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Practice Exam 4 - Chapters 8, 9, - Fall 2012

Practice Exam 4 - Chapters 8, 9, - Fall 2012

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ORANGE COAST COLLEGEFINANCIAL ACCOUNTING 101PRACTICE EXAM #4 - CHAPTERS 8, 9
1.Using the percentage of receivables method for recording bad debts expense, estimated uncollectibleaccounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit beforeadjustment what is the balance after adjustment?A)$25,000B)$8,000C)$33,000D)$17,0002.Accounts receivable are valued and reported on the balance sheetA)in the investment section.B)at gross amounts less sales returns and allowances.C)at cash realizable value.D)only if they are not past due.3.An aging of a company's accounts receivable indicates that $59,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $23,600 debit balance, the adjustment to record bad debts for theperiod will require aA)debit to Bad Debts Expense for $59,000.B)debit to Allowance for Doubtful Accounts for $82,600.C)debit to Bad Debts Expense for $82,600.D)credit to Allowance for Doubtful Accounts for $59,000.4.When calculating interest on a promissory note with the maturity date stated in terms of days, theA)maker pays more interest if 365 days are used instead of 360.B)maker pays the same interest regardless if 365 or 360 days are used.C)payee receives more interest if 360 days are used instead of 365.D)payee receives less interest if 360 days are used instead of 365.5.Arnold Company purchases a new delivery truck for $35,000. The sales taxes are $2,000. The logo of thecompany is painted on the side of the truck for $1,200. The truck's annual license is $120. The truckundergoes safety testing for $220. What does Arnold record as the cost of the new truck?A)$38,540.B)$38,420.C)$37,000.D)$36,420.6.A write off of a specific accounts receivable under the allowance methodA)Increases bad debt expense for the accounting period.B)Should occur on the last day of the accounting period.C)Decreases the cash realizable value of accounts receivable.D)Should be formally approved by an authorized employee.7.All the following are needed for the computation of depreciation exceptA)training costs of manufacturing personnel.B)cost.C)salvage value.D)estimated useful life.8.Runge Company purchased machinery on January 1 at a list price of $200,000, with credit terms 2/10, n/30.Payment was made within the discount period. Runge paid $10,000 sales tax on the machinery, and paidinstallation charges of $3,520. Prior to installation, Runge paid $8,000 to pour a concrete slab on which toplace the machinery. What is the total cost of the new machinery?A)$209,520.B)$217,520.C)$221,520.D)$202,000.9.Equipment was purchased for $65,000. Freight charges amounted to $4,000 and there was a cost of $8,000for building a foundation and installing the equipment. It is estimated that the equipment will have a $8,000
 
salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-linemethod will beA)$15,400.B)$13,800.C)$13,000.D)$11,400.10.The term "receivables" refers toA)amounts due from individuals or companies.B)merchandise to be collected from individuals or companies.C)cash to be paid to creditors.D)cash to be paid to debtors.11.Which of the following assets does
not 
decline in service potential over the course of its useful life?A)Equipment.B)Furnishings.C)Land.D)Fixtures.12.The financial statements of the Phelps Manufacturing Company reports net sales of $400,000 and accountsreceivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is thereceivables turnover ratio for Phelps?A)6.7 timesB)10 timesC)5 timesD)8 times13.The financial statements of the Belfry Manufacturing Company reports net sales of $400,000 and accountsreceivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is theaverage collection period for accounts receivable in days?A)40 timesB)80 timesC)54.7 timesD)50 times14.On January 1, a machine with a useful life of four years and a residual value of $3,000 was purchased for$19,000. What is the depreciation expense for year 2 under straight-line depreciation?A)$2,000.B)$4,000.C)$8,000.D)$4,750.15.Young Company lends Dobson industries $30,000 on August 1, 2010, accepting a 9-month, 12% interestnote. If Young accrued interest at its December 31, 2010 year-end, what entry must it make to record thecollection of the note and interest at its maturity date?A)Cash 32,700Notes Receivable 30,000Interest Revenue 2,700B)Cash 32,700Notes Receivable 32,700C)Notes Receivable 30,000Interest Receivable 1,500Interest Revenue 1,200Cash 32,700D)Cash 32,700Notes Receivable 30,000Interest Receivable 1,500Interest Revenue 1,20016.Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the newparking area cost $12,000. Which of the following statements is true with respect to these additions?A)$30,000 should be debited to the Land account.B)$12,000 should be debited to Land Improvements.
 
C)$42,000 should be debited to the Land account.D)$42,000 should be debited to Land Improvements.17.The matching rule relates to credit losses by stating that bad debt expense should be recordedA)in the same period as allowed for tax purposes.B)in the period of the sale.C)for an exact amount.D)in the period of the loss.18.Interest is usually associated withA)accounts receivable.B)notes receivable.C)doubtful accounts.D)bad debts.19.The balance in the Accumulated Depreciation account represents theA)cash fund to be used to replace plant assets.B)amount to be deducted from the cost of the plant asset to arrive at its fair market value.C)amount charged to expense in the current period.D)amount charged to expense since the acquisition of the plant asset.20.Which of the following would
not 
be included in the Equipment account?A)Installation costs.B)Freight costs.C)Cost of trial runs.D)Electricity used by the machine.21.In 2010 Wilkinson Company had net credit sales of $1,125,000. On January 1, 2010, Allowance for DoubtfulAccounts had a credit balance of $27,000. During 2010, $45,000 of uncollectible accounts receivable werewritten off. Past experience indicates that the allowance should be 10% of the balance in receivables(percentage of receivables basis). If the accounts receivable balance at December 31 was $300,000, what isthe required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?A)$ 30,000B)$112,500C)$ 48,000D)$ 45,00022.Burke Company purchases land for $85,000 cash. Burke assumes $2,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land graded for $2,200. They paid $10,000 forpaving of a parking lot. What amount does Burke record as the cost for the land?A)$88,200.B)$100,700.C)$90,700.D)$85,000.23.Shaffer Company acquires land for $56,000 cash.Additional costs are as follows.Removal of shed$ 300Filling and grading1,500Salvage value of lumber of shed120Broker commission1,130Paving of parking lot10,000Closing costs560Shaffer will record the acquisition cost of the land asA)$56,000.B)$57,690.C)$59,610.D)$59,370.24.On January 15, Nifty Company sells merchandise on account to Martinez Associates for $2,000 with terms3/10, n/05. On January 20, Martinez returns merchandise worth $400 to Nifty. On January 24, payment isreceived from Martinez for the balance due. What is the amount of cash received?A)$1,600

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