ACCT 301, Quiz 2, Question 12

The beginning warranty liability was $25,000. Sales of $5,000,000 were made, and 2% of sales is the estimated warranty cost. The ending balance of the warranty liability was $35,000 (credit). How much warrant work was performed?

QUIZ #2 ACCT 301 Fall 2015 Name: Section: Date: 1. (True or False) The consignor retains title to the transferred merchandise even though the goods are possessed by the sales agent. 2. (Multiple Choice) As generally used in accounting, what is depreciation? A. B. C. D. E. 3. It is a process of asset valuation for balance sheet purposes. It is a costing process for intangible assets. It is used to indicate a decline in market value of a long-lived asset. It is an allocation of cost to accounting periods. None of these. (Multiple Choice) Annual sales were $1,600,000, and the January 1 Allowance for Uncollectibles had a credit balance of $25,000. $18,600 of accounts were written off during the year. Using the percentage of sales technique and a 2% rate, uncollectible accounts expense is: A. B. C. D. E. 4. $7,000. $18,600. $25,600. $32,000. None of these. (Multiple Choice) Using the straight-line method, how much interest income would be recognized for the 20X5 calendar year, for a $1,000, 5-year, 6% bond that was purchased for $960 on July 1, 20X4? A. B. C. D. E. 5. $52. $60. $68. $100. None of these. (True or False) Briefly stated gains on exchanges having commercial substance are ignored, while losses are recognized. 6. (Multiple Choice) In evaluating a proposal to begin selling goods on credit, which of the following would not be a cause for concern? A. B. C. D. E. 7. The need to evaluate credit worthiness. Forgoing use of funds during periods of credit extension to customers. The reluctance of customers to take advantage of the service. The risk of not collecting. None of these. (Multiple Choice) On June 1, Sao Corporation issued $300,000 of 9%, 5-year bonds. The bonds which were issued at 97, pay interest on January 1 and June 1. The entry to record issuance of the bonds includes: A. B. C. D. E. 8. a credit to Bonds Payable of $291,000. a debit to Cash of $300,000. a credit to Interest Payable of $9,000. a debit to Discount on Notes Payable of $9,000. None of these. (Multiple Choice) The September 30 physical inventory appropriately included $3,800 of merchandise that was not recorded as a purchase (on account) until October. What effect will this error have on the September 30 assets, liabilities, and income for the month ending, respectively? A. B. C. D. E. 9. No effect, no effect, understate. Overstate, overstate, no effect. No effect, understate, overstate. Understate, understate, no effect. None of these. (Essay) On July 1, 20X7, Vasquez Publishing Company sold 1,000 two-year subscriptions to a monthly magazine. The subscriptions sold for $18 each. The first issue was mailed at the end of July. What is the proper balance sheet disclosure regarding this transaction for Vasquez at December 31, 20X7? 10. (Multiple Choice) Assume beginning inventory of $25,000 (250 units), a purchase on January 3 of $35,000 (300 units), and a purchase on January 18 of $40,000 (310 units). 500 units were sold on January 15. Using perpetual FIFO, January's ending inventory is: A. B. C. D. E. 11. $36,000. $37,833. $45,000. $45,833. None of these. (Multiple Choice) The allowance method generally is considered preferable to the direct write-off method because the allowance method: A. B. C. D. E. 12. recognizes expense when a specific account is determined to be uncollectible. reflects the actual facts as they have taken place. relies on estimates which are always accurate and stable among years. recognizes the expense of a bad debt in the same period as the sale. None of these. (Multiple Choice) The beginning warranty liability was $25,000. Sales of $5,000,000 were made, and 2% of sales is the estimated warranty cost. The ending balance of the warranty liability was $35,000 (credit). How much warrant work was performed? A. B. C. D. E. 13. $10,000. $90,000. $100,000. $110,000. None of these. (Multiple Choice) The journal entry to record $100 annual of annual depreciation on a three-year old truck would require: A. B. C. D. E. a credit to Accumulated Depreciation for $300. a debit to Retained Earnings for $200. a debit to Depreciation Expense for $100. All of the above. None of these. 14. (Multiple Choice) Residual value is not subtracted from cost in which of the following depreciation methods? A. B. C. D. E. 15. Straight-line. Sum-of-the-years'-digits. Double-declining balance. All of the above. None of these. (Multiple Choice) On April 1, 20X6, Owen issued $100,000 of 12%, 10-year bonds. The bonds were issued at par plus accrued interest, are dated January 1, 20X6, and pay interest on July and January 1. The entry to record issuance of the bonds will include: A. B. C. D. E. 16. a debit to Cash of $103,000. a credit to Bonds Payable of $103,000. a credit to Interest Income of $3,000. All of the above. None of these. (Multiple Choice) Over the long run, one would expect interest income on a bond investment to be equal to: A. B. C. D. E. 17. The difference between the cash invested and the cash returned on the investment. The face value of the bond. The difference between the face value and maturity value of the bond. The cash payments for interest plus any premium on the original investment. None of these. (Multiple Choice) A major overhaul was completed on a truck that resulted in an extension in its useful life from three to five years. The proper entry to reflect this transaction includes a: A. B. C. D. E. debit to Accumulated Deprecation. credit to Accumulated Depreciation. a credit to Depreciation Expense. a debit to Maintenance Expense. None of these. 18. (Multiple Choice) Ashton agrees to purchase certain inventory items from Duart. Duart is to ship the goods F.O.B. destination. At Ashton's fiscal year end, Duart called to say that the goods had been shipped and Ashton could expect to receive them within a week. A. B. C. D. E. 19. Ashton should include the goods in inventory. Ashton should not include the goods in inventory. Ashton may optionally include the goods in inventory. Ashton may optionally exclude the goods from inventory. None of these. (Multiple Choice) Annual sales were $1,600,000, and the January 1 Allowance for Uncollectibles had a credit balance of $25,000. $18,600 of accounts were written off during the year. Using the percentage of sales technique and a 2% rate, uncollectible accounts expense is: A. B. C. D. E. 20. $7,000. $18,600. $25,600. $32,000. None of these. (True or False) An impairment occurs and is recognized when the owner of the asset no longer expects to be able to generate returns of cash from the asset sufficient to recapture its recorded net book value