What should Lennox record as the cost of the new truck?

What should Lennox record as the cost of the new truck?

Corresponds to CLO 5(a) Lennox

Corporation purchased a new delivery truck for 35,000. The sales taxes are $2,700. The logo is painted on the side of the truck for $800. The truck’s annual license is $200. Annual insurance on the

truck is $1,300. What should Lennox record as the cost of the new truck? (Points : 5)

$40,000

$38,500

$37,700

$35,000

18. Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporation purchased equipment for $65,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5 year useful life. If Ballard uses the straight-line method of depreciation, what is the accumulated depreciation at December 31, 2013? (Points : 5)

$13,000

$12,000

$9,750

$9,000

19. Corresponds to CLO 5(c) Tyree Company purchased equipment with a cost of $90,000 and an estimated salvage value of $18,000. The equipment is expected to produce 120,000 units over its estimated useful life of 10 years. If Tyree uses the units-of-activity method, what is the depreciation cost per unit to be used in calculating depreciation? (Points : 5)

$1.67

$0.75

$0.60

$1.33

20. Corresponds to CLO 5(d) Kerns

Company purchased equipment with a cost of $200,000 and an

estimated salvage value of $10,000. The equipment has an estimated

useful life of 10 years. If Kerns uses the double-declining balance

method, what is the annual depreciation rate to be used in

calculating depreciation? (Points : 5)

5%

10%

20%

40%

21. Corresponds to CLO 6(a) Marshall

Machinery made a sale for $80,000 on January 6. The customer is

sent a statement on January 25 and payment is received on February

20. Marshall prepares January’s monthly internal financial

statements on February 15. Marshall follows GAAP and applies the

revenue recognition principle. When is the $80,000 considered to be

earned? (Points : 5)

February

20

February

15

January

25

January

6

22. Corresponds to CLO 6(b) Mann

Corporation’s employees worked overtime to complete an order that

is sold on July 27. The office sends a statement to the customer on

August 15, and payment is received on September 5. Mann follows

GAAP. In what month should the overtime wages be expensed? (Points

: 5)

either

July or August, depending on when the pay period ends

September

August

July

23. Corresponds to CLO 6(c) Sight

Company had the following transactions during 2013: sales of $6,000

on account; collected $1,800 for services to be performed in 2014;

paid $4,300 cash for 2013 salaries; purchased airline tickets for

$500 in December for a trip to take place in 2014. What is Sight’s

2013 net income using accrual accounting? (Points : 5)

$1,700

$1,200

$3,500

$3,000

24. Corresponds to CLO 6(d) Lyme

Corporation had the following transactions during 2013: sales of

$8,000 on account; collected $4,500 for services to be performed in

2014; paid $3,000 cash for 2013 salaries; paid $400 for airline

tickets for a trip to take place in 2014. What is Lyme’s 2013 net

income using cash basis accounting? (Points : 5)

$4,600

$9,100

$1,100

$1,500

25. Corresponds to CLO 7(a) Ping

Sports Company purchases $1,000 of merchandise on credit. Using the

perpetual inventory approach, the journal entry to record this

transaction would be: (Points : 5)

debit:

Inventory $1,000; credit: Accounts Payable $1,000

debit:

Accounts Payable $1,000; credit: Inventory $1,000

debit:

Accounts Payable $1,000; credit: Purchases $1,000

debit:

Purchases $1,000; credit: Accounts Payable $1,000

26. Corresponds to CLO 7(b) Gardner

Corporation had sales of $2,400 on account on January 9, 2013.

Gardner uses the periodic inventory method. The journal entry to

record this transaction would include: (Points : 5)

a

debit to Sales Revenue and a credit to Accounts Receivable.

a

debit to Accounts Receivable, a credit to Sales Revenue, a debit to

Cost of Goods Sold, and a credit to Inventory.

a

debit to Accounts Receivable and a credit to Sales Revenue.

a

debit to Accounts Receivable, a credit to Sales Revenue, a debit to

Cost of Goods Sold, and a credit to Purchases.

27. Corresponds to CLO 7(c) Rupert

Hobby’s accounting records show the following for the year ending

December 31, 2014: Purchase DiscountsAf?cAc‚¬A?¦$15,600;

Freight-inAf?cAc‚¬A?¦$14,000;

PurchasesAf?cAc‚¬A?¦$540,500; Beginning

InventoryAf?cAc‚¬A?¦$54,200; Ending

InventoryAf?cAc‚¬A?¦$58,600; Purchase

ReturnsAf?cAc‚¬A?¦$20,000. Using the periodic inventory

system, what is the cost of goods sold? (Points : 5)

$573,100

$500,500

$536,100

$514,500

28. Corresponds to CLO 7(d) Bay

Company sold $100,000 of merchandise in the month of April, 2013.

Returns that month totaled $5,000. Bay Company uses the periodic

method to determine ending inventory each December 31. For interim

financial statements, cost of goods sold is estimated based on the

previous year’s gross profit
rate. If Bay Company’s gross profit

rate for 2012 was 40%, what is the cost of goods sold for the month

of April? (Points : 5)

$60,000

$57,000

$40,000

$38,000

29. Corresponds to CLO 8(a) We Love

Pets, Inc. has the following inventory data: January 1, beginning

inventory of 50 units at $25; January 10, purchases of 70 units at

$27; January 25, purchases of 40 units at $28. A physical count of

inventory on January 31 reveals that there are 45 units on hand.

Using the FIFO inventory method, cost of goods sold for January is

(Points : 5)

$3,135

$3,005

$2,875

$1,255

30. Corresponds to CLO 8(b) Party

Retailers has the following inventory data: May 1, beginning

inventory of 200 units at $10; May 14, purchases of 300 units at

$12; May 23, purchases of 250 units at $15. A physical count of

inventory on May 31 reveals that there are 225 units on hand. Using

the LIFO inventory method, ending inventory for May is (Points :5)

$2,300

$2,250

$7,050

$3,375

31. Corresponds to CLO 8(c) Halting

Corporation has the following inventory data: September 1,

beginning inventory of 430 units at $11; September 8, purchases of

350 units at $12; September 21, purchases of 460 units at $14. A

physical count of inventory on September 30 reveals that there are

400 units on hand. Using the weighted average inventory method,

rounding the unit cost to the nearest penny, what is cost of goods

sold for September? (Points : 5)

$10,357

$4,960

$10,416

$4,932

32. Corresponds to CLO 8(d) Unleash

Corporation is a retailer operating in an industry currently

experiencing high inflation. Unleash wants to show the highest cost

of goods sold possible in order to reduce the company’s income tax

liability. Which inventory costing method should Unleash use?

(Points : 5)

FIFO

because cost of goods sold represents the earliest costs.

Average

because cost of goods sold will represent an average amount.

Specific

identification because it involves the actual costs.

LIFO

because cost of goods sold represents the latest costs.

33. Corresponds to CLO 9(a) The

following balance sheet and income statement data is available for

Gold River Corporation: Current

assetsAf?cAc‚¬A?¦$205,000; Total

assetsAf?cAc‚¬A?¦$520,000; Net

incomeAf?cAc‚¬A?¦$345,000; Current

liabilitiesAf?cAc‚¬A?¦$125,000; Total

liabilitiesAf?cAc‚¬A?¦$250,000; Stockholders’

equityAf?cAc‚¬A?¦$270,000; Average common shares

outstandingAf?cAc‚¬A?¦ 10,000. What is Gold River’s

current ratio? (Points : 5)

2.08

1.64

1.56

0.82

34. Corresponds to CLO 9(b) The

following balance sheet data is available for Pinpoint Products:

Current assetsAf?cAc‚¬A?¦$25,000; Property, plant, and

equipment,Af?cAc‚¬A?¦$100,000Af?cAc‚¬A?¦Other

assetsAf?cAc‚¬A?¦$15,000; Current

liabilitiesAf?cAc‚¬A?¦$15,000; Long-term

liabilitiesAf?cAc‚¬A?¦$48,000; Stockholders’

equityAf?cAc‚¬A?¦$77,000; Average common shares

outstandingAf?cAc‚¬A?¦ 10,000. What is Pinpoint’s debt to

total assets, shown as a percentage? (Points : 5)

45%

60%

40%

81%

35. Corresponds to CLO 9(c) The

following balance sheet and income statement data is available for

Frame Manufacturing: Total assetsAf?cAc‚¬A?¦$420,000;

Total liabilitiesAf?cAc‚¬A?¦$300,000; Stockholders’

equityAf?cAc‚¬A?¦$120,000; Gross

profitAf?cAc‚¬A?¦$54,000; Net

incomeAf?cAc‚¬A?¦$42,000; Average common shares

outstandingAf?cAc‚¬A?¦ 12,000. What is Frame

Manufacturing’s earnings per share? (Points : 5)

$10.00

$3.50

$1.60

$4.50

36. Corresponds to CLO 9(d) The

following financial information is available for Maroon

Corporation: Sales revenueAf?cAc‚¬A?¦$200,000; Cost of

goods soldAf?cAc‚¬A?¦$120,000; Operating

expensesAf?cAc‚¬A?¦$40,000. What is Maroon’s profit

margin ratio, shown as a percentage? (Points : 5)

20%

80%

60%

40%

37. Corresponds to CLO 10(a) Which of

the following is not true about a company’s system of internal

controls? (Points : 5)

Internal

control procedures are designed to safeguard assets from employee

theft.

Internal

control measures can eliminate all irregularities in the accounting

process.

Internal

controls can be rendered ineffective by employee collusion.

Large

companies often assign internal auditors to continuously evaluate

the effectiveness of the company’s internal control

systems.

38. Corresponds to CLO 10(b) At Speedy

Market, three cashiers handle cash sales from the same cash

register drawer. Which of the following internal control principles

does this violate? (Points : 5)

Segregation

of duties

Physical

controls

Human

resource controls

Establishment

of responsibility

39. Corresponds to CLO 10(c) At Stone

Pool Supplies, one person is responsible for the related activities

of ordering merchandise, receiving goods, and paying for them.

Which of the following internal control principles does this

violate? (Points : 5)

Physical

controls

Segregation

of duties

Human

resource controls

Establishment

of responsibility

40. Corresponds to CLO 10(d) At Beauty

Bargains, the employees that handle cash are all bonded. This is an

example of which of the following internal control procedures?

(Points : 5)

Physical

controls

Establishment

of responsibility

Segregation

of duties

Human

resource controls


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