Which of the following is not an amount that is needed to calculate straight-line
depreciation?
A) The cost of the asset
B) An estimate of the asset’s useful economic life to the company
C) The estimated amount that the company will receive when it disposes of the asset
D) The cost the company will be required to incur to replace the asset
The fixed asset turnover ratio measures the:
A) useful life of long-lived assets.
B) the average difference between book value and disposal value of fixed assets.
C) useful life of intangible assets.
D) efficiency with which the investment in fixed assets produces revenue.
The right to exclude others from making or using an invention is a:
A) patent.
B) copyright
C) franchise.
D) licensing right.
The perpetual inventory method of tracking inventory is considered superior to the
periodic method because the perpetual method:
A) makes calculations easier and less technology can be deployed.
B) tells what inventory a company should have at any point in time.
C) saves a company from ever having to count the goods in inventory.
D) is more consistent with how companies calculated inventory in the past.
The evaluation of the internal control system to determine whether it is working as
intended is referred to as:
A) the control environment.
B) information and communication.
C) risk assessment.
D) monitoring activities.
Your company pays $620,000 for a patent that has 10 years remaining. Each year, your
company should:
A) debit Amortization Expense for $62,000 and credit Accumulated Depreciation for
$62,000.
B) debit Intangible assets and credit Accumulated Amortization for an amount equal to
20% of book value.
C) debit Amortization expense for $62,000 and credit Patent for $62,000.
D) report no Amortization Expense because patents are not subject to amortization.
Cash had a beginning balance of $68,900. During the month, Cash was credited for
$16,000 and debited for $18,300. At the end of the month, the balance is:
A) $71,200 credit.
B) $71,200 debit.
C) $66,600 debit.
D) $66,600 credit.
To calculate the company’s income tax expense for the current period, it is necessary to
know the company’s:
A) operating revenue and tax bill from prior periods.
B) adjusted income (before income taxes) and the company’s tax rate.
C) operating expenses and revenue.
D) revenues, expenses, and dividends.
As of December 31, Frappe Company has a balance of $5,000 in accounts receivable.
Of this amount, $500 is past due and the remainder is not yet due. Frappe has a credit
balance of $45 in the Allowance for Doubtful Accounts. Frappe Company estimates its
bad debt losses using the aging of receivables method, with estimated bad debt loss
rates equal to 1% of accounts not yet due and 10% of past due accounts. How will the
Bad Debt Expense account be included in the required adjusting journal entry at
year-end?
A) Debit of $95
B) Credit of $95
C) Debit of $50
D) Credit of $50
A company’s revenue recognition policy:
A) affects the income statement but not the balance sheet.
B) defines when its revenue should be collected.
C) is usually described in the notes to a company’s financial statements.
D) states that revenues should not be recorded until payments are received from
customers.
In recording the acquisition cost of an entire business:
A) goodwill is recorded as the excess of cost over the fair value of identifiable net
assets.
B) assets are recorded at the seller’s book values.
C) goodwill, if it exists, is never recorded.
D) goodwill is recorded as the excess of cost over the book value of identifiable net
assets.
Daley Company uses the allowance method. At December 31, 2015, the company’s
balance sheet reports Accounts Receivable, Net in the amount of $17,000. On January
2, 2016, Daley writes off a $1,500 customer account balance when it becomes clear that
the customer will never pay. What is the amount of Accounts Receivable, Net after the
write-off?
A) $17,000
B) $1,500
C) $18,500
D) $15,500
The journal entry to establish a petty cash fund should include a debit to:
A) Cash and a credit to Petty Cash.
B) Petty Cash and a credit to Cash.
C) Petty Cash and a credit to Accounts Receivable.
D) Cash and a credit to Petty Cash Shortage.
Because LIFO uses older costs for inventory, in times of rising units costs:
A) LIFO results in a higher book value of inventory and lower inventory turnover ratio
than FIFO.
B) LIFO results in a lower book value of inventory and lower inventory turnover ratio
than FIFO.
C) LIFO results in a higher book value of inventory and higher inventory turnover ratio
than FIFO.
D) LIFO results in a lower book value of inventory and higher inventory turnover ratio
than FIFO.
A company that has a current ratio less than one cannot cover:
A) current liabilities with its current cash flow.
B) current expenses with its current sales revenue.
C) expenses with its current revenues.
D) current liabilities with its current assets.
If XYZ Company had $12 million in revenue and net income of $3 million, then its:
A) expenses must have been $15 million.
B) expenses must have been $9 million.
C) assets must have been $12 million.
D) assets must have been $3 million.
When a company issues stock to the public for the first time, the issuance is called a(n):
A) initial public offering (IPO).
B) first time issue (FTI).
C) seasoned new issue (SNI).
D) initial stock offering (ISO).
Which of the following would not be included in the cash and cash equivalents amount
reported on the balance sheet?
A) Money market funds
B) Checking accounts
C) Treasury bills
D) Notes receivable due in 90 days
The days-to-collect measures the:
A) number of days it takes to collect accounts receivable.
B) average number of times the firm completes the selling and collecting cycle during
the year.
C) average number of days for a customer’s payment to clear the banking system.
D) average number of days before the company receives a customer’s payment and uses
the cash to re-order merchandise.