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GB 518 Unit 4 Quiz
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GB 518 Unit 4 Quiz

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GB 518 Quiz 4

 

 

GB518 Financial Accounting Principles and Analysis

 

1.         Question :        A depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(n):

 

                                     Accelerated depreciation method

 

                                     Book value depreciation method

 

                                     Straight-line depreciation method

 

                                     Units-of-production depreciation method

 

                                     Unrealized depreciation method

 

 

 

Question 2.      Question :        A 90-day note issued on April 20 has a maturity date of:

 

                                     July 17

 

                                     July 18

 

                                     July 19

 

                                     July 20

 

                                     July 21

 

 

Question 3.      Question :        The buyer who pays cash for an account receivable referred to as a:

 

                                     Payor

 

                                     Pledgor

 

                                     Factor

 

                                     Payee

 

                                     Pledgee

 

 

 

Question 4.      Question :        The maturity date of a note receivable:

 

                                     Is the day of the credit sale

 

                                     Is the day the note was signed

 

                                     Is the day the note is due to be paid

 

                                     Is the date of the first payment

 

                                     Is the last day of the month

 

 

           

Question 5.      Question :        Cardco Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 5 year life. What is the total depreciation expense for the current year?

 

                                     $1,900.00

 

                                     $7,600.00

 

                                     $2,533.33

 

                                     $2,800.00

 

                                     $3,166.67

 

 

Question 6.      Question :        A copyright:

 

                                     Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years

                                     Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 17 years

                                     Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years

                                     Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately

                                     Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years

 

 

Question 7.      Question :        The interest accrued on $3,600 at 7% for 60 days is:

 

                                     $36

 

                                     $42

 

                                     $252

 

                                     $180

 

                                     $420

 

           

                       

 

Question 8.      Question :        A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

 

                                     2 years

 

                                     5 years

 

                                     7 years

 

                                     8 years

 

                                     10 years

 

 

Question 9.      Question :        Obsolescence:

 

                                     Occurs when an asset is at the end of its useful life

 

                                     Refers to a plant asset that is no longer useful in producing goods and services

                                     Refers to the insufficient capacity of a company's plant assets to meet the company's productive demands

                                     Occurs when an asset's salvage value is less than its replacement cost

                                     Does not affect plant assets

 

 

Question 10.    Question :        Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

 

                                     Coke has the better turnover for both years

 

                                     Pepsi has the better turnover for both years

 

                                     Coke's turnover is improving

 

                                     Coke's credit policies are too loose

 

                                     Coke is collecting its receivables more quickly than Pepsi in both years

 

 

Question 11.    Question :        A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover is equal to:

 

                                     0.82

 

                                     0.90

 

                                     1.09

 

                                     1.11

 

                                     1.26

 

 

 

Question 12.    Question :        A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1, 2010. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2010?

 

                                     $1,000

 

                                     $1,333

 

                                     $1,533

 

                                     $4,000

 

                                     $4,600

 

 

 

Question 13.    Question :        A credit sale of $2,500 to a customer would result in:

 

                                     A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger

                                     A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger

                                     A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable ledger

                                     A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable ledger

                                     A credit to Sales and a credit to the customer's account in the accounts receivable ledger

 

 

           

                       

Question 14.    Question :        Amortization:

 

                                     Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life

                                     Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use

                                     Is the process of allocating the cost of natural resources to periods when they are consumed

                                     Is an accelerated form of expensing an asset's cost

 

                                     Is the same as depletion

 

 

 

Question 15.    Question :        A company's annual accounting period ends on September 30. During the current year a depreciable asset which cost $16,000 was purchased on January 1. The asset has a $2,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 4-year life. What is the total depreciation expense for the current year?

 

                                     $4,000

 

                                     $3,000

 

                                     $3,500

 

                                     $2,625

 

                                     $875

 

           

Question 16.    Question :        On December 31, 2010, Stable Company sold a piece of equipment that was purchased on January 1, 2005. The equipment originally cost $820,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

 

                                     $230,000 Gain

 

                                     $25,000 Loss

 

                                     $25,000 Gain

 

                                     $73,750 Gain

 

                                     . $0; no gain or loss

 

 

 

Question 17.    Question :        Cardco Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 5 year life. What is the total depreciation expense for the current year?

 

                                     $1,900.00

 

                                     $7,600.00

 

                                     $2,533.33

 

                                     $2,800.00

 

                                     $3,166.67

 

 

Question 18.    Question :        Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is:

 

                                     0.90

 

                                     10.1

 

                                     36.1

 

                                     50.0

 

                                     3,686

 

 

Question 19.    Question :        Depreciation:

 

                                     Measures the decline in market value of an asset

 

                                     Measures physical deterioration of an asset

 

                                     Is the process of allocating to expense the cost of a plant asset

 

                                     Is an outflow of cash from the use of a plant asset

 

                                     Is applied to land

 

 

 

Question 20.    Question :        Plant assets are:

 

                                     Tangible assets used in the operation of a business that have a useful life of more than one accounting period

                                     Current assets

 

                                     Held for sale

 

                                     Intangible assets used in the operations of a business that have a useful life of more than one accounting period

                                     Tangible assets used in the operation of business that have a useful life of less than one accounting period

 

 

Question 21.    Question :        Many companies use accelerated depreciation in computing taxable income because:

 

                                     It is required by the tax rules

 

                                     It is required by financial reporting rules

 

                                     It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due

                                     Using it causes a company to use higher income in the early years of the asset's useful life

                                     The results are identical to straight-line depreciation

 

 

Question 22.    Question :        A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

 

                                     $0.75

 

                                     $0.625

 

                                     $0.875

 

                                     $6.00

 

                                     $8.00

 

 

Question 23.    Question :        A promissory note received from a customer in exchange for an account receivable:

 

                                     Is a cash equivalent for the recipient

 

                                     Is an account receivable for the recipient

 

                                     Is a note receivable for the recipient

 

                                     Is a short-term investment for the recipient

 

                                     Is a note payable for the recipient

 

 

Question 24.    Question :        The matching principle requires:

 

                                     That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user

                                     The use of the direct write-off method for bad debts

 

                                     The use of the allowance method of accounting for bad debts

 

                                     That bad debts be disclosed in the financial statements

 

                                     That bad debts not be written off

 

 

 

Question 25.    Question :        Extraordinary repairs:

 

                                     Are revenue expenditures

 

                                     Extend an asset's useful life beyond its original estimate

 

                                     Are cred

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