1. A company sells a plant asset that originally cost $360,000 for $120,000 on December 31, 2017. The accumulated depreciation account had a balance of $180,000 after the current year's depreciation of $30,000 had been recorded. The company should recognize a

Select one:

a. $60,000 loss on disposal

b. $40,000 gain on disposal

c. $120,000 gain on disposal

d. $120,000 loss on disposal

2. Jack's Copy Shop bought equipment for $240,000 on January 1, 2016. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2017, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2017?

Select one:

a. $80,000

b. $32,000

c. $40,000

d. $60,000

3. Goodwill can be recorded

Select one:

a. only when there is an exchange transaction involving the purchase of an entire business

b. when customers keep returning because they are satisfied with the company's products

c. when the company has exceptional management

d. when the company acquires a good location for its business

4. Arnold Company purchases a new delivery truck for $45,000. The sales taxes are $2,500. The logo of the company is painted on the side of the truck for $1,200. The truck's annual license is $120. The truck undergoes safety testing for $220. What does Arnold record as the cost of the new truck?

a. $48,920

b. $47,500

c. $46,920

d. $49,040

5. Equipment with a cost of $300,000 has an estimated salvage value of $20,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

Select one:

a. $75,600

b. $70,000

c. $72,500

d. $75,000

6. Management should select the depreciation method that

Select one:

a. has been used most often in the past by the company

b. best measures the plant asset's market value over its useful life

c. is easiest to apply

d. best measures the plant asset's contribution to revenue over its useful life

7. A characteristic of a plant asset is that it is

Select one:

a. intangible

b. used in the operations of a business

c. held for sale in the ordinary course of the business

d. not currently used in the business but held for future use

8. Net income will result if gross profit exceeds

Select one:

a. cost of goods sold

b. purchases

c. operating expenses

d. cost of goods sold plus operating expenses

9. The LIFO inventory method assumes that the cost of the latest units purchased are

Select one:

a. not allocated to cost of goods sold or ending inventory

b. the first to be allocated to cost of goods sold

c. the first to be allocated to ending inventory

d. the last to be allocated to cost of goods sold

10. Noise Makers Inc. has the following inventory data:

July 1Beginning inventory30 units at $19$570

7Purchases105 units at $202,100

22Purchases15 units at $22330

$3,000

A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the average cost method, the value of ending inventory is

Select one:

a. $930

b. $976

c. $960

d. $990

11. Allowance for Doubtful Accounts on the balance sheet

Select one:

a. appears under the heading "Other Assets."

b. is offset against total current assets

c. is deducted from accounts receivable

d. increases the cash realizable value of accounts receivable

12. In a perpetual inventory system, cost of goods sold is recorded

Select one:

a. on a monthly basis

b. on an annual basis

c. on a daily basis

d. each time a sale occurs

13. Each of the following companies is a merchandising company except a

Select one:

a. candy store

b. moving company

c. furniture store

d. wholesale parts company.

14. Baker Bakery Company just began business and made the following four inventory purchases in June:

June1150 units$1,040

June10200 units1,560

June15200 units1,680

June28150 units1,320

$5.600

A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is

Select one:

a. $1,824

b. $1,456

c. $1,508

d. $1,848

15. Gross profit equals the difference between

Select one:

a. sales revenue and cost of goods sold

b. sales revenue and operating expenses

c. net income and operating expenses

d. sales revenue and cost of goods sold plus operating expenses