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Hanif Co. specializes in constructing bridges for the city. They use heavy machinery in the building process. Hanif recently purchased a Rotary Blasthole Drill for $230,000 on July 1, 2017. The equipment has a useful life of 10 years and a salvage value of $30,000. On September 1, 2019, the equipment was inspected by the repairs and maintenance department. Its total useful life was revised to 6.5 years and the salvage value to $25,000. The equipment was eventually sold for $140,000 on March 31, 2020. Which of the following statements is True if Hanif uses the straight line method of depreciation (All numbers rounded to the nearest dollar)? The accumulated depreciation at the end of 2018 equals $30,000. The depreciation expense for 2019 is $35,000. The loss on disposal of the equipment is $16,250 O All of the statements above are correct. None of the statements above are correct. The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is: O called the matching principle. nonexistent; that is, there is no such accounting requirement. O called the consistency principle. O called the physical flow assumption. called the materiality principle. Shamba Inc. purchased land to construct an office building. There were several existing fences and gates on the land that were sold as scrap. The amount received from selling this scrap is recorded as: Other revenue on the income statement. Gain on the income statement. O A reduction in the acquisition cost of land. None of the available answers are correct. For the issuer of ten-year bonds, the amount of amortization at each payment date, using the effective interest rate method, would increase each year if the bonds were sold at a: Discount: Yes; Premium: Yes O Discount: Yes; Premium: No Discount: No; Premium: Yes Discount: No; Premium: No Question 18 (2 points) An asset is purchased on January 1 for $40,000. It is expected to have a useful life of five years after which it will have an expected salvage value of $5,000. The company uses the straight-line method. If it is sold for $30,000 exactly two years after its purchase, the company will record a: O loss of $6,000. gain of $4,000. O gain of $6,000. O loss of $4,000. None of the available answers are correct. Previous Page Next Page Page 18 of 60 Question 19 (2 points) Nour Inc. paid $21 wholesale for one unit of inventory for resale in the retail market. The same inventory can now be purchased for $19. The retail sales price of the inventory is $28, however, it normally costs $6 to sell each unit. Using the lower-of- cost-and-net-realizable-value rule, the inventory would be reported on Nour Inc's balance sheet at: $22 None of the available answers are correct O $28 O $19 O $21 Shamba Inc. purchased land to construct an office building. The land had an existing clothing factory on it that had to be demolished. The cost of demolishing the old clothing factory is recorded as: Cost of constructing the office building. O Cost of land improvements which is depreciated. None of the available answers are correct. O Cost of land which is not depreciated. December 31, 2019. A flood damaged the entire inventory on November 1, 2019. Jambo Inc. uses the periodic system. The following information was available for 2019: Beginning Inventory $ 45,000 Sales $300,000 Purchases $150,000 Historical gross profit percentage 70% The balance of inventory on the books of Jambo Inc. as of Nov 1, 2019 is: O $90,000 O $105,000 $45,000 None of the available answers is correct $210,000 Question 21 (2 points) Bata Store has a beginning merchandise inventory of $15,000. During the period, purchases were $70,000; purchase returns, $2,000; and freight in $5,000. A physical count of inventory at the end of the period revealed that $10,000 was still on hand. The cost of goods available for sale was: None of the available answers are correct O $92,000 $82,000 O $88,000 $78,000 Question 2 (1 point) Under the periodic inventory system, the balance in the inventory account during the year reflects: Onone of the available answers are correct. O the expected cost of goods purchased. O the expected cost of goods available for sale. O last year's ending inventory. O the expected inventory that the company should be holding. Mariakani Inc. paid $5,000 during the discount period to settle accounts payable. The terms of the discount were 3/10, n/45. The amount of discount that Mariakani company received was (rounded): O $154.64 one of the available answers are correct O $148.28 O $500.00 O $150.00 Due to the current Covid 19 pandemic, the following would be expected for a wholesaler of goods whose business is suffering during the crisis: O A high days in inventory ratio for toilet paper. O None of the available answers are correct. O A high accounts receivable turnover ratio. O A lower solvency ratio. O A higher TIE ratio (times interest earned). The following information is provided from Malik Corporation's annual report for the years ended December 31: 2019 2018 2017 Sales S120,000 S110,000 $100,000 Cost of goods sold 40,000 34,000 30,000 Gross profit 80,000 76,000 70,000 Operating expenses 48.000 42,000 40.000 Income before taxes 32,000 34,000 30,000 Income tax expense 2,600 10.200 2,000 Net income $22,400 $23,800 $21,000 Using vertical analysis, 2018 Sales would be represented as: 12% 089% O 100% 0 112% None of the available answers are correct Question 7 (1 point) Contingent liabilities such as pending lawsuits: Should only be disclosed in the notes to financial statements if payment for damages is likely and the amount can be reasonably estimated Should always be recorded in the body of financial statements Should be recognized as a liability if payment for damages is unlikely and the amount of liability can be reasonably estimated Should only be disclosed in the notes to financial statements if payment for damages is likely but the amount cannot be reasonably estimated Machakos convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation. One-half of the total cost is paid in cash; the other half is financed. How should Machakos record this transaction? Debit equipment for $450,000, debit expenses for $50,000, credit cash for $250,000, and credit notes payable for $250,000. Debit cash for $250,000, debit notes payable for $250,000 credit equipment for $450,000, and credit expenses for $50,000. Debit equipment for $500,000, credit cash for $250,000, and credit notes payable for $250,000. O None of the available answers are correct. Debit cash for $250,000, debit notes payable for $250,000, and credit stion 9 (2 points) nich of the following statements is True? A) The number of shares currently in the hands of shareholders is the same as the number of shares issued. B) Total share capital is also known as total shareholders' equity. C) Issuing (selling) shares increases assets and equity. D) Income tax expense is debited and income tax payable is credited for the same amount when calculating how much income tax a business needs to pay. E) Only A. and B. above are True. Question 10 (2 points) On November 1, 2013, Aladdin Inc. (the borrower) issued a 12%, 2-month, $50,000 interest-bearing note to Genie Inc. (the lender). The principal amount is due on January 1, 2014 and the interest is payable monthly on December 1, 2013, and January 1, 2014. The fiscal year end is December 31, 2013. The journal entry for Aladdin on January 1, 2014 will include: A debit to interest expense for $500 A debit to interest payable for $3,000 ( A credit to Note Payable for $50,000 A credit to cash for $50,500 Question 11 (2 points) A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because: O goods are not selling as fast as anticipated. the company is expecting to sell more in the future. None of the available answers are correct. O goods cannot be shipped fast enough. O goods are selling, but it is taking longer to collect payment. Selected information for Chunga Inc. is available below: Insurance Expense $ 4,000 Freight out $ 3,000 Freight in $ 6,000 Sales discounts, returns and allowances $ 21,000 Interest expense $ 6,000 Sales $ 170,000 Cost of goods sold $ 77,000 Dividends $ 10,000 Income tax expense $ 11,000 Which of the following statement's is correct? O a) Operating Income is $65,000. Ob) Freight in is an operating expense. O c) Gross Profit is $83,000. Od) Freight out is accounted for, in the cost of goods sold. O e ) None of the available answers are correct