Costs And Equipment Account – Final Exam – Accounting

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Costs And Equipment Account – Final Exam – Accounting & Finance

The key terms in these accounting chapters include Equipment Account, Perpetual Inventory, Useful Life, Depreciation, Salvage Value, Costs, Final Exam – Accounting & Finance


On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000.  Installation and delivery costs totaled $8,000.  Yearly maintenance costs on the equipment are expected to be $6,000.  The expected useful life is 8 years with a salvage value of $12,000.

What amount should Pete Company have in its equipment account after the purchase?

128,000


On February 3, Smart Company sold merchandise in the amount of $4,500 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is $3,100. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Cash3,100 
Accounts receivable 3,100
Cash4,500 
Accounts receivable 4,500
Cash4,420 
Sales discounts31 
Accounts receivable 4,451
Cash3,020 
Accounts receivable 3,020
Cash4,455 
Sales discounts45 
Accounts receivable 4,500

Correct

Explanation

Sales Discounts = $4,500 * .01 = $45
Cash = $4,500 – $45 = $4,455


On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000.  Installation and delivery costs totaled $8,000.  Yearly maintenance costs on the equipment are expected to be $6,000.  The expected useful life is 8 years with a salvage value of $12,000.

What amount of depreciation expense would Pete Company record in 2019?

14,500


A company had beginning inventory of 11 units at a cost of $23 each on March 1. On March 2, it purchased 11 units at $40 each. March 6 it purchased 5 units at $28 each. On March 8, it sold 25 units for $71 each. Using the FIFO perpetual inventory method, what was the cost of the 25 units sold?

$833

$621

$693

$700

$777 – Correct

Explanation

(11 * $23) + (11 * $40) + (3 * $28) = $777


On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000.  Installation and delivery costs totaled $8,000.  Yearly maintenance costs on the equipment are expected to be $6,000.  The expected useful life is 8 years with a salvage value of $12,000.

What amount of accumulated depreciation expense would Pete Company report on its December 31, 2021 balance sheet?

35,500


In the process of reconciling its bank statement for April, Donahue Enterprises’ accountant compiles the following information:
 

  
Cash balance per company books on April 30$6,255
Deposits in transit at month-end$1,340
Outstanding checks at month-end$660
Bank charge for printing new checks$65
Note receivable and interest collected by bank on Donahue’s behalf$730
A check paid to Donahue during the month by a customer is returned by the bank as NSF$520

 
The adjusted cash balance per the books on April 30 is:

$6,920

$5,800

$4,400

$8,120

$6,400 – Correct

Explanation
  
Book balance$6,255
+ note collection & interest revenue + 730
– bank charge for printing new checks – 65
– NSF check returned by bank – 520
Adjusted book balance$6,400

On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000.  Installation and delivery costs totaled $8,000.  Yearly maintenance costs on the equipment are expected to be $6,000.  The expected useful life is 8 years with a salvage value of $12,000.

What is the book value of the equipment on December 31, 2023?

55,500


The interest accrued on $3,600 at 7% for 30 days is: (Use 360 days a year.)

$126.

$25.

$294.

$21.  Correct

$29.

Explanation

$3,600 × 0.07 × 30/360 = $21


On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000.  Installation and delivery costs totaled $8,000.  Yearly maintenance costs on the equipment are expected to be $6,000.  The expected useful life is 8 years with a salvage value of $12,000.

What amount of gain or loss would Pete Company record if it sold the equipment for $36,000 on January 1, 2025?

(Enter a gain as a positive number and a loss as a negative number.)

-5,000


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