1. The two major types of receivables are interest receivable and takes receivable. 2. The three major types of receivables are accounts receivable, notes receivable, and other receivables. 3. Accounts receivable are also called trade receivables. 4. The collection period of accounts receivable is usually long, and therefore, it is classified as a long-term asset on the balance sheet. 5. The collection period of accounts receivable is usually long, and therefore, it is classified as a long-term asset on the balance sheet. 6. Notes receivable due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets. 7. Which of the following statements, regarding notes receivable, is incorrect? A) Notes receivable usually have longer terms than accounts receivable. B) A notes receivable is a written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future. C) All notes receivable are considered long-term assets. D) Notes receivable are sometimes called promissory notes. 8. Which of the following is a weak internal control over cash collections from receivables? A) The credit department should have no access to cash. B) A credit department should evaluate customers' credit applications to determine whether they meet the company's approval standards. C) A company should have written approval standards for processing customers' credit applications. D) In order to avoid losing sales, all customers' credit applications should be approved. 9. Because customers make payments on account throughout the period, the sum of all balances in subsidiary accounts receivable will not equal the control account balance. 10. Credit cards reduce the customer's bank account immediately but allow the customer to pay electronically instead of with currency or writing a check. 11. The process of allocating the cost of a plant asset over its useful life is known as cost reduct/on. 12. A business that has a vacant building that is not currently being used would classify the building as a plant asset. 13. The cost paid to a laborer to assemble a desk is recorded as an expense. a 14. A lump-sum purchase or basket purchase involves paying a single price for several assets as a group 15. Millburn Company has acquired a property that included both land and a building for $530,000. The company hired an appraiser who has determined that the market value of the land is $320,000 and that of the building is $480,000. At what amount should the company record the cost of land? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A) $349,800 B) $128,000 C) $265,000 D) $212,000 16. Repair work that generates a capital expenditure because it extends a plant asset's useful life past the normal expected life is known as an extraordinary repair. 17. Westin Delivery Service Company owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure? A) oil change and lubrication B) major engine overhaul C) modification for new use D) addition to storage capacity 18. A company's accountant capitalized a pavment that should have been recorded as a revenue expenditure How will this error affect the company's financial statements? A) Net income will be overstated B) Revenues will be understated C) Assets will be understated. D) Liabilities will be understated 19. Depreciation means that the business sets aside cash to replace an asset when it is used up. 20. The useful life of a plant asset is the length of the service period expected from the asset. 21. Amounts owed for products or services purchased on account are accounts receivable. 22. Sales Tax Payable is usually calculated as a percentage of the amount of the sale. 23. Sales revenue for a sporting goods store amounted to $526,000 for the current period. All sales are on account and are subject to a sales tax of 10%. Which of the following would be included in the joumal entry to record the sales transaction? A) a debit to Sales Revenue for $526,000 B) a credit to Accounts Receivable for $526,000 C) a debit to Sales Tax Payable for $32,600 D) a debit to Accounts Receivable for $578,600 2. Unearned revenues are current liabilities until they are earned. 25. When borrowing cash from a bank, the business is required to sign a promissory note stating that the business will pay the principal plus interest at a specified maturity date. 26. Which of the following accounts is credited by the seller when tax is collected on retail sales? A) Accounts Payable B) Pavroll Tax C) Sales Tax Pavable D) Unearned Revenue 27. A $45,000, two-month, 9% note payable was issued on December 1, 2018. What is the amount of interest expense recorded in the vear 2019? (Round the final calculation to the nearest dollar.) A) $4050 B) $338 C) $675 I D) $45.675 28. Which of the following accounts will be credited by the borrower when a promissory note is issued? A) Note Pavable B) Note Receivable Interest Parable D) Cash 29. If a long-term debt is paid in installments, the business will report the current portion of the note pavable as a current liability 30. The current portion of notes payable is the amount of the principal that is pavable more than one vear from the balance sheet date. 31. On December 31, 2018, Globe Company borrowed $500,000 by signing a five-year, 8% note payable. The note is payable in five yearly installments of $100,000 plus interest, due at the end of every year beginning on December 31, 2019. Which portion is classified as the long-term portion of Notes Payable at December 31, 2018? 32. A corporation is a business organized under federal law that is a separate legal entity. 33. Which of the following statements regarding corporations is incorrect? A) Corporations dominate business activity in the United States. B) Corporations are businesses organized under state law and do not have an existence that is separate from their owners. C) Most well-known corporations tend to be large multinational businesses. D) Corporations are separate legal entities 34. The current portion of notes pavable is the principal amount that will be paid within two vears of the balance sheet date, and the remaining portion is long term. 35. Double taxation occurs when corporations make dividend payments to stockholders. 36. Higher start-up costs and expensive government regulations are disadvantages of corporations. 37. Which of the following corporate characteristics is a disadvantage of a corporation? A) Stockholders have limited liability. B) A corporation has a continuous life. C) There is no mutual agency between the stockholders and the corporation D) Earnings of a corporation may be subject to double taxation. 38. The corporate charter identifies the maximum number of shares of stock the corporation may issue, which is called 'available for issue' stock. 39. A note payable can be classified either as a long-term liability or a short-term liability, depending on the discretion of the accountant. 40. On December 1, 2018, Modern Dining Products borrowed $84,000 on a 12%, 5-year note with annual installment payments of $16,800 plus interest due on December 1 of each succeeding year. On December 1, the principal amount was recorded as a long-term note pavable. What amount of the note payable will be shown as current portion of Long-Term Note Pavable on the balance sheet as of December 31, 2018? (Round your answer to nearest whole number.) A) $16,800 B: $26.850 C) $10,080 D) $33,600 41. Get Away Vacations signed a 14%, 10-year note for $157,000. The company paid an installment of $2100 for the first month. What portion of the first monthly payment is interest expense? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.) A) $268 B) $85,063 C) $15,183 D) $1832 42. On January 1, 2018, Benbrook Company purchased equipment and signed a six-year mortgage note for $160,000 at 15%. The note will be paid in equal annual installments of $42,278, beginning January 1, 2019. Calculate the balance of Mortgage Pavable after the payment of the first installment. (Round your answer to the nearest whole number.) A) $24,000 B) S117,722 C) $141,722 D) $120.702 43. Significant influence equity investments are reported as current assets on the balance sheet. 14. No significant influence equity investments generally involve the ownership of less than 20% of the investee's voting stock. 45) Which type of debt security is always categorized as a current asset? A) available-for-sale debt investments B) trading debt investments C) held-to-maturity debt investments D) Each of these choices can be categorized as long-term if the investor intends to hold the investment for longer than one year. 46. Which statement regarding investments in equity securities is incorrect? A) Significant influence equity investments are always reported as long-term assets on the balance sheet. B) Significant influence equity investments are consolidated into the investor's financial statements. C) Investments in equity securities are classified into three specific types based on the investor's level of influence over the investee company. D) Generally, no significant influence exists if there is an ownership interest of less than 20% of the investee's voting stock. 47. Which of the following will be classified as an available-for-sale debt investment? A) debt securities which the investor intends to sell in the very near future B) debt securities the investor intends to hold and has the ability to hold until they mature C) all investments in Treasury bills D) all debt securities that are not trading debt investments or held-to-maturity debt investments48 HOW on the balance sheet. 48. Significant influence equity investments are reported as A) current assets B) either current assets or current liabilities C) long-term assets D) either current assets or long-term assets 49. When a company acquires a long-term bond investment, by paying cash, total assets remain unchanged. 50. Investments in debt securities are recorded at cost. Brokerage fees paid are treated as expenses. 51. When a company pays cash for a long-term investment in bonds; A) equity remains unchanged B) current assets increase C) liabilities increase D) total assets increase 52. The balance sheet shows why cash increased or decreased. 53. The statement of cash flows shows where cash came from and how cash was spent. 54. A business's cash receipts and cash payments for a specific period are reported on a(n). A income statement B) balance sheet C) statement of cash flows D) cash reconciliation statement 55. The statement of cash flows explains why net income as reported on the income statement does not equal the change in the cash balance. 56. Which of the following statements accurately describes the statement of cash flows? A) It shows the relative proportion of debt and assets. B) It is the link between the accrual-based income statement and the cash reported on the balance sheet. C) It indicates when long-term debt will mature. D) It is the link between net income and earnings per share. 57. Which of the following describes the operating activities section of the statement of cash flows? A) It reports cash receipts and cash payments that increase or decrease long-term assets. B) It includes cash inflows and outflows related to long-term liabilities and equity. C) It reports on activities that create revenue or expenses for the entity's business. D) It reports on how cash flows affect the total assets and total liabilities. 58. The section of the statement of cash flows includes increases and decreases in long-term assete A) investing activities B) financing activities operating activities D)non-cash operating activities 59. The indirect and direct methods use different computations but produce the same amount of net cash provided by operating activities 60. Which of the following sections of the statement of cash flows is presented differently between the direct method and indirect method? A investing activities Bfinancing activities C operating activities Dy non-cash investing and financing activities