Accounting 221 Chapter 8-9

26 October 2022
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question
With good internal controls, the person who handles cash can also: a.) account for cash payments. b.) account for cash receipts from customers. c.) issue credits to customers for sales returns. d.) none of the above.
answer
d.) none of the above
question
When recording credit card or debit card sales using the net method, a.) cash received equals sales. b.) cash received equals sales minus the fee assessed by the card processing company. c.) cash received equals sales plus the fee assessed by the card processing company. d.) cash isn't received by the seller until the customer pays his or her credit card statement.
answer
b.) cash received equals sales minus the fee assessed by the card processing company.
question
Which of the following is a limitation of the direct write-off method of accounting for uncollectibles? a.) The direct write-off method overstates assets on the balance sheet. b.) The direct write-off method does not match expenses against revenue very well. c.) The direct write-off method does not set up an allowance for uncollectibles. d.) All of the above
answer
d.) All of the above.
question
The entry to record a write-off of an uncollectible account when using the direct write-off method involves a a.) debit to Allowance for Bad Debts b.) credit to Cash c.) debit to Accounts Receivable. d.) debit to Bad Debts Expense.
answer
d.) debit to Bad Debts Expense.
question
Brickman Corporation uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Bad Debts had a credit balance of $1,000. During the year Brickman wrote off uncollectible recievables of $2,100. Brickman recorded Bad Debts Expense of $2,700. What is Brickman's year-end balance in Allowance for Bad Debts? a.) $1,600 b.)$4,800 c.)$3,700 d.)$600
answer
a.) $1,600
question
Brickman's ending balance of Accounts Receivables is $19,500. Use the data in the preceding question to compute the net realizable value of Accounts Receivable at year-end. a.) $16,800 b.) $19,500 c.) $17,400 d.) $17,900
answer
d.) $17,900
question
At December 31 year-end, Crain Corporation has an $8,400 note receivable from a customer. Interest of 10% has accrued for 10 months on the note. What will Crain's financial statements report for this situation? a.) The balance sheet will report the note receivable of $8,400. b.) The balance sheet will report the note receivable of $8,400 and interest receivable of $700. c.) Nothing because the business has not received the cash yet. d.) The income statement will report a note receivable of $8,400.
answer
b.) The balance sheet will report the note receivable of $8,400 and interest receivable of $700.
question
Using the data in the preceding question, what will the income statement for the year ended December 31 report for this situation? a.) Nothing because the business has not received the cash yet. b.) Note receivable of $8,400. c.) Interest revenue of $700. d.) Both b and c.
answer
c.) Interest revenue of $700.
question
At year-end, Schulz, Inc. has cash of $11,600, current accounts receivalbe of $48,900, merchandise inventory of $37,900, and prepaid expenses totaling $5,100. Liabilities of $55,900 must be paid next year. What is Schultz's acid-test ratio? a.) 1.08 b.) 0.21 c.) 1.76 d.) Cannot be determined from the data given
answer
a.) 1.08
question
Using the data in the preceding question, assume accounts receivable had a beginning balance of $67,400 and net credit sales for the current year totaled $807,800. How many days did it take Schultz to collect its average level of receivables? a.) 49 b.) 35 c.) 29 d.) 26
answer
d.) 26
question
Which cost is not recorded as part of the cost of a building? a.) Real estate commission paid to buy the building. b.) Construction materials and labor. c.) Concrete for the building's foundation. d.) Annual building maintenance.
answer
d.) Annual building maintenance.
question
How should you record a capital expenditure? a.) Debit a liability. b.) Debit capital. c.) Debit an expense. d.) Debit an asset.
answer
d.) Debit an asset.
question
Which method almost always produces the most depreciation in the first year? a.) Units-of-production. b.) Straight-line c.) Double-declining-balance. d.) All produce the same depreciation in the first year.
answer
c.) Double-declining-balance.
question
A Celty Airline jet costs 28,000,000 and is expected to fly 200,000,000 miles during its 10-year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 1,000,000 miles the first year, how much depreciation should Celty Airline record under the units-of-production method? a.) $2,800,000 b.) $140,000 c.) $560,000 d.) Cannot be determined from the data given
answer
b.) $140,000
question
A copy machine costs $45,000 when new and has accumulated depreciation of $44,000. Suppose Print and Photo Center junks this machine and receives nothing. What is the result of the disposal transaction? a.) No gain or loss b.) Gain of $1,000 c.) Loss of $1,000 d.) No gain or loss
answer
c.) Loss of $1,000
question
Suppose Print and Photo Center in the preceding question sold the machine for $1,000. What is the result of this disposal transaction? a.)Loss of $44,000 b.) Gain of $1,000 c.) Loss of $1,000 d.) No gain or loss
answer
d.) No gain or loss
question
Which method is used to compute depletion? a.) Double-declining-balance method. b.) Straight-line method c.) Depletion method. d.) Units-of-production method.
answer
d.) Units-of-production method.
question
Which intangible asset is recorded only as part of the acquisition of another company? a.) Patent b.) Goodwill c.) Copyright d.) Franchise
answer
b.) Goodwill
question
Liberty Corporation reported beginning and ending total assets of $25,000 and $22,000, respectively. Its net sales for the year were $18,800. What was Liberty's asset turnover ratio? a.) 0.75 b.) 0.85 c.) 0.80 d.) 1.25
answer
c.) 0.80
question
A truck costs $50,000 when new and has acccumulated depreciation of $35,000. Suppose Wilson Towing exchanges the truck for a new truck. The new truck has a market value of $60,000, and Wilson pays cash of $40,000. Assume the exchange has commercial substance. What is the result of this exchange? a.) No gain or loss b.) Gain of 5,000 c.) Loss of 5,000 d.) Gain of $45,000
answer
b.) Gain of 5,000
question
Which of the following‚Äč statements, regarding notes‚Äč receivable, is‚Äč incorrect? A.) All notes receivable are considered long‚ąíterm assets. B.) Notes receivable are sometimes called promissory notes. C.) A notes receivable is a written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future. D.) Notes receivable usually have longer terms than accounts receivable.
answer
A.) All notes receivable are considered long‚ąíterm assets.
question
Which of the following is a weak internal control over cash collections from‚Äč receivables? A.) In order to avoid losing‚Äč sales, all‚Äč customers' credit applications should be approved. B.) A company should have written approval standards for processing‚Äč customers' credit applications. C.) The credit department should have no access to cash. D.) A credit department should evaluate‚Äč customers' credit applications to determine whether they meet the‚Äč company's approval standards.
answer
A.) In order to avoid losing‚Äč sales, all‚Äč customers' credit applications should be approved.
question
Markus Company maintains a separate accounts receivable account for each customer. On June‚Äč 18, Markus sells‚Äč $6,400 services on account to customer Anthony and‚Äč $1,000 services on account to customer Walker. How will these two transactions affect the control and subsidiary‚Äč accounts? A.) After posting this sales‚Äč transaction, the sum of the balances in subsidiary accounts receivable will not equal the control account balance. B.) The control account will have a debit balance and the subsidiary accounts will have a credit balance. This keeps the accounting equation in balance. C.) The individual customer accounts in the subsidiary ledger will be increased with credits. D.) The control‚Äč account, Accounts‚Äč Receivable, will be increased with a debit of‚Äč $7,400.
answer
D.) The control‚Äč account, Accounts‚Äč Receivable, will be increased with a debit of‚Äč $7,400.
question
When a company uses the allowance method to measure bad‚Äč debts, A.) the Allowance for Bad Debts account balance is added to the balance of the Accounts Receivable account to arrive at the net realizable value B.) the amount of bad debts expense is estimated at the end of the accounting period C.) the Bad Debts Expense account is debited when an account is written off D.) the Allowance for Bad Debts account is debited when the bad debts expense is estimated
answer
the amount of bad debts expense is estimated at the end of the accounting period
question
Accounts Receivable has a balance of $31,000‚Äč, and the Allowance for Bad Debts has a credit balance of $3,000. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a $2,000 account receivable is written‚Äč off? A.) $26,000‚Äč; $30,000 B.) $28,000‚Äč; $28,000 C.) $28,000‚Äč; $26,000 D.)$26,000‚Äč; $26,000
answer
B.) $28,000‚Äč; $28,000
question
Accounts Receivable has a balance of $6,000‚Äč, and the Allowance for Bad Debts has a credit balance of $410. The allowance method is used. What is the net realizable value of Accounts Receivable after a $170 account receivable is written‚Äč off? A.)$5,760 B.) $5,420 C.) $6,000 D.) $5,590
answer
D.) $5,590
question
The Allowance for Bad Debts has a credit balance of‚Äč $8,000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging‚ąíof‚ąí receivables‚Äč method, the‚Äč company's management estimates that uncollectible accounts will be‚Äč $17,000. What will be the amount of Bad Debts Expense reported on the income‚Äč statement? A.) $8,000 B.) ‚Äč$9,000 C.) ‚Äč$17,000 D.) ‚Äč$25,000
answer
B.) ‚Äč$9,000
question
On October‚Äč 1, 2017, Ealys Jewelers accepted a 4minus‚ąí‚Äčmonth, ‚Äč11% note for‚Äč $6,000 in settlement of an overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest on the note at December‚Äč 31, 2017.‚Äč (Round any intermediate calculations to two decimal‚Äč places, and your final answer to the nearest‚Äč dollar.) A.) ‚Äč$220 B.) ‚Äč$330 C.) ‚Äč$660 D.) ‚Äč$165
answer
D.) ‚Äč$165
question
Roberts Construction Group paid$5,000 for a plant asset that had a market value of $16,500. At which of the following amounts should the plant asset be‚Äč recorded? A.) $2,500 B.) $5,000 C.) $16,500 D.) $10,000
answer
B.) $5,000
question
Which of the following is included in the cost of‚Äč land? A.) cost of outdoor lighting B.) brokerage commission C.) cost of fencing D.) cost of paving
answer
B.) brokerage commission
question
Danube Corp. purchased a used machine for $15,000. The machine required installation costs of $7,000 and insurance while in transit of $1,300. At which of the following amounts would the machine be‚Äč recorded? A.) $16,300 B.) $22,000 C.) $23,300 D.) $15,000
answer
C.) $23,300
question
On January‚Äč 1, 2016,‚Äč Martini, Inc. acquired a machine for‚Äč $1,050,000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be‚Äč $100,000. What is the book value of the machine at the end of 2017 if the company uses the straight‚ąíline method of‚Äč depreciation? A.) ‚Äč$629,996 B.) ‚Äč$630,000 C.) ‚Äč$670,000 D.) ‚Äč$570,000
answer
C.) ‚Äč$670,000
question
The cost of an asset is ]180,000‚Äč, and its residual value is 220,000. Estimated useful life of the asset is four years. Calculate depreciation for the first year using the double‚ąídeclining‚ąíbalance method of depreciation.‚Äč (Do not round any intermediate‚Äč calculations, and round your final answer to the nearest‚Äč dollar.) . A.) $480,000 B.) $590,000 C.) $240,000 D.) $295,000
answer
B.) $590,000
question
Radar, Inc. purchased a van on January‚Äč 1, 2016, for $900,000. Estimated life of the van was five‚Äč years, and its estimated residual value was $92,000. Radar uses the straight‚ąíline method of depreciation. At the beginning of‚Äč 2018, the corporation revised the total estimated life of the asset from five years to six years. The estimated residual value remained the same as estimated earlier. Calculate the depreciation expense for 2018. A.) $144,200 B.) $161,600 C.) $80,800 D.) $121,200
answer
D.) $121,200
question
An asset was purchased for $27,000 on January‚Äč 1, 2016. The‚Äč asset's estimated useful life was five‚Äč years, and its residual value was $5,000. The straight‚ąíline method of depreciation was used. Calculate the gain or loss if the asset is sold for $22,000 on December‚Äč 31, 2016, the last day of the accounting period. A.) 600 loss B.) $300 gain C.) 600 gain D.) no gain or no loss
answer
A.) 600 loss
question
A coal mine cost $1,000,000 and is estimated to hold 60,000 tons of coal. There is no residual value. During the first year of‚Äč operations, 8,000 tons are extracted and sold. Calculate depletion per unit.‚Äč (Round your answer to the nearest‚Äč cent.) A.) $4.17 B.) 16.67 C.) $12.50 D.) $8.34
answer
B.) 16.67
question
On October‚Äč 1, 2017,‚Äč Nurix, Inc. purchased a patent for $212,000 cash. Although the patent gives legal protection for 20‚Äč years, the patent is expected to be used for only 10 years. What will be the balance in the patent account on September‚Äč 30, 2018? A.) $212,000 B.) $106,000 C.) $190,800 D.) $201,400
answer
C.) $190,800