Name: Class: Date: 1 MULTIPLE CHOICE 11-21

Transcription

1 1 MULTIPLE CHOICE I certify that I am taking this assessment alone and no help with it other than the use of my textbook and notes. I have not been given these questions in advance, and the results of this assessment fairly measure my learning in the course. (Either answer will be marked as correct). a. False b. True 2 MULTIPLE CHOICE 7-14 Which inventory costing method uses the least current historical costs to value the ending inventory? a. Last in first out b. Specific identification c. First in first out d. Average cost 3 MULTIPLE CHOICE 7-17 The inventory data for an item for November are: Nov. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $21 17 Sold 20 units 30 Purchased 10 units at $22 Using the perpetual system and FIFO, what is the cost of the 30 units in merchandise inventory on November 30? a. $610 b. $630 c. $620 d. $640 4 MULTIPLE CHOICE 7-33 The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $61 First purchase 25 units at $63 Second purchase 30 units at $64 Third purchase 15 units at $73 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method? a. $1,415 b. $1,300 c. $1,236 d. $1,305 5 MULTIPLE CHOICE 7-53 If the estimated rate of gross profit is 40%, what is the estimated cost of the merchandise inventory on June 30, using the gross profit method? June 1 Merchandise Inventory $ 75,000 June 1-30 Purchases (net) 150,000 June 1-30 Sales (net) 135,000 a. $140,000 b. $ 81,000 c. $144,000 d. $ 54,500 PAGE 1

2 6 MULTIPLE CHOICE 9-8 The two methods of accounting for uncollectible receivables are the allowance method and the a. interest method b. cost method c. equity method d. direct write-off method 7 MULTIPLE CHOICE 9-19 An estimate based on an analysis of receivables shows that $780 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Allowance for Doubtful Accounts is a. $670 b. $110 c. $780 d. $890 8 MULTIPLE CHOICE 9-41 The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles a. does not affect income in the period it is collected. 9 MULTIPLE CHOICE 9-56 b. will decrease income in the period it is collected. c. requires a correcting entry for the period in which the account was written off. d. will increase income in the period it is collected. On November 1, Blazer Company receives a 6% interest bearing note from Ram Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Blazer should record interest revenue of a. $100 b. $600 c. $200 d. $0 10 MULTIPLE CHOICE 10-8 A used machine with a purchase price of $77,000 that requires an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of a. $91,000 b. $92,000 c. $86,000 d. $87, MULTIPLE CHOICE A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 5 years or 15,000 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? a. $21,667 b. $8,000 c. $20,000 d. $12, MULTIPLE CHOICE A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method? a. $16,250 b. $32,500 c. $15,000 d. $30, MULTIPLE CHOICE The Brock Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Brock Company should record a. the new machinery at $16, MULTIPLE CHOICE 11-5 b. a loss of $1,500 c. a gain of $1,500 d. the new machinery at $12,700 On June 8, Acme Co. issued an $80,000, 6%, 120-day note payable to Still Co. Assume that the fiscal year of Acme Co. ends June 30. What is the amount of interest expense recognized by Acme in the current fiscal year? a. $ b. $ c. $ d. $1, PAGE 2

3 15 MULTIPLE CHOICE The following totals for the month of June were taken from the payroll register of ABC Company: Salaries expense $13,000 Social security and Medicare Taxes withheld 975 Income Taxes withheld 2,600 Retirement Savings 500 The entry to record the payroll would include a a. Debit to Salaries Payable for $8, MULTIPLE CHOICE b. Credit to Salaries Payable for $8,925 c. debit to Salaries Payable for $13,000 d. Credit to Salaries Expense for $8,925 A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share. What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend? a. $12,800 b. $48,800 c. $19,200 d. $32, MULTIPLE CHOICE Cash dividends are usually not paid on which of the following? a. class B common stock b. treasury stock c. class A common stock d. preferred stock 18 MULTIPLE CHOICE Bonds with a face amount $1,000,000, are sold at 103. The entry to record the issuance is a. c. b. d. 19 MULTIPLE CHOICE The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be a. debit Cash, credit Premium on Bonds Payable and Bonds Payable c. debit Cash and Discount on Bonds Payable, credit Bonds Payable b. debit Cash, credit Bonds Payable d. debit Bonds Payable, credit Cash 20 MULTIPLE CHOICE Patterson Company owns 83% of the outstanding stock of Taylor Company. Taylor Company is referred to as the a. subsidiary b. minority interest c. parent d. affiliate 21 MULTIPLE CHOICE 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. options. c. debentures d. early retirement bonds. PAGE 3

4 22 MULTIPLE CHOICE A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately: a. no changed b. $60 c. $5 d. $24 23 MULTIPLE CHOICE If $3,000,000 of 10% bonds are issued at 97, the amount of cash received from the sale is a. $3,000,000 b. $2,910,000 c. $3,300,000 d. $3,090, MULTIPLE CHOICE Based on the following information, what is Company Y's price-earnings ratio? Company X Company Y Market price per share $60.00 $75.00 Earnings per share Dividends per share Investor's cost per share a b c d MULTIPLE CHOICE Which of the following should be classified as an extraordinary item on the income statement? a. Loss resulting from an infrequent natural disaster. c. Gain on a sale of a long term investment. b. Loss due to discontinued operations. d. Restructuring charges. 26 MULTIPLE CHOICE The Raymore Company issued 10-year bonds on January 1, The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Raymore uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2007, Raymore should record interest expense (round to the nearest dollar) of a. $7,500 b. $14,065 c. $8,790 d. $7, MULTIPLE CHOICE Which of the following items appears on the corporate income statement before income from continuing operations? a. discontinued operations 28 MULTIPLE CHOICE 13-8 b. extraordinary items Which of the following is not true of a corporation? c. cumulative effect of a change in accounting principles d. restructuring charges a. It may sue and be sued. c. It may enter into binding legal contracts in its own name. b. The acts of its owners bind the corporation. d. It may buy, own, and sell property. 29 MULTIPLE CHOICE The excess of sales price of treasury stock over its cost should be credited to a. Premium on Capital Stock b. Paid-In Capital from Sale of Treasury Stock c. Income from Sale of Treasury Stock d. Treasury Stock Receivable PAGE 4

5 30 MULTIPLE CHOICE Which of the following is not classified as paid-in capital on the balance sheet? a. treasury stock b. common stock distributable c. donated capital d. common stock 31 MULTIPLE CHOICE Which of the following is the appropriate general journal entry to record the declaration of a cash dividends? a. c. b. d. 32 MULTIPLE CHOICE The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 50,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared? a. $50,000 b. $100,000 c. $45,000 d. $5, MULTIPLE CHOICE The interest rate specified in the bond indenture is called the a. contract rate b. market rate c. effective rate d. discount rate 34 MULTIPLE CHOICE Temporary investments are a. recorded at cost and reported at cost 35 MULTIPLE CHOICE 15-1 b. recorded at cost but reported at fair market value c. recorded at fair market value and reported at fair market value d. recorded at cost but reported at lower of cost or fair market value When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following below a. denominations the bonds are sold 36 MULTIPLE CHOICE b. market rate of interest c. periodic interest to be paid on the bonds d. face value of the bonds A $300,000 bond was redeemed at 98 when the carrying value of the bond was $296,000. The entry to record the redemption would include a a. loss on bond redemption of $4,000. c. gain on bond redemption of $4,000. b. gain on bond redemption of $2,000. d. loss on bond redemption of $2, MULTIPLE CHOICE 7-44 Merchandise inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? a. merchandise inventory reported on the balance sheet is overstated c. net income is understated b. net income is overstated d. cost of merchandise sold is understated PAGE 5

6 38 MULTIPLE CHOICE 7-55 Inventory turnover a. is computed by dividing average inventory by cost of merchandise sold b. increases the risk of loss from damaged merchandise 39 MULTIPLE CHOICE 9-16 c. measures the relationship between the volume of goods sold and amount of inventory carried d. is computed by dividing the beginning inventory plus the ending inventory by two The LMN Co. uses the direct write-off method of accounting for uncollectible accounts receivable. The entry to write off an account that has been determined to be uncollectible would be as follows: a. debit Sales Returns and Allowance, credit Accounts Receivable c. debit Accounts Receivable, credit Uncollectible Accounts Expense e. debit Uncollectible Accounts Expense; credit Accounts Receivable b. debit Allowance for Doubtful Accounts; credit Accounts Receivable 40 MULTIPLE CHOICE 9-23 d. debit Uncollectible Accounts Expense; credit Allowance for Doubtful Accounts After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $450,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable? a. $425,000 b. $450,000 c. $455,000 d. $25, MULTIPLE CHOICE 9-70 The number of days' sales in receivables a. is not meaningful and therefore is not used 42 MULTIPLE CHOICE b. is Net Credit Sales divided by Average Receivables c. is an estimate of the length of time the receivables have been outstanding d. measures the number of times the receivables turn over each year A fixed asset with a cost of $30,000 and accumulated depreciation of $27,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset? a. $2,500 loss b. $1,000 loss c. $1,000 gain d. $2,500 gain 43 MULTIPLE CHOICE The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called a. depletion b. deferral c. amortization d. depreciation 44 MULTIPLE CHOICE The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is a. debit Cash and Interest Payable; credit Notes Payable c. debit Cash and Interest Expense; credit Notes Payable b. debit Accounts Payable; credit Notes Payable d. debit Notes Payable; credit Cash 45 MULTIPLE CHOICE Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. FICA taxes c. SUTA taxes d. All of these choices. PAGE 6

7 46 MULTIPLE CHOICE An employee receives an hourly rate of $30, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $300; cumulative earnings for year prior to current week, $90,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid the employee? a. $1, b. $1,470 c. $1, d. $1, MULTIPLE CHOICE A pension plan which requires the employer to make annual pension contributions, with no promise to employees regarding future pension payments, is termed a. funded b. defined benefit c. unfunded d. defined contribution 48 MULTIPLE CHOICE The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2006: Determine the quick ratio for the end of the year (rounded to one decimal point). a. 5.8 b. 3.2 c. 2.4 d MULTIPLE CHOICE When common stock is issued in exchange for a noncash asset, the transaction should be recorded at a. the fair market value of the asset acquired or the fair market value of the stock, whichever can be determined more objectively. 50 MULTIPLE CHOICE b. the par value of the stock issued c. the fair market value of the stock d. the fair market value of the asset acquired If Larger Company issues 1,000 shares of $5 par value common stock for $70,000, the account a. Common Stock will be credited for $70,000. c. Paid-in Capital in excess of Par Value will be credited for $65,000. b. Cash will be debited for $65,000. d. Paid-in Capital in excess of Par Value will be credited for $5, MULTIPLE CHOICE If common stock is issued for an amount greater than par value, the excess should be credited to a. Legal Capital. b. Cash. c. Retained Earnings. d. Paid-in Capital in Excess of Par Value. PAGE 7

8 ANSWER KEY Copy of Master Exam Bank - Financial Accounting 1. a,b 2. a 3. d 4. b 5. c 6. d 7. d 8. a 9. c 10. b 11. c 12. a 13. b 14. b 15. b 16. c 17. b 18. b 19. a 20. a 21. a 22. d 23. b 24. a 25. a 26. d 27. d 28. b 29. b 30. a 31. d 32. c 33. a 34. b 35. a 36. b 37. c 38. c 39. e 40. a 41. c 42. c 43. a 44. c 45. b 46. a 47. d 48. d 49. a 50. c 51. d ANSWER KEY - Page 1