86. Which of the following is not classified as plantassets?

Multiple Choice

a. Land.

b. Land improvements.

c. Buildings.

d. Machinery and equipment.

e. Patent.

87. The following statements regarding merchandiseinventory are true except:

Multiple Choice

a. Merchandise inventory is reported on the balancesheet as a current asset.

b. Merchandise inventory refers to products a companyowns and intends to sell.

c. Merchandise inventory may include the costs offreight in and making them ready for sale.

d. Merchandise inventory appears on the balance sheet ofa service company.

e. Purchasing merchandise inventory is part of theoperating cycle for a business.

88. A company had the following purchases and salesduring its first year of operations:

	Purchases	Sales
January:	10 units at $120	6 units
February:	20 units at $125	5 units
May:	15 units at $130	9 units
September:	12 units at $135	8 units
November:	10 units at $140	13 units

On December 31, there were 26 units remaining in endinginventory. Using the Perpetual FIFO inventory valuation method,what is the value of cost of goods sold? (Assume all sales weremade on the last day of the month.)

Multiple Choice

a. $8,670.

b. $3,540.

c. $5,400.

d. $5,130.

e. $3,270.

89. A company uses the percent of receivables method todetermine its bad debts expense. At the end of the current year,the company's unadjusted trial balance reported the followingselected amounts:

Accounts receivable	$	375,000	debit
Allowance for uncollectible accounts		500	credit
Net Sales		800,000	credit

All sales are made on credit. Based on past experience,the company estimates that 6% of receivables are uncollectible.What amount should be debited to Bad Debts Expense when theyear-end adjusting entry is prepared?

Multiple Choice

a. $22,500

b. $23,000

c. $22,000

d. $4,800

e. $5,500

90. Strods Company reported the following purchases andsales of its only product. Strods uses a periodic inventory system.Determine the cost assigned to ending inventory usingLIFO.

Date	Activities	Units Acquired at Cost	Units Sold at Retail
May 1	Beginning Inventory	150 units @ $10.00
5	Purchase	220 units @ $12.00
10	Sales		140 units @ $20.00
15	Purchase	100 units @ $13.00
24	Sales		90 units @ $21.00

Multiple Choice

a. $2,260

b. $3,180

c. $2,580

d. $3,580

e. $2,100

91. After preparing a bank reconciliation, adjustmentsmust be made for items reconciling the bank balance. True orFalse?

92. Special rights often granted to preferred stockinclude a preference for receiving dividends and additional votingprivileges. True or False?

93. The following selected amounts are reported on theyear-end unadjusted trial balance report for a company that usesthe percent of sales method to determine its bad debtsexpense.

Accounts receivable	$	435,000	Debit
Allowance for Doubtful Accounts		1,250	Debit
Net Sales		2,100,000	Credit

All sales are made on credit. Based on past experience,the company estimates 1% of credit sales to be uncollectible. Whatadjusting entry should the company make at the end of the currentyear to record its estimated bad debts expense?

Multiple Choice

a. Debit Bad Debts Expense $19,750; credit Allowance forDoubtful Accounts $19,750.

b. Debit Bad Debts Expense $15,225; credit Allowance forDoubtful Accounts $15,225.

c. Debit Bad Debts Expense $22,250; credit Allowance forDoubtful Accounts $22,250.

d. Debit Bad Debts Expense $7,350; credit Allowance forDoubtful Accounts $7,350.

e. Debit Bad Debts Expense $21,000; credit Allowance forDoubtful Accounts $21,000.

94. Minor Company installs a machine in its factory atthe beginning of the year at a cost of $135,000. The machine'suseful life is estimated to be 5 years, or 300,000 units ofproduct, with a $15,000 salvage value. During its first year, themachine produces 64,500 units of product. What journal entry wouldbe needed to record the machines' first year depreciation under theunits-of-production method?

Multiple Choice

a. Debit Depletion Expense $25,800; credit AccumulatedDepletion $25,800.

b. Debit Depletion Expense $29,025; credit AccumulatedDepletion $29,025.

c. Debit Depreciation Expense $29,025; creditAccumulated Depreciation $29,025.

d. Debit Depreciation Expense $25,800; creditAccumulated Depreciation $25,800.

e. Debit Amortization Expense $24,000; creditAccumulated Amortization $24,000.

95. In applying the lower of cost or market method toinventory valuation, market is defined as:

Multiple Choice

a. Historical cost.

b. Current replacement cost.

c. Current sales price.

d. FIFO.

e. LIFO

96. Credit terms of 2/10, n/30 imply that the selleroffers the purchaser a 2% cash discount if the amount is paidwithin 10 days of the invoice date. Otherwise, the full amount isdue in 30 days. True or false?

97. A debit to Sales Returns and Allowances and a creditto Accounts Receivable:

Multiple Choice

a. Reflects an increase in amount due from acustomer.

b. Recognizes that a customer returned merchandiseand/or received an allowance.

c. Records the cost side of a sales return.

d. Is recorded when a customer takes adiscount.

e. Reflects a decrease in amount due to asupplier.

98. A corporation issued 100 shares of its $5 par valuecommon stock in payment of a $1,800 charge from its accountant forassistance in filing its charter with the state. The entry torecord this transaction will include:

Multiple Choice

a. A $1,800 credit to Common Stock.

b. A $300 debit to Organization Expenses.

c. A $1,300 credit to Paid-in Capital in Excess of ParValue, Common Stock.

d. A $1,800 debit to Legal Expenses.

e. A $1,800 credit to Cash.

99. Sweet Company’s outstanding stock consists of 1,000shares of noncumulative 5% preferred stock with a $100 par valueand 10,000 shares of common stock with a $10 par value. During thefirst three years of operation, the corporation declared and paidthe following total cash dividends.

	Dividend Declared
year 1	$	2,000
year 2	$	6,000
year 3	$	32,000

The total amount of dividends paid to preferred andcommon shareholders over the three-year period is:

Multiple Choice

a. $15,000 preferred; $25,000 common.

b. $11,000 preferred; $29,000 common.

c. $5,000 preferred; $35,000 common.

d. $12,000 preferred; $28,000 common.

e. $10,000 preferred; $30,000 common.

100. Craigmont uses the allowance method to account foruncollectible accounts. Its year-end unadjusted trial balance showsAccounts Receivable of $104,500, allowance for doubtful accounts of$665 (credit) and sales of $925,000. If uncollectible accounts areestimated to be 0.5% of sales, what is the amount of the bad debtsexpense adjusting entry?

Multiple Choice

a. $4,625

b. $3,960

c. $5,290

d. $4,750

e. $4,825

101. Canceled checks are checks the bankhas paid and deducted from the customer's account during theperiod. True or false?

102. Wickland Company installs a manufacturing machine inits production facility at the beginning of the year at a cost of$87,000. The machine's useful life is estimated to be 5 years, or400,000 units of product, with a $7,000 salvage value. During itssecond year, the machine produces 84,500 units of product.Determine the machines' second year depreciation under thedouble-declining-balance method.

Multiple Choice

a. $16,900.

b. $16,000.

c. $17,400.

d. $18,379.

e. $20,880.

103. A company purchased property for $100,000. Theproperty included a building, a parking lot, and land. The buildingwas appraised at $62,000; the land at $35,000, and the parking lotat $18,000. Land should be recorded in the accounting records withan allocated cost of:

Multiple Choice

a. $0.

b. $30,435.

c. $35,000.

d. $46,087.

e. $100,000.

104. Once the estimated depreciation expense for an assetis calculated:

Multiple Choice

a. It cannot be changed, based on the historical costprinciple.

b. It may be revised based on new information.

c. Any changes are accumulated and recognized when the asset issold.

d. The estimate itself cannot be changed; however, newinformation should be disclosed in financial statementfootnotes.

e. It cannot be changed, based on the consistency principle.

105. The cash flows from operating activities section of anindirect method of cash flows begins with net income or loss. Trueor False?

106. Separate accounts receivable information for each customeris important because it reveals all of thefollowing except:

Multiple Choice

a. How much each customer has purchased on credit.

b. How much each customer has paid.

c. How much each customer still owes.

d. The basis for sending bills to customers.

e. When the customer intends to pay outstanding balances.

107. A company had sales of $350,000 and cost of goods soldof $200,000. Its gross profit equals $150,000. True or false?

108. A company had a gross profit of $300,000 based onsales of $400,000. Its cost of goods sold equals $700,000. True orfalse?

109. The purchase of a property that included land,building, and related improvements is called a lump-sum or basketpurchase. True or false?

110. Depreciation expense under thedouble-declining-balance method is equal to the book value of theasset at the beginning of the period multiplied by twice thestraight-line depreciation rate. True or false?