Accounting 102 Exam 2 Quizzes

Equipment was purchased for $50,000. The equipment is expected to be used 15,000 hours over its useful life and then have a residual value of $10,000. In the first two years of operation, the equipment was used 2,700 hours and 3,300 hours, respectively. What is the equipment's accumulated depreciation at the end of the second year using the activity-based method? A) $16,000. B) $7,200. C) $8,800. D) $20,000.

A) $16,000.

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for ending inventory using weighted-average cost? A) $3,380. B) $3,250. C) $3,120. D) $3,000.

A) $3,380.

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year? A) $8,000. B) $5,000. C) $7,000. D) $5,500.

A) $8,000.

Use the information below to calculate net revenues. Service Revenue$100,000 Sales Discounts$2,000 Accounts Receivable$15,000 Sales Allowances$7,000 Cash$18,000 A) $91,000. B) $85,000. C) $68,000. D) $98,000.

A) $91,000.

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is: A) $96,000. B) $96,200. C) $100,000. D) $104,000.

A) $96,000.

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's gross profit ratio? A) 20% B) 10% C) 25% D) 30%

A) 20%

The effect of writing off a specific account receivable is: A) A reduction in the Allowance for Uncollectible Accounts. B) An increase in the amount of Accounts Receivable. C) An increase in the amount of Bad Debt Expense. D) An increase in the Allowance for Uncollectible Accounts.

A) A reduction in the Allowance for Uncollectible Accounts.

Under the allowance method for uncollectible accounts, the balance of Allowance for Uncollectible Accounts increases when: A) Future bad debts are estimated. B) Bad debts actually occur. C) Cash is received from customers. D) Never.

A) Future bad debts are estimated.

Which of the following intangible assets are not amortized? A) Goodwill. B) Patents. C) Copyrights. D) Franchises.

A) Goodwill.

Inventory is defined as: A)Items a company intends for sale to customers. B) Any assets of the company that can be sold. C) The amount of cash received from the sale of goods to customers during the year. D) The cost of goods sold to customers during the year.

A) Items a company intends for sale to customers.

Which cost flow assumption must be used for financial reporting if it is also used for tax reporting? A) LIFO. B) FIFO. C) Weighted-average. D) Any assumption can be used regardless of the tax reporting.

A) LIFO.

An exclusive 20-year right to manufacture a product or to use a process is a: A) Patent. B) Copyright. C) Trademark. D) Franchise.

A) Patent.

Which of the following transactions would result in an account receivable? A) Providing services to customers on account. B) Paying for supplies previously purchased on account. C) Receiving a loan from the bank. D) Purchasing supplies on account.

A) Providing services to customers on account.

Which of the following refers to the seller reducing the customer's balance owed because of some deficiency in the company's product or service? A) Sales Allowance. B) Sales Discount. C) Trade Discount. D) Allowance for Uncollectible Accounts.

A) Sales Allowance.

The receivables turnover ratio is a measure of: A) The number of times during a year that the average accounts receivable balance is collected. B) The likelihood that customers will not pay the full amount due at the end of the year. C) The profitability of transactions related to providing goods and services to customers on account during the year. D) The proportion of credit sales to total sales for the year.

A) The number of times during a year that the average accounts receivable balance is collected.

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.) A) $0. B) $50,000. C) $200,000. D) $100,000.

B) $50,000.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of: A) $8,000. B) $6,000. C) $2,000. D) $0.

B) $6,000.

A company has a profit margin of 10% and reports net sales of $4,000,000 and average total assets of $5,000,000. Calculate the company's return on assets. A) 12.5%. B) 8.0%. C) 4.5%. D) 5.0%.

B) 8.0%.

Using the allowance method, the entry to record a write-off of accounts receivable will include A) A debit to Bad Debt Expense. B) A debit to Allowance for Uncollectible Accounts. C) No entry because an allowance for uncollectible accounts was established in an earlier period. D) A debit to Service Revenue.

B) A debit to Allowance for Uncollectible Accounts.

The asset's cost less accumulated depreciation is called: A) Replacement cost. B) Book value. C) Net fair value. D) Residual value.

B) Book value.

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs? A) LIFO. B) FIFO. C) Weighted-average. D) Income will be the same under each assumption.

B) FIFO.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to: A) Accounts Payable. B) Inventory. C) Cost of Goods Sold. D) Purchases.

B) Inventory.

Which of the following is not recorded as an intangible asset in the balance sheet? A) Patents. B) Research and development. C) Trademarks. D) Goodwill.

B) Research and development.

Gross profit is defined as: A) All revenues minus all expenses. B) Sales Revenue minus Cost of Goods Sold. C) Sales Revenue minus Operating Expenses. D) Income before Income Tax Expense.

B) Sales Revenue minus Cost of Goods Sold.

A multiple-step income statement provides the advantage of: A) Placing all revenues before all expenses. B) Separating revenues and expenses based on their different types of activities. C) Placing all revenues after all expenses. D) Excluding the effects of income taxes in the calculation of net income.

B) Separating revenues and expenses based on their different types of activities.

A company's inventory turnover ratio measures: A) The profitability on sales of inventory during the year. B) The number of times the company sells its average inventory balance during the year. C) The average cost at which inventory was purchased during the year. D) The quantity of inventory remaining at the end of the year.

B) The number of times the company sells its average inventory balance during the year.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase? A) $900,000. B) $200,000. C) $180,000. D) $220,000.

C) $180,000.

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for cost of goods sold using LIFO? A) $2,600. B) $2,900. C) $3,600. D) $3,900.

C) $3,600.

At the beginning of 2021, Clay Ventures has total accounts receivable of $100,000. By the end of 2021, Clay reports net credit sales of $900,000 and total accounts receivable of $200,000. What is the receivables turnover ratio for Clay Ventures? A) 2.0. B) 4.5. C) 6.0. D) 9.0.

C) 6.0.

Accumulated depreciation is: A) An expense account. B) An asset. C) A contra-asset. D) A liability.

C) A contra-asset.

When a company provides services on account, which of the following accounts is debited? A) Service Revenue. B) Accounts Payable. C) Accounts Receivable. D) Cash.

C) Accounts Receivable.

A long-term asset is recorded at the: A) Cost of the asset. B) Additional costs to get the asset ready for use. C) Cost of the asset plus all costs necessary to the asset ready for use. D) Cost of the asset less all costs necessary to the asset ready for use.

C) Cost of the asset plus all costs necessary to the asset ready for use

A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible: Age Group Amount Receivable Estimated Percent Uncollectible Not yet due $175,000 4% 0-60 days past due $40,000 10% 61-120 days past due $10,000 30% More than 120 days past due $5,000 60% Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the following would be recorded in the year-end adjusting entry? A) Credit Allowance for Uncollectible Accounts for $20,000. B) Debit Allowance for Uncollectible Accounts for $14,000. C) Debit Bad Debt Expense for $14,000. D) Credit Allowance for Uncollectible Accounts for $17,000.

C) Debit Bad Debt Expense for $14,000.

Which of the following correctly describes the nature of depreciation? A) Depreciation represents the valuation of property, plant, and equipment over its service life. B) Depreciation represents the valuation of an intangible asset over its service life. C) Depreciation represents the allocation of the cost of property, plant, and equipment over its service life. D) Depreciation represents the allocation of the cost of an intangible asset over its service life.

C) Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life? A) Straight-line method. B) Activity-based method. C) Double declining balance method. D) Each method will result in the same depreciation during the first year.

C) Double declining balance method.

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account: A) Net accounts receivable increase. B) Net accounts receivable decrease. C) Net accounts receivable do not change. D) The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off.

C) Net accounts receivable do not change.

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold? A) $8,200 B) $17,800 C) $20,000 D) $22,200

D) $22,200

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for ending inventory using FIFO? A) $2,600. B) $2,900. C) $3,600. D) $3,900.

D) $3,900.

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Cost of the equipment$50,000 Sales tax (8%) 4,000 Shipping 3,000 Installation 2,000 Depreciation during the first month 1,000 Total costs$60,000 What is the total recorded cost of the equipment? A) $60,000. B) $50,000. C) $57,000. D) $59,000.

D) $59,000.

Which of following best describes a merchandising company? A) A company whose revenues exceed expenses. B) A company that produces products from raw materials, labor, and overhead. C) A company that provides services to its customers. D) A company that purchases products that are primarily in finished form for resale to customers.

D) A company that purchases products that are primarily in finished form for resale to customers.

The entry to record the estimate for uncollectible accounts includes: A) A debit to Allowance for Uncollectible Accounts. B) A credit to Accounts Receivable. C) A debit to Sales Revenue. D) A debit to Bad Debt Expense.

D) A debit to Bad Debt Expense.

Over the entire service life of an asset, which depreciation method records the highest total depreciation? A) The straight-line method. B) The double declining method. C) The activity-based method. D) All the methods result in the same total depreciation.

D) All the methods result in the same total depreciation.

Under a perpetual inventory system: A) Cost of good sold is recorded with a period-end adjusting entry. B) Purchase discounts are not recorded. C) Inventory purchases are recorded only at the end of the period. D) Cost of goods sold is recorded with each sale.

D) Cost of goods sold is recorded with each sale.

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25? A) Debit Cash for $500. B) Credit Accounts Receivable for $490. C) Credit Service Revenue for $500. D) Debit Sales Discount for $10.

D) Debit Sales Discount for $10.

Which of the following represents the balance of Cost of Goods Sold at the end of the year? A) The cost of inventory not yet sold by the end of the year. B) The cost of inventory purchased during the year. C) The cost of inventory at the beginning of the year. D) The cost of inventory sold during the year.

D) The cost of inventory sold during the year.