Unearned Revenue - Payable & Receivable - Finance

Unearned Revenue – Payable & Receivable – Finance

These Accounting chapters discuss Unearned Revenue – Payable & Receivable – Finance

Assume S Company only prepares AJEs as of December 31, the end of S’s accounting year. On August 1, S collected $12,000 of rent for 12 months in advance and recorded the receipt in a real account. The AJE S will make on December 31 will include a(an)

$7,000 debit to unearned rent

$5,000 debit to rent revenue

$7,000 credit to rent revenue

$5,000 credit to rent revenue – Correct

$7,000 credit to unearned rent

The following information was taken from the D Company’s balance sheets:

……………………………………………….12-31-18………..12-31-19
Prepaid advertising…………………….$30,000………….$60,000
Advertising fees receivable………….$40,000………….$20,000
Advertising payable…………………….$85,000………….$80,000
Unearned advertising income……….$35,000………….$75,000

For the year ended 12-31-19, D reported $340,000 of advertising expense.

How much cash did D pay during the year ended 12-31-19 related to advertising?

$305,000

$355,000

$310,000

$375,000 – Correct

$365,000

Assume on 12-31-15, Hoosier entered into an agreement that required it to make the following payments:

$45,000 on 12-31-15
$0 on 12-31-16 and 12-31-17
Starting 12-31-18, $30,000 every 12-31 until 2028
$50,000 on 12-31-29

Assume the appropriate market interest rate to use in this calculation is 4%. As of 12-31-15 what is the present value of Hoosier’s obligation?

$336,688

$271,860

$298,843

$317,168

$316,860 – Correct

The following information was taken from the D Company’s balance sheets:

	12-31-18	12-31-19
Unearned consulting fees	$60,000	$80,000
Prepaid advertising	$30,000	$60,000
Advertising payable	$95,000	$55,000
Consulting fees receivable	$45,000	$35,000
Unearned advertising income	$75,000	$25,000
Wages payable	$10,000	$70,000

Additional information for D follows.

For the year ended 12-31-19, D reported $300,000 of wages expense.

During the year ended 12-31-19, D made cash payments of $200,000 related to advertising.

For the year ended 12-31-19, D reported $600,000 of consulting fees revenue.

How much cash did D pay out during the year ended 12-31-19 related to wages?

$360,000

$240,000 – Correct

$230,000

$370,000

$300,000

$7,000 debit to unearned rent

$5,000 debit to rent revenue

$7,000 credit to rent revenue

$5,000 credit to rent revenue – Correct

$7,000 credit to unearned rent

$305,000

$355,000

$310,000

$375,000 – Correct

$365,000

$336,688

$271,860

$298,843

$317,168

$316,860 – Correct

The following information was taken from the D Company’s balance sheets:

	12-31-18	12-31-19
Unearned consulting fees	$60,000	$80,000
Prepaid advertising	$30,000	$60,000
Advertising payable	$95,000	$55,000
Consulting fees receivable	$45,000	$35,000
Unearned advertising income	$75,000	$25,000
Wages payable	$10,000	$70,000

Additional information for D follows.

For the year ended 12-31-19, D reported $300,000 of wages expense.

During the year ended 12-31-19, D made cash payments of $200,000 related to advertising.

For the year ended 12-31-19, D reported $600,000 of consulting fees revenue.

What were D’s advertising expenses for the year ended 12-31-19?

$80,000

$270,000

$220,000

$180,000

$130,000 – Correct

On August 1, 2018 S issued a $24,000 short-term note that pays 4% interest. S will pay off the note principle in two equal installments with the first installment taking place on November 1, 2018 and the second installment taking place on February 1, 2019. S will pay interest when it makes a principle payment. Assume S only records adjusting journal entries every December 31 AND S does not prepare reversing entries.

The entry S will make on 11-01-18 will include a(an)

$240 debit to interest expense – Correct

$12,240 debit to cash

$320 debit to interest expense

$12,000 credit to short-term notes payable

$12,320 credit to cash

Acme Company reported the following relating to its only inventory item:

Inventory on hand, January 1, 25 units costing $32 per unit
Purchases, January 8, 30 units costing $38 per unit
The Purchases, January 15, 20 units costing $41 per unit
Purchases, January 26, 15 units costing $45 per unit
Total cost of goods available for sale equaled 90 units costing $3,435

Sales, January 5, 5 units
The Sales, January 16, 14 units
Sales, January 25, 31 units
Total sales equaled 50 units for sales revenues of $3,500

Assuming Acme uses a FIFO costing method, what was Acme’s ending inventory and cost of goods sold, respectively?

$1,685, $1,750 – Correct

$1,370, $2,065

$1,850, $1,585

$1,815, $1,620

$1,750, $1,685

Acme Company reported the following relating to its only inventory item:

Inventory on hand, January 1, 25 units costing $16 per unit
Purchases, January 8, 30 units costing $38 per unit
The Purchases, January 15, 20 units costing $41 per unit
Purchases, January 26, 15 units costing $45 per unit
Total cost of goods available for sale equaled 90 units costing $3,035

Sales, January 5, 5 units
The Sales, January 16, 14 units
Sales, January 25, 31 units

Total sales equaled 50 units for sales revenues of $3,500
Assuming Acme uses a perpetual LIFO costing method, what was Acme’s ending inventory and cost of goods sold, respectively?

$970, $2,065

$1,185, $2,315

$1,850, $1,650

$1,185, $1,850 – Correct

$640, $2,395

The formula used to calculate a company’s gross profit amount is:

Net sales minus operating expenses

Net sales revenues minus sales expense

The Net sales minus the change in ending inventory

Net sales minus cost of goods sold – Correct

Net sales minus cost of goods sold and administrative expenses

What is “recourse” as it relates to selling, i.e., factoring, receivables?

The obligation of the factor to pay the seller of the receivables if all of the receivables are collected.

The obligation of the seller of the receivables to pay the factor in case the customer fails to pay. – Correct

Obligation of the seller of the receivables to pay the factor when the customer returns a product.

The obligation of the factor to pay the seller of the receivables when the customer returns a product.

The obligation of the factor to pay the seller of the receivables in case the customer fails to pay.

When dealing with accounting for inventory, net realizable value (NRV) equals

selling price.

the middle numeric value of (1) replacement cost, (2) selling price minus costs to complete the inventory and minus costs to dispose of the inventory, and (3) selling price minus costs to complete the inventory and minus costs to dispose of the inventory and minus a normal profit margin

replacement cost

selling price minus costs to complete the inventory and minus costs to dispose of the inventory. – Correct

selling price minus costs to complete the inventory and minus costs to dispose of the inventory and minus a normal profit margin

Lower-of-cost or net realizable value as it applies to inventory is best described as the

assumption to determine inventory flow.

drop of future utility below the inventory’s original cost. – Correct

net realizable value.

change in inventory value to a change in market value.

method of determining cost of goods sold.

$970, $2,065

$1,185, $2,315

$1,850, $1,650

$1,185, $1,850 – Correct

$640, $2,395

On October 1, 2019, M purchased machinery for $200,000. Salvage value was estimated at $10,000. The machinery will be depreciated over 4 years using a double-declining balance method. If depreciation is computed on the basis of the nearest full month, what should M record as depreciation for 2020?

$83,333

$84,167

$83,125

$87,500 – Correct

$50,000

On 12-31-15, Shannon entered into an agreement that required Shannon to pay a supplier $5,000 every year on 12-31 until 2040. The agreement required Shannon to make the first annual payment on 12-31-20. Assume the market rate of interest for Shannon is 15%. As of 12-31-15 what was the present value of Shannon’s obligation?

$31,562

$31,297

$18,046 – Correct

$17,895

$15,560

The formula used to calculate a company’s gross profit amount is:

Net sales minus operating expenses

Net sales revenues minus sales expense

The Net sales minus the change in ending inventory

Net sales minus cost of goods sold – Correct

Net sales minus cost of goods sold and administrative expenses

Fixed asset expenditures that increase the fixed asset’s productivity and/or efficiency but do not extend the fixed asset’s useful life should be accounted for by

crediting an accumulated depreciation account.

debiting a fixed asset account. – Correct

debiting an expense account.

Crediting debiting a cash account.

debiting an accumulated depreciation account.

Bark self-constructed a machine to be used in Bark’s factory. Construction began on January 1 and was completed on December 31. Construction expenditures were as follows: $840,000 on January 1 and $480,000 on September 30. During the entire year Bark had the following outstanding notes payable: a 5%, 3-year $600,000 note and a 6%, 5-year $900,000 note. What were Bark’s weighted-average accumulated constructions expenditures for interest capitalization purposes?

$1,000,000

$1,320,000

$990,000

$660,000

$960,000 – Correct

Mellow purchased a machine to be used in its factory for $100,000. In receiving and installing the machine, Mellow incurred the following additional costs: $16,000 of shipping costs and $14,000 of installation costs. In addition, Mellow incurred and paid $4,000 of costs caused by damage during the installation. What amount should Mellow capitalize in its machine account?

$130,000 – Correct

$100,000

$116,000

$134,000

$118,000

Fara Co. reported bonds payable of $47,000 at December 31, 20X5 and $50,000 at December 31, 20X6. During 20X6, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premiums or discounts during the year. What amount should Fara report in its 20X6 Statement of Cash Flows for the redemption of bonds payable?

$23,000

$3,000

$20,000

$17,000 – Correct

Explanation

The bonds payable account (which reflects only face value) increased $3,000 during the year. If bonds of $20,000 face value were issued during the year, then $17,000 of bonds payable must have been retired (redeemed).
Without additional information, the redemption must have been accomplished with a cash payment and thus is disclosed in the cash flow statement. The fact that $20,000 of bonds were issued without cash effect has no bearing on the determination of the $17,000 redemption.

Peterson Enterprises reports the following information:

Net income	$5,000,000
Depreciation expense	680,000
Loss on the sale of investments	154,000
Increase in accounts receivable	320,000

Peterson should report cash provided by operating activities of

$3,846,000.

$5,514,000. – Correct

$6,154,000.

$5,000,000.

Explanation

Net Income, $5,000,000 plus Depreciation Expense, $680,000 plus Loss on the sale of investments, $154,000 less Increase in accounts receivable, $320,000 equals $5,514,000, the cash provided by operating activities.

The financial statement which summarizes the operating, investing, and financing activities of an entity for a period of time is the

income statement.

retained earnings statement.

statement of financial position.