Intro to Accounting Week 5 Notes
Intro to Accounting Week 5 Notes ACCT - 23020 - 002
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ACCT - 23020 - 002
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This 8 page Class Notes was uploaded by Alyssa Brutsche on Tuesday March 29, 2016. The Class Notes belongs to ACCT - 23020 - 002 at Kent State University taught by Wendy M. Tietz (P) in Fall 2015. Since its upload, it has received 64 views. For similar materials see INTRODUCTION TO FINANCIAL ACCOUNTING in Accounting at Kent State University.
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Date Created: 03/29/16
A company has a beginning inventory of $40,000 and purchases during the year of $110,000. The beginning inventory consisted of 3,000 units and 7,000 units were purchased during the year. The average cost per unit is -Answer 15.00 The FIFO method assigns the most recent inventory cost to expense -Answer False Which of the following businesses would use the specific unit cost to account for inventory? a) Automobile b) Jewelry c) Real estate d) All of the above -Answer D On which financial statement would you find the cost of the snacks and beverages that had not yet been sold as of December 31? -Answer Balance Sheet At what cost would one can of Diet Coke be carried on Caesars’s balance sheet? a) $1 b) $4 -Answer A What is the impact on Caesars’s assets resulting from the sale of one can of Diet Coke? (Assume that Diet Coke costs Caesars $1; hotel guests pay $4) -Answer $3 increase The lower-of-cost-or-Market rule requires a company to report inventories at the lower of -Answer historical cost or current replacement value The weighted-average cost per unit is calculated as the cost of goods sold divided by the number of units actually sold -Answer False Which of the following accounting principles do NOT have special relevance to inventories? -Answer Revenue Will Caesars recognize a receivable at the time that the gambler’s loan application is approved? -Answer No Will Caesars recognize a receivable at the time that the gambler signs the marker and receives $500 of chips at the table? -Answer yes FedEx signs a $300,000 note payable to purchase 20 acres of land for a new shipping site. FedEx also pays $10,000 for real estate commission, $8,000 of back property tax, $5,000 for removal of an old building, a $1,000 survey fee and $260,000 to pave the parking lot all in cash. Account Debit Credit Land $324,000 Notes payable $300,000 Cash $24,000 ABC Company purchased land with an old building that it plans on demolishing so that it can construct a new, modern building. The cost of demolishing the building will be part of the cost of the: -Answer land Company A purchased a used piece of equipment. All of the following costs should be included in the cost of the equipment EXCEPT for: a) insurance while in transit b) sales tax paid c) installation costs d) maintenance costs after the equipment is up and running -Answer maintenance costs after the equipment is up and running. The cost of land may include the cost of any back property taxes that the purchaser pays -Answer true Company B purchased some land and is preparing the land for a new building. Company B should include which of the following in the cost of the land? a) Cost of driveways b) Cost of fencing c) Cost of sprinkler systems d) Grading and clearing the land -Answer D Land is purchased for $543,710. Back taxes paid by the purchaser were $8,500; total costs to demolish an existing building and clear the land were $215,000, and costs of paving the parking lot were $106,000. What is the cost of the land? -Answer $767,210 S7-2 Graves Automotive pays $320,000 for a group purchase of land, building and equipment. At the time of acquisition, the land has a current market value of $112,000, the buildings current market value is $227,500, and the equipment’s current market value is $10,500. Journalize the lump sum purchase of the three assets for a total cost of $320,000 If you add them up you get 350000, which is more than 320000 Land………………………………………..$112,000/$350,000 = 32% Building…………………………………..$227,500/$350,000 = 65% Equipment………………………………$10,500/$350,000 = 3% You take the percentages and multiply them by the amount you actually paid Land ($320,000 * .32) = $102,400 Building ($320,000 * .65 = $208,000 Equipment ($320,000 * .03) = $9,600 Note Payable = $320,000 Land, buildings and equipment are acquired for a lump sum of $850,000. The market values of the three assets are, respectively, $250,000, $480,000 and $180,000. What is the cost assigned to the equipment? -Answer $168,132 Is the cost of customizing the Chevy Volt car into a Domino's pizza delivery vehicle capitalized or expensed? -Answer Capitalized When we say that Domino's CAPITALIZED the cost of customizing the vehicle into a pizza delivery vehicle, that cost will appear this year on Domino's -Answer balance sheet as an asset called equipment Is cost of replacement tires capitalized or expensed? -Answer expensed When we say that Domino’s EXPENSED the cost of replacement tires for a pizza delivery vehicle, that cost will appear this year on Domino’s -Answer income statement as an expense called REPAIRS EXPENSE Which of the following costs would be capitalized a) Repair of a dump truck’s transmission b) Addition of extra storage capacity c) Oil change on a company car d) Painting a company car -Answer B Treating a capital expenditure as an immediate expense -Answer overstates expenses and understates net income Which of the following is NOT one of the three things needed to measure depreciation? -Answer Probability of obsolescence Which of the following is NOT one of the three main depreciation methods? a) straight-line b) units of production c) residual value d) double declining balance -Answer C) Residual value Would the costs of renovating the Roman Tower (now the new Julius Tower) be capitalized or expensed? -Answer Capitalized What account would be used for renovation costs (on the balance sheet) -Answer Building improvements Land Improvements are subject to depreciation -Answer True The Accumulated Depreciation account is an income statement account -Answer False Book value equals the cost of the asset less the total accumulated depreciation -Answer True At the end of its useful life, the book value of an asset must be zero -Answer False
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