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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.
Quizlet
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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
method, the amount allocated
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
method, the amount allocated
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.
c. debit to Bad Debts Expense
for $2,800.
d. credit to Allowance for
Doubtful Accounts for $4,000.
c. debit to Bad Debts Expense
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
Doubtful Accounts for $5,200.
c. debit to Bad Debts Expense
for $5,200.d. credit to Allowance for
Doubtful Accounts for $4,000.
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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
Allowance for Doubtful
Accounts has a credit balance
of $2,000 before adjustment?
a. Bad Debts Expense 10,000
Allowance for Doubtful
Accounts 10,000b. Bad Debts Expense 8,000
Allowance for Doubtful
Accounts 8,000
c. Bad Debts Expense 8,000
Accounts Receivable 8,000
d. Bad Debts Expense 10,000
Accounts Receivable 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
Allowance for Doubtful
Accounts has a credit balance
of $2,000 before adjustment?
a. Bad Debts Expense 10,000
Allowance for Doubtful
Accounts 10,000
b. Bad Debts Expense 8,000
Allowance for Doubtful
Accounts 8,000c. Bad Debts Expense 6,000
Allowance for Doubtful
Accounts 6,000
d. Bad Debts Expense 12,000
Accounts Receivable 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,
Allowance for Doubtful
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
Allowance for Doubtful
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
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.
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
During 2007 sales on account
were $290,000 and collections
on account were $172,000.
Also during 2007 the company
wrote off $16,000 in
uncollectible accounts. An
analysis of outstanding
receivable accounts at year
end indicated that bad debts
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
During 2007 sales on account
were $290,000 and collections
on account were $172,000.
Also during 2007 the company
wrote off $16,000 in
uncollectible accounts. An
analysis of outstanding
receivable accounts at year
end indicated that bad debts
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
Accounts ReceivableDay
Company 3,000
Interest Revenue 45
c. Notes Receivable 3,000
Interest Receivable 45
Accounts ReceivableDay
Company 3,000
Interest Revenue 45d. Notes Receivable 3,000
Accounts ReceivableDay
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
Interest Revenue 100
c. Cash 100
Interest Revenue 100
d. Interest Receivable 300
Interest Revenue 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
value at the end of its 10-year
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
expense each period.
b. increasing depreciation
expense each period.
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.
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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
for questions 72-74.
Brinkman Corporation bought
equipment on January 1, 2007
.The equipment cost $90,000
and had an expected salvage
value of $15,000. The life of
the equipment was estimated
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
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c. $65,000 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.
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
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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
value at the end of its 5-year
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.
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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.
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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
for questions 96-98.
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
Notes Payable 200,000
b. Cash 200,000
Notes Payable 200,000
c. Cash 200,000
Interest Expense 9,000
Notes Payable 209,000
d. Cash 200,000
Interest Expense 9,000
Notes Payable 200,000
Interest Payable 9,000
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a. Interest Expense 6,000
Interest Payable 6,000
Use the following information
for questions 96-98.
Moss County Bank agrees to
lend the Allenson Brick
Company $200,000 on January
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?
a. Interest Expense 6,000
Interest Payable 6,000
b. Interest Expense 6,000
Cash 6,000
c. Interest Payable 6,000
Cash 6,000
d. Interest Payable 6,000
Interest Expense 6,000
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b. Notes Payable 200,000
Interest Payable 9,000
Cash 209,000
Use the following information
for questions 96-98.
Moss County Bank agrees to
lend the Allenson Brick
Company $200,000 on January
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
b. Notes Payable 200,000
Interest Payable 9,000
Cash 209,000
c. Interest Expense 9,000
Notes Payable 200,000
Cash 209,000
d. Interest Payable 6,000
Notes Payable 200,000
Interest Expense 3,000
Cash 209,000
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b. Cash 100,000
Notes Payable 100,000
Use the following information
for questions 99-101.
West County Bank agrees to
lend the Block Builders
Company $100,000 on January
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
a. Interest Expense 3,000
Cash. 97,000
Notes Payable 100,000
b. Cash 100,000
Notes Payable 100,000
c. Cash 100,000
Interest Expense 3,000
Notes Payable 103,000
d. Cash 100,000
Interest Expense 3,000
Notes Payable 100,000
Interest Payable 3,000
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c. Interest Expense 1,500
Interest Payable 1,500
Use the following information
for questions 99-101.
West County Bank agrees to
lend the Block Builders
Company $100,000 on January
1. Block Builders Companysigns a $100,000, 6%, 6-month
note.
100. What is the adjusting
entry required if Block
Builders Company prepares
financial statements on March
30?
a. Interest Expense 3,000
Interest Payable 3,000
b. Interest Expense 3,000
Cash 3,000
c. Interest Expense 1,500
Interest Payable 1,500
d. Interest Payable 1,500
Interest Expense 1,500
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b. Notes Payable 100,000
Interest Payable 3,000
Cash 103,000
Use the following information
for questions 99-101.
West County Bank agrees to
lend the Block Builders
Company $100,000 on January
1. Block Builders Companysigns a $100,000, 6%, 6-month
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
b. Notes Payable 100,000
Interest Payable 3,000
Cash 103,000
c. Interest Expense 3,000
Notes Payable 100,000
Cash 103,000
d. Interest Payable 1,500
Notes Payable 100,000
Interest Expense 1,500
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
Unearned Subscription
Revenue 600,000
c. Subscriptions Receivable
100,000
Unearned Subscription
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.
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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.
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b. $16,000 Use the following information
for questions 115-118.
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
c. $14,850 Use the following information
for questions 115-118.
Porter Company received
proceeds of $211,500 on 10-
year, 8% bonds issued on
January 1, 2006. The bonds
had a face value of $200,000,
pay interest annually on
December 31st. Porter uses
the straight-line method of
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
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b. $209,200 Use the following information
for questions 115-118.
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.
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
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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.
b. subtracting the amount of
premium amortized for that
period from the amount
of cash paid for interest during
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
period to the amount of
cash paid for interest during
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
discount amortized for that
period to the amount of
cash paid for interest during
the period.
b. subtracting the amount of
discount amortized for that
period from the amount
of cash paid for interest during
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.
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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.
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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.
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b. A stockholder may dispose
of part or all of his shares.
127. Which of the following
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.
c. Paid-in Capital in Excess of
Par Value will be credited for
$130,000.
d. Cash will be debited for
$130,000.
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a. Common Stock will be
credited for $5,000.
134. If Kiner Company issues
1,000 shares of $5 par value
common stock for $70,000, the
account
a. Common Stock will be
credited for $5,000.
b. Paid-in Capital in Excess ofPar Value will be credited for
$5,000.
c. Paid-in Capital in Excess of
Par Value will be credited for
$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.
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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
and total stockholders' equity.
c. has no effect on total assets
and total stockholders' equity.
d. requires that a gain or loss
be recognized on the income
statement.
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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
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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
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a. The dividend can be
rescinded once it has been
declared.
147. Which of the following
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.
149. Which of the following
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.
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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
Paid-in capital in excess of par
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
for questions 151-153.
Starr Corporation's December
31, 2007 Balance Sheet
showed the following:
8% preferred stock, $20 parvalue, 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
Paid-in capital in excess of par
value - common stock
18,000,000
Retained earnings 5,100,000
Treasury stock (10,000 shares)
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
for questions 151-153.
Starr Corporation's December
31, 2007 Balance Sheet
showed the following:
8% preferred stock, $20 parvalue, 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
Paid-in capital in excess of par
value - common stock
18,000,000
Retained earnings 5,100,000
Treasury stock (10,000 shares)
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
for questions 160-162.
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
for questions 160-162.
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.
161. What is the net cash
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
for questions 160-162.
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.
162. What is the net cash
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