ACCT3000 Bonus Multiple-choice Questions

Please submit the answers on Canvas by December 4, 2022. You will earn 5% extra credit toward your final grade if
80% or more of your answers to these questions are correct. You are welcome to collaborate with anyone. Correct
answers to questions will be available on Canvas page starting December 5, 2022.

1. Which step in the process of measuring external transactions involves assessing the equality of total debits and
total credits?
A. Post the transaction to the T-account in the general ledger.
B. Prepare a trial balance.
C. Analyze the impact of the transaction on the accounting equation.
D. Use source documents to determine accounts affected by the transaction.

2. A company has the following account balances at the end of the year:

 Credit Sales = $400,000

 Accounts receivable = $80,000
 Allowance for Uncollectible Accounts = $400 credit

The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad
Debt Expense be reported in the current year’s income statement? 
A. $2,800.
B. $400.
C. $3,200.
D. $3,600.

3. A company has the following aging schedule of its accounts receivable with the estimated percent uncollectible:
 
Age Group Amount Receivable Estimated Percent Uncollectible
Not yet due $ 175,000 4%
0 to 60 days past due $ 40,000 10%
61 to 120 days past due $ 10,000 30%
More than 120 days past
$ 5,000 60%
due
 
Assuming the balance of Allowance for Uncollectible Accounts is $3,000 (credit) before adjustment, which of the
following would be recorded in the year-end adjusting entry?
A. Credit Allowance for Uncollectible Accounts for $20,000.
B. Debit Allowance for Uncollectible Accounts for $14,000.
C. Debit Bad Debt Expense for $14,000.
D. Credit Allowance for Uncollectible Accounts for $17,000.
4. Using a perpetual inventory system, the sale of inventory on account would be recorded as

I. Debit Cost of Goods Sold; credit Inventory.

II. Debit Inventory; credit Sales Revenue.
III. Debit Accounts Receivable; credit Sales Revenue.

A. I only
B. III only
C. II only
D. I and II

5. At the end of a reporting period, Gaston Corporation determines that its ending inventory has a cost of $6,500
and a net realizable value of $5,800. The adjusting entry to write down inventory to net realizable value would
include:
A. A debit to inventory for $5,800.
B. A credit to inventory for $700.
C. A credit to cost of goods sold for $700.
D. A debit to cost of goods sold for $5,800.

6. If equipment is retired, which of the following accounts would be debited?

A. Accumulated depreciation.
B. Equipment.
C. Depreciation expense.
D. Cash.

7. Bryer Company purchases all of the assets and liabilities of Stellar Company for $1,500,000. The fair value of
Stellar’s assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar’s assets and
liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?
A. $700,000.
B. $0.
C. $800,000.
D. $500,000.

8. How much will $4,000 invested at the end of each year grow to in three years, assuming an interest rate of 11%
compounded annually? Round your answer to the dollar amount.
A. $13,200
B. $13,368
C. $51,231
D. $16,412
9. The ending balance of retained earnings increased by $3.2 million from the beginning of the year. The company
declared a dividend of $1.3 million during the year. What was the amount of net income during the year?
A. $1.3 million.
B. $3.2 million.
C. $4.5 million.
D. $1.9 million.

10. The financial statement which reports investments from owners and distributions to owners during a particular
period is:
A. balance sheet.
B. income statement.
C. statement of shareholders’ equity.
D. statement of comprehensive income.

11. Sanfillipo, Incorporated, had 800 units of inventory on hand at March 1 of the current year, costing $20 each.
Purchases and sales of inventory during the month of March were as follows:

Date Purchases Sales

March 8   600 units
March 15 400 units @ $22 each   
March 22 400 units @ $24 each   
March 27   400 units
Sanfillipo uses the perpetual inventory system. According to a physical count, 600 units were on hand at the end of
March.

The cost of goods sold for March applying the average cost method is:
A. $21,500.
B. $20,400.
C. $22,400.
D. $20,960.

12. On December 31, 2024, a company adopted the dollar-value LIFO inventory method. Inventory at the end of
2024 for its only inventory pool was $500,000 under the dollar-value LIFO method. At the end of 2025, inventory at
year-end cost is $672,000 and the cost index is 1.05. Inventory at the end of 2025 at dollar-value LIFO cost is:
A. $640,000.
B. $625,000.
C. $647,000.
D. $672,000.
13. Symington Corporation uses the periodic inventory system. At December 31, 2024, the end of the company's
fiscal year, a physical count of inventory revealed an ending inventory balance of $320,000. The following items
were not included in the physical count:

Goods held on consignment at Murphy Corporation $ 23,000

Merchandise shipped to a customer on 12/30/2024 free on board
destination
(merchandise arrived at customer's location on 1/3/2025) 12,000
Merchandise shipped to a customer on 12/29/2024 free on board
shipping point
(merchandise arrived at customer's location on 1/2/2025) 6,000
Merchandise purchased from a supplier, shipped free on board
destination
on 12/29/2024, in transit at year-end 24,000

Symington's 2024 ending inventory should be:

A. $379,000.
B. $332,000.
C. $320,000.
D. $355,000.

14. For companies that use FIFO, average cost, or any method other than LIFO or retail inventory method,
inventory is valued at:
A. The lower of cost or net realizable value.
B. Net realizable value.
C. Replacement cost.
D. Cost

15. The following information pertains to one item of inventory of the Simon Company:
  Per unit
Cost $ 180
Replacement cost 150
Selling price 195
Costs to sell 35
Applying the lower of cost or net realizable value rule, this item should be valued at:
A. $195
B. $150
C. $160
D. $180
16. Application of the lower of cost or market method is an example of which practice in accounting:
A. Comparability.
B. Historical cost.
C. Revenue recognition.
D. Conservatism.

17. Consider the following information pertaining to a company’s inventory:

Product Quantity Cost Net Realizable Value
Revolvers 16 $ 120 $ 150
Spurs 23 27 22
Hats 12 56 40
Applying the lower of cost or net realizable value rule to individual inventory items, at what amount should the
company report its inventory?
A. $2,906
B. $3,386
C. $2,996
D. $3,213

18. Which of the following inventory changes does not require the company to report the change retrospectively?
A. From FIFO to average.
B. From average to FIFO.
C. From FIFO to LIFO.
D. From LIFO to FIFO.

19. If a company overstates its ending balance of inventory in 2024 and it records inventory correctly in year 2025,
which one of the following is true?
A. Net income is understated in 2024.
B. Retained earnings is overstated in 2024.
C. Net income is overstated in 2025.
D. Cost of goods sold is overstated in 2024.

20. At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance.
Homemark charges a fee of 3% of receivables factored. During July, $150,000 of the factored receivables are
collected. If the transfer were made with recourse but is still accounted for as a sale, what amount of loss on sale of
receivables would the company record in June assuming the estimated recourse liability is $2,000?
A. $4,000
B. Zero.
C. $8,000
D. $6,500
21. As of January 1, 2024, Barley Company had a credit balance of $540,000 in its allowance for uncollectible
accounts. Based on experience, 3% of Barley's gross accounts receivable have been uncollectible. During 2024,
Barley wrote off $670,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2024 is
$19,000,000.

In its December 31, 2024, balance sheet, what amount should Barley report as allowance for uncollectible
accounts?
A. $440,000
B. $570,000
C. $700,000
D. $1,110,000

22. Compensating balances represent:

A. Cash in a bank account that can't be spent
B. Balances in a payroll checking account.
C. Accounts that are subject to bank service charges.
D. Accounts on which banks pay interest, e.g., NOW accounts.

23. Logistics Company had the following items listed in its trial balance at 12/31/2024:
Balance in checking account, Bank of the East $ 442,000
Treasury bills, purchased on 11/1/2024, mature on
1/30/2025 20,000
Loan payable, long-term, Bank of the East 300,000
Included in the checking account balance is $50,000 of restricted cash that Bank of the East requires as a
compensating balance for the $300,000 note. What amount will Logistics include in its year-end balance sheet as
cash and cash equivalents?
A. $412,000
B. $462,000
C. $392,000
D. $442,000

24. Which of the following current liabilities does not typically involve the future payment of cash?
A. Accounts Payable
B. Salaries Payable
C. Deferred Revenue
D. Interest Payable
25. A company reports the following information:

Accounts Payable $ 16,700

Buildings 81,700
Cash 12,200
Accounts Receivable 11,200
Sales Tax Payable 6,200
Retained Earnings 54,300
Supplies 41,700
Notes Payable (due in 18 months) 36,700
Interest Payable 4,700
Common Stock 36,700

What is the amount of current assets, assuming the accounts above reflect normal activity?
A. $65,100
B. $183,500
C. $146,800
D. $23,400

26. Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $43,400
in tailoring fees, and paid $12,500 in expenses. Depreciation expense totaled $2,800. Accounts receivable
increased $1,100, supplies increased $3,100, and accrued liabilities increased $1,800. Pat's accrual-basis net
income was:
A. $34,100.
B. $30,500.
C. $22,100.
D. $25,700.

27. On October 1, 2024, a company purchased a piece of land by agreeing to pay the seller $450,000 in two years. If
the company had borrowed the money from a bank to pay the seller immediately, management estimates the
bank would have required interest of 9%. Calculate the net amount of the note payable as of December 31, 2024
(rounded to the nearest dollar).
A. $439,875
B. $388,045
C. $438,936
D. $387,278
28. Suppose a company spends $200,000 in the current year to research and develop a navigation device for hikers.
By the end of the year, the company estimates that the new navigation device has a 70% chance of generating
$500,000 in revenues from sales to customers over the next four years. For what amount would the company
report research and development expense in the current year?
A. $0
B. $60,000
C. $140,000
D. $200,000

29. Wolf Computer exchanged a machine with a book value of $40,000 and a fair value of $45,000 for a patent. In
addition, Wolf paid $6,000 as part of the exchange. Wolf should recognize:
A. No gain or loss.
B. A loss of $1,000.
C. A gain of $11,000.
D. A gain of $5,000.

30. On August 25, a privately owned company exchanged 10,000 shares of its private common stock for land. There
is no readily available estimate of the stock’s fair value but the land has a current appraised value of $240,000. The
seller originally bought the land for $200,000 two years ago. The journal entry the buyer records for acquisition of
the land includes:
A. A credit to common stock of $200,000.
B. A credit to gain of $40,000.
C. A debit to land for $240,000.
D. All of these answer choices are correct.

31. The initial cost of land would include all of the following except:
A. The cost of grading.
B. Recording fees.
C. Title search costs.
D. Property taxes for the current period.
32. A company incurred the following costs associated with the purchase of a piece of land that it will use to re-
build an office building:
Purchase price of the land $ 400,000
Sale of salvaged parts already on land 20,000
Demolition of the old building 30,000
Ground-breaking ceremony (food and
1,500
supplies)
Land preparation and leveling 7,500
What amount should be recorded for the purchase of the land?
A. $419,000
B. $417,500
C. $437,500
D. $439,000

33. In January of 2024, the Falwell Company began construction of its own manufacturing facility. During 2024,
$6,000,000 in costs were incurred evenly throughout the year. Falwell took out a $2,500,000, 10% construction
loan at the beginning of the year. The company had no other interest-bearing debt. What amount of interest
should Falwell capitalize in 2024?
A. $300,000
B. $250,000
C. $0
D. $600,000

34. Which of the following statements accurately describes depreciation?

I. Depreciation is the process of allocating the cost of the asset over periods benefited.
II. Depreciation is used to track the fair value of the asset.
III. The book value of an asset is its original cost less accumulated depreciation.

A. I and II.
B. I and III.
C. II and III.
D. All of the other choices are correct.

35. A delivery van that cost $40,000 has an expected service life of eight years and a residual value of $4,000.
Depreciation expense for the second year of the asset's life using the straight-line method is:
A. $4,500
B. $7,000
C. $8,000
D. All of these answer choices are incorrect.
36. A delivery van that cost $40,000 has an expected service life of 180,000 miles and a residual value of $4,000.
The van was driven 24,000 miles in the first year and 36,000 miles in the second year. Accumulated depreciation by
the end of the second year of the asset's life using the units-of-production method is:
A. $4,800
B. $12,000
C. $7,200
D. All of these answer choices are incorrect.

37. A machine is purchased on September 30, 2024, for $60,000. Useful life is estimated at four years and no
residual value is anticipated. The double-declining-balance depreciation method is used. Depreciation expense for
2025 should be:
A. $15,000.
B. $30,000.
C. $26,250.
D. All of the other answer choices are incorrect.

38. The Cromwell Company sold equipment for $35,000. The equipment, which originally cost $120,000 and had an
estimated useful life of 10 years and $20,000 residual value, was depreciated for four years using the straight-line
method. Cromwell should report the following on its income statement in the year of sale:
A. A $45,000 loss.
B. A $45,000 gain.
C. A $25,000 gain.
D. All of these answer choices are incorrect.

39. Archie Company purchased a framing machine for $45,000 on January 1, 2024. The machine is expected to
have a four-year life, with a residual value of $5,000 at the end of four years. Using the straight-line method,
depreciation for 2024 and book value on December 31, 2024, would be:
A. $10,000 and $30,000, respectively.
B. $11,250 and $33,750, respectively.
C. $10,000 and $35,000, respectively.
D. $11,250 and $28,750, respectively.

40. On September 30, 2024, Bricker Enterprises purchased a machine for $211,000. The estimated service life is 10
years with a $22,000 residual value. The company records partial-year depreciation based on the number of
months in service. Note: Do not round intermediate calculations.Depreciation for 2024 using the straight-line
method is:
A. $4,725.
B. $14,175.
C. $5,275.
D. $16,725.