125(2) Q1. After the accounts are adjusted and closed at the end of the fiscal y
ID: 2490896 • Letter: 1
Question
125(2)
Q1. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000. What is the net realizable value of the accounts receivable?
a. $30,000
b. $460,000
c. $430,000
d. $400,000
Q2. Under the direct write-off method, an attempt is made to match Bad Debt Expense to sales revenues in the same accounting period.
a. true
b. false
Q3. The estimate based on the sales method violates the matching principle.
a. true
b. false
Q4. The two most widely used methods for determining the cost of inventory are
a. FIFO and LIFO.
b. FIFO and average cost.
c. LIFO and average cost.
d. gross profit and average cost.
Q5. Cost is a method of inventory valuation.
a. true
b. false
Q6. A 90-day, 8% note for $10,000 dated May 1 is received from a customer on account. The maturity value of the note is
a. $10,000.
b. $10,800.
c. $10,200.
d. $9,800.
Q7. If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?
a. Average cost
b. LIFO
c. FIFO
d. All methods will generate the same gross profit.
Q8. During deflationary periods, the use of the LIFO method of costing inventory will result in a greater amount of net income than would result from the use of the FIFO method.
a. true
b. false
Q9. A 60-day, 10% note for $6,000 dated April 15 is received from a customer on account. The face value of the note is
a. $6,100.
b. $5,400.
c. $5,900.
d. $6,000.
Q10. Use the following data to calculate the cost of ending inventory under average cost method.
a. $825
b. $600
c. $675
d. $750
Q11. Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $300,000, the amount of the adjustment to record the provision for doubtful accounts is
a. $400.
b. $3,400.
c. $3,000.
d. $2,600.
Q12. A 60-day, 12% note for $15,000 dated May 1 is received from a customer on account. The maturity value of the note is
a. $15,300.
b. $15,000.
c. $14,700.
d. $16,800.
Q13. A written promise to pay a sum of money on demand or at a definite time is called a(n)
a. default.
b. deferral.
c. accrual.
d. promissory note.
Q14. Inventories of merchandising and manufacturing businesses are reported as current assets on the balance sheet.
a. true
b. false
Q15. If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is
a. average cost.
b. LIFO.
c. FIFO.
d. All methods will generate the same net income.
Q16. The inventory method that assigns the most recent costs to cost of good sold is
a. FIFO.
b. LIFO.
c. average cost.
d. specific identification.
Q17. Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.
a. true
b. false
Q18. Calculate the cost of ending inventory using FIFO inventory cost method.
a. $800
b. $760
c. $580
d. $500
Q19. In valuing damaged merchandise for inventory purposes, net realizable value is the estimated selling price less any direct cost of disposition.
a. true
b. false
Q20. In reference to a promissory note, the person who is to receive payment is called the
a. maker.
b. payee.
c. seller.
d. payor.
Q21. The use of the lower of cost or market method of inventory valuation increases the gross profit for the period in which the inventory replacement price declined.
a. true
b. false
Q22. The FIFO method of costing inventory is based on the assumption that costs should be charged against revenues in the reverse order in which they were incurred.
a. true
b. false
Q23. What type of account is Allowance for Doubtful Accounts?
a. Contra asset
b. Asset
c. Revenue
d. Expense
Q24. Under which method of cost flows is the inventory assumed to be composed of the most recent costs?
a. Average cost
b. Last-in, first-out
c. First-in, last-out
d. First-in, first-out
Q25. During inflationary periods, the use of the LIFO method of costing inventory will result in a lesser amount of net income than would result from the use of the average method.
a. true
b. false
Q26. 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?
a. $3,000
b. $3,400
c. $2,600
d. $5,200
Q27. Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets.
a. true
b. false
Q28. An intangible asset is one that has a physical existence.
a. true
b. false
Q29. If a company sells a fixed asset where the book value is less than the cash received, a gain must be recognized.
a. true
b. false
Q30. Depletion is the process of transferring the cost of intangible assets to an expense account.
a. true
b. false
Q31. Other descriptive titles for fixed assets would include
a. plant assets.
b. property, plant, and equipment.
c. other long-term assets
d. both plant assets and property, plant, and equipment.
Q32. A current asset account must be increased for revenue expenditures since they only benefit the current period.
a. true
b. false
Q33. The Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.
a. true
b. false
Q34. The acquisition costs of property, plant, and equipment should include all normal, reasonable, and necessary costs to get the asset in place and ready for use.
a. true
b. false
Q35. Recording depreciation
a. decreases net income and cash flows.
b. decreases net income and has no effect on cash flows.
c. decreases net income, assets, and cash flows.
d. decreases net income and has no effect on assets and cash flows.
Q36. A fully depreciated asset must be
a. removed from the books.
b. kept on the books until sold or discarded.
c. disclosed only in the notes to the financial statements.
d. recognized on the income statement as a loss.
Q37. 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?
a. $2,500 loss
b. $1,500 loss
c. $2,500 gain
d. $1,500 gain
Q38. Intangible assets are used in operations but
a. cannot be specifically identified.
b. cannot be sold.
c. lack physical substance.
d. cannot be long-lived.
Q39. The double-declining-balance method of depreciation is referred to as an accelerated method.
a. true
b. false
Q40. Fixed assets may be shown at book value on the balance sheet.
a. true
b. false
Q41. Which of the following is an example of a capital expenditure?
a. Cleaning the carpet in the front room
b. Tune-up for a company truck
c. Replacing an engine in a company car
d. Replacing all burned-out light bulbs in the factory
Q42. Goodwill is
a. amortized similar to other intangibles.
b. only written down if an impairment in value occurs.
c. charged to expense immediately.
d. amortized over 40 years or its economic life, whichever is shorter.
Q43. If a fixed asset is sold and the book value is less than cash received, the company must
a. recognize a loss on the income statement under other expenses.
b. recognize a loss on the income statement under operating expenses.
c. recognize a gain on the income statement under other revenues.
d. Gains and losses are not to be recognized upon the sell of fixed assets.
Q44. The removal of an old building to make the land ready for its intended use is charged to
a. land.
b. land improvements.
c. buildings.
d. operating expenses.
Q45. 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?
a. $93,500
b. $91,550
c. $85,700
d. $89,600
Q46. Fixed assets are ordinarily presented in the balance sheet
a. at current market values.
b. at replacement costs.
c. at cost less accumulated depreciation.
d. in a separate section along with intangible assets.
Q47. When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are greater than the book value of the asset.
a. true
b. false
Q48. If an asset is discarded, a loss is recognized equal to the salvage value.
a. true
b. false
Q49. A company sold office furniture costing $16,500 with accumulated depreciation of $14,000 for $1,800 cash. The entry to record the sale would include
a. a loss for $700.
b. an increase in accumulated depreciation for $14,000.
c. a decrease in office furniture for $2,500.
d. a decrease in cash for $1,800.
Q50. If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must
a. recognize a loss on the income statement under other expenses.
b. recognize a loss on the income statement under operating expenses.
c. recognize a gain on the income statement under other revenues.
d. Gains and losses are not to be recognized upon the sell of fixed assets.
Q51. In order to record a contingent liability, the liability must be probable and reasonably estimated.
a. true
b. false
Q52. FICA tax is a payroll tax that is paid only by employers.
a. true
b. false
Q53. A current liability is a debt that can reasonably be expected to be paid
a. between 6 months and 18 months.
b. out of currently recognized revenues.
c. within one year.
d. out of cash currently on hand.
Q54. Earnings per common share is one factor that influences the decision to use debt financing or equity financing.
a. true
b. false
Q55. When the market rate of interest on bonds is equal to the contract rate, the bonds will sell at
a. a premium.
b. their face value.
c. a discount.
d. a discount or a premium.
Q56. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
a. 10,000
b. 70,000
c. 50,000
d. 60,000
Q57. FICA tax becomes a liability to the federal government at the time the employees are paid.
a. true
b. false
Q58. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
a. 5,000
b. 35,000
c. 45,000
d. 55,000
Q59. A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately
a. $30.
b. $36.
c. $45.
d. $50.
Q60. If bonds are issued at a premium, the stated interest rate is
a. higher than the market rate of interest.
b. lower than the market rate of interest.
c. too low to attract investors.
d. adjusted to a higher rate of interest.
Q61. 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.
Q62. For accounting purposes, stated value is treated the same way as par value.
a. true
b. false
Q63. A corporation has 10,000 shares of $25 par value stock outstanding that has a current market value of $100. If the corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately $20.
a. true
b. false
Q64. If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount
a. less than face value.
b. equal to the face value.
c. greater than face value.
d. that cannot be determined.
Q65. One of the prerequisites usually required to pay a cash dividend is sufficient retained earnings.
a. true
b. false
Q66. The main source of paid-in-capital is from issuing stock.
a. true
b. false
Q67. If $1,000,000 of 8% bonds are issued at 102, the amount of cash received from the sale is
a. $1,060,000.
b. $1,020,000.
c. $1,000,000.
d. $1,030,000.
Q68. The par value per share of common stock represents
a. the minimum selling price of the stock established by the articles of incorporation.
b. the minimum amount the stockholder will receive when the corporation is liquidated.
c. the monetary amount assigned to each share of stock in the articles of incorporation.
d. the amount of dividends per share to be received each year.
Q69. Obligations that depend on past events and that are based on future transactions are contingent liabilities.
a. true
b. false
Q70. When the contract rate of interest on bonds is less than the market rate of interest, the bonds sell at
a. a premium.
b. their face value.
c. their maturity value.
d. a discount.
Q71. If 50,000 shares are authorized, 35,000 shares are issued, and 1,000 shares are reacquired, the number of outstanding shares is 36,000.
a. true
b. false
Q72. The total earnings of an employee for a payroll period is referred to as gross pay.
a. true
b. false
Q73. If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired, the number of outstanding shares is 19,500.
a. true
b. false
Q74. If a corporation issues only one class of stock, it is called
a. common stock.
b. treasury stock.
c. no-par stock.
d. preferred stock.
Q75. If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 35,000.
a. true
b. false
Q76. Cash equivalents include
a. checks.
b. coins and currency.
c. money market accounts and commercial paper.
d. stocks and short-term bonds.
Q77. Outstanding checks are checks that have been issued but have NOT cleared the bank.
a. true
b. false
Q78. A minimum cash balance required by a bank is called
a. cash in bank.
b. cash equivalent.
c. compensating balance.
d. EFT.
Q79. For a strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees.
a. true
b. false
Q80. There are two internal control objectives: to ensure accurate financial reports, and to ensure compliance with applicable laws.
a. true
b. false
Q81. Which of the following reflects a weak internal control system?
a. All employees are well supervised.
b. A single employee is responsible for comparing a receiving report to an invoice.
c. All employees must take their vacations.
d. A single employee is responsible for the collecting and recording of cash.
Q82. For efficiency of operations and better control over cash, a company should maintain only one bank account.
a. true
b. false
Q83. A business that requires that all cash payments be made by check CANNOT use a petty cash system.
a. true
b. false
Q84. The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.
a. true
b. false
Q85. A minimum cash balance maintained in a bank account is called a line of credit.
a. true
b. false
Q86. A voucher system is an example of an internal control procedure over cash payments.
a. true
b. false
Q87. In a voucher system, paid vouchers are transferred to a paid voucher file.
a. true
b. false
Q88. A voucher is a written authorization to make a cash payment.
a. true
b. false
Q89. An element of internal control is
a. risk assessment.
b. journals.
c. subsidiary ledgers.
d. controlling accounts.
Q90. The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the
a. Internal Control Integrated Framework by the Committee of Sponsoring Organizations.
b. Internal Control Integrated Framework by the Congress of Special Offerings.
c. Internal Control Localized Structure by the Committee of Sponsoring Organizations.
d. Internal Control Localized Structure by the Congress of Special Offerings.
Q91. A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid.
a. true
b. false
Q92. Employing internal auditors is part of which element of internal control?
a. Monitoring
b. Control procedures
c. Risk assessment
d. The control environment
Q93. The amount of the 'adjusted balance' appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date after all adjusting entries have been entered.
a. true
b. false
Q94. Internal controls are important because they
a. prevent fraud and misleading financial statements.
b. eliminate fraud.
c. deter fraud and prevent theft and other abuses.
d. guarantee accurate financial statements.
Q95. An element of internal control is
a. generally accepted accounting principles.
b. control procedures.
c. concepts.
d. principles.
Q96. Employee fraud is the intentional act of deceiving an employer for personal gain.
a. true
b. false
Q97. A voucher is the notification accompanying the check issued to a creditor that indicates the specific invoice being paid.
a. true
b. false
Q98. An element of internal control is
a. fidelity insurance.
b. prepaid insurance.
c. monitoring.
d. insurance expense.
Q99. Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. This item would require an adjusting entry including a
a. debit to Accounts Receivable.
b. debit to Cash.
c. debit to Accounts Payable.
d. credit to Accouts Payable.
Q100. Which of the following elements of internal control focuses upon locating weaknesses and improving control effectiveness?
a. The control environment
b. Risk assessment
c. Control procedures
d. Monitoring
Explanation / Answer
Q1)
Accounts are adjusted and closed that means allowance for doubtful accounts was already reduced from accounts receivable and debited to profit and loss. Hence, effect on estimated bad debts is already given in accounts.
Hence, net realizable value of accounts will be $430,000 only
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.