MH-EDUCATION Financial Accounting 116A Test on:

Ch. 7: Long term assets

Ch.8: Current Liabilities

Please view attached review sheets. test is very similar to review sheets. test is due tonight by 11:59 pm. duration is 3 hours.

Chapter 7 Homework: Long-term Assets The Italian Bread Company purchased land as a factory site for $70,000. An old building on the property was demolished, and construction began on a new building. Costs incurred during the first year are listed below: Question 1: Required: Determine the amounts that the company should record in the Land and the Building accounts. (Amounts to be deducted should be indicated by a minus sign.) Explanation: The property taxes on the land of $4,000 will be recorded as property tax expense over the first year. Question 2: Great Harvest Bakery purchased bread ovens from New Morning Bakery. New Morning Bakery was closing its bakery business and sold its two-year-old ovens at a discount for $700,000. Great Harvest incurred and paid freight costs of $35,000, and its employees ran special electrical connections to the ovens at a cost of $5,000. Labor costs were $37,800. Unfortunately, one of the ovens was damaged during installation, and repairs cost $5,000. Great Harvest then consumed $900 of bread dough in testing the ovens. It installed safety guards on the ovens at a cost of $1,500 and placed the machines in operation. Prepare a schedule showing the amount at which the ovens should be recorded in Great Harvest's Equipment account. Explanation: 1. The ovens should be recorded in the equipment account at $780,200. The repair costs of $5,000 for the oven damaged during installation should not be included in the equipment account as this is not a normal cost to get the asset ready for use. The repair costs of $5,000 should be recorded as repairs expense on the income statement. Question 3: Several years ago, Health Services acquired a helicopter for use in emergency situations. Required: Select whether Health Services should capitalize or expense each of the following expenditures related to the helicopter delivery operations in 2015: Question 4: [The following information applies to the questions displayed below.] University Car Wash built a deluxe car wash across the street from campus. The new machines cost $270,000 including installation. The company estimates that the equipment will have a residual value of $24,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Required: 1.Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations. Round your answers to the nearest dollar amount.) Question 5: 2.Prepare a depreciation schedule for six years using the doubledeclining-balance method. (Do not round your intermediate calculations. Round your answers to the nearest dollar amount.) Question 6: 3.Prepare a depreciation schedule for six years using the activitybased method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.) Question 7: [The following information applies to the questions displayed below.] Solich Sandwich Shop had the following long-term asset balances as of December 31, 2015: Solich purchased all the assets at the beginning of 2013 (3 years ago). The building is depreciated over a 10-year service life using the double-declining-balance method and estimating no residual value. The equipment is depreciated over a nine-year useful life using the straight-line method with an estimated residual value of $10,000. The patent is estimated to have a five-year service life with no residual value and is amortized using the straight-line method. Required: 1.For the year ended December 31, 2015, record depreciation expense for buildings and equipment. Land is not depreciated. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Explanation: 1. 1. Depreciation expense: $294,400 2/10 = $58,880 2. Depreciation expense: $235,000 - $10,000/9 = $25,000 Question 8: 2.For the year ended December 31, 2015, record amortization expense for the patent. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Explanation: 2. Amortization expense = $250,000/5 = $50,000 Question 9: 3. Calculate the book value for each of the four long-term assets at December 31, 2015. Chapter 8 Homework: Current Liabilities Question 1: Select the most appropriate item from the dropdown to match each of the following terms and phrases associated with current liabilities. Question 2: Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2015, to provide working capital for anticipated expansion. Precision signs a one-year, 9% promissory note to Midwest Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. Required: 1.Prepare the journal entries on October 1, 2015, to record the issuance of the note. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.Enter your answers in dollars, not in millions.) Question 3; 2.Record the adjustment on December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Question 4: 3.Prepare the journal entry on September 30, 2016, to record payment of the notes payable at maturity. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Question 5: [The following information applies to the questions displayed below.] Caribbean Tours' total payroll for the month of January was $600,000. The following withholdings, fringe benefits, and payroll taxes apply: Required: 1.Record the employee salary expense, withholdings, and salaries payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Question 6: 2.Record the employer-provided fringe benefits. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Question 7: 3.Record the employer payroll taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Question 8: [The following information applies to the questions displayed below.] The University of Michigan football stadium, built in 1927, is the largest college stadium in America, with a seating capacity of 114,000 fans. Assume the stadium sells out all six home games before the season begins, and the athletic department collects $102.6 million in ticket sales. Question 9: 2.Record the advance collection of $102.6 million in ticket sales. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Question 10: 3.Record the revenue earned after the first home game is completed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Question 11: [The following information applies to the questions displayed below.] The ink-jet printing division of Environmental Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December 31, 2015. Record any amounts as a result of each of these contingencies. Required: 1.Environmental Printing was sued for $11 million by Addamax. Plaintiff alleges that the defendants formed an unlawful joint venture and drove it out of business. The case is expected to go to trial later this year. The likelihood of payment is reasonably possible. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Explanation: 1. The likelihood of loss is reasonably possible rather than probable, so no journal entry is recorded. However, full disclosure of the contingent liability is made in a footnote to the financial statements. Question 12: 2.Environmental Printing is the plaintiff in an $9 million lawsuit filed against a competitor in the high-end color-printer market. Environmental Printing expects to win the case and be awarded between $6.5 and $9 million. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions.) Explanation: 2. Environmental Printing has a contingent gain that is probable and can be reasonably estimated within a range between $6.5 and $9 million. Contingent gains are not recorded until the gain is certain. Though firms do not record contingent gains in the accounts, they sometimes disclose them in notes to the financial statements. Question 13