Question 1 - When recording depreciation, which of the following statements is true?

Question 1 - When recording depreciation, which of the following statements is true? 

Total assets increase and stockholders equity increases. 

Total assets decrease and total liabilities increase. 

Total assets decrease and stockholders equity increases. 

Total assets decrease and stockholders equity decreases.

Question 2 - ACME, Inc. uses straight- line depreciation for all of its depreciable assets. ACME sold a piece of machinery on December 31, 2010, that it purchased on January 1, 2009, for $ 10,000. The asset had a five- year life and zero residual value. Accumulated depreciation was $4,000. If the sales price of the used machine was $ 7,500, the resulting gain or loss on disposal was which of the following amounts?

Loss of $ 6,000. 

Loss of $ 1,500. 

Gain of $ 6,000. 

Gain of $ 1,500.   

Question 3 - On January 1, 200X Jones Company purchased a machine for $20,000. The machine had a salvage value of $2,000 and a useful life of 5 years. Using straight line depreciation, the accounting entry for recording depreciation expense for 200X would be:

Debit depreciation expense - $3,600, credit accumulated depreciation - $3,600. 

Debit depreciation expense - $4,000, credit accumulated depreciation - $4,000.

 Debit depreciation expense - $3,600, credit machine - $3,600. 

Debit depreciation expense - $4,000, credit machine - $4,000.

Question 4 - On January 1, 200X Jones Company purchased a machine for $10,000. The machine has no salvage value and a useful life of 5 years. Jones uses straight line depreciation. After 4 years the book value of the machine would be?

$10,000 

$2,000    

$8,000 

$5,000.

Question 5 - You purchase a patent for $100,000. The remaining useful life is 10 years. The entry for amortization expense for the first year would be:

Debit patent $100,000 and credit cash $100,000. 

Debit patent expense $10,000 and credit cash $10,000. 

Debit patent $10,000 and credit cash $10,000. 

Debit amortization expense $10,000 and credit patent $10,000.  

Question 6 - Assume that Warnaco Group Inc. the makers of Calvin Klein underwear, borrowed $ 100,000 from the bank to be repaid over the next five years, with principal payments of $20,000 each year. Warnaco should report this item as:

$100,000 should be reported as a long- term liability. 

$80,000 should be reported as a long- term liability and $20,000 as a current liability. 

$100,000 should be reported as a long- term asset.  

$80,000 should be reported as a long- term asset and $20,000 as a current asset.

Question 7 - On April 1, 200X you enter into a note payable of $100,000 with a 9% annual interest rate. Your interest expense for 200X will be:

$9,000 

$750 

$6,750   

$6,000

Question 8 - Jones Company issues a 10 year, 8%, $400,000 bond at par on July 31. The journal entry would be:

A debit to cash of $400,000 and a credit to bonds payable of $400,000. 

A debit to bonds payable of $400,000 and a credit to cash of $400,000. 

A debit to cash of $400,000 and a credit to bonds receivable of $400,000.  

A debit to bonds receivable of $400,000 and a credit to cash of $400,000.

Question 9 - Jones Company issues a 10 year, 8%, $400,000 bond at par on July 31. How much interest will be paid over the life of the bond?

$40,000 

$4,000 

$320,000    

$32,000

Question 10 - Post Company issues 100,000 shares of S10 par value stock for $18 a share. The accounting entry for this transaction would be:

Debit cash -$1,000,000 and credit Capital Stock - $1,000,000.  

Debit cash -$1,800,000 and credit Capital Stock - $1,800,000.  

Debit cash -$1,800,000 and credit Capital Stock - $1,000,000, credit Additional Paid in Capital $800,000. 

Debit cash -$1,000,000, debit Additional Paid in Capital Stock - $800,000 and credit Capital - $1,800,000,

Question 11 - Dividends become a liability of the corporation:

On the date the board of directors declares the dividend. 

On the date of record. 

On the date payment is made. 

When preferred dividends have not been paid.

Question 12 - On January 1, 200X XYZ Company declared a cash dividend of .50 per share. On January 1 they will make the following journal entry:

Debit cash and credit dividends payable. 

Debit dividends declared and credit dividends payable. 

Credit cash and debit dividends declared. 

Debit expense and credit cash.