Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. Use the _______ principle to estimate warranty liabilities.
A. matching
B. entity
C. objectivity
D. conservatism
2. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item B should be recorded is
A. ($55,000/$125,000) × $150,000.
B. ($55,000/$95,000) × $125,000.
C. ($55,000/$150,000) × $125,000.
D. ($55,000/$95,000) × $150,000.
3. A $400,000 issue of bonds that sold for $363,000 matures on August 1, 2015. The journal entry to record the payment of the bond on the maturity date is
A. debit cash, $400,000; credit bonds payable, $400,000.
B. debit bonds payable, $400,000; credit cash, $400,000.
C. debit bonds payable, $363,000; credit cash, $363,000.
D. debit cash, $363,000; credit bonds payable, $363,000.
4. By not accruing warranty expense,
A. reported expenses will be understated, and net income will be understated.
B. reported liabilities will be overstated, and net income will be understated.
C. reported expenses will be overstated, and reported liabilities will be understated.
D. reported liabilities will be understated, and net income will be overstated.
5. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectible accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the percent of credit sales as its method of estimating uncollectible accounts?
A. $5,525
B. $5,067
C. $4,250
D. $7,159
6. If the amount extracted from a coal mine was different every year for four years, you would
A. debit depletion expense for the same amount each year.
B. credit accumulated depletion-coal mine for the same amount each year.
C. use the same depletion expense rate per unit each year.
D. recompute the depletion expense rate per unit each year.
7. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50. Casey's book balance shows outstanding checks of $5,288 and deposits in transit of $9,325. The bank-side reconciliation would show cash of
A. $43,217.
B. $47,304.
C. $39,230.
D. $43,267.
8. Which of the following would indicate poor internal control over accounts receivable?
A. The person handling cash receipts passes the receipts to someone who enters them into accounts receivable.
B. The mailroom employees open the mail and give the cash receipts to another employee.
C. The person who handles accounts receivable wouldn't write off accounts as uncollectable.
D. The same person handling cash receipts also records the accounts receivable transactions.
9. Research and development costs (R&D) are generally
A. expensed and become part of the income statement.
B. listed as "other intangibles" on the balance sheet.
C. listed as "current assets" on the balance sheet.
D. listed as "long-term assets" on the balance sheet.
10. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)
A. $1,584,88.
B. $1,520.13.
C. $20.13.
D. $1,605.00.
11. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item C should be recorded (rounded to the nearest dollar) is
A. $50,000.
B. $83,300.
C. $29,167.
D. $72,000.
12. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)
A. $119.84.
B. $2,943.00.
C. $2,819.84.
D. $2,821.50.
13. Rick Company has cash of $143,000; net accounts receivable of $89,000; short-term investments of $35,000; and prepaid expenses of $40,000. It also has $50,000 in current liabilities and $80,000 in long-term liabilities. The quick ratio for Rick Company is
A. 6.14.
B. 5.34.
C. 3.34.
D. 4.64.
14. Which of the following would not be a liability according to FASB's definition of a liability?
A. The signing of a three-year employment contract at a fixed annual salary
B. An obligation to provide goods or services in the future
C. An obligation that's estimated in amount
D. A note payable with no specified maturity date
15. A patent has amortization this year of $2,300. The journal entry would be
A. debit Accumulated Amortization-Patent, $2,300; credit Amortization Expense-Patent, $2,300.
B. debit Amortization Expense-Patent, $2,300; credit Patent, $2,300.
C. debit Amortization Expense-Patent, $2,300; credit Accumulated Depreciation-Patent, $2,300.
D. debit Accumulated Amortization-Patent, $2,300; credit Patent, $2,300.
16. Which marketable securities are reported at market value on the balance sheet date
A. Trading securities
B. Held-to-maturities securities
C. Available-for-sale and trading securities
D. Available-for-sale securities
17. A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $0. The journal entry to record this transaction is
A. debit Truck for $50,000, debit Loss on Disposal for $6,000 and credit Accumulated Depreciation-Truck for $56,000.
B. debit Accumulated Depreciation-Truck for $50,000 and credit Truck for $50,000.
C. debit Truck for $56,000, credit Accumulated Depreciation-Truck for $50,000, and credit Gain on Disposal for $6,000.
D. debit Loss on Disposal $6,000, debit Accumulated Depreciation-Truck for $50,000, and credit Truck for $56,000.
18. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50 and a bank collection of $760 in Casey Company's behalf. Casey's book balance should be adjusted by a total of
A. +$810.
B. +$710.
C. +$760.
D. -$710.
19. A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $500. The journal entry to record this transaction is
A. debit Cash for $500, debit Loss on Disposal for $55,500, and credit Truck for $56,000.
B. debit Cash for $500, debit Truck for $50,000, debit Loss on Disposal for $5,500, and credit Accumulated Depreciation-Truck for $56,000.
C. debit Loss on Disposal $6,000, debit Accumulated Depreciation-Truck for $50,000, and credit Truck for $56,000.
D. debit Cash for $500, debit Accumulated Depreciation-Truck for $50,000, debit Loss on Disposal for $5,500, and credit Truck for $56,000.
20. Margaret is a customer of Tammy Company. The company wrote off her account of $1,200 on August 15. On October 12, she sent in a payment of $560. What will Tammy Company record first to reinstate her account?
A. Debit Uncollectible Accounts Expense; credit Accounts Receivable/Margaret.
B. Debit Cash; credit Accounts Receivable/Margaret.
C. Debit Allowance for Doubtful Accounts; credit Accounts Receivable/Margaret.
D. Debit Accounts Receivable/Margaret; credit Allowance for Doubtful Accounts.