GB518 - Unit 4 Quiz - A Graded

1.            Question :           Extraordinary repairs:

                                                  Are revenue expenditures

                                                  Extend an asset's useful life beyond its original estimate

                                                  Are credited to accumulated depreciation

                                                  Are additional costs of plant assets that do not materially increase the asset's life

                                                  Are expensed as incurred

Question 2.         Question :           Revenue expenditures:

                                                  Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities

                                                  Are known as balance sheet expenditures

                                                  Extend the asset's useful life

                                                  Substantially benefit future periods

                                                  Are debited to asset accounts

Question 3.         Question :           Cardco Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 5 year life. What is the total depreciation expense for the current year?

                                                  $1,900.00

                                                  $7,600.00

                                                  $2,533.33

                                                  $2,800.00

                                                  $3,166.67

Question 4.         Question :           An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

                                                  Allowance method of accounting for bad debts

                                                  Aging of notes receivable

                                                  Adjustment method for uncollectible debts

                                                  Direct write-off method of accounting for bad debts

                                                  Cash basis method of accounting for bad debts

Question 5.         Question :           A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

                                                  A loss of $25,000

                                                  A gain of $25,000

                                                  A loss of $65,000

                                                  A gain of $65,000

                                                  A gain of $90,000

Question 6.         Question :           Many companies use accelerated depreciation in computing taxable income because:

                                                  It is required by the tax rules

                                                  It is required by financial reporting rules

                                                  It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due

                                                  Using it causes a company to use higher income in the early years of the asset's useful life

                                                  The results are identical to straight-line depreciation

Question 7.         Question :           A change in an accounting estimate is:

                                                  Reflected in past financial statements

                                                  Reflected in future financial statements and also requires modification of past statements

                                                  A change in a calculated amount that is part of financial statements that results from new information or subsequent developments and from better insight or improved judgment

                                                  Not allowed under current accounting rules

                                                  Considered an error in the financial statements

Question 8.         Question :           A company's annual accounting period ends on September 30. During the current year a depreciable asset which cost $16,000 was purchased on January 1. The asset has a $2,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 4-year life. What is the total depreciation expense for the current year?

                                                  $4,000

                                                  $3,000

                                                  $3,500

                                                  $2,625

                                                  $875

Question 9.         Question :           A copyright:

                                                  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years

                                                  Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 17 years

                                                  Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years

                                                  Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately

                                                  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years

Question 10.      Question :           Total asset turnover is calculated by dividing:

                                                  Gross profit by average total assets

                                                  Average total assets by gross profit

                                                  Net sales by average total assets

                                                  Average total assets by net sales

                                                  Net assets by total assets

Question 11.      Question :           A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1, 2010. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2010?

                                                  $1,000

                                                  $1,333

                                                  $1,533

                                                  $4,000

                                                  $4,600

Question 12.      Question :           A 90-day note issued on April 20 has a maturity date of:

                                                  July 17

                                                  July 18

                                                  July 19

                                                  July 20

                                                  July 21

Question 13.      Question :           Depletion:

                                                  Is the process of allocating the cost of natural resources to periods in which they are consumed

                                                  Is also called depreciation

                                                  Is also called amortization

                                                  Is an unrealized expense reported in equity

                                                  Is the process of allocating the cost of intangibles to periods in which they are used

Question 14.      Question :           Failure by a promissory note's maker to pay the amount due at maturity is known as:

                                                  Protesting a note

                                                  Closing a note

                                                  Dishonoring a note

                                                  Discounting a note

                                                  Depreciating a note

Question 15.      Question :           The person who signs a note receivable and promises to pay the principal and interest is the:

                                                  Maker

                                                  Payee

                                                  Holder

                                                  Receiver

                                                  Owner

Question 16.      Question :           On December 31, 2010, Stable Company sold a piece of equipment that was purchased on January 1, 2005. The equipment originally cost $820,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

                                                  $230,000 Gain

                                                  $25,000 Loss

                                                  $25,000 Gain

                                                  $73,750 Gain

                                                  . $0; no gain or loss

Question 17.      Question :           Amortization:

                                                  Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life

                                                  Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use

                                                  Is the process of allocating the cost of natural resources to periods when they are consumed

                                                  Is an accelerated form of expensing an asset's cost

                                                  Is the same as depletion

Question 18.      Question :           The matching principle requires:

                                                  That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user

                                                  The use of the direct write-off method for bad debts

                                                  The use of the allowance method of accounting for bad debts

                                                  That bad debts be disclosed in the financial statements

                                                  That bad debts not be written off

Question 19.      Question :           Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

                                                  Coke has the better turnover for both years

                                                  Pepsi has the better turnover for both years

                                                  Coke's turnover is improving

                                                  Coke's credit policies are too loose

                                                  Coke is collecting its receivables more quickly than Pepsi in both years

Question 20.      Question :           A leasehold:

                                                  Is a short-term rental agreement

                                                  Is the same as a patent

                                                  Are the rights granted to the lessee by the lessor of a lease

                                                  Is recorded as rent expense

                                                  Is an investment asset

Question 21.      Question :           On August 1, 2010, Ace Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $123,965. The note is due in 90 days and has an interest rate of 8%. What would be the total amount collected at the maturity date?

                                                  $123,965.00

                                                  $2,479.30

                                                  $126,444.30

                                                  $121,485.70

                                                  $133,882.20

Question 22.      Question :           Depreciation:

                                                  Measures the decline in market value of an asset

                                                  Measures physical deterioration of an asset

                                                  Is the process of allocating to expense the cost of a plant asset

                                                  Is an outflow of cash from the use of a plant asset

                                                  Is applied to land

Question 23.      Question :           A patent:

                                                  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 50 years

                                                  Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 20 years

                                                  Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years

                                                  Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately

                                                  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years

Question 24.      Question :           The interest accrued on $3,600 at 7% for 60 days is:

                                                  $36

                                                  $42

                                                  $252

                                                  $180

                                                  $420

Question 25.      Question :           A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

                                                  Direct write-off method

                                                  Aging of accounts receivable method

                                                  Percentage of sales method

                                                  Aging of investments method

                                                  Percent of accounts receivable method