1) the asset turnover ratio is computed by dividing
a.net income by ending total assets
b.net income by average total assets
c.net sales by ending total assets
d.net sales by average total assets
2) which of the following is a reason why the specific identification method may be
considered ideal for assigning costs to inventory and cost of goods sold?
a.the potential for manipulation of net income is reduced
b.there is no arbitrary allocation of costs
c.the cost flow matches the physical flow
d.able to use on all types of inventory
3) laventhol corporation had accounts receivable of $100,000 at 1/1. the only
transactions affecting accounts receivable were sales of $1,200,000 and cash collections
of $1,150,000. the accounts receivable turnover is
a.8.0
b.8.8
c.9.6
d.12.0
4) how can accounting for bad debts be used for earnings management?
a.determining which accounts to write-off
b.changing the percentage of sales recorded as bad debt expense
c.using an aging of the accounts receivable balance to determine bad debt expense
d.reversing previous write-offs
5) which of the following disclosures is required for a change from
sum-of-the-years-digits to straight-line?
a.the cumulative effect on prior years, net of tax, in the current retained earnings
statement
b.restatement of prior years income statements
c.recomputation of current and future years depreciation
d.all of these are required.
6) when the cost-of-goods-sold method is used to record inventory at market
a.there is a direct reduction in the selling price of the product that results in a loss being
recorded on the income statement prior to the sale
b.a loss is recorded directly in the inventory account by crediting inventory and debiting
loss on inventory decline
c.only the portion of the loss attributable to inventory sold during the period is recorded
in the financial statements
d.the market value figure for ending inventory is substituted for cost and the loss is
buried in cost of goods sold
7) in a period of rising prices, the inventory method which tends to give the highest
reported inventory is
a.fifo
b.moving average
c.lifo
d.weighted-average
8) jonas won a lottery that will pay him $200,000 at the end of each of the next twenty
years. zebra finance has offered to purchase the payment stream for $2,718,000. what
interest rate (to the nearest percent) was used to determine the amount of the payment?
a.7%
b.6%
c.5%
d.4%
9) consider each of the items below. place the proper letter in the blank space provided
to indicate the nature of the account or accounts to be debited when recording each
transaction using the preferred accounting treatment. prepayments should be recorded
in balance sheet accounts. disregard income tax considerations unless instructed
otherwise.
a.asset(s) only
b.accumulated amortization, depletion, or depreciation only
c.expense only
d.asset(s) and expense
e.some other account or combination of accounts
1>a motor in one of north companys trucks was overhauled at a cost of $600. it is
expected that this will extend the life of the truck for two years.
2>machinery which had originally cost $130,000 was rearranged at a cost of $450,
including installation, in order to improve production.
3>orlando company recently purchased land and two buildings for a total cost of
$35,000, and entered the purchase on the books. the $1,200 cost of razing the smaller
building, which has an appraisal value of $6,200, is recorded.
4>jantzen company traded its old machine with a net book value of $3,000 plus cash of
$7,000 for a new one which had a fair market value of $9,000.
5>jim parra and mary lawson, maintenance repair workers, spent five days in unloading
and setting up a new $6,000 precision machine in the plant. the wages earned in this
five-day period, $480, are recorded.
6>on june 1, the milton hotel installed a sprinkler system throughout the building at a
cost of $13,000. as a result the insurance rate was decreased by 40%.
7>an improvement, which extended the life but not the usefulness of the asset, cost
$6,000.
8>the attic of the administration building was finished at a cost of $3,000 to provide an
additional office.
9>in march, the lyon theatre bought projection equipment on the installment basis. the
contract price was $23,610, payable $5,610 down, and $2,250 a month for the next
eight months. the cash price for this equipment was $22,530.
10>lambert company recorded the first years interest on 6% $100,000 ten-year bonds
sold a year ago at 94. the bonds were sold in order to finance the construction of a
hydroelectric plant. six months after the sale of the bonds, the construction of the
hydroelectric plant was completed and operations were begun. (only cash interest, and
not discount amortization, is to be considered.)
10) ifrs allows reversal of impairment losses when
a.the reversal is greater than the amount of the original impairment
b.the reversal falls in a subsequent fiscal year of the company’s operations
c.there has been a change in economic conditions or in the expected use of the asset
d.reversal of impairment losses is never allowed