accounting test 2
Which of the following is not a feature of a promissory note? A) Maker B) Collateral C) Payee D) Principal E) None of the above
E
On January 1, 2012, Rowley Company purchased a truck that cost $22,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. The amount of depreciation expense recognized in 2013 assuming that Rowley uses the double declining balance method is: (A) $4,320 (B) $5,280 (C) $7,200 (D) $8,800
B
The entry required to recognize the uncollectible accounts expense will: A) increase total assets and retained earnings B) decrease total assets and retained earnings C) decrease total assets and increase net income D) increase total assets and decrease net income
B
The most favorable opinion that an auditor can express on the financial statements is a / an: A) Qualified opinion. B) Unqualified opinion. C) Adverse opinion. D) Disclaimer.
B
Trenton Corporation's accounts receivable balance as of 1/1/2012 was $65,000. During the year, it generated $120,000 in credit sales, and collected $162,000 in accounts receivables. Trenton wrote of $600 in receivables that were more than 360 days overdue. The balance in its allowance for doubtful accounts as of 1/1/2012 was $750. Trenton recorded $2,400 in uncollectible accounts expense during the year. What will be the net realizable value reported on the company's 2012 balance sheet? A) $22,400 B) $19,850 C) $20,450 D) $23,000
B
Two companies (A & B) each purchase an asset for the same cost. If each of these assets has the same salvage value and the same estimated useful life, but one company (A) chooses to use the straight line method of depreciation and the other (B) chooses to use Double Declining Balance as a depreciation method, then which company will exhibit higher depreciation expense levels during the first year of ownership? (A) Company A. (B) Company B. (C) Both will have the same expense.
B
Warlord Enterprises, Inc. had a $20,000 balance in Accounts Receivable and a zero balance in the Allowance account as of January 1, 2012. During 2012, the company provided $75,000 in security services on account. Also during the year, they collected $70,000 from accounts receivable. Bad debts are estimated to be 3% of credit sales. The amount of bad debt expense recognized on the 2012 income statement will be: A) $2,850 B) $2,250 C) $750 D) $600
B
What element of Internal Control would encompass fireproof vaults, limited access storage, and observation cameras? A) Performance Evaluations B) Physical Control C) Authority and Responsibility D) Pre-numbered Documents
B
Which type of rules prohibit auditors from voluntarily disclosing information they have acquired as a result of their accountant-client relationships? A) Federal laws B) Confidentiality rules in the AICPA's code of ethics C) Privilege rules defined by the FASB D) The Sarbanes-Oxley Act
B
Luciena Restaurant Supplies experienced $3,600,000 in sales during 2012, of which 1/3 was paid for by credit cards. If the credit card company charges .5% for processing services, what amount of cash will Luciena receive from credit card sales? A) $3,582,000 B) $2,376,000 C) $1,194,000 D) $2,168,000
C
Makhas Industries, Inc. experienced the following transactions during 2012, its first year of operations: Provided $173,000 of services on account Collected $137,000 cash from accounts receivable Established an Allowance for Doubtful Accounts using the aging below: Days past due Balance Uncollectible % Current $23,000 .01 0 - 30 6,500 .07 31 - 60 2,500 .12 61 - 90 750 .35 Over 90 3,250 .60 Using the information given, what amount should be reported as the balance in the company's allowance for uncollectible accounts? A) $2,835 B) $3,150 C) $3,198 D) $2,975
C
Suppose a company estimates that its bad debts related to credit sales for the year 2012 will be $22,000. The company utilizes the allowance method. How will the necessary adjusting entry affect Liabilities and Expenses, respectively? A) Increase; Increase B) Increase; No effect C) No effect; Increase D) Decrease; Decrease
C
The amount of the cost of an asset that is allocated to expense during any accounting period is called (A) Wasting expense (B) Wear and tear expense (C) Depreciation expense (D) Usage expense
C
The most effective way to reduce opportunities for ethical or criminal misconduct is: A) To obtain fidelity bonds for all employees. B) To perform extensive background checks before hiring employees. C) To implement an effective system of internal controls. D) To perform random physical counts frequently.
C
The most negative opinion that an auditor can express on the financial statements is a / an: A) Qualified opinion. B) Unqualified opinion. C) Adverse opinion. D) Disclaimer.
C
Which of the following is considered an accelerated depreciation method? (A) Straight Line (B) LIFO (C) Double Declining Balance (D) Units of Production
C
Which of the following is not a procedure for control of cash payments? A) Spoiled checks should be voided and retained. B) All checks should be pre-numbered. C) The business should provide written receipts to all cash customers. D) Checks should be properly authorized with approval signatures.
C
Which of the following would not be classified as an intangible asset? (A) Patent (B) Goodwill (C) A Coal Mine (D) Franchises
C
An element that is often present when fraud occurs is: A) The availability of opportunity. B) The existence of some form of pressure. C) The ability to rationalize. D) All of the above.
D
As of January 1, 2012, Nabisco Corporation had 100 units in inventory at $25 each. It purchased 200 units at $28 each during the year. A total of 250 units were sold at $45 during the year. Using the weighted average method, the inventory balance as of December 31, 2012 was: A) $1,400 B) $1,250 C) $2,250 D) $1,350
D
Cash has several attributes that make it susceptible to loss. First, it has universal appeal (everyone wants it). Second, it is easily transportable (a small suitcase filled with high denomination currency can have significant value). A third attribute would be: A) It is green. B) It is made of paper. C) It is easily copied. D) Ownership is difficult to prove.
D
Greenharbour, Inc. purchased a working oil well for $2,500,000. This well was expected to produce 700,000 barrels of oil over its useful life. During the year, Greenharbour extracted 260,000 barrels of oil, and sold them for $75 per barrel. Assume the company incurred $7,700,000 in operating expenses during the year. Based on this information, how much income would Greenharbour report for the year? (A) $11,800,000 (B) $10,800,000 (C) $12,000,000 (D) $10,871,800
D
In a company's bank reconciliation, an outstanding check is a check that: A) Has been written for an amount that is greater than the balance in the account holder's bank account. B) Has been issued by the company but has not been presented to the bank for payment. C) Is guaranteed for payment by the bank. D) Has not yet been presented by the payee to the bank for payment and has not been reported on the bank statement.
D
Independent auditors are: A) Responsible for discovering fraud. B) Responsible for providing absolute assurance that financial statements are free of errors. C) Responsible for providing reasonable assurance that financial statements are free of misstatements. D) Responsible for providing reasonable assurance that financial statements are free of material misstatements.
D
Mickey's Luxury Auto Emporium, Inc. sells fine, luxurious automobiles that are priced above $75,000. What method of inventory cost flow would be appropriate for Mickey's? A) FIFO B) Weighted Average C) LIFO D) Specific Identification
D
A company owns an asset that had an original cost of $65,000. The asset had an estimated useful life of 12 years and an estimated salvage value of $5,000. The company uses the straight line method of depreciation. After 7 years, the company sells the asset for $27,000 cash. What would be the amount of gain or loss on the sale? (A) $3,000 Loss (B) $3,000 Gain (C) $2,000 Loss (D) $2,000 Gain
A
As of January 1, 2012, Nabisco Corporation had 100 units in inventory at $25 each. It purchased 200 units at $28 each during the year. A total of 250 units were sold at $45 during the year. Using FIFO, the inventory balance as of December 31, 2012 was: A) $1,400 B) $1,250 C) $2,250 D) $1,500
A
Narvell's Nouvelle Cuisine, Inc., a trendy new eatery, recently purchased the building that serves as its location, adjacent land to be used as a parking lot, and a commercial grade oven and griddle combination from the former occupant and owner of the building, Bob's Burger Barn. The purchase price of all the assets involved was $1,200,000. The assets purchased were appraised as follows: Land $300,000 Building 1,100,000 Oven 100,000 Total $1,500,000 Based on this information alone, how much of the purchase price will be allocated to land? (A) $240,000 (B) $80,400 (C) $300,000 (D) $235,000
A
The fair value of the assets and liabilities for Ziegler's Restaurant were $450,000 and $160,000, respectively. If Locante Company pays $325,000 cash for the restaurant and assumes its existing liabilities, what amount of goodwill would Locante record? (A) $35,000 (B) $285,000 (C) $125,000 (D) $165,000
A
Which of the following assets is considered to have an indefinite useful life? (A) Goodwill (B) Patent (C) Copyright (D) Franchises
A
Which of the following statements is true? A) Companies generally do not expect to collect the full face value of their accounts receivable. B) Companies always collect the full face amount of their receivables. C) Companies are not allowed to make any provision against potential losses due to the inability to collect what is due to them totally. D) None of the above
A
Which of the following would be classified as a long-term operational asset? (A) Delivery Truck (B) Preferred Stock (C) Cash (D) Inventory
A
Which of the following would produce the lowest net income in an inflationary environment? A) LIFO B) Weighted Average C) FIFO D) Specific Identification
A
As of January 1, 2012, Nabisco Corporation had 100 units in inventory at $25 each. It purchased 200 units at $28 each during the year. A total of 250 units were sold at $45 during the year. Using LIFO, the inventory balance as of December 31, 2012 was: A) $1,400 B) $1,250 C) $2,250 D) $1,500
B
Conoco Corporation purchased a truck that cost $26,000. The company expected to drive the truck 100,000 miles. The truck had an estimated salvage value of $2,000. If the truck is driven 24,000 miles in the current accounting period, which of the following amounts should be recognized as depreciation expense? (A) $4,800 (B) $5,760 (C) $6,240 (D) $7,500
B
Marla Company's unadjusted book balance at November 30, 2012 is $13,757. The following information is available Outstanding checks $2,400 Deposits in Transit 3,750 Bank charges 35 Receivable collected by Bank 4,000 Bank Balance, November 30, 2012 16,372 What is the amount of Marla's true cash balance? A) $17,757 B) $17,722 C) $13,972 D) $20,122
B
On January 1, 2012, Altgeld Industries, Inc. purchased an asset costing $36,000. The asset had an estimated useful life of 6 years and a salvage value of $3,000. The company depreciates its assets on a straight line basis. On January 1, 2015, the company spends $14,000 to enhance the quality of the asset. Based on this information, depreciation expense for 2015 would be: (A) $30,500 (B) $10,167 (C) $19,500 (D) $16,500
B
A company purchases an asset on January 1, 2012 for $162,000. The asset had, at that time, an estimated life of 10 years with an estimated salvage value of $12,000. After 6 years, the company revises its estimate of salvage value to $6,000. Based on this information, what would be the amount of depreciation expense for 2018? (A) $16,000 (B) $15,000 (C) $16,500 (D) $15,500
C
An effective system of internal control is designed to detect the following except for: A) Fraud. B) Theft. C) Collusion. D) Irregularities.
C
In establishing a strong internal control system at your company, you should be concerned with, among other things, administrative controls. These would include: A) Accuracy in accounting procedures. B) Bank reconciliations. C) Performance Evaluations. D) Camera Surveillance.
C
Rielle Corp.'s unadjusted bank balance as of October 31, 2012 is $34,300. A review of the October bank statement and the cash account activity reveals the following: Outstanding checks $3,750 Unadjusted book balance, 10/31 28,640 Bank charges, October 40 Deposits in Transit 10,625 Bank collection of account receivable 13,750 NSF check written by Rielle's customer 1,175 Based on this information, what is Rielle's true cash balance as of October 31, 2012? A) $44,925 B) $32,350 C) $27,425 D) $41,175
D
The following are strong control measures over cash receipts except for: A) A record of all cash collections should be prepared immediately upon receipt. B) Cash receipts should be deposited in a bank as soon as possible. C) Use of pre-numbered documents. D) There should be a significant amount of cash on hand in order to avoid writing checks.
D
The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will have which of the following effects? A) Decrease total assets B) Increase total assets C) Increase total equity D) None of the above
D
When using the Percent of Receivables method to estimate Uncollectible Account expense, the amount of expense recognized would be equal to: A) a percentage of revenue. B) a percentage of receivables. C) a percentage of credit sales minus a percent of revenue. D) a percentage of total receivables minus the balance in the allowance account.
D
Which of the following measurements would not be affected by the choice of depreciation methods? (A) Asset turnover ratio (B) Debt to asset ratio (C) Times interest earned ratio (D) Current ratio
D