Q: If a company uses the double-declining balance method for a truck costing $$75,000, with a 5-year life and 7$$,500 residual value, what is the depreciation expense for the first year?

$$ 75,000 \times \frac{2}{5} = \30$$,000 $

Question 1

Sunshine Company uses the FIFO method for inventory costing. Given the following data: Beginning Inventory: 1,000 units at $$14/unit; Purchase #1: 2,500 units at 16/$$unit; Purchase #2: 4,000 units at $20/unit. If 2,000 units are sold, what is the cost of goods sold (COGS) under FIFO?

Accepted Answer

$$ \30$$,000 $

Question 2

Which of the following journal entries correctly records the purchase of $30,000 worth of supplies on account?

Accepted Answer

Debit Supplies $$30,000; Credit Accounts Payable 30$$,000

Question 3

A company issues 1,000 shares of common stock for $150,000. What is the correct journal entry?

Accepted Answer

Debit Cash $$150,000; Credit Common Stock 150$$,000

Question 4

Which activity would be classified as a FINANCING activity on the cash flow statement?

Accepted Answer

The firm paid its shareholders a cash dividend.

Question 5

Which statement best describes the purpose of the balance sheet?

Accepted Answer

It is a 'snapshot' of the firm's financial position at a single point in time.

Question 6

ABBA Inc. borrowed $200,000 at 7% interest on July 1, 2011, to be paid in full on December 31, 2012. What is the adjusting journal entry for interest expense on December 31, 2011?

Accepted Answer

Debit Interest Expense $$7,000; Credit Interest Payable 7$$,000

Question 7

A company estimates that 5% of its $1,125,000 credit sales will be uncollectible. What is the journal entry to record bad debt expense using the percentage of sales method?

Accepted Answer

Debit Bad Debt Expense $$56,250; Credit Allowance for Doubtful Accounts 56$$,250

Question 8

ABBA Inc. purchases equipment for $$100,000 with a useful life of 5 years and a residual value of 2$$,500. What is the annual straight-line depreciation expense?

Accepted Answer

$$ \frac{100,000 - 2,500}{5} = \19$$,500 $

Question 9

If a company uses the double-declining balance method for a truck costing $$75,000, with a 5-year life and 7$$,500 residual value, what is the depreciation expense for the first year?

Accepted Answer

$$ 75,000 	imes \frac{2}{5} = \30$$,000 $

Question 10

Which of the following is NOT a current liability?

Accepted Answer

Equipment

Question 11

Which account is closed at year-end during the closing process?

Accepted Answer

Service Revenue

Question 12

Given the following: Net Income = $$50,000, Dividends = 10$$,000, Beginning Retained Earnings = $40,000. What is the ending Retained Earnings?

Accepted Answer

$$ \80$$,000 $

Question 13

A company has total assets of $$500,000 and net income of 50$$,000. What is the Return on Assets (ROA)?

Accepted Answer

$$ \frac{50,000}{500,000} = 10\% $$

Question 14

Which ratio best measures a firm's ability to pay its short-term obligations?

Accepted Answer

Current Ratio

Question 15

Which principle requires that assets be recorded at their original cost?

Accepted Answer

Cost Principle

Question 16

If a company estimates $40,000 of its accounts receivable will be uncollectible, what is the effect on the balance sheet?

Accepted Answer

Decrease in Net Accounts Receivable

Question 17

Which of the following is a temporary account?

Accepted Answer

Service Revenue

Question 18

Which of the following is NOT a reason to make a journal entry?

Accepted Answer

To increase net income without a transaction

Question 19

If an asset is purchased for $$13,000, has a residual value of 1$$,000, and a useful life of 4 years, what is the book value at the end of year 2 using straight-line depreciation?

Accepted Answer

$$ 13,000 - 2 	imes \frac{13,000 - 1,000}{4} = \8$$,000 $

Question 20

Which of the following is an example of an investing activity?

Accepted Answer

Purchasing equipment for cash

Financial Accounting Final Exam Review: Comprehensive Study Notes

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