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Indicate whether the statement is true or false.
1. Estimated federal income tax must be paid in monthly installments.
a.
True
b.
False
2. The tax rate associated with an income tax bracket is called the effective tax rate.
a.
True
b.
False
3. The book value of a plant asset is its original cost minus accumulated depreciation.
a.
True
b.
False
4. Functional depreciation should be considered in estimating the useful life of computer equipment.
a.
True
b.
False
5. Depreciation expense is recorded on all plant assets.
a.
True
b.
False
6. The difference between an asset’s account balance and its related contra account is called book value.
a.
True
b.
False
7. Cash and other assets expected to be exchanged for cash or consumed within a year are called liquid assets.
a.
True
b.
False
8. The Prepaid Insurance account must be adjusted at the end of a fiscal period because the account balance does not
reflect the value of the insurance premiums that expired during the period.
a.
True
b.
False
9. A business can use any 12-month period for reporting its financial performance.
a.
True
b.
False
10. The annual straight-line depreciation of equipment costing $7,000.00 with a salvage value of $1,000.00 and a useful
life of 5 years would be $1,400.00.
a.
True
b.
False
11. Annual straight-line depreciation expense of a plant asset is calculated as the original cost of the plant asset divided by
the years of estimated useful life.
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a.
True
b.
False
12. For a business using the periodic inventory method, the balance of Merchandise Inventory in the unadjusted trial
balance represents the beginning balance plus all purchases of merchandise made in the fiscal period.
a.
True
b.
False
13. The marginal tax rate increases as the net income before federal income tax increases.
a.
True
b.
False
14. The Income Summary account is one of the accounts used to adjust the Merchandise Inventory account at the end of
the fiscal period.
a.
True
b.
False
15. For a business using the periodic inventory method, purchases are recorded in the Merchandise Inventory account.
a.
True
b.
False
16. The Internal Revenue Service sets the amounts and rates of the tax brackets used to calculate federal income tax
expense.
a.
True
b.
False
17. The value of the insurance coverage used is recorded as a debit to Insurance Expense.
a.
True
b.
False
18. The total amount of depreciation expense that has been recorded since the purchase of a plant asset is called
accumulated depreciation.
a.
True
b.
False
19. Revenue earned in one fiscal period but not received until a later fiscal period is called accrued revenue.
a.
True
b.
False
20. All accounts are listed on the unadjusted trial balance regardless of whether there is a balance or not.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
21. The adjustment for unpaid federal income tax includes a(n)
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a.
expense and a liability account.
b.
expense account only.
c.
expense account and a temporary equity account.
d.
liability account only.
22. The adjustment unique to merchandising businesses adjusts
a.
Accounts Receivable.
b.
Accumulated Depreciation.
c.
Merchandise Inventory.
d.
Prepaid Insurance.
23. Depreciation expense is calculated using all of the following amounts except
a.
fair market value.
b.
estimated salvage value.
c.
estimated useful life.
d.
original cost.
24. Recording depreciation expenses is an application of the accounting concept
a.
Accounting Period Cycle.
b.
Adequate Disclosure.
c.
Matching Expenses with Revenue.
d.
Historical Cost.
25. A physical inventory is always conducted at the end of each
a.
week.
b.
month.
c.
fiscal year.
d.
none of these.
26. The journal entry to adjust Merchandise Inventory when beginning merchandise inventory is $125,000.00 and ending
merchandise inventory is $115,000.00 would be
a.
debit Merchandise Inventory, $10,000.00 and credit Income Summary, $10,000.00.
b.
debit Income Summary, $10,000.00 and credit Merchandise Inventory, $10,000.00.
c.
debit Merchandise Inventory, $115,000.00 and credit Income Summary, $115,000.00.
d.
debit Income Summary, $115,000.00 and credit Merchandise Inventory, $115,000.00.
27. The total amount of depreciation expense that has been recorded since the purchase of a plant asset is called
a.
book value.
b.
accumulated depreciation.
c.
salvage value.
d.
net realizable value.
28. The amount of the adjustment to Allowance for Uncollectible Accounts when the account balance is a $400.00 debit
and $5,000.00 of accounts receivable is estimated to be uncollectible would be
a.
$400.00.
b.
$4,600.00.
c.
$5,000.00.
d.
$5,400.00.
29. Recording depreciation expenses is an application of the accounting concept
a.
Accounting Period Cycle.
b.
Adequate Disclosure.
c.
Matching Expenses with Revenue.
d.
Historical Cost.
30. Accrued interest income on notes receivable is calculated using all of the following information except the
a.
annual interest rate.
b.
principal.
c.
term of the note.
d.
date of the note.
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