Solved by verified expert :1. A problem
with the specific identification method is that
a. inventories can be reported at actual
b. management can manipulate income.
c. matching is not achieved.
d. the lower of cost or market basis
cannot be applied.
2. In a period of increasing prices, which
inventory flow assumption will result in the lowest amount of income tax
c. Average Cost Method
d. Income tax
expense for the period will be the same under all assumptions.
3. When applying the lower of cost or
market rule to inventory valuation, market generally means
a. current replacement cost.
b. original cost.
c. resale value.
d. original cost, less physical
4. Which of these would cause the
inventory turnover ratio to increase the most?
a. Increasing the amount of inventory on
b. Keeping the amount of inventory on hand
constant but increasing sales.
c. Keeping the amount of inventory on hand
constant but decreasing sales.
d. Decreasing the amount of inventory on
hand and increasing sales.
5. Under the allowance method, writing off
an uncollectible account
a. affects only balance sheet accounts.
b. affects both balance sheet and income
c. affects only income statement accounts.
d. is not acceptable practice.
6. The direct write-off method of
accounting for uncollectible accounts
a. emphasizes the matching of expenses
b. emphasizes balance sheet relationships.
c. emphasizes cash realizable value.
d. is not generally accepted as a basis
for estimating bad debts.
7. The interest on a $4,000, 6%, 60-day
note receivable is
8. A high receivable turnover ratio
company’s sales are increasing.
b. a large
proportion of the company’s sales are on credit.
are making payments very quickly.
are making payments slowly.
9. Manning Company uses the percentage of
receivables method for recording bad debts expense. The accounts receivable
balance is $200,000 and credit sales are $1,000,000. Management estimates that
5% of accounts receivable will be uncollectible. What adjusting entry will
Manning Company make if the Allowance for Doubtful Accounts has a credit
balance of $2,000 before adjustment?
a. Bad Debts Expense 10,000
for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000
for Doubtful Accounts 8,000
c. Bad Debts Expense 8,000
d. Bad Debts Expense 10,000
10. The two key
parties to a promissory note are the
a. maker and a bank.
b. debtor and the payee.
c. maker and the payee.
d. sender and the receiver.
11. A company purchased land for $72,000
cash. Real estate brokers’ commission
was $5,000 and $7,000 was spent for demolishing an old building on the land
before construction of a new building could start. Under the cost principle, the cost of land
would be recorded at
12. Newton Hospital installs a new parking
lot. The paving cost $35,000 and the
lights to illuminate the new parking area cost $15,000. Which of the following statements is true
with respect to these additions?
a. $35,000 should be debited to the Land
b. $15,000 should be debited to Land
c. $50,000 should be debited to the Land
d. $50,000 should be debited to Land
13. General Molding is building a new plant
that will take three years to construct.
The construction will be financed in part by funds borrowed during the
construction period. There are
significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?
a. Excavation fees are capitalized but
building permit fees are not.
b. Architect fees are capitalized but
building permit fees are not.
c. Interest is capitalized during the
construction as part of the cost of the uilding.
d. The capitalized cost is equal to the
contract price to build the plant less any interest on borrowed funds.
14. Equipment was purchased for $17,000. Freight charges amounted to $700 and there
was a cost of $2,000 for building a foundation and installing the equipment. It
is estimated that the equipment will have a $3,000 salvage value at the end of
its 5-year useful life. Depreciation
expense each year using the straight-line method will be
15. The declining-balance method of
depreciation produces a(n)
a. decreasing depreciation expense each
b. increasing depreciation expense each
c. declining percentage rate each period.
amount of depreciation expense each period.
16. Which depreciation method is most
frequently used in businesses today?
17. The custodian of a company asset should
a. have access to the accounting records
for that asset.
b. be someone outside the company.
c. not have access to the accounting
records for that asset.
d. be an accountant.
18. Which of the following is not a suggested
procedure to establish internal control over cash disbursements?
a. Anyone can
sign the checks.
individuals approve and make the payments.
c. Blank checks
are stored with limited access.
d. The bank
statement is reconciled monthly.
19. Cash equivalents do not include
a. money market
d. long term
20. The Allowance for Doubtful Accounts is
recording uncollectible accounts expense, it is not possible to know which
specific accounts will not pay.
accounts that are written off must be accumulated in a separate account.
c. a liability
results when a credit sale is made.
needs to accumulate all the credit losses over the years.