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ACCT 2101: EXAM 3
Which of the following would be classified as a long-term operational asset?
A) Accounts receivable.
B) Treasury stock.
C) Inventory.
D) Machinery.
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d. machinery
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Which of the following would not be classified as a tangible long-term asset?
A) Delivery trucks
B) Franchises
C) Land
D) Oil and gas reserves
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b. franchise
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Which of the following is not classified as Property, Plant and Equipment?
A) Computers
B) Goodwill
C) Machinery
D) Office furniture
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b. goodwill
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Which of the following terms is used to identify the process of expense recognition for buildings and equipment?
A) Amortization
B) Depletion
C) Depreciation
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c. depreciation
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On January 1, 2005 Franz Company purchased a truck that cost $22,000. The truck had an expected useful life of 5 years and a $2,000 salvage value. The amount of depreciation expense recognized in 2006 assuming that Franz uses straight-line depreciation is:
A) $4,000.
B) $$,400.
C) $22,000.
D) $0
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a. $4,000
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Evelyn Company purchased equipment that cost $55,000 cash on January 1, 2005. The equipment had an expected useful life of six years and an estimated salvage value of $4,000. Assuming that Evelyn depreciates its assets under the straight-line method, the amount of depreciation expense appearing on the December 31, 2007 income statement and the amount of accumulated depreciation appearing on the December 31, 2007 balance sheet would be:
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A. $8,500 & $25,500
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Clark Company paid cash to purchase equipment on January 1, 2005. Select the answer that shows how the recognition of depreciation expense in 2006 would affect assets, liabilities, equity, net income, and cash flow (+ means increase, - decrease, and NA not affected).
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D)
-
NA
-
-
NA
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At the end of the current accounting period, Rodgers Co. recorded depreciation of $25,000 on its equipment. The effect of this entry on the company's balance sheet is to:
A) decrease assets and increase liabilities.
B) decrease owners' equity and increase liabilities.
C) decrease assets and increase owners' equity.
D) decrease owners' equity and decrease assets.
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D) decrease owners' equity and decrease assets.
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T/F Inventory is one example of a current asset.
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true
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T/F Tangible assets include land, equipment, and goodwill.
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False
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T/F
Intangible assets include patents, copyrights, and natural resources.
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false
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T/F Tangible assets are rights or privileges.
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false
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T/F The term used to recognize expense for property, plant, and equipment is depletion.
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false |
T/F Land differs from other property because it is not subject to depreciation.
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true
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T/F The depreciable cost of a long-term asset is the difference between the amount paid for the asset and its salvage value.
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true
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T/F
The purchase of a new delivery truck for cash is an asset use transaction.
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false
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T/F Recognizing depreciation expense on equipment or a building is an asset use transaction
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true
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T/F Accumulated Depreciation is a temporary account that is closed each year
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false
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Merchandising businesses
A) generate revenue by selling goods.
B) include wholesale and retail companies.
C) both A and B
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C. both a and b
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How is the balance sheet (not income statement) of a merchandising firm different from the balance sheet of a service business?
A) It includes the asset, Accounts Receivable.
B) It reports the cost of goods sold.
C) It includes the asset, Merchandise Inventory.
D) It reports various period costs.
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C) It includes the asset, Merchandise Inventory.
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Which of the following would be primarily a merchandising business?
A) Ruth Consulting
B) Bonds Department Store
C) Sosa Law Offices
D) McGwire Accounting Service
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B) Bonds Department Store
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T/F
Retail companies sell goods primarily to other businesses.
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false
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T/F Merchandising businesses buy the goods they sell from suppliers.
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true
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T/F Merchandising businesses include retail companies and wholesale companies.
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true
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T/F Selling and administrative costs are product costs.
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false
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T/F Costs included in the Merchandise Inventory account are product costs.
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true
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T/F Selling and administrative costs are recognized as expenses in the period incurred.
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true |
Which of the following is not a period cost?
A) Advertising Expense
B) Sales Commissions
C) Cost of Goods Sold
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C) Cost of Goods Sold
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roduct costs are also referred to as
A) period costs.
B) selling and administrative expenses.
C inventory costs.
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C inventory costs.
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The Cost of Goods Sold account is classified as:
A) an expense.
B) an asset.
C) a revenue account.
D) a liability.
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A) an expense.
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T/F A perpetual inventory system updates the Merchandise Inventory account for all purchases of inventory but not for sales of inventory.
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false
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T/F
With a perpetual inventory system, the cost of goods sold is recognized at the time of sale.
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true |
T/F
With a perpetual inventory system, both revenue and an expense are recognize at the time of a sale of goods.
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true
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vWith a perpetual inventory system, the balance in the Merchandise Inventory account is adjusted
A) for every purchase of inventory.
B) every time inventory is sold.
C) only at the end of each accounting period.
D) both A and B
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D) both A and B
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A purchase of merchandise for cash is
A) An asset source transaction.
B) An asset exchange transaction.
C) An asset use transaction.
D) A claims exchange transaction.
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B) An asset exchange transaction.
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A purchase of merchandise on account is
A) An asset source transaction.
B) An asset exchange transaction.
C) An asset use transaction.
D) A claims exchange transaction.
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A) An asset source transaction.
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During the month of August, Holtz Company purchased merchandise inventory for cash in the amount of $6,200. Which of the following represents the effects of this transaction on Holtz’s financial statements?
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B
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During the month of August, Holtz Company collected $8,000 of accounts receivable. Which of the following represents the effects of the collection of the receivables on Holtz’s financial statements?
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A
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During the month of August, Holtz Company incurred selling and administrative expenses on account in the amount of $1,800. Which of the following represents the effects of this transaction on Holtz’s financial statements?
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C
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During the month of August, Holtz Company incurred selling and administrative expenses on account in the amount of $1,800. What kind of transaction is this?
A) a claims exchange transaction
B) an asset exchange transaction
C) an asset source transaction
D) an asset use transaction
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A) a claims exchange transaction
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A company purchased inventory on account. If the perpetual inventory method is used, which of the following choices accurately reflects how the purchase affects the company's financial statements?
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C
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An entry to record the purchase of inventory on account under the perpetual inventory method
A) increases total assets.
B) decreases total liabilities.
C) decreases total assets
D) increases total equity
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A) increases total assets.
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A company using the perpetual inventory method paid cash to purchase inventory. Which of the following answers reflects the effects of this event on the financial statements?
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B
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Use the following information for questions 26 and 27:
Baxter Company’s merchandise inventory at the start of 2007 was $85,000. The company purchased inventory during 2007 in the amount of $306,000, and its inventory at the end of the year was $102,000.
26. What was Baxter’s Cost of Goods Available for Sale for the year 2007?
A) $391,000
B) $306,000
C) $408,000
D) $289,000
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A) $391,000
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What was Baxter’s Cost of Goods Sold for 2007?
A) $391,000
B) $306,000
C) $408,000
D) $289,000
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D) $289,000
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T/F
A company’s cost of goods sold for a period equals the beginning inventory plus the amount of inventory purchased during the period.
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false
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T/F The ending Merchandise Inventory plus Cost of Goods Sold equals the Cost of Goods Available for Sale during the period.
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true
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T/F
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false
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1) Referring to the data above, what is the company’s Gross margin Percentage?
A) 12.5%
B) 37.5%
C) 62.5%
D) 60.0%
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B) 37.5%
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1) Referring to the data for the Orange Company above, what is the company’s Markup on Cost?
A) 40%
B) 50%
C) 60%
D) 70%
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C) 60%
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If a company’s market on cost is 50% and its sales are $90,000. What is its CGS.
A) $90,000
B) $60,000
C) $30,000
D) $20,000
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B) $60,000
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Which of the following retailers would be expected to have the highest gross margin % ?
A) Kmart
B) Saks of 5th Ave
C) Wal-Mart
D) Foodlion
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B) Saks of 5th Ave
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Net income percentage is equal to
A) Net Income divided by Net Sales.
B) Net Income divided by Total Assets.
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A) Net Income divided by Net Sales.
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net MARGIN IS ALSO CALLED RETURN ON SALES? (t/f
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true
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