AC/113 AC113 AC 113 UNIT 8 EXAM

1.

Question :

When an account is written off under the allowance method,

Student Answer:

 the write-off is taken against the allowance account.

 bad debt expense is increased.

 accounts receivable remains unchanged.

 accounts receivable increases.

Question 2.

Question :

To measure depreciation, all of the following must be known EXCEPT:

Student Answer:

 Market value

 Residual value

 Historical cost

 Estimated life

Question 3.

Question :

Merchandise inventory is reported on the balance sheet in the section entitled _______.

Student Answer:

 current assets

 fixed assets

 current liabilities

 stockholders' equity

Question 4.

Question :

The inventory data for an item for November are:
Nov. 1          Inventory            25 units at $20 
10               Purchased          30 units at $21 
30               Purchased          10 units at $22 
                   Sold                   35 units 

Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

Student Answer:

 $640

 $605

 $623

 $660

Question 5.

Question :

A capital expenditure would appear on the _______.

Student Answer:

 income statement under operating expenses

 balance sheet under fixed assets

 balance sheet under current assets

 income statement under other expenses

Question 6.

Question :

The process of a company selling its accounts receivable to another company is referred to as _______.

Student Answer:

 discounting

 adjusting

 assignment

 factoring

Question 7.

Question :

Which of the following expenditures would NOT be included in the cost of an asset?

Student Answer:

 Freight costs

 Vandalism

 Sales tax

 Surveying fees

Question 8.

Question :

A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

Student Answer:

 $2,500 loss

 $1,500 loss

 $2,500 gain

 $1,500 gain

Question 9.

Question :

A note receivable due in 90 days is listed on the balance sheet under _______.

Student Answer:

 long-term liabilities

 fixed assets

 current liabilities

 current assets

Question 10.

Question :

A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Under the straight-line method, what is annual depreciation expense?

Student Answer:

 $13,200

 $12,000

 $11,000

 $10,800

Question 11.

Question :

The inventory data for an item for November are:

Nov. 1          Inventory            25 units at $20 
10               Purchased          30 units at $21 
30               Purchased          10 units at $22 
                   Sold                   35 units

Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

Student Answer:

 $640

 $623

 $600

 $605

Question 12.

Question :

Fixed assets are ordinarily presented in the balance sheet _______.

Student Answer:

 at current market values

 at replacement costs

 at cost less accumulated depreciation

 in a separate section along with intangible assets

Question 13.

Question :

A note receivable due in five years is listed on the balance sheet under the caption _______.

Student Answer:

 investments

 current assets

 fixed assets

 stockholders' equity

Question 14.

Question :

The two methods of accounting for uncollectible receivables are the allowance method and the _______.

Student Answer:

 equity method

 direct write-off method

 interest method

 cost method

Question 15.

Question :

Other descriptive titles for fixed assets would include _______.

Student Answer:

 plant assets

 property, plant, and equipment

 other long-term assets

 both plant assets and property, plant, and equipment

Question 16.

Question :

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called _______.

Student Answer:

 depletion

 deferral

 amortization

 depreciation

Question 17.

Question :

A written promise to pay a sum of money on demand or at a definite time is called a (n) _______.

Student Answer:

 default

 deferral

 accrual

 promissory note

Question 18.

Question :

A machine with a useful life of 10 years and a residual value of $4,000 was purchased for $30,000. What is annual depreciation under the straight-line method?

Student Answer:

 $3,000

 $3,400

 $2,600

 $5,200

Question 19.

Question :

A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building from which salvaged materials sold for $1,950. What is the cost basis for the land?

Student Answer:

 $93,500

 $91,550

 $85,700

 $89,600

Question 20.

Question :

Depreciable cost equals _______.

Student Answer:

 cost less accumulated depreciation

 book value less residual value

 cost less residual value

 market value less residual value