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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Sarbanes-Oxley was passed in response to which of the following? 1) A) The mounting government deficit B) The accounting scandals of WorldCom and Enron C) The stock market crash of 2002 D) The savings and loan bailout 2) Which is NOT a provision of Sarbanes-Oxley? 2) A) Those who commit securities fraud may be sentenced to 25 years in prison. B) Accounting firms are allowed to provide both audit services and a full range of consulting services to their public company clients. C) Auditors of public companies are under the scrutiny of the Public Company Accounting Oversight Board. D) Public companies must issue an internal control report evaluated by an outside auditor. 3) Which of the following items will NOT appear on the book side of the reconciliation? 3) A) The bank collected a note receivable of $1,000. B) A deposit was in transit. C) The bank charged a service fee of $20. D) A nonsufficient funds check of $75 was returned to the bank. 4) A check was written by a business for $205, but recorded in the cash payments journal as $502. How would this error be included on the bank reconciliation? 4) A) A deduction on the bank side B) An addition on the book side C) A deduction on the book side D) An addition on the bank side 5) A check of $75 deposited by a company was returned to the bank for nonsufficient funds. How would this information be included on the bank reconciliation? 5) A) An addition on the bank side B) A deduction on the bank side C) A deduction on the book side D) An addition on the book side 6) Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? 6) A) Decrease the book balance. B) Increase the bank statement balance. C) Decrease the bank statement balance. D) Increase the book balance. 7) The following information is available for Matt’s Unlimited Company for the current month. What is the adjusted book balance on the bank reconciliation? Book balance end of the month $5,575 Outstanding checks 584 Deposits in transit 2,500 Service charges 75 Interest revenue 25 7) A) $5,500 B) $7,466 C) $5,550 D) $5,525 1 8) A company received a bank statement showing a balance of $62,300. Reconciling items were outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjusted bank balance? 8) A) $69,350 B) $70,850 C) $60,850 D) $72,250 9) A company received a bank statement with a balance of $5,350. Reconciling items included a bookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, a service charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjusted bank balance? 9) A) $4,610 B) $5,016 C) $4,810 D) $4,636 10) Which of the following would be included in a journal to record an NSF check? 10) A) A debit to Accounts payable and a credit to Cash B) A debit to Miscellaneous expense and a credit to Cash C) A debit to Cash and a credit to Accounts receivable D) A debit to Accounts receivable and a credit to Cash 11) In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205. Which of the following is the MOST probable reason why the bank balance is larger than the book balance? 11) A) A deposit in transit was made at the end of the month. B) There are outstanding checks. C) The bank has deducted certain amounts for bank service charges. D) The company erroneously recorded a check for an amount less than actual. 12) The following information is available for Andersen Company for the month ending June 30, 2008. • Balance per the bank statement is $10,241.43. • Balance per books is $9,745.06. • Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 bank statement. • A deposit in transit of $5,113.40 had not been received by the bank when the bank statement was generated. • A bank debit memo indicated an NSF check in the amount of $79 written by Bruce Garrett to Andersen Company on June 13. • A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of $75 on June 20. • The bank statement indicated service charges of $35. What is the adjusted book balance? 12) A) $7,884.06 B) $11,109.69 C) $11,606.06 D) $7,971.29 2 13) Please refer to the following bank reconciliation: No journal entries are required for the reconciling items on the bank side because: 13) A) the adjusted balances on both sides are the same amounts. B) those transactions have already been recorded in the company ledger. C) those transactions are already included in the bank balance at June 30. D) the amounts are immaterial. 14) Please refer to the following information needed to reconcile the cash balance for Woods Paper Products. • A deposit of $5,794.62 is in transit. • Outstanding checks total $1,533.25. • The book balance is $5,695.62. • The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month’s rent. • The bank balance at February 28, 2008 was $16,500.25. • A deposit of $300 was credited by the bank for $3,000. • A customer’s check for $1,280 was returned for nonsufficient funds. • The bank service charge is $70. Which of the following journal entries is needed to adjust for the booking error? 14) A) Cash 13,716 Sales revenue 13,716 B) Booking error 1,524 Cash 1,524 C) Cash 13,716 Rent expense 13,716 D) Rent expense 15,240 Cash 1,524 3 15) Please refer to the following information needed to reconcile the cash balance for Woods Paper Products. • A deposit of $5,794.62 is in transit. • Outstanding checks total $1,533.25. • The book balance is $5,695.62. • The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month’s rent. • The bank balance at February 28, 2008 was $16,500.25. • A deposit of $300 was credited by the bank for $3,000. • A customer’s check for $1,280 was returned for nonsufficient funds. • The bank service charge is $70. Which of the following journal entries is needed to adjust for the NSF check? 15) A) Accounts payable 1,280 Cash 1,280 B) Cash 1,280 Sales revenue 1,280 C) NSF check 1,280 Cash 1,280 D) Accounts receivable 1,280 Cash 1,280 16) A company has a petty cash fund amount of $200. When replenished, it has petty cash receipts of $15 for gas expense, $23 for postage expense, $18 for supplies expense and $12 for miscellaneous expenses. In the journal entry, Cash would be credited for: 16) A) $42. B) $132. C) $200. D) $68. 17) A fund for petty cash of $200 has $17 remaining in cash, $3 in miscellaneous cash receipts and an additional $180 specific cash receipts. The debit to Cash short and over would be: 17) A) $180. B) $183. C) $0. D) $17. 18) A petty cash fund was established with a $250 balance. It currently has cash of $31 and petty cash tickets totaling $219. Which of the following would be included in the entry to replenish the fund? 18) A) A debit to petty cash for $31 B) A credit to cash in bank for $31 C) A credit to petty cash for $219 D) Debits to various expenses for $219 19) A petty cash fund was established with a $250 balance. It currently has cash of $31 and petty cash tickets totaling $219. Which of the following would be included in the entry to replenish the fund? 19) A) A debit to petty cash for $31 B) A credit to petty cash for $219 C) A credit to cash in bank for $219 D) A credit to cash in bank for $31 4 20) A petty cash fund was established with a $400 balance. It currently has cash of $15 and petty cash tickets as shown below. Travel expense $120 Office supplies $200 Equipment rental expense $70 The journal entry to replenish the account would be which of the following: 20) A) Credit Petty cash fund $5 B) Credit Cash short & over for $5 C) Debit to Cash short & over for $5 D) Debit Petty cash fund $5 21) Which of the following statements is TRUE? 21) A) Accounts receivable are liabilities. B) Notes receivable are always due in 30 days. C) Accounts receivable are more liquid than cash. D) Notes receivable are longer in term than accounts receivable. 22) Which of the following are the two methods of accounting for uncollectible receivables? 22) A) The allowance method and the liability method B) The asset method and the sales method C) The allowance method and the direct write-off method D) The direct write-off method and the liability method 23) Which of the following are the two methods of estimating uncollectible receivables? 23) A) The aging-of-accounts-receivable method and the percent-of-sales method B) The allowance method and the amortization method C) The direct write-off method and the percent-of-completion method D) The gross-up method and the direct write-off method 24) The Allowance for uncollectible accounts currently has a credit balance of $200. The company’s management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? 24) A) $2,675 B) $2,875 C) $3,075 D) $3,275 25) The allowance for uncollectible accounts currently has a credit balance of $200. The company’s management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? 25) A) $3,275 B) $2,875 C) $3,075 D) $2,675 26) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? 26) A) $14,100 B) $15,000 C) $14,900 D) $15,900 5 27) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? 27) A) $15,000 B) $15,900 C) $14,100 D) $14,900 28) The Allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible account expense reported on the income statement? 28) A) $14,100 B) $15,900 C) $14,900 D) $15,000 29) The Allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger, the company’s management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? 29) A) $15,000 B) $15,900 C) $14,100 D) $14,900 30) The following information is from the 2013 records of Armadillo Camera Shop: Accounts receivable, December 31, 2013 $20,000 (debit) Allowance for uncollectible accounts, December 31, 2013 prior to adjustment 600 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the amount of Uncollectible accounts expense? 30) A) $2,250 B) $7,000 C) $2,850 D) $3,450 31) The following information is from the 2013 records of Armadillo Camera Shop: Accounts receivable, December 31, 2013 $20,000 (debit) Allowance for uncollectible accounts, December 31, 2013 prior to adjustment 600 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $2,850 of accounts receivable will be uncollectible. Which of the following will be the amount of Uncollectible accounts expense? 31) A) $7,000 B) $2,250 C) $2,850 D) $3,450 6 32) A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart Art uses the percentage-of-sale method to account for uncollectible account expense, and has decided to use a factor of 2% for their year-end adjustment of uncollectible account expense. At the end of the year, what is the balance in Uncollectible account expense? 32) A) $1,450 B) $800 C) $250 D) $150 33) A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart Art uses the aging-of-accounts method to account for uncollectible account expense, and has calculated an amount of $200 as their estimate of uncollectible amounts at year-end. At the end of the year, what is the ending balance in the Allowance for uncollectible accounts? 33) A) $1,450 B) $200 C) $800 D) $150 34) At the beginning of 2014, Mark’s sales had the following ledger balances: During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of the year, Mark’s adjusted for uncollectible account expense using the aging-of-accounts method, and calculated an amount of $1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the Uncollectible account expense? 34) A) $4,300 B) $2,700 C) $5,400 D) $2,300 35) Which of the following entries would be used to account for uncollectible receivables using the direct write-off method? 35) A) Allowance for uncollectible accounts is debited and Uncollectible accounts expense is credited. B) Accounts receivable is debited and Uncollectible accounts expense is credited. C) Uncollectible accounts expense is debited and Allowance for uncollectible accounts is credited. D) Uncollectible accounts expense is debited and Accounts receivable is credited. 36) The following information is from the 2013 records of Armadillo Camera Shop: Accounts receivable, December 31, 2013 $20,000 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is determined by the direct write-off method. Which of the following will be the amount of Uncollectible accounts expense? 36) A) $3,450 B) $2,250 C) $7,000 D) $2,850 7 37) A company uses the direct write-off method to account for uncollectible receivables. Which of the following is included in the entry to write off an uncollectible account? 37) A) A debit to Allowance for uncollectible-accounts B) A credit to the customer’s Account receivable C) A credit to the Allowance for uncollectible accounts D) No entry is made to write off uncollectible accounts. 38) Charlton Sales has a receivable for $92 that they now deem to be uncollectible. Charlton uses the direct write-off method. Which of the following entries correctly records the write-off? 38) A) Allowance for uncollectible accounts 92 Accounts Receivable 92 B) Cash 92 Accounts receivable 92 C) Uncollectible accounts expense 92 Accounts receivable 92 D) Accounts receivable 92 Uncollectible accounts expense 92 39) What is the maturity value of a 3-month, 12% note for $20,000? 39) A) $20,000 B) $21,200 C) $20,600 D) $22,400 40) A company issues a 60-day, 12% note for $11,000. What is the principal amount? 40) A) $220 B) $10,780 C) $11,000 D) $11,220 41) On October 2, 2014, Allen Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. What is the journal entry to record the acceptance of the note? 41) A) Notes receivable 2,400 Accounts receivable 2,400 B) Notes receivable 2,400 Cash 2,400 C) Accounts receivable 2,400 Notes receivable 2,400 D) Cash 2,400 Sales revenue 2,400 42) On October 1, 2014, Allen Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. If the company accrues interest at year-end only, how much interest revenue should be accrued on December 31, 2014? 42) A) $80 B) $240 C) $60 D) $40 8 43) A note receivable was NOT paid at maturity. Which of the following will be included in the journal entry to record the dishonoring of the note at maturity? 43) A) A debit to Cash B) A debit to Accounts receivable C) A debit to Interest expense D) A debit to Uncollectible account expense 44) On September 1, 2013, Adirondac Marine Supplies made a loan to one of its customers. The customer signed a 6-month note for $1,500 at 10%. How much interest revenue did Adirondac record in the year 2013? 44) A) $150 B) $125 C) $50 D) $100 45) On December 1, 2014, Parsons Sales sold machinery to a customer for $2,000. The customer could not pay at the time of sale, but agreed to pay 9 months later, and sign a 9-month note at 12% interest. How much interest revenue was earned for the entire term of the note? 45) A) $90 B) $160 C) $75 D) $180 46) Assets are listed on the balance sheet in order of liquidity. Which of the following items reflects the normal order of liquidity? 46) A) Cash, Inventory, Notes receivable, Accounts receivable B) Notes receivable, Inventory, Accounts receivable, Cash C) Plant assets, Inventory, Notes receivable, Cash D) Cash, Accounts receivable, Inventory, Notes receivable 47) ABC receives a $9,000, 8%, 2-month note. The maturity value is: 47) A) $720. B) $9,120. C) $120. D) $9,720. 48) Which of the following is included in the cost of a plant asset? 48) A) Wages of workers who use the asset B) Amounts paid to ready the asset for its intended use C) Regular maintenance cost D) Normal repair cost 49) Which of the following would be expensed, rather than capitalized? 49) A) Addition to storage capacity B) Major engine overhaul C) Oil change and lubrication D) Modification for new use 50) A company’s accountant capitalizes a payment that should be recorded as an expense. Which of the following is TRUE? 50) A) Assets are overstated. B) Expenses are overstated. C) Liabilities are overstated. D) Revenue is overstated. 51) Roberts Construction Company paid $40,000 for equipment with a market value of $45,000. At which of the following amounts should the equipment be recorded? 51) A) $42,500 B) $5,000 C) $40,000 D) $45,000 52) A company purchased a used machine for $80,000. The machine required installation costs of $8,000 and insurance while in transit of $500. At which of the following amounts would the equipment be recorded? 52) A) $80,500 B) $80,000 C) $88,000 D) $88,500 9 53) Which of the following items should be depreciated? 53) A) Land B) Tangible property, plant, and equipment other than land C) Intangible property D) Natural resources 54) Which of the following items should NOT be depreciated, depleted, or amortized? 54) A) Land B) Tangible property, plant, and equipment other than land C) Natural resources D) Intangible property 55) Which of the following depreciation methods allocates a fixed amount of depreciation to miles driven, hours used, or some other measure of the asset’s utilization? 55) A) Straight-line B) Double-declining-balance C) Units-of-production D) Declining-balance 56) Which of the following properly describes accumulated depreciation? 56) A) Accumulated depreciation is a contra asset account. B) Accumulated depreciation is a contra equity account. C) Accumulated depreciation is a contra liability account. D) Accumulated depreciation is an expense account. 57) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is depreciation expense for 2013 if the company uses double-declining-balance depreciation? 57) A) $6,667 B) $12,000 C) $6,000 D) $13,333 58) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is depreciation expense for 2013 if the company uses straight-line depreciation? 58) A) $6,000 B) $13,333 C) $12,000 D) $6,667 59) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is depreciation expense for 2014 if the company uses straight-line depreciation? 59) A) $9,000 B) $10,000 C) $13,333 D) $6,000 10 60) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is the book value of the machine at the end of 2014 if the company uses straight-line depreciation? 60) A) $10,000 B) $17,778 C) $20,000 D) $28,000 61) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is depreciation expense for 2014 if the company uses units-of-production depreciation? 61) A) $9,000 B) $18,000 C) $10,000 D) $6,000 62) Lexis Company purchased equipment on January 1, 2012 for $35,500. The estimated useful life of the equipment was 7 years and the estimated residual value was $4,000. After using the straight-line method of depreciation for 3 years, the estimated useful life was revised to 9 years on January 1, 2015. How much is depreciation expense for 2015? 62) A) $2,000 B) $3,667 C) $2,444 D) $3,000 63) An asset costs $80,000 and has a salvage value of $7,000. It has a four-year life. Using double-declining-balance depreciation, Year 1 depreciation would be: 63) A) $40,000. B) $36,500. C) $20,000. D) $18,250. 64) On January 1, 2013, a company buys a truck for $42,000 cash. It has estimated residual value of $2,000, and an estimated life of 4 years, or 200,000 miles. Assume the company uses units-of-production depreciation. The truck drove 40,000 miles in 2013, 60,000 miles in 2014, 80,000 miles in 2015, and 20,000 miles in 2016. What is the depreciation rate? 64) A) $4.00/mile B) $0.21/mile C) $0.25/mile D) $0.20/mile 65) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $3,000 at the end of the fifth year? 65) A) $1,000 gain B) $2,000 loss C) $1,000 loss D) No gain or loss 66) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $9,000 at the end of the first year? 66) A) $1,000 gain B) No gain or loss C) $1,000 loss D) $2,000 loss 67) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $9,000 at the end of the second year? 67) A) No gain or loss B) $1,000 gain C) $1,000 loss D) $2,000 loss 11 68) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $4,500 at the end of the fourth year? 68) A) $1,500 gain B) $1,500 loss C) $500 gain D) No gain or loss 69) Which of the following items is included in the journal entry if a company sells equipment at a price greater than its book value? 69) A) A credit to Gain on sale of equipment B) A credit to Accumulated depreciation C) A debit to Loss on sale of equipment D) A debit to Equipment for its book value 70) Kelly Petroleum Products owns furniture that was purchased for $19,600. Accumulated depreciation is $17,300. The furniture was sold for $3,800. Which of the following is the correct entry to record the transaction? 70) A) Furniture 19,600 Cash 2,700 Gain on sale 5,000 Accumulated depreciation 17,300 B) Accumulated depreciation 17,300 Cash 3,800 Furniture 31,100 C) Accumulated depreciation 17,300 Cash 3,800 Gain on sale 1,500 Furniture 19,600 D) Furniture 19,600 Gain on sale 3,800 Cash 2,700 Accumulated depreciation 17,300 12 71) Kelly Petroleum Products owns fully depreciated furniture that was purchased for $26,500. The furniture had an estimated useful life of 8 years and an estimated residual value of $2,500. The furniture was sold for $2,700. Which of the following is the correct entry to record the transaction? 71) A) Furniture 2,000 Cash 2,700 Loss on sale 19,300 Accumulated depreciation 24,000 B) Accumulated depreciation 24,000 Cash 2,700 Gain on sale 200 Furniture 26,500 C) Accumulated depreciation 26,500 Cash 2,700 Gain on sale 2,700 Furniture 26,500 D) Furniture 26,500 Gain on sale 200 Cash 2,700 Accumulated depreciation 24,000 72) On September 1, 2012, Algernon Company sold a truck for $15,000 cash. The truck was originally purchased for $40,000, had an estimated salvage value of $4,000 and an estimated life of 6 years. Algernon had recorded depreciation of $30,000 through the end of 2011 using the straight-line method. Algernon had to update the depreciation prior to sale. After updating the depreciation, how much was the total accumulated depreciation on the truck? 72) A) $36,000 B) $34,250 C) $34,000 D) $34,440 73) A plant asset is fully depreciated when the book value is: 73) A) greater than the salvage value. B) equal to the salvage value. C) equal to the market value. D) greater than the market value. 74) Albatross Services scrapped a van. The van originally cost $40,000, had an estimated salvage value of zero, and an estimated life of 10 years. At the time it was scrapped, it had accumulated depreciation of $40,000. What was the effect of scrapping the van? 74) A) Gain of $2,000 B) Loss of $1,000 C) No gain or loss D) Loss of $2,000 75) Which of the following is NOT considered a plant asset? 75) A) Copyright B) Equipment C) Land D) Building 13 76) On January 1, 2012, Portwell Company purchased a patent for $200,000. They estimate a useful life of 4 years. What entry is needed at the end of the first year? 76) A) Loss on patents 50,000 Patents 50,000 B) Amortization expense – patents 50,000 Accumulated amortization 50,000 C) Amortization expense – patents 50,000 Patents 50,000 D) Patents 50,000 Amortization expense – patents 50,000 77) A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart Art uses the aging-of-accounts method to account for uncollectible account expense, and has calculated an amount of $200 as their estimate of uncollectible amounts at year-end. At the end of the year, what is the ending balance in Accounts receivable? 77) A) $36,000 B) $3,350 C) $4,000 D) $39,350 78) The bank recorded a $2,000 deposit as $200. How would this information be included on the bank reconciliation? 78) A) An addition on the bank side B) An addition on the book side C) A deduction on the bank side D) A deduction on the book side 79) The bank collected a note receivable of $1,000. How would this information be included on the bank reconciliation? 79) A) A deduction on the book side B) An addition on the bank side C) An addition on the book side D) A deduction on the bank side 80) Which of the following is NOT one of the purposes of internal control? 80) A) To encourage employees to follow company policy B) To ensure accurate, reliable accounting records C) To guarantee that a business makes a profit D) To safeguard the company’s assets 14

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Sarbanes-Oxley was passed in response to which of the following? 1) A) The mounting government deficit B) The accounting scandals of WorldCom and Enron C) The stock market crash of 2002 D) The savings and loan bailout

2) Which is NOT a provision of Sarbanes-Oxley? 2) A) Those who commit securities fraud may be sentenced to 25 years in prison. B) Accounting firms are allowed to provide both audit services and a full range of consulting

services to their public company clients. C) Auditors of public companies are under the scrutiny of the Public Company Accounting

Oversight Board. D) Public companies must issue an internal control report evaluated by an outside auditor.

 

3) Which of the following items will NOT appear on the book side of the reconciliation? 3) A) The bank collected a note receivable of $1,000. B) A deposit was in transit. C) The bank charged a service fee of $20. D) A nonsufficient funds check of $75 was returned to the bank. 4) A check was written by a business for $205, but recorded in the cash payments journal as $502.

How would this error be included on the bank reconciliation?

 

4) A) A deduction on the bank side B) An addition on the book side C) A deduction on the book side D) An addition on the bank side 5) A check of $75 deposited by a company was returned to the bank for nonsufficient funds. How

would this information be included on the bank reconciliation?

 

5) A) An addition on the bank side B) A deduction on the bank side C) A deduction on the book side D) An addition on the book side 6) Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be

made? 6) A) Decrease the book balance. B) Increase the bank statement balance. C) Decrease the bank statement balance. D) Increase the book balance.

 

7) The following information is available for Matt’s Unlimited Company for the current month. What

is the adjusted book balance on the bank reconciliation?

Book balance end of the month $5,575 Outstanding checks 584 Deposits in transit 2,500 Service charges 75 Interest revenue 25

7) A) $5,500 B) $7,466 C) $5,550 D) $5,525 1

 

8) A company received a bank statement showing a balance of $62,300. Reconciling items were

outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjusted

bank balance? 8) A) $69,350 B) $70,850 C) $60,850 D) $72,250

 

9) A company received a bank statement with a balance of $5,350. Reconciling items included a

bookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, a

service charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjusted

bank balance?

 

9) A) $4,610 B) $5,016 C) $4,810 D) $4,636 10) Which of the following would be included in a journal to record an NSF check?

 

10) A) A debit to Accounts payable and a credit to Cash B) A debit to Miscellaneous expense and a credit to Cash C) A debit to Cash and a credit to Accounts receivable D) A debit to Accounts receivable and a credit to Cash

11) In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205.

Which of the following is the MOST probable reason why the bank balance is larger than the book

balance?

11) A) A deposit in transit was made at the end of the month. B) There are outstanding checks. C) The bank has deducted certain amounts for bank service charges. D) The company erroneously recorded a check for an amount less than actual.

12) The following information is available for Andersen Company for the month ending June 30, 2008.

• Balance per the bank statement is $10,241.43. • Balance per books is $9,745.06. • Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 bank statement.

• A deposit in transit of $5,113.40 had not been received by the bank when the bank statement was generated.

• A bank debit memo indicated an NSF check in the amount of $79 written by Bruce Garrett to Andersen Company on June 13.

• A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of $75 on June 20.

• The bank statement indicated service charges of $35.

What is the adjusted book balance? 12) A) $7,884.06 B) $11,109.69 C) $11,606.06 D) $7,971.29 2

13) Please refer to the following bank reconciliation:

No journal entries are required for the reconciling items on the bank side because: 13) A) the adjusted balances on both sides are the same amounts. B) those transactions have already been recorded in the company ledger. C) those transactions are already included in the bank balance at June 30. D) the amounts are immaterial.

14) Please refer to the following information needed to reconcile the cash balance for Woods Paper

Products.

• A deposit of $5,794.62 is in transit. • Outstanding checks total $1,533.25. • The book balance is $5,695.62. • The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month’s rent. • The bank balance at February 28, 2008 was $16,500.25. • A deposit of $300 was credited by the bank for $3,000. • A customer’s check for $1,280 was returned for nonsufficient funds. • The bank service charge is $70.

Which of the following journal entries is needed to adjust for the booking error? 14) A) Cash 13,716 Sales revenue 13,716 B) Booking error 1,524 Cash 1,524 C) Cash 13,716 Rent expense 13,716 D) Rent expense 15,240 Cash 1,524

3

15) Please refer to the following information needed to reconcile the cash balance for Woods Paper

Products.

• A deposit of $5,794.62 is in transit. • Outstanding checks total $1,533.25. • The book balance is $5,695.62. • The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month’s rent. • The bank balance at February 28, 2008 was $16,500.25. • A deposit of $300 was credited by the bank for $3,000. • A customer’s check for $1,280 was returned for nonsufficient funds. • The bank service charge is $70.

Which of the following journal entries is needed to adjust for the NSF check? 15) A) Accounts payable 1,280 Cash 1,280 B) Cash 1,280 Sales revenue 1,280 C) NSF check 1,280 Cash 1,280 D) Accounts receivable 1,280 Cash 1,280

 

16) A company has a petty cash fund amount of $200. When replenished, it has petty cash receipts of

$15 for gas expense, $23 for postage expense, $18 for supplies expense and $12 for miscellaneous

expenses. In the journal entry, Cash would be credited for: 16) A) $42. B) $132. C) $200. D) $68.

 

17) A fund for petty cash of $200 has $17 remaining in cash, $3 in miscellaneous cash receipts and an

additional $180 specific cash receipts. The debit to Cash short and over would be: 17) A) $180. B) $183. C) $0. D) $17. 18) A petty cash fund was established with a $250 balance. It currently has cash of $31 and petty cash

tickets totaling $219. Which of the following would be included in the entry to replenish the fund? 18) A) A debit to petty cash for $31 B) A credit to cash in bank for $31 C) A credit to petty cash for $219 D) Debits to various expenses for $219 19) A petty cash fund was established with a $250 balance. It currently has cash of $31 and petty cash

tickets totaling $219. Which of the following would be included in the entry to replenish the fund? 19) A) A debit to petty cash for $31 B) A credit to petty cash for $219 C) A credit to cash in bank for $219 D) A credit to cash in bank for $31 4

20) A petty cash fund was established with a $400 balance. It currently has cash of $15 and petty cash

tickets as shown below.

Travel expense $120 Office supplies $200 Equipment rental expense $70 The journal entry to replenish the account would be which of the following: 20) A) Credit Petty cash fund $5 B) Credit Cash short & over for $5 C) Debit to Cash short & over for $5 D) Debit Petty cash fund $5 21) Which of the following statements is TRUE? 21) A) Accounts receivable are liabilities. B) Notes receivable are always due in 30 days. C) Accounts receivable are more liquid than cash. D) Notes receivable are longer in term than accounts receivable. 22) Which of the following are the two methods of accounting for uncollectible receivables? 22) A) The allowance method and the liability method B) The asset method and the sales method C) The allowance method and the direct write-off method D) The direct write-off method and the liability method 23) Which of the following are the two methods of estimating uncollectible receivables? 23) A) The aging-of-accounts-receivable method and the percent-of-sales method B) The allowance method and the amortization method C) The direct write-off method and the percent-of-completion method D) The gross-up method and the direct write-off method 24) The Allowance for uncollectible accounts currently has a credit balance of $200. The company’s

management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are

$115,000. What will be the amount of Uncollectible account expense reported on the income

statement? 24) A) $2,675 B) $2,875 C) $3,075 D) $3,275 25) The allowance for uncollectible accounts currently has a credit balance of $200. The company’s

management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are

$115,000. What will be the balance of the Allowance for uncollectible accounts reported on the

balance sheet? 25) A) $3,275 B) $2,875 C) $3,075 D) $2,675 26) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing

the accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s management estimates that uncollectible accounts will be $15,000. What will be the

amount of Uncollectible accounts expense reported on the income statement? 26) A) $14,100 B) $15,000 C) $14,900 D) $15,900 5

27) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing

the accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s management estimates that uncollectible accounts will be $15,000. What will be the

balance of the Allowance for uncollectible accounts reported on the balance sheet? 27) A) $15,000 B) $15,900 C) $14,100 D) $14,900 28) The Allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the

accounts in the accounts receivable subsidiary ledger using the aging-of-accounts method, the company’s

management estimates that uncollectible accounts will be $15,000. What will be the amount of

Uncollectible account expense reported on the income statement? 28) A) $14,100 B) $15,900 C) $14,900 D) $15,000 29) The Allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the

accounts in the accounts receivable subsidiary ledger, the company’s management estimates that

uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible

accounts reported on the balance sheet? 29) A) $15,000 B) $15,900 C) $14,100 D) $14,900 30) The following information is from the 2013 records of Armadillo Camera Shop:

Accounts receivable, December 31, 2013 $20,000 (debit) Allowance for uncollectible accounts, December 31, 2013

prior to adjustment 600 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the

amount of Uncollectible accounts expense? 30) A) $2,250 B) $7,000 C) $2,850 D) $3,450 31) The following information is from the 2013 records of Armadillo Camera Shop:

Accounts receivable, December 31, 2013 $20,000 (debit) Allowance for uncollectible accounts, December 31, 2013

prior to adjustment 600 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $2,850 of accounts receivable will be uncollectible. Which of the

following will be the amount of Uncollectible accounts expense? 31) A) $7,000 B) $2,250 C) $2,850 D) $3,450 6

32) A newly created design business called Smart Art is just finishing up its first year of operations.

During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650

was written off. Smart Art uses the percentage-of-sale method to account for uncollectible account expense, and has decided to use a factor of 2% for their year-end adjustment of uncollectible account expense. At the end of the year, what is the balance in Uncollectible account

expense? 32) A) $1,450 B) $800 C) $250 D) $150 33) A newly created design business called Smart Art is just finishing up its first year of operations.

During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650

was written off. Smart Art uses the aging-of-accounts method to account for uncollectible account expense, and has calculated an amount of $200 as their estimate of uncollectible amounts at

year-end. At the end of the year, what is the ending balance in the Allowance for uncollectible accounts? 33) A) $1,450 B) $200 C) $800 D) $150 34) At the beginning of 2014, Mark’s sales had the following ledger balances:

During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of

write-offs. At the end of the year, Mark’s adjusted for uncollectible account expense using the aging-of-accounts method, and calculated an amount of $1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the Uncollectible account expense? 34) A) $4,300 B) $2,700 C) $5,400 D) $2,300 35) Which of the following entries would be used to account for uncollectible receivables using the

direct write-off method? 35) A) Allowance for uncollectible accounts is debited and Uncollectible accounts expense is

credited. B) Accounts receivable is debited and Uncollectible accounts expense is credited. C) Uncollectible accounts expense is debited and Allowance for uncollectible accounts is

credited. D) Uncollectible accounts expense is debited and Accounts receivable is credited. 36) The following information is from the 2013 records of Armadillo Camera Shop:

Accounts receivable, December 31, 2013 $20,000 (debit) Net credit sales for 2013 95,000 Accounts written off as uncollectible during 2013 7,000 Cash sales during 2013 27,000 Uncollectible accounts expense is determined by the direct write-off method. Which of the following will be the amount of Uncollectible accounts expense? 36) A) $3,450 B) $2,250 C) $7,000 D) $2,850 7

37) A company uses the direct write-off method to account for uncollectible receivables. Which of the following is included in the entry to write off an uncollectible account? 37) A) A debit to Allowance for uncollectible-accounts B) A credit to the customer’s Account receivable C) A credit to the Allowance for uncollectible accounts D) No entry is made to write off uncollectible accounts. 38) Charlton Sales has a receivable for $92 that they now deem to be uncollectible. Charlton uses the

direct write-off method. Which of the following entries correctly records the write-off? 38) A) Allowance for uncollectible accounts 92 Accounts Receivable 92 B) Cash 92 Accounts receivable 92 C) Uncollectible accounts expense 92 Accounts receivable 92 D) Accounts receivable 92 Uncollectible accounts expense 92 39) What is the maturity value of a 3-month, 12% note for $20,000? 39) A) $20,000 B) $21,200 C) $20,600 D) $22,400 40) A company issues a 60-day, 12% note for $11,000. What is the principal amount? 40) A) $220 B) $10,780 C) $11,000 D) $11,220 41) On October 2, 2014, Allen Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. What is the journal entry to record the acceptance of the note? 41) A) Notes receivable 2,400 Accounts receivable 2,400 B) Notes receivable 2,400 Cash 2,400 C) Accounts receivable 2,400 Notes receivable 2,400 D) Cash 2,400 Sales revenue 2,400 42) On October 1, 2014, Allen Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. If the company accrues interest at year-end only, how much interest revenue should be accrued on December 31, 2014? 42) A) $80 B) $240 C) $60 D) $40 8

43) A note receivable was NOT paid at maturity. Which of the following will be included in the

journal entry to record the dishonoring of the note at maturity? 43) A) A debit to Cash B) A debit to Accounts receivable C) A debit to Interest expense D) A debit to Uncollectible account expense 44) On September 1, 2013, Adirondac Marine Supplies made a loan to one of its customers. The

customer signed a 6-month note for $1,500 at 10%. How much interest revenue did Adirondac record in the year 2013? 44) A) $150 B) $125 C) $50 D) $100 45) On December 1, 2014, Parsons Sales sold machinery to a customer for $2,000. The customer could

not pay at the time of sale, but agreed to pay 9 months later, and sign a 9-month note at 12% interest. How much interest revenue was earned for the entire term of the note? 45) A) $90 B) $160 C) $75 D) $180 46) Assets are listed on the balance sheet in order of liquidity. Which of the following items reflects the

normal order of liquidity? 46) A) Cash, Inventory, Notes receivable, Accounts receivable B) Notes receivable, Inventory, Accounts receivable, Cash C) Plant assets, Inventory, Notes receivable, Cash D) Cash, Accounts receivable, Inventory, Notes receivable 47) ABC receives a $9,000, 8%, 2-month note. The maturity value is: 47) A) $720. B) $9,120. C) $120. D) $9,720. 48) Which of the following is included in the cost of a plant asset? 48) A) Wages of workers who use the asset B) Amounts paid to ready the asset for its intended use C) Regular maintenance cost D) Normal repair cost 49) Which of the following would be expensed, rather than capitalized? 49) A) Addition to storage capacity B) Major engine overhaul C) Oil change and lubrication D) Modification for new use 50) A company’s accountant capitalizes a payment that should be recorded as an expense. Which of

the following is TRUE? 50) A) Assets are overstated. B) Expenses are overstated. C) Liabilities are overstated. D) Revenue is overstated. 51) Roberts Construction Company paid $40,000 for equipment with a market value of $45,000. At

which of the following amounts should the equipment be recorded? 51) A) $42,500 B) $5,000 C) $40,000 D) $45,000 52) A company purchased a used machine for $80,000. The machine required installation costs of

$8,000 and insurance while in transit of $500. At which of the following amounts would the

equipment be recorded? 52) A) $80,500 B) $80,000 C) $88,000 D) $88,500 9

53) Which of the following items should be depreciated? 53) A) Land B) Tangible property, plant, and equipment other than land C) Intangible property D) Natural resources 54) Which of the following items should NOT be depreciated, depleted, or amortized? 54) A) Land B) Tangible property, plant, and equipment other than land C) Natural resources D) Intangible property 55) Which of the following depreciation methods allocates a fixed amount of depreciation to miles

driven, hours used, or some other measure of the asset’s utilization? 55) A) Straight-line B) Double-declining-balance C) Units-of-production D) Declining-balance 56) Which of the following properly describes accumulated depreciation? 56) A) Accumulated depreciation is a contra asset account. B) Accumulated depreciation is a contra equity account. C) Accumulated depreciation is a contra liability account. D) Accumulated depreciation is an expense account. 57) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The

company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated

sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000

hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2013 if the company uses double-declining-balance depreciation? 57) A) $6,667 B) $12,000 C) $6,000 D) $13,333 58) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The

company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated

sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000

hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2013 if the company uses straight-line depreciation? 58) A) $6,000 B) $13,333 C) $12,000 D) $6,667 59) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The

company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated

sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000

hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2014 if the company uses straight-line depreciation? 59) A) $9,000 B) $10,000 C) $13,333 D) $6,000 10

60) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The

company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated

sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000

hours in 2013 and 12,000 in 2014.

What is the book value of the machine at the end of 2014 if the company uses straight-line depreciation? 60) A) $10,000 B) $17,778 C) $20,000 D) $28,000 61) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The

company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated

sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000

hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2014 if the company uses units-of-production depreciation? 61) A) $9,000 B) $18,000 C) $10,000 D) $6,000 62) Lexis Company purchased equipment on January 1, 2012 for $35,500. The estimated useful life of

the equipment was 7 years and the estimated residual value was $4,000. After using the

straight-line method of depreciation for 3 years, the estimated useful life was revised to 9 years on January 1, 2015. How much is depreciation expense for 2015? 62) A) $2,000 B) $3,667 C) $2,444 D) $3,000 63) An asset costs $80,000 and has a salvage value of $7,000. It has a four-year life. Using double-declining-balance depreciation, Year 1 depreciation would be: 63) A) $40,000. B) $36,500. C) $20,000. D) $18,250. 64) On January 1, 2013, a company buys a truck for $42,000 cash. It has estimated residual value of

$2,000, and an estimated life of 4 years, or 200,000 miles. Assume the company uses

units-of-production depreciation. The truck drove 40,000 miles in 2013, 60,000 miles in 2014, 80,000 miles in 2015, and 20,000 miles in 2016. What is the depreciation rate? 64) A) $4.00/mile B) $0.21/mile C) $0.25/mile D) $0.20/mile 65) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual

value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $3,000 at the end of the fifth year? 65) A) $1,000 gain B) $2,000 loss C) $1,000 loss D) No gain or loss 66) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual

value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $9,000 at the end of the first year? 66) A) $1,000 gain B) No gain or loss C) $1,000 loss D) $2,000 loss 67) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual

value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $9,000 at the end of the second year? 67) A) No gain or loss B) $1,000 gain C) $1,000 loss D) $2,000 loss 11

68) An asset was purchased for $12,000. The asset’s estimated useful life was 5 years and its residual

value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $4,500 at the end of the fourth year? 68) A) $1,500 gain B) $1,500 loss C) $500 gain D) No gain or loss 69) Which of the following items is included in the journal entry if a company sells equipment at a

price greater than its book value? 69) A) A credit to Gain on sale of equipment B) A credit to Accumulated depreciation C) A debit to Loss on sale of equipment D) A debit to Equipment for its book value 70) Kelly Petroleum Products owns furniture that was purchased for $19,600. Accumulated

depreciation is $17,300. The furniture was sold for $3,800. Which of the following is the correct

entry to record the transaction? 70) A) Furniture 19,600 Cash 2,700 Gain on sale 5,000 Accumulated depreciation 17,300 B) Accumulated depreciation 17,300 Cash 3,800 Furniture 31,100 C) Accumulated depreciation 17,300 Cash 3,800 Gain on sale 1,500 Furniture 19,600 D) Furniture 19,600 Gain on sale 3,800 Cash 2,700 Accumulated depreciation 17,300

12

71) Kelly Petroleum Products owns fully depreciated furniture that was purchased for $26,500. The

furniture had an estimated useful life of 8 years and an estimated residual value of $2,500. The

furniture was sold for $2,700. Which of the following is the correct entry to record the transaction? 71) A) Furniture 2,000 Cash 2,700 Loss on sale 19,300 Accumulated depreciation 24,000 B) Accumulated depreciation 24,000 Cash 2,700 Gain on sale 200 Furniture 26,500 C) Accumulated depreciation 26,500 Cash 2,700 Gain on sale 2,700 Furniture 26,500 D) Furniture 26,500 Gain on sale 200 Cash 2,700 Accumulated depreciation 24,000 72) On September 1, 2012, Algernon Company sold a truck for $15,000 cash. The truck was originally

purchased for $40,000, had an estimated salvage value of $4,000 and an estimated life of 6 years.

Algernon had recorded depreciation of $30,000 through the end of 2011 using the straight-line method. Algernon had to update the depreciation prior to sale. After updating the depreciation,

how much was the total accumulated depreciation on the truck? 72) A) $36,000 B) $34,250 C) $34,000 D) $34,440 73) A plant asset is fully depreciated when the book value is: 73) A) greater than the salvage value. B) equal to the salvage value. C) equal to the market value. D) greater than the market value. 74) Albatross Services scrapped a van. The van originally cost $40,000, had an estimated salvage value

of zero, and an estimated life of 10 years. At the time it was scrapped, it had accumulated

depreciation of $40,000. What was the effect of scrapping the van? 74) A) Gain of $2,000 B) Loss of $1,000 C) No gain or loss D) Loss of $2,000 75) Which of the following is NOT considered a plant asset? 75) A) Copyright B) Equipment C) Land D) Building 13

76) On January 1, 2012, Portwell Company purchased a patent for $200,000. They estimate a useful life

of 4 years. What entry is needed at the end of the first year? 76) A) Loss on patents 50,000 Patents 50,000 B) Amortization expense – patents 50,000 Accumulated amortization 50,000 C) Amortization expense – patents 50,000 Patents 50,000 D) Patents 50,000 Amortization expense – patents 50,000 77) A newly created design business called Smart Art is just finishing up its first year of operations.

During the year, there were credit sales of $40,000 and collections of $36,000. One account for $650

was written off. Smart Art uses the aging-of-accounts method to account for uncollectible account expense, and has calculated an amount of $200 as their estimate of uncollectible amounts at

year-end. At the end of the year, what is the ending balance in Accounts receivable? 77) A) $36,000 B) $3,350 C) $4,000 D) $39,350 78) The bank recorded a $2,000 deposit as $200. How would this information be included on the bank

reconciliation? 78) A) An addition on the bank side B) An addition on the book side C) A deduction on the bank side D) A deduction on the book side 79) The bank collected a note receivable of $1,000. How would this information be included on the

bank reconciliation? 79) A) A deduction on the book side B) An addition on the bank side C) An addition on the book side D) A deduction on the bank side 80) Which of the following is NOT one of the purposes of internal control? 80) A) To encourage employees to follow company policy B) To ensure accurate, reliable accounting records C) To guarantee that a business makes a profit D) To safeguard the company’s assets 14

 

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