When originally purchased, a vehicle had an estimated useful life of 8 years. The
vehicle cost $25,000 and its estimated residual value is $3,000. After 3 years of
straight-line depreciation, the asset’s total estimated useful life was revised from 8 years
to 5 years and there was no change in the estimated residual value. The Depreciation
Expense in year 4 is:
A) $6,875.
B) $4,400.
C) $4,125
D) $1,650.
Use the information above to answer the following question. Eaton Electronics uses the
FIFO method. What is the cost of its ending inventory?
A) $13,850
B) $13,800
C) $13,760
D) $13,600
Which of the following statements about inventory turnover analysis is not correct?
A) In making comparisons of financial statements, it is desirable to compare data
calculated using the same inventory costing methods.
B) The inventory turnover ratio and days to sell measure will be affected by the cost
flow assumptions used, which causes problems for financial statements users.
C) Inventory turnover also can vary significantly between companies within the same
industry.
D) The inventory turnover and days to sell ratios are consistent among companies in
different industries.
Many companies use accelerated depreciation in computing taxable income because:
A) it reports higher net income in the early years as compared to other methods.
B) it is required by IFRS.
C) it is easier than straight-line deprecation.
D) it postpones tax payments until later years because it lowers taxable income in the
early years.
Which of the following statements regarding posting and classification is correct?
A) Posting journal entries involves copying the dollar amounts from the ledger into the
journal.
B) If a $100 debit is erroneously posted to an account as a $100 credit, the accounts will
be out of balance by $100.
C) If a $5,000 credit to a stockholders’ equity account is misclassified as a $5,000 credit
to a liability, the accounting equation will still balance.
D) If a purchase of supplies on account for $100 is recorded with a debit to Supplies of
$10 and a credit to Accounts Payable for $10, the accounting equation will not balance.
Which of the following would be classified as a noncurrent liability on the balance
sheet at December 31, Year 1?
A) An accounts payable due on January 30, Year 2
B) A notes payable due November 30, Year 2
C) A note receivable that matures on April 30, Year 3
D) A notes payable due January 15, Year 3
Account titles in the chart of accounts are:
A) general purpose and do not indicate the nature of the account.
B) consistent with those used by other companies.
C) linked to account numbers.
D) the names mandated for use by the FASB.
The book value of a long-lived tangible asset is equal to:
A) its acquisition cost less the accumulated depreciation from the acquisition date to the
balance sheet date.
B) its acquisition cost plus accumulated depreciation from the acquisition date to the
balance sheet date.
C) the amount that could be obtained for the asset on the balance sheet date if it were
sold.
D) the annual cost of carrying the asset in inventory.
Park & Company was recently formed with a $5,000 investment in the company by
stockholders in exchange for common stock. The company then borrowed $2,000 from
a local bank, purchased $1,000 of supplies on account, and also purchased $5,000 of
equipment by paying $2,000 in cash and signing a promissory note for the balance.
Based on these transactions, the company’s total assets are:
A) $7,000.
B) $9,000.
C) $10,000.
D) $11,000.
Contra-revenue accounts:
A) are balance sheet accounts.
B) increase net income.
C) are increased with a debit.
D) increase net sales.
Use the information above to answer the following question. What journal entry will
record the purchase of the stock on January 20?
A) Debit Treasury Stock for $8,000, debit Additional Paid-in Capital for $24,000, and
credit Cash for $32,000
B) Debit Treasury Stock and credit Cash for $32,000
C) Debit Treasury Stock for $8,000, debit Common Stock for $24,000, and credit Cash
for $32,000
D) Debit Common Stock and credit Cash for $32,000
Dividends are reported on the:
A) income statement.
B) balance sheet.
C) statement of retained earnings.
D) income statement and balance sheet.
The statement of cash flows for a company contained the following:
· Cash flows from operating activities in the amount of $29,000
· Cash flows from investing activities in the amount of$30,000
· Cash flows from (used by) financing activities in the amount of ($45,000)
What was the change in cash for the period?
A) $14,000 increase
B) $15,000 increase
C) $14,000 decrease
D) $15,000 decrease