Flip Co. Accounting Help With Solution

Flip Co. Accounting Help With Solution

 
Flip Company purchased a refrigerated delivery truck for $65,000 on April 1, 2016. The plan is to use the truck for 4 years and then replace it. At the end of it’s useful life the truck is expected to have a salvage value of $10,000.
a. Prepare the depreciation table for Flip’s truck assuming that the company uses the straight-line method for depreciation.
b. Prepare the depreciation table for Flip’s truck assuming that the truck was purchased on January 1, 2016 and the company uses the double-declining-balance depreciation method.
c. Compute the depreciation expense for 2016 for Flip’s truck assuming the truck has an expected life of 200,000 miles and during 2016 the truck was driven 24,540 miles. Round your depreciation expense per mile to three decimal places.
 
Question 5: 7% points:
Flip Company has a January 15 mid-month gross salaries expense of $25,000. All is subject to FICA Social Security (6.2%), FICA Medicare (1.45%), state income tax (5%) and federal income tax (15%) withholdings. Additionally, all is subject to employer taxes to include FUTA (0.8%) and SUTA (5.4%) taxes. (Round all calculations to the nearest penny.)
Required:
a. Prepare the general journal entry to record the employer’s payroll liability.
b. Prepare the general journal entry to record the employer’s payroll tax liability. c. Prepare the general journal entry to liquidate the liabilities accrued in parts (a) and (b) on January 22.
 
Question 6: 4% points:
Flip Company at the end of the fiscal 2014 year has the following information: Credit Sales, $2,500,000 Sales Returns & Allowances $25,000 Accounts Receivable $200,000 and Allowance for Doubtful Accounts with a debit o $1,500.
Required:
a. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 0.5% of Net Credit Sales as the basis for determining Bad Debt Expense.
b. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 5% of Accounts Receivable as the basis for determining Bad Debt Expense.
Multiple choice questions allocated 1% point each. Make your selection by recording the letter in the answer box provided.
 
Question 7: When the stockholders invest cash in the business, what is the effect?
a Liabilities increase and stockholders’ equity increases
b Both assets and liabilities increase
c Both assets and stockholders’ equity increase
d None of the above
Question 8: The ending balance in retained earnings is shown in the:
a. b. c. d. e. f.
Income statement
Statement of retained earnings Balance sheet
Both (b) and (c)
Both (a) and (c)
(a), (b) and (c)
 

Question 9: A cash dividend of $500 was declared and paid to stockholders. The correct journal entry to record the declaration is:
a. DR Capital stock 500 and CR Cash 500 b. DR Cash 500 and CR Dividends 500
c. DR Dividends 500 and CR Cash 500
d. DR Cash 500 and CR Capital stock 500
 
Question 10: If $3,000 has been earned by a company’s workers since the last payday in an accounting period, the necessary adjusting entry would be:
a. Debit an expense and credit a liability.
b. Debit an expense and credit an asset.
c. Debit a liability and credit an asset.
d. Debit a liability and credit an expense.
 
Question 11: The accrual basis of accounting:
a. Recognizes revenues only when cash is received
b. Is used by almost all companies
c. Recognizes expenses only when cash is paid out
d. Recognizes revenues when sales are made or services are performed and
recognizes expenses only when cash is paid out.
 
Question 12: The need for adjusting entries is based on:
a. The matching principle
b. Source documents
c. The cash basis of accounting
d. Activity that has already been recorded in the proper accounts.
 
Question 13: Which of the following statements is false regarding the closing process?
a. The Dividends account is closed to Income Summary.
b. The closing of expense accounts results in a debit to Income Summary.
c. The closing of revenues results in a credit to Income Summary.
d. The Income Summary account is closed to the Retained Earnings account.

Question 14: Which of the following statements is true regarding the classified balance sheet?
a. b. c.
d.
Current assets include cash, accounts receivable, and equipment.
Plant, property, and equipment is one category of long-term assets. Current liabilities include accounts payable, salaries payable, and notes receivable.
Stockholders’ equity is subdivided into current and long-term categories.
 

Question 15: The underlying assumptions of accounting includes all the following except:
a. Business entity
b. Going concern
c. Matching
d. Money measurement and periodicity
 

 
Question 16: Frick Company began the accounting period with $60,000 of merchandise, and net cost of purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end of the period. The cost of goods sold of Frick Company for the period is:
a. $300,000
b. $228,000
c. $252,000
d. $168,000
e. None of the above
 
Question 17: A classified income statement consists of all of the following major sections except for:
a. Operating revenues
b. Cost of goods sold
c. Operating expenses
d. Non-operating revenues and expenses
e. Current assets
 
Question 18: A business purchased merchandise for $12,000 on account; terms are 2/10, n/30. If $2,000 of the merchandise was returned and the remaining amount due was paid within the discount period, the purchase discount would be:
a. $240 b. $200 c. $1,200 d. $1,000 e. $3,600
 
Question 19: Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of ending inventory using weighted-average is:
a. b. c. d. e.
$114,750 $157,600 $122,400 $109,650
None of the above
 
Question 20: Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of goods sold using weighted-average is:
a. $147,200
b. $160,350
c. $155,250
d. $114,000
e. None of the above
 
Question 21: During a period of rising prices, which inventory method might be expected to give the highest net income?
a. Weighted-average
b. FIFO
c. LIFO
d. Specific identification
e. Cannot determine
 
Question 22: The following information: related to the bank reconciliation of the Flip Company:
Balance per bank statement
$1,951.20
Balance per ledger
1,869.60
Deposits in transit
271.20
Outstanding checks
427.80
NSF check
61.20
Service charges
13.80
The adjusted/correct cash balance is: a. $1,794.60
b. $1,719.60
c. $1,638.00
d. $1,713.00
e. $1,876.20
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Question 23: In a bank reconciliation, deposits in transit should be:
a. b. c. d. e.
Deducted from the balance per books Deducted from the balance per bank statement Added to the balance per ledger
Added to the balance per bank statement Disregarded in the bank reconciliation

 

Question 24: After the bank reconciliation is prepared, the entry to record bank service
charges would a.
b. c. d. e.
have a credit to:
Bank Service Charge Expense Cash
Petty Cash
Cash Short and Over
None of the above
 
Question 25: Frick Company estimates uncollectible accounts using the percentage-of- receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2010. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year-end. The uncollectible accounts expense for 2010 will be:
a $7,000
b. $10,000
c. $13,000
d. $9,850
e. None of the above
 
Question 26: Frick Company issued its own $10,000, 90-day, non interest-bearing note to a bank. If the note is discounted at 10 percent, the proceeds to Frick are:
a. $10,000
b. $9,000
c. $9,750
d. $10,250
e. None of the above
 
Question 27: On 2010 July 1, Frick Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Frick uses the double-declining- depreciation method, the depreciation expense for 2010 is:
a. $88,000
b. $72,000
c. $36,000
d. $44,000
e. $40,000
 
Question 28: The result of recording a capital expenditure as a revenue expenditure is an:
a. b. c. d. e.
Overstatement of current year’s expense Understatement of current year’s expense Understatement of subsequent year’s net income Overstatement of current year’s net income None of the above

 

Question 29: A truck costing $45,000 and having an estimated salvage value of $4,500 and an original life of five years is exchanged for a new truck. The cash price of the new truck is $57,000, and a trade-in allowance of $22,500 is received. The old truck has been depreciated for three years using the straight-line method. The new truck would be recorded at:
a. $55,200
b. $57,000
c. $34,500
d. $43,200
e. None of the above
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Question 30: Which of the following is not an advantage of the corporate form of organization?
a. Continuous existence of the entity
b. Limited liability of stockholders
c. Government regulation
d. Easy transfer of ownership
 
Question 31: Treasury stock should be shown on the balance sheet as a(n):
Reduction of the corporation’s stockholders’ equity Current asset
Current liability
Investment asset

 

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