Accounting final 2

During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million. Assuming a 365-day year, the average number of days required for Carl Equipment to sell its inventory is: (Round your final answer to one decimal place.) A). 36.5days. B). 73.0 days. C). 24.3 days. D). 304.2 days.

A). 36.5days.

Which of the following is not a capital expenditure? A). Advertising expenditures to introduce a new product line B). Sales tax paid in conjunction with the purchase of new machinery C). Installation of elevators to replace escalators D). An amount paid to acquire a patent with a remaining life of only three years

A). Advertising expenditures to introduce a new product line

Which of the following statistics is of more significance to a long-term creditor than to a short-term creditor? A). Interest coverage ratio B). Receivables turnover rate C). Working capital. D). Quick ratio

A). Interest coverage ratio

When a promissory note is issued, you would expect to find: A). Notes payable and interest expense in the financial statements of the maker of the note throughout the life of the note. B). Notes receivable and interest revenue in the financial statements of the maker of the note throughout the life of the note. C). Notes receivable in the financial statements of the maker of the note throughout the life of the note, but interest revenue only when interest payments are received. D). Notes payable in the financial statements of the payee of the note throughout the life of the note, but interest expense only when interest payments are made.

A). Notes payable and interest expense in the financial statements of the maker of the note throughout the life of the note.

If a business ceases operations and liquidates, which of the following will be paid last? A). Owners. B). General creditors. C). Employees. D). Creditors who have collateral for their loans.

A). Owners.

Early in the current year, Tokay Co. purchased the Silverton Mine at a cost of $20,000,000. The mine was estimated to contain 200,000 tons of ore and to have a residual value of $5,000,000 after mining operations are completed. During the year, 105,000 tons of ore were removed from the mine. At year-end, the book value of the mine (cost minus accumulated depletion) is: A). $15,000,000. B). $12,125,000. C). $7,875,000. D). $9,500,000.

B). $12,125,000.

During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million. Refer to the information above. Carl Equipment 's inventory turnover rate is: A). 6.7 times. B). 10 times. C). 12 times. D). 1.2 times.

B). 10 times.

If sales discounts are shown as a separate item in financial statements, they should be shown as a(n): A). Deduction from accounts receivable. B). Deduction from gross sales revenue. C). Operating expense. D). Current liability.

B). Deduction from gross sales revenue.

Which of the following is not considered an acceptable inventory cost method according to GAAP? A). First-in, first-out B). First-in, last-out C). Last-in, first-out D). Average cost

B). First-in, last-out

Which of the following companies would be most likely to use a perpetual inventory system? A). Corner deli. B). Home Depot. C). James Dean, CPA. D). A manufacturer of custom sailboats.

B). Home Depot.

Which of the following practices best illustrates efficient management of cash? A). The accountant records all cash receipts and payments when reconciling the bank account at the end of each month. B). Management arranges for a loan to cover projected cash shortages during the production phase of the business cycle each year. C). Cash budgets (forecasts) are prepared only one month in advance in order to avoid the need for constant revision. D). All cash resources are held in the checking account to maximize liquidity.

B). Management arranges for a loan to cover projected cash shortages during the production phase of the business cycle each year

For financial reporting purposes, the gain or loss on the sale of a plant asset is determined by comparing the asset's: A). Cost with its book value. B). Sales price with its book value. C). Tax basis with its book value. D). Sales price with its tax basis.

B). Sales price with its book value.

The gain on the disposal of equipment is recognized when: A). The book value of the equipment is greater than the value received. B). The book value of the equipment is less than the value received. C). A salvage value exists. D). A gain should not be recognized on the disposal of an asset.

B). The book value of the equipment is less than the value received.

Using different accounting methods on financial statements and tax returns will create: A). No effect on the balance sheet, only the income statement. B). No effect on the balance sheet or the income statement. C). A deferred tax liability. D). An illegal situation.

C). A deferred tax liability.

Which of the following is not considered a cash equivalent? A). U.S. Treasury bills B). Money market funds C). Accounts receivable D). High-grade commercial paper

C). Accounts receivable

Commitments, such as contracts for future transactions: A). Are classified as liabilities. B). Are classified as assets. C). Are footnoted in financial statements, if material. D). Are only disclosed if negative due to the principle of conservatism.

C). Are footnoted in financial statements, if material.

The accounts receivable turnover rate for Baldwin Corporation is 8, and for Basinger Company the turnover rate is 10. These statistics indicate that: A). Basinger collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average. B). Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company. C). Basinger collects its accounts receivable faster than does Baldwin Company. D). Basinger makes on average 10 credit sales annually to each of its customers, while Baldwin makes 8 credit sales to each customer.

C). Basinger collects its accounts receivable faster than does Baldwin Company.

International standards require that goodwill: A). Be capitalized and amortized over 20 years or less. B). Be capitalized and amortized over 40 years or less. C). Be capitalized and reviewed annually and its value should be adjusted if impaired. D). Be expensed immediately.

C). Be capitalized and reviewed annually and its value should be adjusted if impaired.

Which of the following situations is impossible? A). Book value is greater than residual value. B). Book value is equal to the residual value. C). Book value is less than residual value. D). Book value is less than the original cost.

C). Book value is less than residual value.

Which of the following is generally not true about inventory? A). Inventory consists of all goods owned and held for sale to customers. B). Inventory is a non-financial asset. C). Inventory must be managed on a unit-by-unit (i.e., specific identification) method. D). Inventory is usually shown on the balance sheet at cost.

C). Inventory must be managed on a unit-by-unit (i.e., specific identification) method.

If an error in valuing inventory occurs in one year: A). It has no effect upon income in the following year. B). It has no effect upon the income statement, only on the balance sheet. C). It is self-correcting after two years. D). Retained earnings will be adversely affected until corrected.

C). It is self-correcting after two years.

Armstrong Company recently acquired a new computer system. Which of the following costs associated with the computer should not be debited to the Equipment account? A). Insurance coverage purchased by Armstrong to cover the computer during shipment from the manufacturer B). Wages paid to system programmers hired to prepare the new computer for use C). Replacement of several circuit boards damaged during installation D). Installation of new electrical power supplies required for the computer

C). Replacement of several circuit boards damaged during installation

The aging of the accounts receivable approach to estimating uncollectible accounts does not: A). Take into consideration the existing balance in the Allowance for Doubtful Accounts. B). Utilize a percentage of probable uncollectible accounts for each age group of accounts receivable. C). Stress the relationship between uncollectible accounts expense and net sales. D). Tend to give a reliable estimate of uncollectible accounts because of the consideration given to the collectability of specific accounts receivable.

C). Stress the relationship between uncollectible accounts expense and net sales.

A bank reconciliation explains the difference between: A) Cash receipts and cash disbursements for the period. B). The balance of cash in the bank and the budgeted expenditures for the upcoming accounting period. C). The balance per bank statement and the cash balance per the accounting records of the depositor. D). The balance per bank statement and cash expected to be on hand according to the cash forecast.

C). The balance per bank statement and the cash balance per the accounting records of the depositor.

Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership? A). Pickup trucks offered for sale. B). Used cars taken in trade and offered for sale on the company's used-car lot. C). Spark plugs, oil filters, and other parts that are intended for use by the service department in repairing and servicing customers' cars. D). "Company cars" provided to specific company executives for their personal use.

D). "Company cars" provided to specific company executives for their personal use.

Kent Company has used the same inventory method for many years. This is an example of which principle? A). Matching B). Realization C). Cost D). Consistency

D). Consistency

The lower-of-cost-or-market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on any of the following except: A). individual inventory items. B). Major inventory categories. C). The entire inventory. D). Industry inventory standards.

D). Industry inventory standards.

The fair value accounting adjustment: A). Affects both the balance sheet and the current period income statement. B). Is not made when the current market value of investments in marketable securities is higher than original cost. C). May result in either a gain or a loss to be reported in the current period income statement. D). Represents a departure from the cost principle.

D). Represents a departure from the cost principle.

When comparing the units-of-output method of depreciation with straight-line depreciation: A). The depreciation expense in the first year will always be greater under units-of-output method. B). The depreciation expense in the first year will always be less under the units-of-output method. C). The depreciation expense in the first year will always be the same under both the methods. D). The depreciation expense in the first year may be greater than, equal to, or less under the units-of-output method.

D). The depreciation expense in the first year may be greater than, equal to, or less under the units-of-output method.

If an asset is determined to be impaired, it should be: A). Depreciated only using the straight-line method. B). Written up to its historical cost. C). Reclassified as a liability. D). Written down to its fair market value.

D). Written down to its fair market value.

Wholesalers buy from retailers and sell to the general public. T F

False.