BBK quiz 15-19

Created by nkirn 

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Which of the following statements is not correct?
A) The use of the direct charge-off method of recording losses from uncollectible accounts usually results in the balance in the Accounts Receivable account being overstated.
B) The direct charge-off method of recording losses from uncollectible accounts is the method required by Federal income tax laws.
C) The direct charge-off method of recording losses from uncollectible accounts is an application of the matching principle.
D) All of the above statements are correct.

c

Which of the following statements is not correct?
A) The allowance method involves anticipating losses from uncollectible accounts by recognizing an expense for these losses before the actual accounts are written off.
B) The adjusting entry to record the estimated loss from uncollectible accounts includes a credit to the Accounts Receivable account.
C) Losses from uncollectible accounts can be estimated by analyzing sales or accounts receivable.
D) The balance of Uncollectible Accounts Expense account appears among the operating expenses on the income statement.

B

The adjusting entry to record estimated losses from uncollectible accounts consists of a
A) debit to the Uncollectible Accounts Expense account and a credit to the Accounts Receivable.
B) debit to the Uncollectible Accounts Expense account and a credit to the Allowance for Doubtful Accounts account.
C) debit to the Allowance for Doubtful Accounts account and a credit to the Accounts Receivable account.
D) debit to the Accounts Receivable account and a credit to the Allowance for Doubtful Accounts account.

B

A firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts to be one-half of one percent (or 0.5%) of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A) $1,200.
B) $1,500.
C) $1,800.
D) $3,000.

B

It is necessary to take the end-of-period unadjusted balance in the Allowance for Doubtful Accounts into account before calculating the dollar amount of the adjusting entry when the
A) percentage of total accounts receivable method is used.
B) percentage of net credit sales method is used.
C) aging the accounts receivable method is used.
D) total accounts receivable or aging the accounts receivable methods is used.

D

When the allowance method is used, the entry to record the write off of a customer's account would include a
A) debit to the Accounts Receivable account and a credit to the Uncollectible Accounts Expense account.
B) debit to the Uncollectible Accounts Expense account and a credit to the Accounts Receivable account.
C) debit to the Allowance for Doubtful Accounts account and a credit to the Accounts Receivable account.
D) debit to the Uncollectible Accounts Expense account and a credit to the Allowance for Doubtful Accounts account

C

When the allowance method is used, the entry to record the collection of an account that has been previously written off would include a
A) debit to the Accounts Receivable account and a credit to the Allowance for Doubtful Accounts account.
B) debit to the Uncollectible Accounts Expense account and a credit to the Accounts Receivable account.
C) debit to the Allowance for Doubtful Accounts account and a credit to the Accounts Receivable account.
D) debit to the Uncollectible Accounts Expense account and a credit to the Allowance for Doubtful Accounts account.

A

When the direct charge-off method is used, the entry to record the write off of a customer's account would include a
A) debit to the Accounts Receivable account and a credit to the Uncollectible Accounts Expense account.
B) debit to the Uncollectible Accounts Expense account and a credit to the Accounts Receivable account.
C) debit to the Allowance for Doubtful Accounts account and a credit to the Accounts Receivable account.
D) debit to the Uncollectible Accounts Expense account and a credit to the Allowance for Doubtful Accounts account.

B

When the direct charge-off method is used and payment is received in a period subsequent to that in which an account was charged off, the entry would include a
A) debit to the Accounts Receivable account and a credit to the Uncollectible Accounts Expense account.
B) debit to the Accounts Receivable account and a credit to the Uncollectible Accounts Recovered account.
C) debit to the Allowance for Doubtful Accounts account and a credit to the Accounts Receivable account.
D) debit to the Uncollectible Accounts Expense account and a credit to the Allowance for Doubtful Accounts account.

B

Common internal controls for accounts receivable include the following except
A) authorizing all credit sales.
B) aging the accounts receivable if the aging the accounts receivable method is used to record the estimated expense from uncollectible accounts receivable.
C) approving the write-off of accounts by authorized individuals only, and making the approvals in writing.
D) investigating and taking appropriate action on past due accounts.

B

A) To be considered a negotiable instrument, a promissory note must specify an interest rate.
B) The amount shown on a note is called the face value.
C) A company that issued a 6-month note payable would report its face value on the balance sheet as a long-term liability.
D) All of the above statements are correct.

B

How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year?
A) $300.
B) $450.
C) $900.
D) $1,800.

A

The total that must be paid when a note becomes due is known as the
A) principle.
B) face value.
C) note value.
D) maturity value.

D

A 30-day note dated October 15, would be due on November
A) 14.
B) 15.
C) 16.
D) 17.

A

A one-month note dated October 15, would be due on November
A) 14.
B) 15.
C) 16.
D) 17

B

A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. The entry to record this transaction would include a
A) debit to the Equipment account for $6,000 and a credit to the Notes Payable account for $6,000.
B) debit to the Equipment account for $6,180, a credit to the Interest Expense account for $180, and credit to the Notes Payable account for $6,000.
C) debit to the Equipment account for $6,000, a debit to the Interest Expense account for $180, and a credit to the Notes Payable account for $6,180.
D) debit to the Equipment account for $6,000 and credit to the Accounts Payable account for $6,000.

A

On January 2, Centrum Company signed a $20,000, 12 percent, 90-day note payable with the bank. The note was issued at a discount. The entry to record this transaction would include a
A) debit to the Cash account for $20,000 and credit to the Notes Payable—Bank for $20,000.
B) debit to the Cash account for $20,000, a debit to the Interest Payable account for $600, and a credit to the Notes Payable—Bank for $20,600.
C) debit to the Cash account for $19,600, a debit to the Interest Expense account for $600, and a credit to the Notes Payable—Bank for $20,000.
D) debit to the Cash account for $20,600 and a credit to the Notes Payable—Bank for $20,600.

C

If a note is not paid at maturity and there are no arrangements for renewal, the note is said to be
A) a draft.
B) an acceptance.
C) discounted.
D) dishonored.

D

On August 1, Abbitt Inc. needed cash to pay some bills. Kim Abbitt decided to discount a 60-day, noninterest-bearing note receivable for $100,000 that the business had received from Peter Houghton on July 1. The maturity date of the note is August 30. On August 1, Abbitt discounts the note at First National Bank. The bank's discount rate is 12 percent. The proceeds received from the bank equal
A) $1,000.
B) $99,000.
C) $100,000.
D) $101,000.

C

Which of the following statements is not correct?
A) A draft is a written order that requires one party (a person or business) to pay a stated sum of money to another party.
B) A bank draft is a check written by a bank that orders another bank to pay the stated amount to a specific party.
C) A cashier's check is a draft on the issuing bank's own funds. Cashier's checks are sometimes used to pay bills.
D) A commercial draft is payable on presentation.

D

A firm that sells a single product had a beginning inventory of 4,000 units with a cost of $4 per unit and a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using the last-in, first out (LIFO) method of inventory valuation, the value of the ending inventory of 2,000 units is
A) $4,000.
B) $8,000.
C) $10,000.
D) $12,000.

B

A firm that sells a single product had a beginning inventory of 4,000 units with a cost of $4 per unit and a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using the first-in, first out (FIFO) method of inventory valuation, the value of the ending inventory of 2,000 units is
A) $4,000.
B) $8,000.
C) $10,000.
D) $12,000.

D

The specific identification method of inventory valuation is based on the
A) actual cost of each item of merchandise.
B) average cost of each item of merchandise.
C) earliest cost of each item of merchandise.
D) latest cost of each item of merchandise.

A

The weighted average cost of an inventory item is calculated by dividing the
A) sum of the unit cost on the purchase invoices by the number of units purchased.
B) cost of goods available for sale by the number of units on the ending inventory.
C) cost of goods available for sale by the number of units available during the period.
D) cost of goods sold by the number of units available during the period.

C

A matching of the most recent costs to revenue results from the use of the
A) LIFO method of inventory valuation.
B) FIFO method of inventory valuation.
C) average cost method of inventory valuation.
D) lower of cost or market method

A

The use of the FIFO method of inventory valuation results in
A) a matching of current inventory costs against sales revenue.
B) the most current costs in ending inventory.
C) a lowest reported net income in a time of rising prices.
D) a highest reported net income in a time of falling prices

B

The modifying convention of conservatism requires that inventory be presented on the balance sheet at
A) cost.
B) market value.
C) either cost or market value, whichever is lower.
D) average cost during the period.

C

The gross profit method of determining ending inventory cost
A) can be used without taking a physical count of merchandise.
B) provides accurate information about the number of units in inventory.
C) requires that a firm keep inventory and purchases data at retail value as well as at cost.
D) requires that the inventory be classified into groups of items of about the same rate of mark on.

A

The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $100,000 and the net sales were $80,000 up to the date of the fire. The accountant also determined that the company's normal gross profit rate is 40 percent of net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be
A) $60,000.
B) $52,000.
C) $32,000.
D) $20,000.

B

The merchandise available for sale cost a company $90,000 and was marked to sell at a retail price of $125,000. Sales during the period totaled $80,000. If the retail method is used, the estimated cost of the ending inventory is
A) $12,600.
B) $22,400.
C) $32,400.
D) $45,000.

C

A company purchased equipment for $16,000 cash. In addition, the company paid $1,000 to have the equipment delivered and $500 to have it installed. The cost of this asset for financial accounting purposes is
A) $16,000.
B) $17,000.
C) $17,500.
D) $16,500

C

The method of depreciation that results in the same amount of depreciation expense each year is the
A) units-of-output method.
B) straight-line method.
C) sum-of-the-years'-digits method.
D) declining-balance method.

B

A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the fifth year of the asset's useful life is
A) $1,480.
B) $2,592.
C) $10,000.
D) $20,000.

A

A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the sum-of-the-years'-digits (SYD) method, the depreciation expense for the first year of the asset's useful life is
A) $1,480.
B) $2,592.
C) $15,000.
D) $20,000.

C

Which of the following statements is not correct?
A) The treatments of many items of revenue and expense for income tax purposes differ greatly from those required under generally accepted accounting principles.
B) Some small businesses that do not have audits by certified public accountants may adopt some tax requirements as part of their financial accounting in order to avoid confusion and duplication of work.
C) Federal income tax rules allow taxpayers to choose between the depreciation rules of generally accepted accounting principles and those of the Modified Accelerated Cost Recovery System (MACRS).
D) Taxpayers can use the units-of-production depreciation method instead of MACRS.

C

Equipment asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of
A) a gain of $2,000.
B) a loss of $2,000.
C) a loss of $5,000.
D) neither a gain or a loss.

A

Assume that a business trades in an old cash register for a new one. Under the income tax method,
A) a gain may be recognized, but a loss cannot be recorded.
B) the cost of the new asset is recorded as the cash paid for the new asset.
C) the asset account is debited for the difference between the original cost of the old asset and the fair market value of the new asset.
D) the cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid.

D

The cost of an intangible asset (other than computer software) should be
A) immediately charged to expense if the cost was incurred to develop the intangible asset.
B) immediately charged to expense whether the intangible asset was developed internally or purchased.
C) recorded as an asset whose cost, like the cost of land, will not be allocated to expense.
D) charged to expense over the life of the intangible asset.

A

When intangibles that do not have estimable lives have been purchased,
A) the cost of purchasing the intangible asset should be immediately charged to expense.
B) the cost of purchasing the intangible asset should be amortized using the straight-line method.
C) the cost of purchasing the intangible asset should be charged to expense over its useful life.
D) an assessment must be made each year to estimate the value of the intangible.

D

Common internal controls for property, plant, and equipment include the following except
A) authorize and justify the purchase of all long-lived assets.
B) maintain an asset register listing all capital assets, their costs, acquisition dates, location, and any other useful information.
C) assign responsibility for safekeeping, maintaining, and operating each asset to a three separate individuals.
D) take a physical inventory periodically and compare it with the asset register and investigate any differences.

C

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