Friday, August 2, 2013

1. A patent has amortization this year of $2,300. The journal entry would be

A. debit Accumulated Amortization— Patent, $2,300; credit Amortization Expense— Patent, $2,300.

B. debit Accumulated Amortization— Patent, $2,300; credit Patent, $2,300.

C. debit Amortization Expense— Patent, $2,300; credit Accumulated Depreciation— Patent, $2,300.

D. debit Amortization Expense—Patent, $2,300; credit Patent, $2,300.



2. Which of the following would not be considered a contingent liability?

A. Potential fines from the EPA

B. Cosigning a loan

C. Pending legal action

D. Mortgage payable



3. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded

to the nearest cent)

A. $20.13

B. $1,520.13

C. $1, 584, 88

D. $1,605.00



4. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount

of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts

is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much

will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables

as its method of estimating uncollectable accounts?

A. $5,067

B. $4,250

C. $5,525

D. $7,159



5. Which of the following would indicate poor internal control over accounts receivable?

A. The mailroom employees open the mail and give the cash receipts to another employee.

B. The same person handling cash receipts also records the accounts receivable transactions.

C. The person who handles accounts receivable wouldn't write off accounts as uncollectable.

D. The person handling cash receipts passes the receipts to someone who enters them into accounts receivable.



6. By not accruing warranty expense,

A. reported liabilities will be overstated, and net income will be understated.

B. reported expenses will be understated, and net income will be understated.

C. reported expenses will be overstated, and reported liabilities will be understated.

D. reported liabilities will be understated, and net income will be overstated.



7. Cash equivalents are

A. not liquid and carry high risk.

B. very liquid and carry little risk.

C. not liquid and carry little risk.

D. very liquid and carry high risk.



8. Which of the following would not be a liability according to FASB's definition of a liability?

A. A note payable with no specified maturity date

B. The signing of a three-year employment contract at a fixed annual salary

C. An obligation to provide goods or services in the future

D. An obligation that's estimated in amount



9. Which of the following is not a benefit to extending credit to customers?

A. Increased revenues

B. Bad-debt expenses

C. Wider range of customers

D. Increased profits



10. A warranty is an example of a/an _______ liability.

A. settled

B. estimated

C. known

D. contingent



11. Taylor Company has given you the following information from its aging of accounts receivable. The

current amount in the allowance for doubtful accounts is a $958 credit.

Using this information, what is the amount of the journal entry to record the allowance for doubtful accounts?

Current $24,400 2% uncollectible

31–60 days 7,350 8% uncollectible

61–90 days 3,380 15% uncollectible

91 and up 1,220 30% uncollectible

Using this information, what is the amount of the journal entry to record the allowance for doubtful

accounts?

Current $24,400 2% uncollectible

31–60 days 7,350 8% uncollectible

61–90 days 3,380 15% uncollectible

91 and up 1,220 30% uncollectible

A. $541

B. $991

C. $2,457

D. $1,949



12. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value

of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the

depreciation for 2012 to the nearest dollar will be

A. $9,333.

B. $5,200.

C. $10,400.

D. $4,667.



13. If a $6,000, 10%, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue

on December 31 if interest payments are made annually?

A. None

B. $104

C. $500

D. $150



14. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank

service charge of $50 and a bank collection of $760 in Casey Company's behalf. Casey's book balance

should be adjusted by a total of

A. +$760.

B. +$810.

C. +$710.

D. –$710.



15. Rick Company has cash of $143,000; net accounts receivable of $89,000; short-term investments of

$35,000; and prepaid expenses of $40,000. It also has $50,000 in current liabilities and $80,000 in longterm

liabilities. The quick ratio for Rick Company is

A. 3.34.

B. 6.14.

C. 5.34.

D. 4.64.



16. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B

was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000.





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