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Accounting 2301 - Final Exam Created by mommyntyler180 terms

b. $1,072.50 1. Using the LIFO inventory

method, the value of the ending

inventory on June 30 is

a. $1,040.00

b. $1,072.50

c. $1,305.00

d. $1,320.00

c. $1,305.00 2. Using the FIFO inventory

method, the amount allocated

to ending inventory for June is

a. $1,040.00

b. $1,072.50

c. $1,305.00

d. $1,320.00

d. $1,200. 3. Using the average costmethod, the amount allocated

to the ending inventory on June

30 is

a. $1,170.

b. $1,320.

c. $1,260.

d. $1,200.

a. the FIFO method. 4. The inventory method whichresults in the highest gross

profit for Juneis

a. the FIFO method.

b. the LIFO method.

c. the weighted average unit

cost method.

d. not determinable.

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a. $1,385. 5. Using the LIFO inventory

method, the value of the ending

inventory on June 30 is

a. $1,385.

b. $1,425.

c. $1,455.

d. $1,475.

c. $1,455. 6. Using the FIFO inventory


to ending inventory for June is

a. $1,385.

b. $1,425.

c. $1,455.

d. $1,475.

a. $1,418. 7. Using the average cost


to the ending inventory on June

30 is

a. $1,418.

b. $1,475.

c. $1,425.

d. $1,400.

b. Overstate liabilities in order

to be conservative

8. Which one of the following

is not an objective of a system

of internal controls?

a. Safeguard company assets

b. Overstate liabilities in order

to be conservative

c. Enhance the accuracy and

reliability of accounting records

d. Reduce the risks of errors

a. an extensive marketing plan. 9. Each of the following is a

feature of internal control

except

a. an extensive marketing plan.

b. bonding of employees.

c. separation of duties.

d. recording of all transactions.


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c. Collusion 10. Which of the following is

not a limitation of internal

control?

a. Cost of establishing control

procedures should not exceed

their benefit

b. The human elementc. Collusion

d. The size of the company

c. may be subject to fines and

officer imprisonment.

11. Companies that fail to

maintain an adequate system

of internal control

a. may be subject to charges

of fraud.

b. will be automaticallydissolved.

c. may be subject to fines and

officer imprisonment.

d. may be forced to sell their

assets.

c. not have access to the

accounting records for that

asset.

12. The custodian of a

company asset should

a. have access to theaccounting records for that

asset.

b. be someone outside the

company.

c. not have access to the

accounting records for that

asset.

d. be an accountant.

b. cash. 13. From an internal control

standpoint, the asset most

susceptible to improper

diversion and use is

a. prepaid insurance.

b. cash.

c. buildings.

d. land.


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a. Separation of duties 14. A very small company

would have the most difficulty

in implementing which of the

following internal control

activities?

a. Separation of duties

b. Limited access to assetsc. Periodic independent

verification

d. Sound personnel procedures

b. getting the owner actively

involved.

15. In a small business, the

lack of certain separations of

duties can best be overcome

by

a. bonding the employees.b. getting the owner actively

involved.

c. hiring only honest

employees.

d. holding one person

responsible for a given set of

transactions.

a. other controls. 16. Mrs. Smith has worked for Arcco Inc. for 20 years

without taking a vacation. An

internal control feature that

would address this situation

would be

a. other controls.

b. establishment of

responsibility.

c. physical controls.

d. documentation procedures.

d. shows the activities that

increased or decreased the

depositor's account balance.

17. A bank statement

a. lets a depositor know the

financial position of the bank

as of a certain date.

b. is a credit reference letter

written by the depositor's bank.

c. is a bill from the bank for

services rendered.

d. shows the activities that

increased or decreased the

depositor's account balance.


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b. Collection of a note

receivable

18. Which one of the following

would not cause a bank to

debit a depositor's account?

a. Bank service charge

b. Collection of a note

receivable

c. Wiring of funds to otherlocations

d. Checks marked NSF

b. credit. 19. A deposit made by a

company will appear on the

bank statement as a

a. debit.

b. credit.

c. debit memorandum.d. credit memorandum.

d. Service charges 20. Which of the following

would be deducted from the

balance per books on a bank

reconciliation?

a. Outstanding checks

b. Deposits in transit

c. Notes collected by the bankd. Service charges

b. deposits in transit. 21. All of the following bank

reconciliation items would

result in an adjusting entry on

the company's books except

a. interest earned.

b. deposits in transit.

c. fee for collection of note bybank.

d. NSF check of customer.

a. $8,320. The adjusted cash balance per

books on August 31 is

a. $8,320.

b. $8,020.

c. $4,620.

d. $4,920.


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c. $8,325. The adjusted cash balance per

books on April 30 is

a. $9,225.

b. $8,820.

c. $8,325.

d. $9,165.

c. $2,485 Using the above information,

determine the cash balance per

books (before adjustments) for

the Barns Company.

a. $13,685

b. $21,700

c. $2,485

d. $21,000

d. $4,860. The adjusted cash balance per

books on October 31 is

a. $4,710.

b. $4,010.

c. $2,860.

d. $4,860.

c. $4,775. The adjusted cash balance per books on June 30 is

a. $5,075.

b. $4,940.

c. $4,775.

d. $5,055.

d. Reduce its cash account by

$315.

a. Reduce its cash account by

$1,425.

b. Reduce its cash account by$75.

c. Increase its cash account by

$165.

d. Reduce its cash account by

$315.

b. $6,000 a. $4,000

b. $6,000

c. $5,000d. $6,900


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d. $900 a. $1,600

b. $1,500

c. $1,000

d. $900

c. at cash realizable value. 30. Accounts receivable arevalued and reported on the

balance sheet

a. in the investment section.

b. at gross amounts less sales

returns and allowances.

c. at cash realizable value.

d. only if they are not past due.

c. recognizing, valuing, andaccelerating collections.

31. Three accounting issuesassociated with accounts

receivable are

a. depreciating, returns, and

valuing.

b. depreciating, valuing, and

collecting.

c. recognizing, valuing, and

accelerating collections.

d. accrual, bad debts, and

accelerating collections.

b. $588 32. Larson Company on July

15 sells merchandise on

account to Stuart Co. for

$1,000, terms 2/10, n/30. On

July 20 Stuart Co. returns

merchandise worth $400 to

Larson Company. On July 24

payment is received fromStuart Co. for the balance due.

What is the amount of cash

received?

a. $600

b. $588

c. $580

d. $1,000


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a. when recording uncollectible

accounts expense, it is not

possible to know which

specific accounts will not pay.

33. The Allowance for

Doubtful Accounts is

necessary because

a. when recording uncollectible

accounts expense, it is not

possible to know which

specific accounts will not pay.b. uncollectible accounts that

are written off must be

accumulated in a separate

account.

c. a liability results when a

credit sale is made.

d. management needs to

accumulate all the credit losses

over the years.

b. necessitates the recording of

an estimated amount for bad

debts.

34. The matching principle

a. requires that all credit losses

be recorded when an individual

customer cannot pay.

b. necessitates the recording of

an estimated amount for bad

debts.

c. results in the recording of a

known amount for bad debt

losses.

d. is not involved in the

decision of when to expense a

credit loss.

d. net Accounts Receivable

will be understated.

35. If the amount of

uncollectible account expense

is overstated at year end

a. net income will be

overstated.

b. stockholders' equity will be

overstated.

c. Allowance for Doubtful

accounts will be understated.

d. net Accounts Receivable

will be understated.


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c. management estimates the

amount of uncollectibles.

36. When the allowance

method is used to account for

uncollectible accounts, Bad

Debts Expense is debited

when

a. a sale is made.

b. an account becomes badand is written off.

c. management estimates the

amount of uncollectibles.

d. a customer's account

becomes past due.

c. debit to Bad Debts Expense

for $2,800.

37. An aging of a company's

accounts receivable indicates

that $4,000 are estimated to beuncollectible. If Allowance for

Doubtful Accounts has a

$1,200 credit balance, the

adjustment to record bad debts

for the period will require a

a. debit to Bad Debts Expense

for $4,000.

b. debit to Allowance for

Doubtful Accounts for $2,800.


for $2,800.

d. credit to Allowance for



for $5,200.

38. An aging of a company's

accounts receivable indicates

that $4,000 are estimated to be

uncollectible. If Allowance for

Doubtful Accounts has a

$1,200 debit balance, the

adjustment to record bad debts

for the period will require a

a. debit to Bad Debts Expense

for $4,000.

b. debit to Allowance for



for $5,200.d. credit to Allowance for



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b. debit to Bad Debts Expense

and a credit to Allowance for

Doubtful Accounts.

39. To record estimated

uncollectible accounts using

the allowance method, the

adjusting entry would be a

a. debit to Accounts

Receivable and a credit to

Allowance for DoubtfulAccounts.

b. debit to Bad Debts Expense

and a credit to Allowance for

Doubtful Accounts.

c. debit to Allowance for

Doubtful Accounts and a

credit to Accounts Receivable.

d. debit to Loss on Credit Sales

and a credit to Accounts

Receivable.

b. Bad Debts Expense 8,000

Allowance for Doubtful

Accounts 8,000

40. Manning Company uses

the percentage of receivables

method for recording bad debts

expense. The accounts

receivable balance is $200,000

and credit sales are

$1,000,000. Management

estimates that 5% of accounts

receivable will be uncollectible.

What adjusting entry will

Manning Company make if the


Accounts has a credit balance

of $2,000 before adjustment?

a. Bad Debts Expense 10,000


Accounts 10,000b. Bad Debts Expense 8,000


Accounts 8,000

c. Bad Debts Expense 8,000

Accounts Receivable 8,000

d. Bad Debts Expense 10,000



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c. $33,000 41. Using the percentage of

receivables method for

recording bad debts expense,

estimated uncollectible

accounts are $25,000. If the

balance of the Allowance for

Doubtful Accounts is $8,000debit before adjustment what is

the amount of bad debt

expense for that period?

a. $25,000

b. $8,000

c. $33,000

d. $17,000

c. Bad Debts Expense 6,000Allowance for Doubtful

Accounts 6,000

42. Laurs Company uses thepercentage of receivables

method for recording bad debts

expense. The Accounts

Receivable balance is $200,000

and credit sales are

$1,000,000. Management

estimates that 4% of accounts

receivable will be uncollectible.

What adjusting entry will

Manning Company make if the


Accounts has a credit balance

of $2,000 before adjustment?

a. Bad Debts Expense 10,000


Accounts 10,000

b. Bad Debts Expense 8,000


Accounts 8,000c. Bad Debts Expense 6,000


Accounts 6,000

d. Bad Debts Expense 12,000



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c. $28,000 43. Using the allowance

method, the uncollectible

accounts for the year is

estimated to be $28,000. If the

balance for the Allowance for

Doubtful Accounts is a $7,000

credit before adjustment, whatis the balance after

adjustment?

a. $7,000

b. $21,000

c. $28,000

d. $35,000

d. $35,000 44. Using the allowance

method, the uncollectibleaccounts for the year is

estimated to be $28,000. If the

balance for the Allowance for

Doubtful Accounts is a $7,000

debit before adjustment, what

is the amount of bad debt

expense for the period?

a. $7,000

b. $21,000

c. $28,000

d. $35,000


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b. $34,000. 45. In 2007 the Fitzu Co. had

net credit sales of $750,000.

On January 1, 2007,


Accounts had a credit balance

of $16,000. During 2007,

$30,000 of uncollectibleaccounts receivable were

written off. Past experience

indicates that the allowance

should be 10% of the balance

in receivables (percentage of

receivable basis). If the

accounts receivable balance at

December 31 was $200,000

what is the required adjustment

to the Allowance for Doubtful

Accounts at December 31,

2007?

a. $20,000.

b. $34,000.

c. $36,000.

d. $30,000.

b. $19,000 (Note: Another

"allowance method" for

recording uncollectible

accounts receivable is the

"Percentage of Sales" method.

With this method, the Bad

Debt expense is estimated as a

percent of net sales for the

period. This method is a little

easier, because you don't haveto compute the adjustment to


accounts; rather, you just make

the year-end adjusting entry

using whatever the ending

balance of Net Sales is, and

your percent estimate. See

Review for more)

46. A company has net credit

sales of $900,000 for the year

and it estimates that

uncollectible accounts will be

2% of sales. If Allowance for

Doubtful Accounts has a credit

balance of $1,000 prior to

adjustment, its balance after

adjustment will be a credit of

a. $18,000b. $19,000

c. $17,980

d. $17,000


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d. $1,470,000 47. An analysis and aging of

the accounts receivable of

Yates Company at December

31 reveal these data:

Accounts receivable $

1,600,000Allowance for doubtful

accounts per books before

adjustment (credit) 100,000

Amounts expected to become

uncollectible 130,000

What is the cash realizable

value of the accounts

receivable at December 31

after adjustment?

a. $1,370,000

b. $1,500,000

c. $1,600,000

d. $1,470,000


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c. $42,000 increase Use the following information

to answer questions 48 & 49.

12/31/06

Accounts receivable $525,000

Allowance (45,000)

Cash realizable value 480,000

During 2007 sales on account

were $145,000 and collections

on account were $86,000.

Also, during 2007 the company

wrote off $8,000 in

uncollectible accounts. An

analysis of outstanding

receivable accounts at year

end indicated that bad debts

should be estimated at $54,000.

48. The change in the cash

realizable value from the

balance at 12/31/06 to 12/31/07

was

a. $50,000 increase

b. $59,000 increase

c. $42,000 increase

d. $51,000 increase


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a. $17,000 Use the following information

to answer questions 48 & 49.

12/31/06

Accounts receivable $525,000

Allowance (45,000)

Cash realizable value 480,000




Also, during 2007 the company

wrote off $8,000 in





should be estimated at $54,000.

49. Bad debt expense for 2007

is:

a. $17,000

b. $ 9,000

c. $54,000

d. $ 1,000


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c. $ 84,000 increase Use the following information

to answer questions 51 and 52.

12/31/06

Accounts receivable

$1,050,000Allowance (90,000)

Cash realizable value $960,000




Also during 2007 the company

wrote off $16,000 in





should be estimated at

$108,000.

51. The change in the cash

realizable value from the

balance at 12/31/06 to 12/31/07

was aa. $100,000 increase

b. $118,000 increase

c. $ 84,000 increase

d. $102,000 increase


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a. $ 34,000 Use the following information

to answer questions 51 and 52.

12/31/06

Accounts receivable

$1,050,000Allowance (90,000)

Cash realizable value $960,000




Also during 2007 the company

wrote off $16,000 in





should be estimated at

$108,000.

52. Bad debts expense for

2007 is

a. $ 34,000

b. $ 18,000

c. $108,000

d. $ 2,000


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b. $45,840 53. Papa Bear Corporation's

unadjusted trial balance

includes the following balances

(assume normal balances)

:

Accounts Receivable

$1,119,000Allowances for Doubtful

Accounts $ 21,300

Bad debts are estimated to be

6% of outstanding receivables.

What amount of bad debts

expense will the company

record?

a. $67,140

b. $45,840

c. $44,562

d. $68,418

d. To match bad debt expense

to the period in which the

revenues were earned.

54. Under the allowance

method of accounting for bad

debts, why must uncollectible

accounts receivable be

estimated at the end of the

accounting period?

a. To allow the collection

department to schedule work

for the next accounting period.

b. To determine the gross

realizable value of accounts

receivable.

c. The IRS rules require thecompany to make the estimate.

d. To match bad debt expense

to the period in which the

revenues were earned.


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c. payee receives more

interest if 360 days are used

instead of 365.

55. When calculating interest

on a promissory note with the

maturity date stated in terms of

days, the

a. maker pays more interest if

365 days are used instead of

360.b. maker pays the same

interest regardless if 365 or

360 days are used.

c. payee receives more

interest if 360 days are used

instead of 365.

d. payee receives less interest

if 360 days are used instead of

365.

b. $400. 56. The interest on a $4,000,

10%, 1-year note receivable is

a. $4,000.

b. $400.

c. $4,400.

d. $4,040.

d. Notes Receivable 3,000Accounts ReceivableDay

Company 3,000

57. Sloan Company receives a$3,000, 3-month, 6%

promissory note from Day

Company in settlement of an

open accounts receivable.

What entry will Sloan

Company make upon receiving

the note?

a. Notes Receivable 3,045

Accounts ReceivableDay

Company 3,045

b. Notes Receivable 3,045


Company 3,000

Interest Revenue 45

c. Notes Receivable 3,000

Interest Receivable 45


Company 3,000

Interest Revenue 45d. Notes Receivable 3,000


Company 3,000


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b. Interest Receivable 100

Interest Revenue 100

58. Garber Company lends

Newell Company $20,000 on

April 1, accepting a four-

month, 6% interest note.

Garber Company prepares

financial statements on April

30. What adjusting entryshould be made before the

financial statements can be

prepared?

a. Note Receivable 20,000

Cash 20,000

b. Interest Receivable 100


c. Cash 100


d. Interest Receivable 300


a. $82,800. 59. A company purchased land

for $72,000 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.

Proceeds from salvage of the

demolished building was

$1,200. Under the cost

principle, the cost of land

would be recorded at

a. $82,800.

b. $72,000.

c. $77,800.d. $84,000.


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c. $90,700 60. Elway Company purchases

land for $85,000 cash. Elway

assumes $2,500 in property

taxes due on the land. The title

and attorney fees totaled

$1,000. Elway has the land

graded for $2,200. They paid$10,000 for paving of a parking

lot. What amount does Elway

record as the cost for the land?

a. $88,200

b. $100,700

c. $90,700

d. $85,000

d. $25,050. 61. Stories Company

purchased equipment and

these costs were incurred:

Cash price $22,500

Sales taxes 1,800

Insurance during transit 320

Installation and testing 430

Total costs $25,050

Stories will record the

acquisition cost of the

equipment as

a. $22,500.

b. $24,300.

c. $24,620.

d. $25,050.

c. cost allocation. 62. Depreciation is a process

of

a. asset devaluation.

b. cost accumulation.

c. cost allocation.

d. asset valuation.


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c. an estimate of a plant

asset's value at the end of its

useful life.

63. In computing depreciation,

salvage value is

a. the fair market value of a

plant asset on the date of

acquisition.

b. subtracted from

accumulated depreciation todetermine the plant asset's

depreciable cost.

c. an estimate of a plant

asset's value at the end of its

useful life.

d. ignored in all the

depreciation methods.

b. $11,760. 64. Equipment was purchasedfor $60,000. Freight charges

amounted to $2,800 and there

was a cost of $8,000 for

building a foundation and

installing the equipment. It is

estimated that the equipment

will have a $12,000 salvage

value at the end of its 5-year

useful life. Depreciation

expense each year using the

straight-line method will be

a. $14,160.

b. $11,760.

c. $9,840.

d. $9,600.

d. $43,500 65. Equipment with a cost of

$192,000 has an estimated

salvage value of $18,000 and

an estimated life of 4 years or

12,000 hours. It is to be

depreciated by the straight-line

method. What is the amount of

depreciation for the first full

year, during which the

equipment was used 3,300

hours?

a. $48,000b. $52,500

c. $49,500

d. $43,500


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c. $3,150 66. A company purchased

factory equipment on April 1,

2007, for $48,000. It is

estimated that the equipment

will have a $6,000 salvage


useful life. Using the straight-line method of depreciation, the

amount to be recorded as

depreciation expense at

December 31, 2007, is

a. $4,800

b. $4,200

c. $3,150

d. $3,600

a. decreasing depreciation

expense each period.

67. The declining-balance

method of depreciation

produces a(n)

a. decreasing depreciation


b. increasing depreciation


c. declining percentage rate

each period.

d. constant amount of

depreciation expense each

period.

d. Declining-balance 68. Which of the following

methods will result in the

highest depreciation in the first

year?

a. Sum-of-year's-digits

b. Time valuation

c. Straight-line

d. Declining-balance


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b. $1,600 69. On November 1, 2006,

Dark Company places a new

asset into service. The cost of

the asset is $9,000 with an

estimated 5-year life and

$1,000 salvage value at the end

of its useful life. What is thedepreciation expense for 2007

if Dark Company uses the

straight-line method of

depreciation?

a. $400

b. $1,600

c. $266.67

d. $900

c. $4,000 70. On January 1, a machine

with a useful life of five years

and a residual value of $5,000

was purchased for $25,000.

What is the depreciation

expense for year 2 under

straight-line depreciation?

a. $5,000

b. $15,000

c. $4,000

d. $12,000

d. 3 years. 71. A plant asset was

purchased on January 1 for

$40,000 with an estimated

salvage value of $8,000 at the

end of its useful life. The

current year's Depreciation

Expense is $4,000 calculated

on the straight-line basis and

the balance of the

Accumulated Depreciation

account at the end of the year

is $20,000. The remaining

useful life of the plant asset is

a. 10 years.

b. 8 years.c. 5 years.

d. 3 years.


26/74



b. $75,000 Use the following information

for questions 72-74.

Brinkman Corporation bought

equipment on January 1, 2007

.The equipment cost $90,000

and had an expected salvagevalue of $15,000. The life of

the equipment was estimated

to be 6 years.

72. The depreciable cost of the

equipment is

a. $90,000

b. $75,000

c. $50,000

d. $12,500

c. $12,500 Use the following information





and had an expected salvage

value of $15,000. The life of


to be 6 years.

73. The depreciation expense

using the straight-line method

of depreciation is

a. $17,500

b. $18,000

c. $12,500d. none of the above


27/74








and had an expected salvagevalue of $15,000. The life of


to be 6 years.

74. The book value of the

equipment at the beginning of

the third year would be

a. $90,000

b. $75,000

c. $65,000

d. $25,000

d. $234,000 75. Bates Company purchased

equipment on January 1, 2006,

at a total invoice cost of

$600,000. The equipment has

an estimated salvage value of

$15,000 and an estimated

useful life of 5 years. What is

the amount of accumulated

depreciation at December 31,

2007, if the straight-line

method of depreciation is

used?

a. $120,000

b. $240,000

c. $117,000

d. $234,000


28/74



b. $16,700 76. Machinery was purchased

for $85,000. Freight charges

amounted to $3,500 and there

was a cost of $10,000 for

building a foundation and

installing the machinery. It is

estimated that the machinerywill have a $15,000 salvage


useful life. Depreciation

expense each year using the

straight-line method will be

a. $19,700

b. $16,700

c. $14,300

d. $14,000

c. that the amount of periodic

depreciation be changed in the

current year and

in future years.

77. A change in the estimated

useful life of equipment

requires

a. a retroactive change in the

amount of periodic

depreciation recognized in

previous years.

b. that no change be made in

the periodic depreciation so

that depreciation

amounts are comparable over

the life of the asset.

c. that the amount of periodic

depreciation be changed in the

current year and

in future years.

d. that income for the current

year be increased.


29/74



c. $10,000 78. Greg's Copy Shop bought

equipment for $60,000 on

January 1, 2006. Greg

estimated the useful life to be 3

years with no salvage value,

and the straight-line method of

depreciation will be used. OnJanuary 1, 2007, Greg decides

that the business will use the

equipment for a total of 5

years. What is the revised

depreciation expense for 2007?

a. $20,000

b. $8,000

c. $10,000

d. $15,000

a. $4,000 79. Joe's Quik Shop bought

equipment for $25,000 on

January 1, 2006. Joe estimated

the useful life to be 5 years

with no salvage value, and the

straight-line method of

depreciation will be used. On

January 1, 2007, Joe decides

that the business will use the

equipment for a total of 6

years. What is the revised

depreciation expense for 2007?

a. $4,000

b. $2,000

c. $3,333

d. $5,000

d. They increase the

productive capacity of the

asset.

80. Which of the following is

not true of ordinary repairs?

a. They primarily benefit the

current accounting period.

b. They can be referred to as

revenue expenditures.

c. They maintain the expected

productive life of the asset.

d. They increase the

productive capacity of theasset.


30/74



c. increase the company's

investment in productive

facilities.

81. Additions and

improvements

a. occur frequently during the

ownership of a plant asset.

b. normally involve immaterial

expenditures.

c. increase the company'sinvestment in productive

facilities.

d. typically only benefit the

current accounting period.

c. $40,000 loss on disposal. 82. A company sells a plant

asset that originally cost

$150,000 for $50,000 on

December 31, 2007. Theaccumulated depreciation

account had a balance of

$60,000 after the current

year's depreciation of $15,000

had been recorded. The

company should recognize a

a. $100,000 loss on disposal.

b. $40,000 gain on disposal.

c. $40,000 loss on disposal.

d. $25,000 loss on disposal.

a. $30,000 loss on disposal. 83. A company sells a plant

asset that originally cost

$180,000 for $60,000 on

December 31, 2007. The

accumulated depreciation

account had a balance of

$90,000 after the current

year's depreciation of $15,000

had been recorded. The

company should recognize a

a. $30,000 loss on disposal.

b. $30,000 gain on disposal.

c. $60,000 loss on disposal.

d. $60,000 gain on disposal.


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d. do not have physical

substance.

84. Intangible assets are the

rights and privileges that result

from ownership of long-lived

assets that

a. must be generated

internally.

b. are depreciated over theiruseful life.

c. have been exchanged at a

gain.

d. do not have physical

substance.

d. only when there is an

exchange transaction involving

the purchase of an entirebusiness.

85. Goodwill can be recorded

a. when customers keep

returning because they aresatisfied with the company's

products.

b. when the company acquires

a good location for its business.

c. when the company has

exceptional management.

d. only when there is an

exchange transaction involving

the purchase of an entire

business.

b. Patent 86. Which of the following is

not an intangible asset arising

from a government grant?

a. Goodwill

b. Patent

c. Trademark

d. Trade name

b. An oil well 87. Which of the following is

not considered an intangible

asset?

a. Goodwill

b. An oil well

c. A franchise

d. A patent


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c. can only be identified with

the business as a whole.

88. Goodwill

a. is only recorded when

generated internally.

b. can be subdivided and sold

in parts.

c. can only be identified with

the business as a whole.d. can be defined as normal

earnings less accumulated

amortization.

a. $600,000 loss 89. A computer company has

$3,000,000 in research and

development costs. Before

accounting for these costs, the

net income of the company is$2,400,000. What is the

amount of net income or loss

after these research and

development costs are

accounted for?

a. $600,000 loss

b. $2,400,000 net income

c. $0

d. Cannot be determined from

the information provided

c. $5,500,000 90. Given the following

account balances at year end,

compute the total intangible

assets on the balance sheet of

Anisha Enterprises.

Cash $1,500,000

Accounts Receivable

4,000,000

Trademarks 1,000,000

Goodwill 4,500,000

Research & Development

Costs 2,000,000

a. $11,500,000

b. $7,500,000

c. $5,500,000d. $9,500,000


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b. $13,500. 91. A plant asset cost $96,000

and is estimated to have a

$12,000 salvage value at the

end of its 8-year useful life.

The annual depreciation

expense recorded for the third

year using the double-declining-balance method

would be

a. $8,040.

b. $13,500.

c. $11,812.

d. $9,190.

a. $10,800 92. On January 1, a machine

with a useful life of five yearsand a residual value of $15,000

was purchased for $45,000.

What is the depreciation

expense for year 2 under the

double-declining-balance

method of depreciation?

a. $10,800

b. $18,000

c. $14,400

d. $8,640

a. within one year, or the

operating cycle, whichever is

longer.

93. A current liability is a debt

that can reasonably be

expected to be paid

a. within one year, or the

operating cycle, whichever is

longer.

b. between 6 months and 18

months.

c. out of currently recognized

revenues.

d. out of cash currently on

hand.


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a. Dividends payable 94. Which of the following

most likely would be classified

as a current liability?

a. Dividends payable

b. Bonds payable in 5 years

c. Three-year notes payable

d. Mortgage payable as asingle payment in 10 years

d. expense. 95. Very often, failure to

record a liability means failure

to record a(n)

a. revenue.

b. asset conversion.

c. footnote.

d. expense.

b. Cash 200,000

Notes Payable 200,000

Use the following information


Moss County Bank agrees to

lend the Allenson Brick

Company $200,000 on January

1. Allenson Brick Company

signs a $200,000, 6%, 9-monthnote.

96. The entry made by

Allenson Brick Company on

January 1 to record the

proceeds and issuance of the

note is

a. Interest Expense 9,000

Cash. 191,000


b. Cash 200,000


c. Cash 200,000

Interest Expense 9,000


d. Cash 200,000



Interest Payable 9,000


35/74










1. Allenson Brick Companysigns a $200,000, 6%, 9-month

note.

97. What is the adjusting entry

required if Allenson Brick

Company prepares financial

statements on June 30?



b. Interest Expense 6,000

Cash 6,000

c. Interest Payable 6,000

Cash 6,000

d. Interest Payable 6,000



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b. Notes Payable 200,000


Cash 209,000






1. Allenson Brick Companysigns a $200,000, 6%, 9-month

note.

98. What entry will Allenson

Brick Company make to pay

off the note and interest at

maturity assuming that interest

has been accrued to

September 30?

a. Notes Payable 209,000

Cash 209,000



Cash 209,000

c. Interest Expense 9,000


Cash 209,000




Cash 209,000


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b. Cash 100,000




West County Bank agrees to

lend the Block Builders


1. Block Builders Companysigns a $100,000, 6%, 6-month

note.

99. The entry made by Block

Builders Company on January

1 to record the proceeds and

issuance of the note is


Cash. 97,000


b. Cash 100,000


c. Cash 100,000



d. Cash 100,000





38/74











note.

100. What is the adjusting

entry required if Block

Builders Company prepares

financial statements on March

30?



b. Interest Expense 3,000

Cash 3,000






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Cash 103,000







note.

101. What entry will Block

Builders Company make to

pay off the note and interest at

maturity assuming that interest

has been accrued to June 30?

a. Notes Payable 103,000

Cash 103,000



Cash 103,000



Cash 103,000




Cash 103,000


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b. Cash 600,000

Unearned Subscription

Revenue 600,000

102. Ramsey Company

typically sells subscriptions on

an annual basis, and publishes

six times a year. The magazine

sells 60,000 subscriptions in

January at $10 each. What

entry is made in January torecord the sale of the

subscriptions?

a. Subscriptions Receivable

600,000

Subscription Revenue 600,000

b. Cash 600,000


Revenue 600,000

c. Subscriptions Receivable

100,000


Revenue 100,000

d. Prepaid Subscriptions

600,000

Cash 600,000

a. a bond certificate. 103. A legal document that

indicates the name of the

issuer, the face value of the

bond and such other data is

called

a. a bond certificate.

b. a bond debenture.

c. trading on the equity.

d. a convertible bond.

c. convertible bonds. 104. Bonds that may be

exchanged for common stock

at the option of the

bondholders are called

a. options.

b. stock bonds.

c. convertible bonds.

d. callable bonds.


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a. callable bonds. 105. Bonds that are subject to

retirement at a stated dollar

amount prior to maturity at the

option of the issuer are called

a. callable bonds.

b. early retirement bonds.

c. options.d. debentures.

b. debenture bonds. 106. Bonds that are issued

against the general credit of

the borrower are called

a. callable bonds.

b. debenture bonds.

c. secured bonds.

d. term bonds.

d. $102,250. 107. A bond with a face value

of $100,000 and a quoted price

of 102 has a selling price of

a. $120,225.

b. $102,025.

c. $100,225.

d. $102,250.

b. market price. 108. The present value of a

bond is also known as its

a. face value.

b. market price.

c. future value.

d. deferred value.

c. at a discount. 109. If the market rate of interest is greater than the

contractual rate of interest,

bonds will sell

a. at a premium.

b. at face value.

c. at a discount.

d. only after the stated rate of

interest is increased.


42/74



b. by the amortization of

discount on bonds payable.

110. The interest expense

recorded on an interest

payment date is increased

a. by the amortization of

premium on bonds payable.

b. by the amortization of

discount on bonds payable.c. only if the bonds were sold

at face value.

d. only if the market rate of

interest is less than the stated

rate of interest on that date.

d. $250. 111. On January 1, 2007,

$1,000,000, 10-year, 10%

bonds, were issued for$970,000. Interest is paid

annually on January 1. If the

issuing corporation uses the

straight-line method to

amortize discount on bonds

payable, the monthly

amortization amount is

a. $9,700.

b. $3,000.

c. $808.

d. $250.

a. $10,840. 112. A corporation issues

$100,000, 10%, 5-year bonds

on January 1, 2007, for

$95,800. Interest is paid

annually on January 1. If the

corporation uses the straight-

line method of amortization of

bond discount, the amount of

bond interest expense to be

recognized in December 31,

2007's adjusting entry is

a. $10,840.

b. $10,000.

c. $9,160.

d. $840.


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a. $7,160. 113. A corporation issues

$100,000, 8%, 5-year bonds on

January 1, 2007, for $104,200.

Interest is paid annually on

January 1. If the corporation

uses the straight-line method of

amortization of bond discount,the amount of bond interest

expense to be recognized in

December 31, 2007's adjusting

entry is

a. $7,160.

b. $8,000.

c. $8,840.

d. $840.

c. interest paid over the life of

the bond minus the amount of

premium at sale

point.

114. When bonds are issued at

a premium, the total interest

cost of the bonds over the life

of the bonds is equal to the

amount of

a. interest paid over the life of

the bond.

b. interest paid over the life of

the bond plus the amount of

premium at sale

point.

c. interest paid over the life of

the bond minus the amount of

premium at sale

point.

d. premium at sale point.


44/74





Porter Company received

proceeds of $211,500 on 10-

year, 8% bonds issued on

January 1, 2006. The bondshad a face value of $200,000,

pay interest annually on

December 31st. Porter uses

the straight-line method of

amortization.

115. What is the amount of

interest Porter must pay the

bondholders in 2006?

a. $16,920

b. $16,000

c. $16,320

d. $1,692






January 1, 2006. The bonds

had a face value of $200,000,




amortization.

116. What is the amount of

interest expense Porter will

show with relation to these

bonds for the year ended

December 31, 2007?

a. $16,000

b. $16,920

c. $14,850

d. $12,550


45/74








January 1, 2006. The bondshad a face value of $200,000,




amortization.

117. What is the carrying value

of the bonds on January 1,

2008?

a. $200,000

b. $209,200

c. $190,800

d. $210,350

d. $19,200 119. Turner Company issued

$300,000 of 6%, 5-year bonds

at 98. Assuming straight-line

amortization and annual

interest payments, how much

bond interest expense is

recorded on the next interest

date?

a. $18,000

b. $9,000

c. $18,600

d. $19,200


46/74



b. subtracting the amount of

premium amortized for that

period from the amount

of cash paid for interest during

the period.

120. When the straight-line

method of amortization is used

for a bond premium, the

amount of interest expense for

an interest period is calculated

by

a. adding the amount ofpremium amortized for that

period to the amount of

cash paid for interest during

the period.


premium amortized for that



the period.

c. multiplying the face value of

the bonds by the stated interest

rate.

d. multiplying the face value of

the bonds by the market

interest rate.

a. adding the amount of

discount amortized for that



the period.

121. When the straight-line

method of amortization is used

for a bond discount, the

amount of interest expense for

an interest period is calculated

by

a. adding the amount of




the period.





the period.

c. multiplying the face value of

the bonds by the stated interest

rate.

d. multiplying the face value of

the bonds by the market

interest rate.


47/74



b. $171,300. 122. On January 1, Jean

Loptein Inc. issued $3,000,000,

9% bonds for $2,817,000. The

market rate of interest for

these bonds is 10%. Interest is

payable annually on December

31. Jean Loptein uses theeffective-interest method of

amortizing bond discount. At

the end of the first year, Jean

Loptein should report

unamortized bond discount of

a. $164,700.

b. $171,300.

c. $154,830.

d. $153,000.

c. $257,304. 123. On January 1, Cleopatra

Corporation issued $2,000,000,

14%, 5-year bonds with

interest payable on December

31. The bonds sold for

$2,144,192. The market rate of

interest for these bonds was

12%. On the first interest date,

using the effective-interest

method, the debit entry to

Bond Interest Expense is for

a. $240,000.

b. $251,162.

c. $257,304.

d. $280,000.


48/74



a. is less than the amount of

cash to be paid for interest for

the period.

124. The amortization of a

bond premium will result in

reporting an amount of interest

expense for an interest period

that

a. is less than the amount ofcash to be paid for interest for

the period.

b. exceeds the amount of cash

to be paid for interest for the

period.

c. equals the amount of cash to

be paid for interest for the

period.

d. has no predictable

relationship with the amount of

cash to be paid for interest

for the period.

b. uniform rate of interest. 125. The effective-interest

method of amortization of bond

premiums and discounts is

considered superior to the

straight-line method because it

results in a(n)

a. interest rate that is close to

the market interest rate.

b. uniform rate of interest.

c. more variable interest rate.

d. interest rate that increases

or decreases slightly over time.

b. Its shares are regularly

traded on the New York Stock

Exchange.

126. Which of the following

would not be true of a privately

held corporation?

a. It is sometimes called a

closely held corporation.

b. Its shares are regularly

traded on the New York Stock

Exchange.

c. It does not offer its shares

for sale to the general public.

d. It is usually smaller than apublicly held company.


49/74



b. A stockholder may dispose

of part or all of his shares.


statements reflects the

transferability of ownership

rights in a corporation?

a. If a stockholder decides to

transfer ownership, he must

transfer all of his shares.b. A stockholder may dispose

of part or all of his shares.

c. A stockholder must obtain

permission of the board of

directors before selling shares.

d. A stockholder must obtain

permission from at least three

other stockholders before

selling shares.

b. To declare dividends on the

common stock

128. Which one of the

following is not an ownership

right of a stockholder in a

corporation?

a. To vote in the election of

directors

b. To declare dividends on the

common stock

c. To share in assets upon

liquidation

d. To share in corporate

earnings

a. is legally significant. 129. The par value of a stock

a. is legally significant.

b. reflects the most recent

market price.

c. is selected by the SEC.

d. is indicative of the worth of

the stock.


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d. is the value assigned per

share in the corporate charter.

130. Par value

a. represents what a share of

stock is worth.

b. represents the original

selling price for a share of

stock.

c. is established for a share ofstock after it is issued.

d. is the value assigned per

share in the corporate charter.

b. par value. 131. The term legal capital is a

descriptive term for

a. stockholders' equity.

b. par value.

c. residual equity.d. market value.

a. authorized stock. 132. The amount of stock that

may be issued according to the

corporation's charter is

referred to as the

a. authorized stock.

b. issued stock.

c. unissued stock.d. outstanding stock.

c. Paid-in Capital in Excess of

Par Value will be credited for

$130,000.

133. If Morgan Company

issues 2,000 shares of $5 par

value common stock for

$140,000, the account

a. Common Stock will be

credited for $140,000.

b. Paid-in Capital in Excess ofPar Value will be credited for

$10,000.



$130,000.

d. Cash will be debited for

$130,000.


51/74





134. If Kiner Company issues

1,000 shares of $5 par value

common stock for $70,000, the

account



b. Paid-in Capital in Excess ofPar Value will be credited for

$5,000.



$70,000.

d. Cash will be debited for

$65,000.

b. is reported as part of paid-incapital on the balance sheet.

135. Paid-in Capital in Excessof Par Value

a. is credited when no-par

stock does not have a stated

value.

b. is reported as part of paid-in

capital on the balance sheet.

c. represents the amount of

legal capital.

d. normally has a debit

balance.

b. Common Stock of $100,000. 136. Specialty Packaging

Corporation began business in

2007 by issuing 20,000 shares

of $5 par common stock for $8

per share and 5,000 shares of

6%, $10 par preferred stock

for par. At year end, the

common stock had a market

value of $10. On its December

31, 2007 balance sheet,

Specialty Packaging would

report

a. Common Stock of $200,000.

b. Common Stock of $100,000.

c. Common Stock of $160,000.

d. Paid-in Capital of $150,000.


52/74



b. Foley's total stockholders'

equity decreased $69,000.

137. Foley Manufacturing

Corporation purchased 3,000

shares of its own previously

issued $10 par common stock

for $69,000. As a result of this

event,

a. Foley's Common Stockaccount decreased $30,000.

b. Foley's total stockholders'

equity decreased $69,000.

c. Foley's Paid-in Capital in

Excess of Par Value account

decreased $39,000.

d. All of the above.

d. a corporation's own stock,which has been reacquired and

held for future use.

138. Treasury stock isa. stock issued by the U.S.

Treasury Department.

b. stock purchased by a

corporation and held as an

investment in its treasury.

c. corporate stock issued by

the treasurer of a company.

d. a corporation's own stock,

which has been reacquired and

held for future use.

b. decreases its total assets

and total stockholders' equity.

139. The acquisition of

treasury stock by a corporation

a. increases its total assets and

total stockholders' equity.

b. decreases its total assets


c. has no effect on total assets


d. requires that a gain or loss

be recognized on the income

statement.


53/74



d. deduction from total paid-in

capital and retained earnings.

140. Treasury stock should be

reported in the financial

statements of a corporation as

a(n)

a. investment.

b. liability.

c. deduction from total paid-incapital.

d. deduction from total paid-in

capital and retained earnings.

b. outstanding shares plus

treasury shares.

141. The number of shares of

issued stock equals

a. unissued shares minus

authorized shares.

b. outstanding shares plustreasury shares.

c. authorized shares minus

treasury shares.

d. outstanding shares plus

authorized shares

b. issued stock. 142. Treasury shares plus

outstanding shares equal

a. authorized stock.b. issued stock.

c. unissued stock.

d. distributable stock.

a. The right to vote 143. Which of the following is

not a right or preference

associated with preferred

stock?

a. The right to voteb. First claim to dividends

c. Preference to corporate

assets in case of liquidation

d. To receive dividends in

arrears before common

stockholders receive

dividends


54/74



b. must be paid before

common stockholders can

receive a dividend.

144. Dividends in arrears on

cumulative preferred stock

a. never have to be paid, even

if common dividends are paid.

b. must be paid before

common stockholders can

receive a dividend.c. should be recorded as a

current liability until they are

paid.

d. enable the preferred

stockholders to share equally in

corporate earnings with

the common stockholders.

b. change the composition ofstockholders' equity.

145. The effect of a stockdividend is to

a. decrease total assets and

stockholders' equity.

b. change the composition of

stockholders' equity.

c. decrease total assets and

total liabilities.

d. increase the book value per

share of common stock.

b. No change Decrease 146. Stock dividends and stock

splits have the following

effects on retained earnings:

Stock Splits Stock Dividends

a. Increase No change

b. No change Decrease

c. Decrease Decrease

d. No change No change


55/74



a. The dividend can be

rescinded once it has been

declared.


statements regarding the date

of a cash dividend declaration

is not accurate?

a. The dividend can be

rescinded once it has been

declared.b. The corporation is

committed to a legal, binding

obligation.

c. The board of directors

formally authorizes the cash

dividend.

d. A liability account must be

increased.

b. $30,000 in total 148. Sun Inc. has 5,000 shares

of 6%, $100 par value,

cumulative preferred stock and

50,000 shares of $1 par value

common stock outstanding at

December 31, 2007. What is

the annual dividend on the

preferred stock?

a. $60 per share

b. $30,000 in total

c. $3,000 in total

d. $0.60 per share

b. Total contributed capital

increases.


statements is not true about a

2-for-1 split?

a. Par value per share is

reduced to half of what it was

before the split.

b. Total contributed capital

increases.

c. The market price probably

will decrease.

d. A stockholder with ten

shares before the split owns

twenty shares after the split.


56/74



c. $600,000 150. What is the total

stockholders' equity based on

the following account

balances?

Common Stock $400,000

Paid-In Capital in Excess of

Par 50,000Retained Earnings 175,000

Treasury Stock 25,000

a. $650,000

b. $625,000

c. $600,000

d. $450,000

a. $31,240,000. Use the following informationfor questions 151-153.

Starr Corporation's December

31, 2007 Balance Sheet

showed the following:

8% preferred stock, $20 par

value, cumulative, 20,000

shares

authorized; 10,000 shares

issued $ 200,000

Common stock, $10 par value,

2,000,000 shares authorized;

1,300,000 shares issued,

1,280,000 shares outstanding

13,000,000

Paid-in capital in excess of par

value - preferred stock 40,000


value - common stock

18,000,000

Retained earnings 5,100,000

Treasury stock (10,000 shares)

420,000

151. Starr's total paid-in capital

was

a. $31,240,000.

b. $31,660,000.

c. $30,820,000.d. $18,040,000.


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c. $22,000. Use the following information





8% preferred stock, $20 parvalue, cumulative, 20,000

shares


issued $ 200,000





13,000,000





18,000,000



420,000

152. Starr declared and paid a

$50,000 cash dividend on

December 15, 2007. If the

company's dividends in arrears

prior to that date were $12,000,

Starr's common stockholders

received

a. $38,000.

b. $18,000.

c. $22,000.

d. no dividend.


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d. $35,920,000. Use the following information





8% preferred stock, $20 parvalue, cumulative, 20,000

shares


issued $ 200,000





13,000,000





18,000,000



420,000

153. Starr's total stockholders'

equity was

a. $36,760,000.

b. $31,240,000.

c. $36,340,000.

d. $35,920,000.

b. Statement of Cash Flows 154. In addition to the three

basic financial statements,

which of the following is also a

required financial statement?

a. The "Cash Budget"

b. Statement of Cash Flows

c. Statement of Cash Inflows

and Outflows

d. The "Cash Reconciliation"


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a. operating, investing, and

financing.

155. The order of presentation

of activities on the statement

of cash flows is

a. operating, investing, and

financing.

b. operating, financing, and

investing.c. financing, operating, and

investing.

d. financing, investing, and

operating.

c. issuing debt. 156. Financing activities

involve

a. lending money.

b. acquiring investments.c. issuing debt.

d. acquiring long-lived assets.

a. collecting cash on loans

made.

157. Investing activities include

a. collecting cash on loans

made.

b. obtaining cash from

creditors.

c. obtaining capital fromowners.

d. repaying money previously

borrowed.

a. operating activities. 158. Generally, the most

important category on the

statement of cash flows is

cash flows from

a. operating activities.b. investing activities.

c. financing activities.

d. significant noncash

activities.

c. financing activity. 159. The payment of a cash

dividend would be classified as

a(n)

a. operating activity.b. investing activity.

c. financing activity.

d. significant noncash activity.


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d. $8,000. Use the following information


Joy Elle's Vegetable Market

had the following transactions

during 2007:

1. Issued $25,000 of par value

common stock for cash.

2. Recorded and paid wages

expense of $10,000.

3. Acquired land by issuing

common stock of par value

$50,000.

4. Declared and paid a cash

dividend of $1,000.

5. Sold a long-term investment

(cost $3,000) for cash of

$3,000.

6. Recorded cash sales of

$20,000.

7. Bought inventory for cash of

$2,000.

8. Acquired an investment in

IBM stock for cash of $6,000.

9. Converted bonds payable to

common stock in the amount

of $10,000.

10. Repaid a 6 year note

payable in the amount of

$11,000.

160. What is the net cash

provided by operating

activities?

a. $20,000.b. $18,000.

c. $10,000.

d. $8,000.


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a. $13,000. Use the following information




during 2007:




expense of $10,000.



$50,000.


dividend of $1,000.



$3,000.


$20,000.


$2,000.





of $10,000.



$11,000.


provided by financing

activities?

a. $13,000.b. $25,000.

c. $14,000.

d. $9,000.


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c. ($3,000). Use the following information




during 2007:




expense of $10,000.



$50,000.


dividend of $1,000.



$3,000.


$20,000.


$2,000.





of $10,000.



$11,000.


provided by investing

activities?

a. $6,000.b. $16,000

c. ($3,000).

d. $3,000.


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b. $621,000. 163. A company had net

income of $705,000.

Depreciation expense is

$78,000. During the year,

accounts receivable and

inventory increased $45,000

and $120,000, respectively.Prepaid expenses and

accounts payable decreased

$6,000 and $12,000,

respectively. There was also a

loss on the sale of equipment

of $9,000. How much cash

was provided by operating

activities?

a. $603,000.

b. $621,000.

c. $843,000.

d. $879,000.

b. $317,000 164. The net income reported

on the income statement for

the current year was $220,000.

Depreciation was $50,000.

Accounts receivable and

inventories decreased by

$10,000 and $30,000,

respectively. Prepaid expenses

and accounts payable

increased, respectively, by

$1,000 and $8,000. How much

cash was provided by

operating activities?

a. $281,000

b. $317,000

c. $301,000

d. $239,000

a. dividends declared. 165. Comprehensive income

would not include

a. dividends declared.

b. unrealized gains on

available-for-sale securities.

c. discontinued operations.d. extraordinary gains and

losses.


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b. Subtracted from "balance

per bank."

166. In preparing a typical

bank reconciliation, how would

outstanding checks be

handled?

a. Added to "balance per

bank."

b. Subtracted from "balanceper bank."

c. As an item that requires a

general ledger adjustment.

d. They would be ignored.

c. $24,500 167. During 2004, ABC

Company had $750,000 of net

credit sales. Accounts

Receivable had a December31, 2004, balance of $250,000.

No amounts have been added

to the Allowance for Doubtful

Accounts during 2004. Before

adjustment on December 31,

2004, the Allowance for

Doubtful Accounts had a

credit balance of $2,000. ABC

estimates that 3% of net credit

sales will become uncollectible.

What will be the adjusted

balance in Allowance for

Doubtful Accounts at

December 31?

a. $22,500

b. $20,500

c. $24,500

d. $7,500


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d. $15,000 168. During 2004, Allied

Associates had $750,000 of net

credit sales. Accounts

Receivable had a December

31, 2004, balance of $250,000.

No amounts have been added

to the Allowance for DoubtfulAccounts during 2004. Before

adjustment on December 31,

2004, the Allowance for

Doubtful Accounts had a

credit balance of $2,000. Allied

estimates that 6% of

receivables will become

uncollectible. What will be the

adjusted balance in Allowance

for Doubtful Accounts at

December 31?

a. $43,000

b. $47,000

c. $45,000

d. $15,000

a. a loss of $5,000 169. An exchange of similar

productive assets was

completed between Company

A and Company Z. Prior to the

exchange, Company A owned

Asset A; Company Z owned

Asset Z. Companies A and Z

swapped Assets A and Z.

Company A also paid $44,000

cash to Company Z in the

exchange.

Additional information:

Asset A Asset Z

Book Value $60,000 $94,000

Market Value $55,000 $99,000

In recording the exchange,

Company A will report:

a. a loss of $5,000

b. a portion of a $5,000 loss

c. a gain of $44,000

d. a loss of $99,000


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d. $1,125,000 170. ZETO Company acquired

a new construction crane. The

crane cost $1,000,000. In

addition, Zeto paid delivery

cost of $50,000, setup and

installation of $75,000, and

truck repairs of $5,000 (itseems that during setup, a

large beam was accidentally

dropped on the hood of one of

Zeto's trucks).

ZETO should record the crane

in its accounting records at:

a. $1,000,000

b. $1,050,000

c. $1,075,000

d. $1,125,000

b. $9,000 171. On July 1, 2003, PLEE

Corporation purchased factory

equipment for $50,000.

Salvage value was estimated

at $2,000. The equipment will

be depreciated over 10 years

using the double-declining-

balance method. Counting the

year of acquisition as one-half

year, PLEE should record

2004 depreciation expense of:

a. $8,640

b. $9,000

c. $8,000

d. $10,000


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c. $40,600 172. Since 2001, TSAY Steel

has replaced all its major

manufacturing equipment and

now has the following

equipment recorded in the

appropriate accounts. TSAY

uses a calendar year as itsfiscal year.

A forge purchased Jan

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