Quiz 2

School: Northern Virginia Community College - Course: IT 293 - Subject: Accounting

Depreciation on equipment = (Purchase price - salvage value)/No. of years of useful life Accumulated depreciation in year 2 = depreciation expense in year 1 + depreciation expense in year 2 Straight line depreciation: Annual depreciation = (Cost of the computer system - Salvage value) ÷ Expected life Double declining balance depreciation: Depreciation rate = (1/ Expected life) × 2 Book value = Book value year 1 - Depreciation expense year 1 = $52,000 - $20,800 = $31,200 Depreciation expense for year 2 = $31,200 × 40% = $12,480 Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account.Returned $50 of the inventory purchased in Event 1. Sold the inventory for $6,000 cash. Based on this information, which of the following shows how the recognition of the return will affect the Company's financial statements? -50 -50 na na na na na Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in account payable for the inventory purchased in Event 1. Immediately after the three events have been recognized, the balance in the inventory account is: 4000 Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory for cash. Returned $100 of the inventory purchased in Event 1 Based on this information, which of the following shows how the recognition of the return will affect the Company's financial statements? Na na na na na na 100oa Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in account payable for the inventory purchased in Event 1. Sold inventory purchased in Event 1 for $5,000 to customers on account. At the end of the first accounting period what would be reported on the Income Statement for net income? 1000 Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in account payable for the inventory purchased in Event . Based on this information, which of the following shows how the recognition of the cash discount (Event 1) will affect the Company's financial statements? -40 -40 na na na na na Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account under terms 1/10/n30. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in account payable within the discount period for the inventory purchased in Event 1. Immediately after the three events have been recognized, the balance in the inventory account is: 3960 Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account under terms 1/10/n30. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in account payable for the inventory purchased in Event 1. If the Company pays the account payable after the discount period has expired, how much cash will be required to settle the liability? 4000 AmRon Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show:a cash inflow from investing activities of $26,500 on the statement of cash flows. Beachwood Clothing Company operates a chain of high end men's clothing stores. Recently the Company closed one of its stores and sold the equipment that was used in the store. The equipment had cost $5,000 and was sold for $6,000. Which of the following shows how the

recognition of this event would affect the Company's financial statements?6000 -5000 na 1000 na 1000 na 1000 6000IA Common size statements are presented as percentages to promote comparisons between different size companies. This statement is: True Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.) - NA - NA +- NA Escrow Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information, the net income or (net loss) amounted to: -8000 Inventory isan asset account that appears on the balance sheet. Keisha Dress Shops experienced the following events during its third accounting period. Sold merchandise that cost $92,000 for $140,000 cash. Paid $30,000 of operating expenses. Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is 48000 Mahan Company purchased inventory on account under terms 2/10/n30. Mahan would like to pay the account payable within the discount period in order to receive the discount. Unfortunately, Mahan does not have the cash. What is the maximum annual interest rate that Mahan would be willing to pay in order to borrow the money necessary to settle the account payable? 36.5% McDonald's will recognize a gain if it generates an amount of revenue that is higher than its operating expenses. This statement is:false Paying cash to purchase inventory is:an asset exchange transaction.