Exam 2 Review

When establishing an allowance for doubtful accounts, what account is debited?

Avalanche Automotive withholds federal and state income taxes, FICA taxes, and federal and state unemployment taxes. Avalanche also contributes to health insurance premiums. Which of these, if any, would be considered fringe benefits?

Canuck Corporation issue a six-month 5% note receivable for $7,500. How much interest revenue will Canuck record on the day of maturity when the note is paid?

The balance sheet for King Company shows cash, current investments, accounts receivable, notes receivable, and PPE. Which, if any, of these accounts should be used in calculating the acid-test ratio?

Wild Widgets incurs costs associated with both shipping inventory out to customers and in from suppliers. Wild also returns damaged inventory to a vendor and receives a purchase discount. Which transactions require debit to inventory?

Oiler Originals buys a drill. In addition to the purchase price, Oiler also pays for shipping, installation, and insurance for the first year of operation. Which, if any, of these costs, are included in the cost of drill on balance sheet?

Lightning Legal issues a nine-month 8% note receivable for $10,000. How much interest revenue will Lightning record on the day the note is issued?

Bruin Brews has beginning inventory of 100 units that were purchased for $5 each. Bruin purchased an additional 100 units for $6 each later in the period. If Bruin sells 125 units during the period, ending inventory under FIFO would be

Ducks Unlimited has a balance of $100,000 in A/R and the balance in AFUA is $4,000 (credit). If Ducks estimates that 10% of A/R will go uncollected, how much bad debt expense should they record?

Flyer Foods sells 125 units on account for $10 each, but the customer returns 25 of them one week later. What journal entry should Flyer record for this return? (Ignore the entry for putting returned units back into inventory)

Sabre Swords sells a building for $500,000. The original cost of the building was $750,000 and accumulated depreciation of $200,000. What would be the gain/loss on this sale?

Jets Jams writes off an uncollectible account worth $3,000. What journal entry must Jets make to record this write-off?

The Detroit Red Wings sell $5,000,000 worth the tickets for their home hockey games. As of December 31, the Red Wings have played 30% of their home games. How much service revenue should the Red Wings record on December 31?

Capital Company has a contingent liability. The likelihood of payment is reasonably possible, but the amount of payment is not reasonably estimable. Should this liability be recorded on the balance sheet, disclosed in the notes, or ignored?

On November 1, Panther Produce sells fruit on account to Senator Supermarket for $1,000, terms 5/10, n/30. If Senator pays for the fruit on November 7, how much cash will Panther receive?

Blues Boards understate their ending inventory balance by $2,500 in the current year. What impact will this error have on retained earnings?

Ranger has beginning inventory of 100 units that were purchased for $5 each. Ranger purchased an additional 100 units for $6 each later in the period. If Ranger sells 125 units during the period, Ranger’s COGS under LIFO would be

When inventory costs are rising, which inventory costing method will result in the highest profitability?

Hurricane Hardware owns a trademark that they plan to renew, a patent, and a copyright. Their balance sheet also shows goodwill. Which, if any, of these assets should Hurricane amortize?

Using the allowance method, are adjusting entries recorded at the start of each period, during the period when accounts are written off, or at the end of each period?

Mammoth Manufacturing reports sales of $500,000 and net income of $30,000. Mammoth also reports beginning total assets of $400,000 and ending total assets of $450,000. What is Mammoth’s return on assets, or ROA?

In pursuit of creating a new patent, Stars Solutions incurs costs related to R&D salaries, depreciation on R&D equipment, filing fees, and paying another company to do a portion of the development. Which costs included?

Islander has equipment that originally cost $200,000 and has an estimated residual value of $25,000. If the equipment has a useful life of five years, how much accumulated depreciation would Islander report after 2 years?

For a manufacturer, the cost of fully assembled inventory that is ready for sale to customers is called