Accounting MCQ

Description

Question 1 2 pts
To engage in the practice of public accounting usually requires one to be licensed as a Certified
Public Auditor (CPA).
True
False
Question 2 2 pts
Stockholders’ equity can consist of both capital stock and retained earnings.
True
False
Question 3 2 pts
On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with
a client to provide bookkeeping services to the client in the following year. Which accounting
principle would require Conrad Accounting Services to record the bookkeeping revenue in the
following year and not the year the cash was received?
Cost principle.
Revenue recognition principle
Monetary unit assumption.
Business entity assumption.
Going-concern assumption.
Question 4 2 pts
Recording the receipt of a utilities bill that will be paid in cash next month will cause total assets,
total liabilities, and stockholders’ equity to:
None of these.
increase, decrease, and remain unchanged, respectively.
increase, remain unchanged, and decrease, respectively.
remain unchanged, increase, and decrease, respectively.
decrease, remain unchanged, and decrease, respectively.
Question 5 2 pts
Pure Water’s complete assets and liabilities are Accounts Receivable ($800), Equipment
($10,000), Accounts Payable ($4,200), Prepaid Rent ($2,000), Supplies ($400), Bank Loan
($1,600), and Tools ($300). Pure Water’s total equity is:
$7,700.
$15,700.
$7,300.
Cannot be determined from the information given.
None of these.
Question 6 2 pts
Beginning stockholders’ equity was $120,000. Ending stockholders’ equity was
$195,000. Additional issuances of capital stock during the year amounted to
$18,000. Dividends during the year amounted to $12,000. How much was net income for the
year?
Question 7 2 pts
Wagner Company experienced a total increase in stockholders’ equity of $14,000 during the
current year. Stockholders’ equity was increased by additional issuances of $50,000 capital stock
during the year. No dividends were paid. Expenses incurred during the year were $110,000. How
much was Wagner’s revenue for the year?
Question 8 2 pts
If a company purchases equipment costing $4,500 on credit, the effect on the accounting
equation would be:
Assets increase $4,500 and liabilities decrease $4,500.
Equity decreases $4,500 and liabilities increase $4,500
Liabilities decrease $4,500 and assets increase $4,500.
Assets increase $4,500 and liabilities increase $4,500.
Equity increases $4,500 and liabilities decrease $4,500.
Question 9 2 pts
. If the assets of a business increased $89,000 during a period of time and its liabilities increased
$67,000 during the same period, equity in the business must have:
Decreased $22,000.
Increased $156,000.
Increased $22,000.
Decreased $156,000.
Increased $89,000.
Question 10 2 pts
Atkins Company collected $1,750 as payment for the amount owed by a customer from services
provided the prior month on credit. How does this transaction affect the accounting equation for
Atkins?
Assets would decrease $1,750 and liabilities would decrease $1,750.
Liabilities would decrease $1,750 and equity would increase $1,750.
Assets would increase $1,750 and liabilities would increase $1,750.
Assets would increase $1,750 and equity would increase $1,750
One asset would increase $1,750 and a different asset would decrease $1,750, causing no
effect.
Question 11 2 pts
Journals and ledgers are synonymous terms.
True
False
Question 12 2 pts
In the accounting process, a transaction is generally recorded first in the ledger accounts and then
posted to the journal.
True
False
Question 13 2 pts
The numbering system used in a company’s chart of accounts:
Is determined by generally accepted accounting principles.
Typically begins with balance sheet accounts.
Is the same for all companies.
Typically begins with income statement accounts.
Depends on the source documents used in the accounting process.
Question 14 2 pts
A business’s source documents may include all of the following except:
Checks.
Purchase orders.
Bank statements.
Ledgers.
Sales tickets.
Question 15 2 pts
A business uses a credit to record:
A decrease in an asset account.
A decrease in an equity account.
A decrease in an unearned revenue account.
An increase in an expense account.
A decrease in a revenue account.
Question 16 2 pts
Beginning and ending balances of Accounts Receivable were $43,000 and $22,000, respectively.
If collections from clients during the period were $65,000, how much were services rendered on
account? (a.k.a How much sales did he have on account)
Question 17 2 pts
Jorden Company reports total assets and total liabilities of $251,000 and $100,000, respectively,
at the conclusion,of its first year of business. The company earned $75,000 during the first year,
and distributed $30,000 to shareholders as dividends. How much did shareholders initially invest
in the business?
Question 18 2 pts
Richards Corporation declared and paid a $3,500 dividend. The appropriate journal entry to
record this transaction is:
Debit Dividends/Credit Cash.
Debit Cash/Credit Dividends.
None of these.
Debit Dividends/Credit Expense.
Debit Expense/Credit Dividends.
Question 19 2 pts
A debit is used to record which of the following?
A decrease in an asset account.
An increase in the dividends account.
A decrease in an expense account.
An increase in a revenue account.
An increase in a contributed capital account.
Question 20 2 pts
Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the
following general journal entries will Wiley Consulting make to record this transaction?
Debit: Supplies Expense 7,000 / Credit: Accounts Payable 7,000
Debit: Supplies 7,000 / Credit: Accounts Payable 7,000
Debit: Accounts Payable 7,000 / Credit: Supplies 7,000
Debit: Cash 7,000 / Credit: Supplies 7,000
Debit: Supplies 7,000 / Credit: Cash 7,000
Question 21 2 pts
In order to determine the proper point in time to enter revenue in the accounting records,
accountants normally recognize revenue when it is earned.
True
False
Question 22 2 pts
Accrued revenues at the end of one accounting period are expected to result in cash collections in
a future period.
True
False
Question 23 2 pts
On January 15, Collin paid $600 in insurance premiums for a two-month policy for January 15 to
March 15. The payment was initially recorded to Insurance Expense. Approximately how much
should be debited to Prepaid Insurance at January 31? (Hint: What should the balance be in that
account as of January 31st – Insurance Gets used up with the passage of time)
$450.
$150.
$0
None of these.
$600.
Question 24 2 pts
Collin Printing began operations on January 1. At the end of January, Collin had $700 of
equipment depreciation for the month. The entry to record deprecation includes.
a credit to the Equipment account.
a debit to Accumulated Depreciation.
a credit to Deprecation Expense.
a debit to Depreciation Expense.
None of these.
Question 25 2 pts
Assuming unearned revenues are originally recorded in balance sheet accounts, the adjusting
entry to record earning of unearned revenue is:
Decrease a liability; increase revenue.
Increase an asset; increase revenue.
Increase an expense; decrease an asset.
Increase an expense; increase a liability.
Increase an expense; decrease a liability.
Question 26 2 pts
On March 1, 20X3, Jimenez purchased a one-year insurance policy for $2,400. On that date,
Jimenez debited Insurance Expense for $2,400. If Jimenez desires to prepare financial
statements at the end of March, the adjusting journal entry would include a:
credit to Prepaid Insurance for $2,200.
credit to Insurance Expense for $2,200.
debit to Insurance Expense for $2,400.
None of these.
debit to Insurance Expense for $200.
Question 27 2 pts
If cash is received from customers in payment for products or services that have not yet been
delivered to the customers, the business would record the cash receipt as:
A debit to an unearned revenue account.
No entry is required at the time of collection.
A debit to a prepaid expense account.
A credit to an unearned revenue account.
A credit to a prepaid expense account.
Question 28 2 pts
On April 30, Victor Services had an Accounts Receivable balance of $18,000. During the month
of May, total credits to Accounts Receivable were $52,000 from customer payments. The May
31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?
(Remember credit sales are “sales on account” so they INCREASE accounts receivable)
$47,000.
$5,000.
$52,000.
$57,000.
$32,000.
Question 29 2 pts
On January 26, a customer paid Collin Printing $250 in advance for printing. On January 28,
Collin printed 500 posters for Grubb at a price of 30¢ each. The proper entry on January 26
would include a:
credit to Unearned Revenue for $250.
debit to Unearned Revenue for $100.
debit to Unearned Revenue of $250.
None of these.
credit to Unearned Revenue for $100.
Question 30 2 pts
Larry Bar opened a frame shop and completed these transactions:
1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000.
2. Purchased $70 of office supplies on credit.
3. Paid $1,200 cash for the receptionist’s salary.
4. Sold a custom frame service and collected a $1,500 cash on the sale.
5 לויטרה 20 מ”ג מחיר. Completed framing services and billed the client $200.
What was the balance of the cash account after these transactions were posted?
$38,700.
$40,300.
$300.
$41,500.
$38,500.
Question 31 2 pts
Obligations that are expected to be paid after one year or the operating cycle, whichever is
longer, are classified as current liabilities.
True
False
Question 32 2 pts
Net income may be found in the:
income statement and statement of retained earnings.
balance sheet and statement of retained earnings.
income statement and balance sheet.
None of these.
balance sheet and income statement.
Question 33 2 pts
Ending stockholders’ equity may be found in the:
balance sheet.
statement of retained earnings.
none of these
footnotes to financial statements
income statement.
Question 34 2 pts
Sansom had revenues of $8,000 and expenses of $9,500. A summary entry to close the Revenue
and Expense accounts to the Income Summary account would include:
a credit to Income Summary of $9,500.
a credit to Revenues of $9,500.
None of these.
a debit to Income Summary of $8,000.
a debit to Expenses of $8,000.
Question 35 2 pts
The current ratio may be calculated as:
None of these.
total assets divided by current assets.
(total assets – current assets) divided by total assets..
current assets divided by total assets.
total assets – current assets.
Question 36 2 pts
Conner Corporation’s adjusted trial balance included the following items:
Accounts payable ($65,000), Accounts receivable ($45,000), Capital stock ($100,000), Cash
($50,000), Dividends ($10,000), Goodwill ($47,000), Interest expense ($4,000), Interest payable
($2,000), Inventory ($32,000), Notes payable ($80,000), Prepaid expenses ($5,000), Property,
plant & equipment ($123,000), Retained earnings ($46,000), Rent expense ($18,000), Revenues
($101,000), and Salary expense ($60,000). How much is retained earnings to be reported in the
balance sheet?
Question 37 2 pts
Match the following term on the left side, with its appropriate definition on the right side
Temporary accounts Revenues, expenses and dividends
Current Ratio Current assets divided by current liabilities
Working capital When income is positive, closed with debit
Real Accounts Balance is rolled forward to next period
Income Summary Current assests less current liabilities
Question 38 2 pts
A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the
accounts under- or overstated as a result of this error?
Supplies, understated $260; Fees Earned, overstated $130.
Supplies, overstated $130; Fees Earned, overstated $130.
Supplies, understated $130; Fees Earned, overstated $130.
Supplies, overstated $260; Fees Earned, understated $130.
Supplies, overstated $130; Fees Earned, understated $130.
Question 39 2 pts
Holman Company owns equipment with an original cost of $95,000 and an estimated salvage
value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation
method. The adjusting entry needed to record annual depreciation is: .
Debit Depreciation Expense, $15,000; credit Equipment, $15,000.
Debit Equipment, $15,000; credit Accumulated Depreciation, $15,000.
Debit Depreciation Expense, $10,000; credit Accumulated Depreciation $10,000.
Debit Depreciation Expense, $15,000; credit Accumulated Depreciation, $15,000.
Debit Depreciation Expense, $10,000; credit Equipment, $10,000
Question 40 2 pts
With a periodic inventory system, the beginning inventory is closed in an entry involving a debit
to the Income Summary account.
True
False
Question 41 2 pts
A merchandiser:
Earns net income by buying and selling merchandise.
Receives fees only in exchange for services.
Earns profit from commissions only.
Buys products from consumers.
Earns profit from fares only.
Question 42 2 pts
In a merchandising operation, the Sales account should include:
None of these.
all merchandise sales and sales of any other assets.
only credit sales of merchandise.
both cash and credit sales of merchandise.
only cash sales of merchandise..
Question 43 2 pts
Sperry Company had beginning inventory of $80,000, purchased merchandise during the period
for $140,000, and had ending inventory of $95,000. How much was goods available for sale?
None of these.
$125,000.
$155,000.
$175,000.
$315,000.
Question 44 2 pts
Mathew Company provided the following data concerning its income statement: sales,
$1,000,000; purchases, $400,000; beginning inventory, $250,000; ending inventory, $275,000;
operating expenses, $95,000; freight-in, $5,000; sales discounts, $20,000; purchases discounts,
$15,000; sales returns & allowances, $120,000; and purchases returns & allowances, $45,000.
The data are complete and provide the basis for preparation of an income statement. How much
is cost of goods sold?
Question 45 2 pts
Given below are account balances for Clayton Company:
Gross sales, $100,000
Sales returns and allowances, $8,000
Selling expenses, $12;000
Interest earned, $5,000
Interest expense, $3,000
How much are net sales, using a single-step income statement?
Question 46 2 pts
. A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:
$157,500.
$217,500.
$375,000.
($217,000).
$532,500.
Question 47 2 pts
. The following statements regarding merchandise inventory are true except:
Merchandise inventory refers to products a company owns and intends to sell.
Merchandise inventory appears on the balance sheet of a service company.
Purchasing merchandise inventory is part of the operating cycle for a business.
Merchandise inventory is reported on the balance sheet as a current asset.
Merchandise inventory may include the costs of freight in and making them ready for sale.
Question 48 2 pts
Merchandise inventory:
Must be sold within one month.
Is classified with investments on the balance sheet.
Includes supplies the company will use in future periods.
Is a long-term asset.
Is a current asset
Question 49 2 pts
Mathew Company provided the following data concerning its income statement: sales,
$1,000,000; purchases, $400,000; beginning inventory, $250,000; ending inventory, $275,000;
operating expenses, $95,000; freight-in, $5,000; sales discounts, $20,000; purchases discounts,
$15,000; sales returns & allowances, $120,000; and purchases returns & allowances, $45,000.
The data are complete and provide the basis for preparation of an income statement. How much
are net sales for Mathew Company?
Question 50 2 pts
A cash disbursement system with proper internal control should include a procedure which
requires all significant disbursements to be made by check.
True
False
Question 51 2 pts
Which statement about internal control for cash disbursements is false?
Petty cash receipts should be destroyed once paid.
The individual responsible for signing checks should not also prepare the checks.
None of these.
All significant disbursements should be made by check.
Cash in the ledger should be reconciled to cash reported by the bank.
Question 52 2 pts
Quick assets are defined as:
Accounts receivable, inventory, and prepaid expenses.
Cash, short-term investments, and current receivables.
Cash, inventory, and current receivables.
Cash, short-term investments, and inventory.
Cash, noncurrent receivables, and prepaid expenses.
Question 53 2 pts
The Cash Over and Short account:
Can never have a credit balance.
Can never have a debit balance.
Is used to record the income effects of errors in making change and/or processing petty
cash transactions.
Is not necessary in a computerized accounting system.
Is used when the cash account reports a credit balance.
Question 54 2 pts
A properly designed internal control system:
Is not necessary if the company uses a computerized system.
Lowers the company’s risk of loss.
Requires the use of non-computerized systems.
Insures profitable operations.
Eliminates the need for an audit.
Question 55 2 pts
Which of the following is not one of the policies and procedures that make up an internal control
system?
Urge adherence to company policies.
Guarantee a return to investors.
Protect assets.
Promote efficient operations.
Ensure reliable accounting.
Question 56 2 pts
Bennet Company was preparing a month-end bank reconciliation. The cash balance per the
general ledger was $1,645. Bennet’s accountant discovered that the bank had charged $15 in
service charges for the month, that outstanding checks were $60, and that there were no deposits
in transit. What is the correct adjusted ending cash balance?
Question 57 2 pts
A bank reconciliation revealed bank charges of $11, outstanding checks of $221, and NSF
checks of $90. The journal entry to cause the company records to match the correct adjusted
ending cash balance includes:
a credit to cash for $11.
a credit to cash for $90.
a credit to cash for $322.
None of these.
a credit to cash for $101.
Question 58 2 pts
A reconciliation shows cash per bank ($22,484), NSF checks ($322), notes collected ($5,000
plus $106 interest), deposits in transit ($1,776), service charges ($35), outstanding checks
($4,717), and a $1,275 disbursement recorded as $1,725.
The balance per books before adjusting entries would be $25,425.
None of these.
The balance per books before adjusting entries would be $19,508.
The balance per books before adjusting entries would be $14,344.
The balance per books before adjusting entries would be $19,543.
Question 59 2 pts
Hastings Company replenished a $500 petty cash fund. The petty cash box contained vouchers of
$87 for postage, $173 for supplies, $58 for gasoline, and cash on hand of $180. The journal entry
to reflect replenishment would include a:
credit to Cash or $180.
None of these.
credit to Petty Cash for $2.
credit to Cash for $318.
debit to Cash Short for $2.
Question 60 2 pts
Separate accounts receivable information for each customer is important because it reveals all of
the following except:
When the customer intends to pay outstanding balances.
The basis for sending bills to customers.
How much each customer has purchased on credit.
How much each customer still owes.
How much each customer has paid.
Question 61 2 pts
If McCarthy should collect an account in 20X6 which was written off in 20X5, McCarthy would
debit Cash for the amount received and credit:
an income account entitled Adjustment of Prior Period Earnings.
the Bad Debts Expense account.
None of these.
the Accounts Receivable account.
the Accounts Receivable account after the original write-off is reestablished.
Question 62 2 pts
Hall uses aging to estimate uncollectibles. Accounts of $100,000 are less than 30 days old (98%
collectible), $50,000 are 30 to 60 days old (90% collectible), $25,000 are 61-120 days old (50%
collectible), and the remaining $10,000 is 10% collectible.
The Allowance for Uncollectibles should have a balance of $35,000.
The Allowance for Uncollectibles should have a balance of $7,000.
None of these.
The Allowance for Uncollectibles should have a balance of $28,500.
The Allowance for Uncollectibles should have a balance of $9,000.
Question 63 2 pts
. The quality of receivables refers to:
The creditworthiness of sellers.
Sales turnover.
The speed of collection.
The interest rate.
The likelihood of collection without loss.
Question 64 2 pts
. Pepperdine reported net sales of $8,600 million, net income of $126 million and average
accounts receivable of $890 million. Its accounts receivable turnover is:
9.7.
7.1.
37.8.
68.3.
51.7.
Question 65 2 pts
Deposits with utility companies would qualify as trade receivables.
True
False
Question 66 2 pts
If the credit balance of the Allowance for Uncollectible Accounts account exceeds the amount of
a bad debt being written off, the entry to record the write-off against the allowance account
results in:
A reduction in current liabilities.
A reduction in equity.
No effect on the expenses of the current period.
A reduction in current assets.
An increase in the expenses of the current period.
Question 67 2 pts
A company uses the percent of sales method to determine its bad debts expense. At the end of
the current year, the company’s unadjusted trial balance reported the following selected amounts:
Accounts receivable $375,000 debit
Allowance for uncollectible accounts 500 debit
Net Sales 800,000 credit
All sales are made on credit. Based on past experience, the company estimates 0.6% of credit
sales to be uncollectible. What adjusting entry should the company make at the end of the current
year to record its estimated bad debts expense?
Debit Uncollectible Accounts Expense $4,300; credit Allowance for Uncollectible
Accounts $4,300.
Debit Uncollectible Accounts Expense $4,800; credit Allowance for Uncollectible
Accounts $4,800.
None of these
Debit Uncollectible Accounts Expense $2,630; credit Allowance for Uncollectible
Accounts $2,630.
Debit Uncollectible Accounts Expense $2,130; credit Allowance for Uncollectible
Accounts $2,130.
Question 68 2 pts
Match the following definition on the right withe the appropriate term on the left
Principle Party that promises to pay a stipulated amount
Maker Amount due on maturity date of note
Payee Party that pays a stipulated amount
Maturity value Stated amount on which interest is calculated
Interest Charge imposed on the borrower of funds
Question 69 2 pts
Inventory errors affect both the balance sheet and the income statement disclosure in the period
of the error.
True
False
Question 70 2 pts
The inventory turnover ratio can be calculated by dividing the average inventory level by cost of
goods sold.
True
False
Question 71 2 pts
Alta had beginning inventory of 100 units at $10 each. The purchase price increased steadily
during the period. Purchases during the period were 200 at $11 each, 300 at $13 each, and 150 at
$15 each. Sales were 500 units at $20. Using perpetual FIFO:
ending inventory is $3,550.
None of these.
All of these answers are correct (except none of these)
gross profit is $4,200.
cost of goods sold is $5,800.
Question 72 2 pts
An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the
ending inventory valuation is:
Weighted-average.
FIFO.
Retail.
None of these.
LIFO.
Question 73 2 pts
The understatement of the beginning inventory balance causes:
Cost of goods sold to be overstated and net income to be understated.
Cost of goods sold to be understated and net income to be overstated.
Cost of goods sold to be overstated and net income to be correct.
Cost of goods sold to be overstated and net income to be overstated.
Cost of goods sold to be understated and net income to be understated.
Question 74 2 pts
A company had the following purchases during the current year:
January: 10 units at $120
February: 20 units at $130
May: 15 units at $140
September: 12 units at $150
November: 10 units at $160
On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of
2 from January, 4 from February, 6 from May, 4 from September, and 10 from November. Using
the specific identification method, what is the cost of the ending inventory?
$3,640.
$3,960.
$3,280.
$3,800.
$3,500.
Question 75 2 pts
Alta had beginning inventory of 100 units at $10 each. The purchase price increased steadily
during the period. Purchases during the period were 200 at $11 each, 300 at $13 each, and 150 at
$15 each. Sales were 500 units at $20. Using periodic FIFO:
ending inventory is $2,650.
All of the answers are correct (except “none of these”)
cost of goods sold is $6,233.
None of these.
gross profit is $4,200.
Question 76 2 pts
Jackson Company’s inventory cost on its balance sheet was lower using first-in, first-out than
last-in, first-out. Assuming no beginning inventory, in which direction did the cost of purchases
move during the period?
Cannot be determined.
None of these.
Down.
Up.
Steady.
Question 77 2 pts
Internal controls that should be applied when a business takes a physical count of inventory
should include all of the following except:
Prenumbered inventory tickets.
Second counts by a different counter.
A manager confirms that all inventories are ticketed only once.
Counters of inventory should be those who are responsible for the inventory.
Counters confirm the validity of inventory existence, amounts, and quality.
Question 78 2 pts
Dividends received on an “equity method” investment are not included in income.
True
False
Question 79 2 pts
Amortization of a premium on investments in bonds will result in an increase in interest revenue.
True
False
Question 80 2 pts
The presence of goodwill in a balance sheet suggests that accounts of the subsidiary have not yet
been consolidated with the parent company.
True
False
Question 81 2 pts
Under which scenario will bond interest income exceed cash received for interest during each
period?
Bond are purchased at a par.
Bond are purchased at a premium.
None of these.
Bond are purchased at a discount.
All of these answers are correct (except “none of these”)
Question 82 2 pts
If one business acquires another for $1,000,000, and the acquired business has assets with a fair
value $800,000, and liabilities with a fair value of $100,000, how much is the goodwill?
None of these.
$200,000.
$0.
$300,000.
$100,000.
Question 83 2 pts
Using the straight-line method, how much interest income would be recognized for the 20X5
calendar year, for a $1,000, 5-year, 6% bond that was purchased for $960 on July 1, 20X4?
$100.
None of these.
$52.
$60.
$68.
Question 84 2 pts
Over the long run, one would expect interest income on a bond investment to be equal to:
The cash payments for interest plus any premium on the original investment.
The difference between the cash invested and the cash returned on the investment.
The difference between the face value and maturity value of the bond.
The face value of the bond.
None of these.
Question 85 2 pts
An “equity method” investment has a beginning balance of $250,000. This investment balance
represents 40% of the equity of the investee. If the investee earns $25,000 and pays dividends of
$10,000 during the period, then:
Earnings on the investment is reported as $4,000.
Earnings on the investment is reported as $6,000.
Earnings on the investment is reported as $10,000.
Earnings on the investment is reported as $0.
None of these.
Question 86 2 pts
Seamark buys $300,000 of Eider’s 8% five-year bonds payable at par value. Interest payments
are made semiannually. Seamark plans to hold the bonds for the five year life. When the bonds
mature, the journal entry to record the proceeds will be:
Debit Cash $300,000; credit Investment in bonds $300,000.
Debit Cash $300,000; credit Interest Receivable $300,000.
Debit Cash $300,000; credit Interest Revenue $300,000.
Debit Cash $300,000; credit Bonds Payable $300,000.
Debit Investments In Bonds $300,000; credit Cash $300,000.
Question 87 2 pts
Depreciation expense for the third year of an asset with a five-year life would be the same under
the straight-line and sum-of-the-years’-digits methods.
True
False
Question 88 2 pts
A new truck is purchased on January 1, 20X6. The truck cost $10,000, has a 5-year life, and a
$2,000 residual value. Given a December 31 year-end, and use of the double-declining balance
method, how much is 20X7 depreciation expense?
$4,000.
None of these.
$1,920.
$3,200.
$2,400.
Question 89 2 pts
Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will
be depreciated using the straight-line method over its four-year useful life. Assuming the asset’s
salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in
the amount of:
$20,000
$10,000
$5,500
$5,000
$9,250
Question 90 2 pts
Residual value is not subtracted from cost in which of the following depreciation methods?
Straight-line.
Double-declining balance.
None of these.
Sum-of-the-years’-digits.
All of the above.
Question 91 2 pts
Diamond Industries acquired a new machine at a cost of $62,000. Service life was estimated to
be eight years and total units of output to be 200,000. Estimated residual value was $8,000.
Compute depreciation for the second year in the life of the machine using the double-declining
balance method.
Question 92 2 pts
Aspelin Company negotiated the purchase of a new piece of equipment. The list price on this
equipment was $200,000. After hours of negotiation, Aspelin was able to acquire the equipment
at $170,000. Furthermore, Aspelin was entitled to a 1% discount if it paid for the equipment
within 10 days. After completing the purchase, a third party offered Aspelin, $185,000 for the
piece of equipment. At what amount should Aspelin record the equipment (assume the discount
is taken)?
Question 93 2 pts
The straight-line depreciation method and the double-declining-balance depreciation method:
Produce the same book value each year.
Produce the same total depreciation over an asset’s useful life.
Are acceptable for tax purposes only.
Produce the same depreciation expense each year.
Are the only acceptable methods of depreciation for financial reporting.
Question 94 2 pts
Depletion is to an intangible as depreciation is to a plant asset.
True
False
Question 95 2 pts
A new, larger dump bed was added to one of a company’s dump trucks. The new dump bed will
allow the truck to carry twice as much as before, but it is not expected to increase the truck’s
service life. The proper entry to reflect this transaction includes a:
None of these.
credit to Accumulated Depreciation.
a credit to Depreciation Expense.
a debit to Maintenance Expense.
debit to Truck.
Question 96 2 pts
In an exchange transaction, the term boot means:
The transaction was at a gain.
Additional monetary consideration was given or received.
A pair of shoes you wear to a rodeo
The transaction was at a loss.
The transaction has been completed.
Question 97 2 pts
On January 1, 20X1, Blake Company purchased a patent for $68,000. The patent has a remaining
legal life of nine years and an expected service life of eight years. The amortization expense (to
the nearest dollar) properly recognized for 20X1 is:
None of these.
$0.
$8,500.
$7,556.
$3,400.
Question 98 2 pts
Trevino Company acquired office equipment on January 1, 20X1, at a cost of $28,000. Estimated
service life was ten years and estimated residual value $1,000. The office equipment was
depreciated by the straight-line method. On April 30, 20X8, after the equipment had been used
for seven years and four months, it was traded for another item of equipment having a fair value
of $11,000. The exchange is deemed to have commercial substance. At what amount should the
new equipment be recorded?
Question 99 2 pts
A company paid $150,000, plus a 7% commission and $5,000 in closing costs for a property.
The property included land appraised at $87,500, land improvements appraised at $35,000, and a
building appraised at $52,500. What should be the allocation of this property’s costs in the
company’s accounting records?
Land $75,000; Land Improvements, $30,000; Building, $45,000.
Land $77,500; Land Improvements, $31,000; Building, $46,500.
Land $82,750; Land Improvements, $33,100; Building, $49,650.
Land $75,000; Land Improvements, $30,800; Building, $46,200.
Land $80,250; Land Improvements, $32,100; Building, $48,150.
Question 100 2 pts
An advance or prepayment received from a customer is an accrued liability which should be
reported on the balance sheet.
True
False
Question 101 2 pts
The account Discount on Notes Payable:
is amortized to reduce interest expense over the life of a note.
None of these.
is a contra liability account.
is an asset account because it has a debit balance.
is a contingent liability account.
Question 102 2 pts
Sylvan Company had sales of $1,500,000. Estimated warranty costs are 1% of sales. Work
performed under warranties during the period actually cost $8,750. The entry to record the
warranty liability includes:
a debit to Warranty Expense for $23,750.
a debit to Warranty Expense for $15,000.
a debit to Warranty Expense for $8,750.
None of these.
a debit to Warranty Expense for $6,250.
Question 103 2 pts
Bledso Tool Company sells an automobile jack for $35. The jack has a 30-day warranty. Bledso
estimates that 6% of the jacks will require repair during the 30-day warranty period. The repair
costs average $4.35 per jack. During August, sales were $70,000. Of the Jacks sold in August, 47
have been repaired under the warranty agreement. What should be the balance in the Estimated
Liability for Warranties account at the end of August?
Question 104 2 pts
Stuart Hawkin earned a gross salary of $121,500 from Menasco Corporation during the current
year. Social Security tax is assumed to be 6% of the first $100,000 in wages per year.
Medicare/Medicaid is assumed to be 1.5% of gross pay. Federal unemployment tax is 0.5% of an
employee’s first $10,000 of gross wages and state unemployment tax is 3.0% of an employee s
first $10,000 of gross wages. Federal income tax of $16,000 was withheld from Hawkin’s
paycheck during the current year. Menasco also paid $1,500 for a health insurance policy for
Hawkin. What is Menasco’s total yearly cost of having Hawkin on the payroll?
Question 105 2 pts
The employer should record deductions from employee pay as:
Employee payables.
Current liabilities.
Payroll taxes.
Wages payable.
Employee receivables.