Accounting 8-10 Test
On June 1, Michael Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight-line depreciation, calculate depreciation expense for the second year.
-$30,000
A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of 5 years or 15,000 hours. It is to be depreciated by the units-of-output method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?
-$35,000
A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of
-$93,000
The calculation for annual depreciation using the straight-line depreciation method is
-Depreciable cost / Estimated useful life
If a fixed asset, such as a computer, were purchased on January 1 for $3,750 with an estimated life of 3 years and a salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is
-Depreciation Expense 100 Accumulated Depreciation 100
Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called
-FASB controls
The formula for depreciable cost is
-Initial cost - Residual value
The most widely used depreciation method is
-The most widely used depreciation method is
A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is..
-a promissory note left for collection
Which one of the following reflects a weak internal control system?
-a single employee is responsible for collecting and recording of cash
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would be included on the bank reconciliation as a(n)
-addition to the balance per the company's records
The amount of cash to be reported on the balance sheet at June 30 is the...
-adjusted balance appearing in the bank reconciliation for June 30
Which of the following should be included in the acquisition cost of a piece of equipment?
-all of these
If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?
-allowance for doubtful accounts
A capital expenditure results in a debit to
-an asset account
The debit balance in Cash Short and Over at the end of an accounting period is reported as
-an expense on the income statement
A bank reconciliation should be prepared periodically because
-any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected
If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?
-bad debt expense
Which of the following is included in the cost of land?
-brokerage commission
Expenditures that add to the utility of fixed assets for more than one accounting period are
-capital expenditures
What is the type of account and normal balance of Allowance for Doubtful Accounts?
-contra asset, credit
Which one of the following below is not an element of internal control?
-cost-benefit considerations
Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?
-debit Accounts Receivable; credit Cash
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?
-debit Cash; credit Accounts Payable
Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item would be included on the bank reconciliation as a(n)
-deduction from the balance per company's records
A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)
-deduction from the balance per the company's records
Which of the following items that appeared on the bank reconciliation did not require a journal entry?
-deposits in transit
The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is the
-double-declining-balance method
Which of the following would be subtracted from the balance per books on a bank reconciliation?
-error in recording a check for $732 as $723
Internal control does not consist of policies and procedures that
-guarantee the company will earn a profit
A necessary element of internal control is
-information and communication
Which of the following is included in the cost of constructing a building?
-insurance costs during construction
Land acquired so it can be resold in the future is listed on the balance sheet as a(n)
-investment
Accumulated Depreciation
-is a contra asset account
The bank reconciliation
-is part of the internal control system
When a firm uses internal auditors, it is adhering to which of the following internal control elements?
-monitoring
A firm's internal control environment is not influenced by
-monitoring policies
Which of the following are criteria for determining whether to record an asset as a fixed asset?
-must be long lived and used by the company in its normal operations
Which of the following would be added to the balance per books on a bank reconciliation?
-notes collected by the bank
Which of the following receivables would not be classified as an "other receivable"
-notes receivable
Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categories
-physical and functional
Which one of the following is not a factor that influences a business's control environment?
-proofs and security measures
The objectives of internal control are to
-provide reasonable assurance that assets are safeguarded and used for business purposes, financial reports are accurate, and laws and regulations are complied with
Which of the following below is an example of a capital expenditure?
-replacing an engine in a company car
A fixed asset's estimated value at the time it is to be retired from service is called
-residual value
Which of the following would be deducted from the balance per books on a bank reconciliation?
-service charges
Credit memos from the bank...
-show the bank has collected a note receivable for the customer
A bank statements
-shows the activity that increased or decreased the company's account balance
Indications that an account may be uncollectible include all of the following except
-the costumer is making small but regular payments
On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
-total estimated uncollectible accounts as of the end of the year
All of the following are needed for the calculation of straight-line depreciation except
-units produced
A characteristic of a fixed asset is that it is
-used in the operations of a business
A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)
-voucher
Two methods of accounting for uncollectible accounts are the
direct write- off method and the allowance method
the two methods of accounting for uncollectible receivables are the allowance method and the
direct write-off method
Selling receivables is called
factoring
When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is
units-of-output method
One of the weakness of the direct write off method is that it
violates the matching principle
under the direct write off method of accounting for uncollectible accounts, bad debt expense is debited
when an account is determined to be worthless
If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?
accounts receivable
if the allowance method for uncolectible receivables is used, the general ledger account is credited to write off a costumer's account as a uncollectible
accounts receivable
what statement is not true
all receivables that are expected to be realized in cash beyond 265 days are reported in the non-current assets section
What is the type of account and normal balance of Allowance for Doubtful Accounts?
contra asset, credit
The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?
debit Sales returns and allowance; credit accounts receivable
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?
-$289,000
On June 1, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours.
-$12,500
A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is
-$160,000
A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double-declining-balance method?
-$18,750
"To maintain public confidence and trust in the financial reporting of companies" is the purpose of"
Sarbanes-Oxley
If collections of an other receivable is expected beyond one year, it is classified as a(n)
investment under non current assets
A note receivable due in 18 months is listed on the balance sheet under the caption
investments
The direct write-off method of accounting for uncollectible accounts
is often used by small companies with few receivables
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
management estimates the amount of uncollectibles
The terms "receivables included all
money claims against other entites
the receivable that is usually evidenced by a formal, written instrument of credit is a
note receivable
other receivables includes all of the following execpt
notes receivable
when does account become uncollectible
there is no general rule for when an account becomes uncollectible