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Acco 112 Partial Test 1 - UMET - 2013
Acco 112 Partial Test 1 - UMET - 2013
I.
True (T) or
T 1.
Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.
T 2.
A company whose current liabilities exceed its current assets may have a liquidity problem.
F 3.
Book value is equal to the cost of the asset less the expected residual value.
T 4.
A $30,000, 8%, 9-month note payable requires an interest payment of $1,800 at maturity.
T 5.
The depreciation cost of a plant asset is the original costs less accumulated depreciation.
F 6.
The higher the sales tax rate, the more profit a retailer can earn.
T 7.
During the month, a company sells goods for a total of $108,000, which includes sales taxes of $8,000;
therefore, the company should recognize $100,000 in Sales Revenues and $8,000 in Sales Tax
Expense.
T 8.
Contingent liabilities should be recorded in the accounts if there is a remote possibility that the
contingency will actually occur.
T 9.
FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.
T 10.
If a firm changes its estimate of the useful life on an asset, the accumulated depreciation account must
be adjusted.
T 11.
The cost of land improvements includes fencing, paving, sprinklers systems, and lighting.
T 27.
The balances of the major classes of plant assets and accumulated depreciation by major classes
should be disclosed in the balance sheet or notes.
F 28. When an asset is purchased during the year, it is not necessary to record depreciation expense in the
first year under the declining-balance depreciation method.
T 29. Payroll deductions withheld from employees become an expense for the employer.
T 30. The personal assets, liabilities, and personal transactions of partners are excluded from the accounting
records of the partnership.
F 31. A major advantage of the partnership form of organization is that the partners have unlimited liability.
T 32. If a partner invests noncash assets in a partnership, they should be recorded by the partnership at their
fair market value.
F 33. Two proprietorships cannot combine and form a partnership.
F 34. Unless stated otherwise in the partnership contract, profits and losses are shared among the partners
in the ratio of their capital equity balances.
F 35. Unless the partnership agreement specifically indicates an income ratio, partnership net income or loss
is not allocated to the partners.
T 36. If a partnership has a loss for the period, the closing entry to transfer the loss to the partners will require
a credit to the Income Summary account.
F 37. Salary allowances to partners are a major expense on most partnership income statements.
F 38. The income earned by a partnership will always be greater than the income earned by a proprietorship
because in a partnership there is more than one owner contributing to the success of the business.
T 39. Total partners' equity of a partnership is equal to the sum of all partners' capital account balances.
F 40. The liquidation of a partnership means that a new partner has been admitted to the partnership.
T 41. The admission of a new partner results in the legal dissolution of the existing partnership and the
beginning of a new partnership.
T 42. Payroll tax expense is debited when recording the employees deductions.
F 43. A partnership is an association of no more than two persons to carry on as co-owners of a business for
profit.
2.
A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000
was spent for demolishing an old building on the land before construction of a new building could start.
Under the cost principle, the cost of land would be recorded at
a.
b.
c.
d.
3.
Sales tax
Truck license
Freight charges
Cost of lettering on side of truck
Which of the following assets does not decline in service potential over the course of its useful life?
a.
b.
c.
d.
5.
$97,000.
$90,000.
$95,000.
$102,000.
Which one of the following items is not considered a part of the cost of a truck purchased for business
use?
a.
b.
c.
d.
4.
closing costs.
real estate broker's commission.
remodeling costs.
All of these are included.
Equipment
Furnishings
Land
Fixtures
a.
b.
c.
d.
6.
Gagner Clinic purchases land for $130,000 cash. The clinic assumes $1,500 in property taxes due on
the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What
amount does Gagner Clinic record as the cost for the land?
a.
b.
c.
d.
7.
$132,200
$130,000
$134,700
$132,500
Carey Company buys land for $50,000 on 12/31/09. As of 3/31/10, the land has appreciated in value to
$50,700. On 12/31/10, the land has an appraised value of $51,800. By what amount should the Land
account be increased in 2010?
a.
b.
c.
d.
8.
$0
$700
$1,100
$1,800
Hull Company acquires land for $86,000 cash. Additional costs are as follows:
Removal of shed
Filling and grading
Salvage value of lumber of shed
Broker commission
Paving of parking lot
Closing costs
300
1,500
120
1,130
10,000
560
10.
land.
buildings on the land.
land or land improvements, whichever is longer.
land improvements.
11.
$86,000.
$87,690.
$89,610.
$89,370.
cost.
residual value.
salvage value.
useful life.
$22,500
1,800
320
430
$25,050
13.
$22,500.
$24,300.
$24,620.
$25,050.
Which one of the following items is not a consideration when recording periodic depreciation expense
on plant assets?
a.
b.
c.
d.
14.
Depreciation is the process of allocating the cost of a plant asset over its service life in
a.
b.
c.
d.
15.
24.
accounts payable.
bonds payable.
notes payable.
unearned revenues.
23.
straight-line.
units-of-activity.
declining-balance.
none of these.
22.
is easiest to apply.
best measures the plant asset's market value over its useful life.
best measures the plant asset's contribution to revenue over its useful life.
has been used most often in the past by the company.
The depreciation method that applies a constant percentage to depreciable cost in calculating
depreciation is
a.
b.
c.
d.
21.
20.
19.
asset devaluation.
cost accumulation.
cost allocation.
asset valuation.
18.
Depreciation is a process of
a.
b.
c.
d.
17.
16.
Salvage value
Estimated useful life
Cash needed to replace the plant asset
Cost
deferred.
unearned.
long-term.
accrued.
Valerie's Salon has total receipts for the month of $16,430 including sales taxes. If the sales tax rate is
26.
$576.
$480.
$624.
$864.
30.
FICA tax
Federal income tax
Federal unemployment tax
State unemployment tax
Ann Ellis's regular rate of pay is $12 per hour with one and one-half times her regular rate for any hours
which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were
a.
b.
c.
d.
29.
take-home pay.
net pay.
net earnings.
gross earnings.
Which one of the following payroll taxes does not result in a payroll tax expense for the employer?
a.
b.
c.
d.
28.
revenue.
expense.
current asset.
current liability.
27.
$15,444.20
$17,415.80
$15,500.00
It cannot be determined.
The journal entry to record the payroll for a period will include a credit to Wages and Salaries Payable
for the gross
a.
b.
c.
d.
31. The amount of income taxes withheld from employees is dependent on each of the following except the
a.
b.
c.
d.
32.
FICA Taxes Payable was credited for $9,000 in the entry when Peltry Company recorded payroll. When
Peltry Company records employer's payroll taxes, FICA Taxes Payable should be credited for:
a.
b.
c.
d.
33.
$0.
$9,000.
$18,000.
some other amount.
A partnership
a.
b.
c.
d.
34.
Which one of the following would not be considered a disadvantage of the partnership form of
organization?
a.
b.
c.
d.
Limited life
Unlimited liability
Mutual agency
Ease of formation
36. Which of the following is not a principal characteristic of the partnership form of business organization?
a.
b.
c.
d.
Mutual agency
Association of individuals
Limited liability
Limited life
37. Which of the following statements is true regarding the form of a legally binding partnership contract?
a.
b.
c.
d.
The personal assets of a partner are included in the partnership accounting records.
A partnership is not required to file an information tax return.
Each partner's share of income is taxable to the partnership.
A partnership represents an accounting entity for financial reporting purposes.
39. A partnership
a.
b.
c.
d.
Accumulated depreciation
Allowance for doubtful accounts
Accounts receivable
All of these would be recorded.
42. Sam is investing in a partnership with Jerry. Sam contributes equipment that originally cost $63,000,
has a book value of $30,000, and a fair market value of $39,000. The entry that the partnership makes
to record Sam's initial contribution includes a
a.
b.
c.
d.
43. A partner invests into a partnership a building with an original cost of $90,000 and accumulated
depreciation of $40,000. This building has a $70,000 fair market value. As a result of the investment,
the partners capital account will be credited for
a.
b.
c.
d.
$70,000.
$50,000.
$90,000.
$120,000.
44. Danny and Vicky are forming a partnership. Danny will invest a truck with a book value of $10,000 and
a fair market value of $14,000. Vicky will invest a building with a book value of $30,000 and a fair
market value of $42,000 with a mortgage of $15,000. At what amount should the building be recorded?
a.
b.
c.
d.
$30,000
$27,000
$42,000
$45,000
5,700
M. Raney
42
22
169
7
49,500
Additional information: All employees are paid overtime at time and a half for hours worked in excess
of 40 per week. The FICA tax rate is 8% for the first $100,000 of each employee's annual
earnings. The employer pays unemployment taxes of 6.2% (5.4% for state and .8% for federal)
on the first $7,000 of each employee's annual earnings.
Instructions
(a) Prepare the payroll register for the pay period.
Employee
Earnings
Total
Deductions
Regular
Overtime
Gross
FICA
1,800
400
780
880
270
90
2070
490
780
946
39.20
62.40
75.68
Hours
C. Brown
J. Polk
K. Glass
M. Raney
Total
(b)
44
46
39
42
66
3860
426
4286
177.28
Federal
Income
Tax
State
Income
Tax
Paid
United
Fund
Union
Dues
Total
Net
Pay
362
65
118
169
9
5
371
1699
109.20
251.68
380.80
599.60
694.32
714
21
912.28
3373.72
180.40
Prepare general journal entries to record the payroll and payroll taxes
5,198.28
177.28
714.00
21.00
4,286.00
November 30)
State unemployment tax
4286 x 5.4% = 231.444
Federal unemployment tax
4286 x 0.8% = 34.288
November 30, 2013
443.01
177.28
34.29
231.44
Account
Debited
Salaries
and
Wages
Expense
2070
490
780
946
4286
Revenue
Sales
Expenses
Cost of goods sold
Operating Expense
Gross Profit (495,000 290,000)
Net Income (205,000 75,000)
Salary Allowance
Interest Allowance on Partners Capital
Decker (90,000 X 10%)
Mader (120,000 X 10%)
Total Interest Allowance
Total Salaries and Interest
Remaining Income (19,000)
(130,000 111,000)
Decker (19,000 x 60%)
Mader (19,000 x 40%)
Total Remainder
Total Division of Net Income
495,000
290,000
75,000
205,000
130,000
Mader
36,000
Total
90,000
231.44
9,000
12,000
63,000
48,000
21,000
111,000
11,400
7,600
74,400
55,600
19,000
130,000