Test 1 Material
Fill in the blank: Assets, Liabilities, and _____________
A tractor cost $100,000, with a salvage value of $10,000, and a useful life of 5 years. What is the annual depreciation?
What is $18,000?
The two main types of stock are:
Common and Preferred Stock
This type of business is owned by one person, and the owner has more liability than in any other business.
What is Sole Proprietorship?
Issuing Common Stock is a ___________ activity.
Financing
Accounts Payable 100 (Debit)
Cash 100 (Credit)
If this journal entry isn't made, what parts of the balance sheet are over/understated?
Overstated: Liabilities, Assets
Net Sales - Cost of Goods Sold (COGS) = ________
What is Gross Profit?
If there are $300,000 worth of $10 PAR value Common Stock already issued, and 1,500 Common Stock were bought back in the Treasury Stock account at a value of $10,000, how many Common Stock are outstanding?
28,500 (300,000/10 - 1,500)
The buyer pays for the shipping and receives ownership when the goods hit the UPS truck in this type of shipping.
What is FOB Shipping Point?
Given this inventory, what is the average cost per unit?
$4.61 ($2,075/450 units)
(Bonus question: if 250 units were sold, what is the ending inventory amount using average cost?)
An inventory purchase was made by ABC for $1,000, terms 2/10, n/30. They pay nine days after the purchase. What is the appropriate journal entry to record the payment?
Accounts Payable 1,000 (Debit)
Cash 980 (Credit)
Inventory 20 (Credit)
Between FIFO, LIFO, and Average Cost, this process will always have the highest Cost of Goods Sold and the lowest Ending Inventory
What is LIFO?
As clearly as possible, explain how to create a journal entry to record paying off mortgage payable and interest on a long-term mortgage.
#1: Calculate Interest Expense based on the remaining Mortgage Payable (Debit)
#2: Put your monthly payment as Cash (Credit)
#3: Calculate the difference, which is what you are paying off of the Mortgage Payable (Debit)
Name all types of bonds.
What are Secured, Unsecured, Convertible, and Callable?
(Extra 50 points each: What is the definition of each?)
On July 1st, ABC purchased a copyright for $100,000. The copyright will have a useful life of 5 years. The amount of amortization expense in 2010 is:
$10,000 ($100,000 / 5 years x 6/12)
To show that an unearned service revenue has been finally earned with an adjusted journal entry, you would debit the _____ _____ account and credit the _____ _____ account (must have both)
What is:
Debit: Unearned Service Revenue xxxx
Credit: Service Revenue xxxx
If a loss on disposal occurs, the debit and credit accounts are:
Debit: Cash
Credit: Accumulated Depreciation, Equipment, Loss on Disposal
ABC sold $6,000,000 of 9%, 8-year bonds on January 1st for $5,000,000. The market interest rate is 12%, and interest will be paid each January 1st. What is the interest EXPENSE in the first year?
$600,000 ($5M x 0.12)
A bond's stated rate is 9%, but the market rate is 3%. It will sell at a:
Premium
ABC issued 1,000 shares of $5 par value common stock for $9,900. What is the accurate journal entry to record the sale of stock?
Cash $9,900
Common Stock $5,000
Paid in Excess - Common Stock $4,900
A person pays ABC Company $500 for a service that will happen in two weeks. What are the journal entries for:
-When the purchase occurs?
-When the service is completed?
#1: Cash (Debit), Unearned Service Revenue (Credit); $500 each
#2: Unearned Service Revenue (Debit), Service Revenue (Credit); $500 each
A note you currently own is expiring, meaning you will receive your money back, plus interest accrued in the past and in this period. What are the debit and credit accounts to record this entry?
Debit: Cash
Credit: Notes Receivable, Interest Receivable, Interest Revenue
ABC is issuing $3,000,000 of 5-year, 10% bonds with semi-annual interest. The market rate is 8%. How much will ABC make on the sale of this bond?
(Hint: PV of 1 chart value needed is .67556, and PV of annuity value needed is 8.1109, but how do you get to these numbers?)
$3,243,315 ($3,000,000 x 0.67556 + $150,000 x 8.1109)
When a 3:1 stock split occurs, what happens to the Stockholders' Equity totals?
Nothing.
On July 1st, ABC purchased a copyright for $100,000. The copyright will have a useful life of 5 years. The amount of amortization expense in 2010 is:
$10,000 ($100,000 / 5 years x 6/12)