25 Exam 2 Review

A company purchased a machine by paying cash of $8,000. The machine's fair value on the date of the purchase was $10,000. The company incurred $500 in transportation costs, $400 installation fees, and paid $300 annual insurance on the equipment. For what amount will the company record the machine?

• $8,900

• $9,200

• $10,900

• $11,200

Nearly all research and development costs should be:

• Expensed if unsuccessful, capitalized if successful.

• Deferred pending determination of success.

• Expensed in the period they are determined to be unsuccessful.

• Expensed in the period incurred.

Kansas Enterprises purchased equipment for $81,500 on January 1, 2024. The equipment is expected to have a five-year service life, with a residual value of $6,750 at the end of five years.

Using the double-declining method, the depreciation expense at December 31, 2024, would be:

• 32,600

• 29,900

• 31,600

• 30,900

Using a perpetual inventory system, the sale of inventory on account would be recorded as:

I. Debit Cost of Goods Sold; credit Inventory.

II. Debit Inventory; credit Sales Revenue.

III. Debit Accounts Receivable; credit Sales Revenue.

• I only

• I and III

• II only

• III only

During 2024, a company sells 300 units of inventory for $85 each. The company has the following inventory purchase transactions for 2024:

Q: Using LIFO, Ending Inventory is

• 7860

• 9350

• 8140

• 8560

A company has the following balances at year end: Accounts Receivable = $80,000;

The company expects to collect 96% of these accounts. At what amount would Bad Debt Expense be reported in the current year?

• $2,400

• $2,800

• $3,200

• $3,600

Which of the following is not deducted from an employee’s salary?

• Unemployment taxes.

• Income taxes.

• FICA taxes.

• Employee portion of insurance and retirement payments.

AAB Co. has a $3 million liability as of 12/31/2023, with $1 million payable in 2024. How should the company report this $3 million debt on its 12/31/2023 balance sheet?

• $2 million as a current liability and $1 million as a long-term liability

• $3 million as a current liability

• $1 million as a current liability and $2 million as a long-term liability

• $3 million as a long-term liability

The balance sheet of ABC Co. shows assets of $55,000 and liabilities of $33,000. The fair value of the assets is $61,000 and the fair value of liabilities is $40,000. XYZ paid $38,000 to acquire ABC. XYZ should record goodwill at:

• $14,000

• $15,000

• $16,000

• $17,000

Salvage Juices Inc. shipped the wrong flavor of juice to a customer and the customer agreed to keep the juice upon being offered a 9% price reduction. The price reduction is an example of a:

• Sales revenue

• Sales return

• Sales allowance

• Sales discount