Accounting 202 Sample Exam I—Chapters 10, 11, 12
Review all notes, Cengage HW, READ-ACTION quizzes, lab assignments

I. True or False?

_____1.       Depreciation is designed to accumulate money for the replacement of the asset.

_____2.       Johnson Company purchases a machine for $3,000. The cost of having someone test the machine (cost=$1500) would be added to the cost of the machine.

_____3.       The current ratio is calculated by dividing current liabilities by current assets.

_____4.       Warranty liability is an example of a contingent liability.

_____5.       A capital expenditure represents an asset.

_____6.       On a sale of a plant asset, the gain or loss can be computed by comparing the cash received with the book value of the asset given up.

_____7.       Accelerated depreciation methods include double declining balance and MACRS.

_____8.       Double declining balance depreciation is calculated on the depreciable cost of the asset rather than the declining book value.

_____9.       When calculating the cost of a plant asset, we should capitalize all costs necessary to acquire the asset and place it into service.

_____10.    Research and Development is an intangible asset that should be amortized over a 40-year period.

_____11.    The double declining balance rate is 1 divided by the useful life of the asset.

_____12.    Depreciable cost = Asset cost minus Accumulated Depreciation.

_____13.    The writeoff of an intangible asset is called depletion.

_____14.    The adjustment for a patent consists of a debit to Patent Amortization Expense and a credit to Patent.

_____15.    The interest for one month on a 6 month $1000 note payable at 12% would be ten bucks.

_____16.    An advantage of the partnership form is that it brings together the skills and resources of individuals, for the purpose of making a profit.

_____ 17. The assets contributed by the partners are recorded at their original cost, less accumulated depreciation.

_____ 18. The income earned by the partners is conveyed to their capital accounts at closing.

Journal Entries

1.Johnson Company sells $1,000 of merchandise on account. Estimated Warranty costs are 5% of sales.

2.Johnson Companys research and development costs are $70,000, paid in cash.

3. Johnson owns a machine that cost $42,000. It currently has $36,000 of Accumulated Depreciation. Johnson sells the machine for $9,000 cash.

4.Same machine as in number 3, but they sold it for $4,000.

5.Johnson recorded the first month depreciation on a machine for which $10,000 was paid. The machine will last 5 years, with $1000 salvage value. (Use SL)

6.Johnson purchased a machine. Costs include base price of $5,000, sales tax @ 8%, test runs (labor and materials) of $1000. The company also arranged for a 1-year insurance policy on the machine, $500. Journalize the purchase; journalize the insurance policy purchase as well.

7.Johnson acquired a patent for $1700. The patents legal life is 17 years. Johnson forecasts that the patent will produce revenue for about 4 years. Make adjusting entry for 1 year of amortization.

8.Johnson acquires Mercury for $100,000 cash. Mercurys balance sheet looks like this: Cash $10,000, Receivables $20,000, Equipment $40,000, Buildings $30,000, Notes Payable $15,000. Record this purchase.

9.Johnsons employee, Rude, worked 44 hours this week at a rate of $14 per hour, with overtime at 1.5 the regular rate. FIT withholding=$28. Using the book rates, determine the FICA, Medicare, and net pay.

10.Johnsons payroll was $9,000 for the first week in January. Make the entry to record payroll taxes. Use the rates .8% for FUTA, 5.4% for SUTA; Social Security is 6% on first $100,000; Medicare is 1.5% on all earnings. If Johnson has questions or issues with payroll, where is the information to be found?

11. Tom, of TMJ Partners, contributed Cash of $12,000, Equipment costing $40,000, Land of $8,000 and a Note Payable due on the Land, of $5,000. The FMV of the Equipment was $18,000 and FMV of the Land was $14,000. Record Tom’s contribution to the partnership.

12. Clark and Philip earned $40,000 in the partnership of PC Partners. The partnership agreement rewards each partner with a salary allowance of $10,000 to Philip and $12,000 to Clark; the remainder is shared 60% to Philp and 40% to Clark. Make the entry to share the income.

III. Financial Ratios--be able to calculate:
1. current ratio
2. working capital
3. quick ratio

Contruct two depreciation schedules (SL, DDB) with table formats provided. Try this one:

Cost=$18,000, Salvage Value = $2,000, useful life = 4 years.

  1. Straight Line

YR

RATE

DEPR COST

DEPR EXP

ACC. DEPR

BOOK VALUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

.

2. Double Declining Balance

YR

RATE

BOOK VAL.

DEPR EXP

ACC. DEPR

BOOK VALUE END

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESSAY: Depreciation is a noncash expense that is recorded for certain assets. Which assets are depreciated? How does depreciation compare with depletion and amortization of intangibles?

Name and describe three methods of depreciation.

In what order is a partnership liquidation carried out?

Lewis Company purchases a computer for $10,000. This asset is in the 5 year class for MACRS depreciation.

Year 

3-year(200%DB)

5-year (200%DB)

1

33.33%

20.00%

2

44.45%

32.00%

3

14.81%

19.20%

4

7.41%

11.52%

5

 

11.52%

6

 

5.76%

 

 

 

a. What amount of depreciation would be taken in year 1 for this 5-year asset?______

b. What amount of depreciation would be taken in year 6 for this 5-year asset?_____

c. After 6 years, how much of the $10,000 will have been depreciated?________

d. What convention is built into MACRS?_____________

In addition to the topics mentioned above, I may select a few exercises from CengageNow. Those exercises will probably come from the following topic areas:

Obj 10-2 Depreciation Methods
Obj 10-3 Asset Disposals
Obj 10-5 Intangible Assets and Amortization
Obj 11-2 Payroll
Obj 12-1 Partnership Formation
Obj 12-2 Sharing of Partnership Income