinary course of the business. d. not currently used in the business but held for future use.

Which one of the following items is not a consideration when recording depreciation expense on plant assets? a. Salvage value. b. Estimated useful life. c. Cash needed to replace the plant asset. d. Cost.

The book value of an asset is equal to the a. asset's fair value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset's cost less accumulated depreciation.

Recording depreciation each period is necessary in accordance with the a. going concern principle. b. historical cost principle. c. expense recognition (matching) principle. d. asset valuation principle.

All the following are needed for the computation of depreciation except a. training costs of manufacturing personnel. b. cost. c. salvage value. d. estimated useful life.

Equipment with a cost of $320,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,000 hours? a. $80,000. b. $87,500. c. $82,500. d. $72,500.

Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits. b. Time valuation. c. Straight-line. d. Double declining-balance.

The double declining-balance method of depreciation produces a(n) a. decreasing depreciation expense each period. b. increasing depreciation expense each period. c. declining percentage rate each period. d. constant amount of depreciation expense each period.

A company purchased factory equipment on June 1, 2014, for $96,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2014, is a. $9,000. b. $5,250. c. $4,500. d. $3,750.

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.

Mitchell Corporation bought equipment on January 1, 2014. The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years and depreciation is calculated on the straight-line basis. The book value of the equipment at the beginning of the third year would be a. $180,000. b. $150,000. c. $130,000. d. $50,000.

A gain or loss on disposal of a plant asset is determined by comparing the a. replacement cost of the asset with the asset's original cost. b. book value of the asset with the asset's original cost. c. original cost of the asset with the proceeds received from its sale. d. book value of the asset with the proceeds received from its sale.

Jack's Copy Shop bought equipment for $150,000 on January 1, 2013. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014? a. $50,000. b. $20,000. c. $25,000. d. $37,500

An asset was purchased for $300,000. It had an estimated salvage value of $60,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $48,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be a. $36,000. b. $26,400. c. $18,000. d. $25,200.

When an asset is sold, a gain occurs when the a. sale price exceeds the book value of the asset sold. b. sale price exceeds the original cost of the asset sold. c. book value exceeds the sale price of the asset sold. d. sale price exceeds the depreciable cost of the asset sold.

A company sells a plant asset that originally cost $225,000 for $75,000 on December 31, 2014. The accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $22,500 had been recorded. The company should recognize a a. $150,000 loss on disposal. b. $60,000 gain on disposal. c. $60,000 loss on disposal. d. $37,500 loss on disposal.

Equipment that cost $54,000 and on which $30,000 of accumulated depreciation has been recorded was disposed of for $27,000 cash. The entry to record this event would include a a. gain of $3,000. b. loss of $3,000. c. credit to the Equipment account for $9,000. d. credit to Accumulated Depreciation for $30,000.

If a plant asset is retired and is fully depreciated a. a gain on disposal will be recorded. b. phantom depreciation must be taken as though the asset were still on the books. c. a loss on disposal will be recorded. d. no gain or loss on disposal will be recorded.

On July 1, 2014, Dillman Kennels sells equipment for $66,000. The equipment originally cost $180,000, had an estimated 5-year life and an expected salvage value of $30,000. The Accumulated Depreciation account had a balance of $105,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is a. $9,000 gain. b. $6,000 loss. c. $9,000 loss. d. $6,000 gain.

A loss on disposal of a plant asset is reported in the financial statements a. in the Other Revenues and Gains section of the income statement. b. in the Other Expenses and Losses section of the income statement. c. as a direct increase to the capital account on the balance sheet. d. as a direct decrease to the capital account on the balance sheet.

Sprague Associates sold office furniture for $32,000. The furniture had an original cost of $96,000 and accumulated depreciation of $48,000. Ignoring the tax effect, as a result of the sale a. net income will increase $32,000. b. net income will increase $16,000. c. net income will decrease $16,000. d. net income will decrease $32,000.

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.

Which of the following is not considered an intangible asset? a. Goodwill. b. An oil well. c. A franchise. d. A patent.

Compute the total intangible assets on the balance sheet of Janssen Enterprises. a. $9,500,000. b. $5,500,000. c. $3,500,000. d. $7,500,000.

A company purchased factory equipment for $350,000. It is estimated that the equipment will have a $35,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be a. $140,000. b. $84,000. c. $126,000. d. $75,600.

On October 1, 2014, Hess Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2014, balance sheet assuming that Hess Company uses the double-declining-balance method of depreciation? a. $52,000. b. $60,000. c. $72,000. d. $76,000.

A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? a. $150,000. b. $90,000. c. $130,000. d. $160,000.

Foyle Company purchased a new van for floral deliveries on January 1, 2013. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2014? a. $7,680. b. $23,040. c. $30,720. d. $11,520.

All of the following statements are true regarding the double declining-balance method of depreciation except a. the double declining-balance method ignores salvage value when calculating depreciation. b. the double declining-balance method produces lower depreciation expense in the early years as opposed to the later years. c. the double declining-balance method is compatible with the matching principle. d. the double declining-balance method is appropriate when assets lose their usefulness rapidly.

A current liability is a debt that can reasonably be expected to be paid a. within one year, or the operating cycle, whichever is longer. b. between 6 months and 18 months. c. out of currently recognized revenues. d. out of cash currently on hand.

With an interest-bearing note, the amount of assets received upon issuance of the note is generally a. equal to the note's face value. b. greater than the note's face value. c. less than the note's face value. d. equal to the note's maturity value.

The interest charged on a $250,000 note payable, at the rate of 6%, on a 90-day note would be a. $15,000. b. $7,500. c. $3,750. d. $1,250.

Sales taxes collected by a retailer are recorded by a. crediting Sales Tax Revenue. b. debiting Sales Tax Expense. c. crediting Sales Taxes Payable. d. debiting Sales Taxes Payable.

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30?

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What entry will Sadowski Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

The amount of sales tax collected by a retail store when making sales is a. a miscellaneous revenue for the store. b. a current liability. c. not recorded because it is a tax paid by the customer. d. recorded as an operating expense.

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a a. debit to Sales Taxes Expense for $16. b. credit to Sales Taxes Payable for $16. c. debit to Sales Revenue for $176. d. debit to Cash for $160.

A company receives $261, of which $21 is for sales tax. The journal entry to record the sale would include a a. debit to Sales Taxes Expense for $21. b. debit to Sales Taxes Payable for $21. c. debit to Sales Revenue for $261. d. debit to Cash for $261.

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 $252,000, what is the amount of the sales taxes owed to the taxing agency? a. $240,000 b. $252,000 c. $12,600 d. $12,000

The current portion of long-term debt should a. be paid immediately. b. be reclassified as a current liability. c. be classified as a long-term liability. d. not be separated from the long-term portion of debt.

On January 1, 2014, Ermler Company, a calendar-year company, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is a. Current liabilities, $1,000,000. b. Long-term debt, $1,000,000. c. Current liabilities, $500,000; Long-term Debt, $500,000. d. Current liabilities, $250,000; Long-term Debt, $750,000.

Morgan Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $25,440. If the sales tax rate is 6%, what amount must be remitted to the state for February's sales taxes? a. $1,527 b. $1,440 c. $1,435 d. It cannot be determined.

A cash register tape shows cash sales of $6,000 and sales taxes of $300. The journal entry to record this information is

Don's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance?

The following totals for the month of April were taken from the payroll records of Noll Company. The journal entry to record the monthly payroll on April 30 would include a a. debit to Salaries and Wages Expense for $60,000. b. credit to Salaries and Wages Payable for $60,000. c. debit to Salaries and Wages Payable for $60,000. d. debit to Salaries and Wages Expense for $40,660.

The contractual interest rate on a bond is often referred to as the a. callable rate. b. the maturity rate. c. market rate. d. stated rate.

Bonds with a face value of $300,000 and a quoted price of 102¼ have a selling price of a. $360,675. b. $306,075. c. $300,675. d. $306,750.

Bonds with a face value of $300,000 and a quoted price of 97¼ have a selling price of a. $291,750. b. $291,075. c. $291,006. d. $292,500.

The following totals for the month of April were taken from the payroll records of Noll Company. The entry to record accrual of employer's payroll taxes would include a a. debit to Payroll Tax Expense for $1,240. b. debit to Payroll Tax Expense for $8,080. c. credit to FICA Taxes Payable for $9,180. d. credit to Payroll Tax Expense for $1,240.

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at a. a premium. b. a discount. c. par. d. either a discount or premium.

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount a. less than face value. b. equal to face value. c. greater than face value. d. that cannot be determined.

The price of a $10,000, 5-year bond, will be less than $10,000 if the a. contractual rate of interest is less than the market rate of interest. b. contractual rate of interest is greater than the market rate of interest. c. bond is convertible. d. contractual rate of interest is equal to the market rate of interest.

The price of a bond is a function of all of the following except the a. dollar amounts to be received. b. maturity date. c. market interest rate. d. type of bonds.

Selling the bonds at a premium has the effect of a. causing the total cost of borrowing to be higher than the bond interest paid. b. causing the total cost of borrowing to be lower than the bond interest paid. c. raising the effective interest rate above the state interest rate. d. increasing the amount of cash paid for interest each 6 months.

If bonds have been issued at a discount, then over the life of the bonds the a. carrying value of the bonds will decrease. b. carrying value of the bonds will increase. c. interest expense will increase, if the discount is being amortized on a straight-line basis. d. unamortized discount will increase.

When the effective-interest method of amortization is used for a bond premium, the amount of interest expense for an interest period is calculated multiplying the a. face value of the bonds at the beginning of the period by the contractual interest rate. b. face value of the bonds at the beginning of the period by the effective interest rate. c. carrying value of the bonds at the beginning of the period by the contractual interest rate. d. carrying value of the bonds at the beginning of the period by the effective interest rate.

The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014, contained the following accounts. The total long-term liabilities reported on the balance sheet are a. $1,565,000 b. $1,550,000 c.$1,665,000 d. $1,650,000

The amortization of a bond premium will result in reporting an amount of interest expense for an interest period that a. is less than the amount of interest payable. b. exceeds the amount of interest payable. c. equals the amount of cash to be paid for interest for the period. d. has no predictable relationship with the amount of cash to be paid for interest for the period.

A corporation has the following account balances: Common Stock, $1 par value, $80,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the a. legal capital is $2,780,000. b. number of shares issued is 80,000. c. number of shares outstanding is 2,780,000. d. average price per share issued is $3.48.

If Norben Company issues 4,000 shares of $5 par value common stock for $140,000, the account a. Common Stock will be credited for $140,000. b. Additional Paid-in Capital will be credited for $20,000. c. Additional Paid-in Capital will be credited for $120,000. d. Cash will be debited for $120,000.

Treasury stock is a. stock issued by the U.S. Treasury Department. b. stock purchased by a corporation and held as an investment in its treasury. c. corporate stock issued by the treasurer of a company. d. a corporation's own stock, which has been reacquired and held for future use.

The acquisition of treasury stock by a corporation a. increases its total assets and total stockholders' equity. b. decreases its total assets and total stockholders' equity. c. has no effect on total assets and total stockholders' equity. d. requires that a gain or loss be recognized on the income statement.

A corporation purchases 15,000 shares of its own common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity? a. Increase by $525,000. b. Decrease by $300,000. c. Decrease by $525,000. d. Decrease by $225,000.

Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to a. Preferred Stock for $3,000,000. b. Preferred Stock for $2,500,000 and Additional Paid-in Capital—Preferred Stock for $500,000. c. Preferred Stock for $2,500,000 and Retained Earnings for $500,000. d. Additional Paid-in Capital—Preferred Stock for $3,000,000.

Treasury Stock is a(n) a. contra asset account. b. retained earnings account. c. asset account. d. contra stockholders' equity account.

Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, West declared and paid dividends of $4,000. In 2014, West declared and paid dividends of $12,000. How much of the 2014 dividend was distributed to preferred shareholders? a. $8,000. b. $14,000. c. $6,000. d. None of these answer choices are correct.

Sizemore, Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2014. If the board of directors declares a $30,000 dividend, the a. preferred stockholders will receive 1/10th of what the common stockholders will receive. b. preferred stockholders will receive the entire $30,000. c. $30,000 will be held as restricted retained earnings and paid out at some future date. d. preferred stockholders will receive $15,000 and the common stockholders will receive $15,000.