1. At the beginning of Year 1, Fernbank Farms purchased a semi-trailer at a cost of $100,000. The truck has an estimated life of five years and an estimated residual value of $20,000, and it will be depreciated using the straight-line method. On January 1, Year 3, the company made $30,000 worth of repairs to the truck that extended its life by 3 years. Thus, starting with Year 3, the truck has a remaining life of five years and a new salvage value of $8,000.

   What amount should be recorded as depreciation expense each year starting in Year 3?

   	a.	$12,400
   	b.	$13,600
   	c.	$16,000
   	d.	$18,000

2. With regard to its relationship to dividends and market price, which of the following ratios is typically most important to investors?

   	a.	asset turnover ratio
   	b.	dividend yield ratio
   	c.	debt-to-equity ratio
   	d.	current dividend ratio

3. SPI-W has the following data for the year ended December 31, Year 1:

   Accounts receivable (January 1, Year 1)	$ 350,000
   Credit sales	1,200,000
   Collections from credit customers	850,000
   Customer accounts written off as uncollected	10,000
   Allowance for doubtful accounts (January 1, Year 1)	35,000
   Estimated uncollected accounts based on an aging analysis (December 31, Year 1)	50,000

   What is the balance of accounts receivable at December 31, Year 1?

   	a.	$340,000
   	b.	$655,000
   	c.	$690,000
   	d.	$700,000

4. Furniture Barn and Furniture World purchased identical equipment that has an estimated useful life of five years. Furniture Barn uses the straight-line depreciation method whereas Furniture World uses the double-declining-balance method. The two entities are the same in all other respects. What is the effect of this choice?

   	a.	Furniture Barns net income will be greater in Year 9.
   	b.	Furniture Barns depreciation expense will be greater in the second year.
   	c.	Furniture Worlds equipment book value will be less at the end of Year 2.
   	d.	Furniture Worlds equipment book value will be greater at the end of Year 1.

5. Which of the following ratios is the best measure for analyzing a companys efficiency in using assets to produce sales revenues?

   	a.	current ratio
   	b.	return on assets
   	c.	asset turnover ratio
   	d.	debt-to-total-assets ratio

6. Which of the following is indicated by earnings per share?

   	a.	how much cash the company has for outstanding shares
   	b.	how much earnings the company has for authorized shares
   	c.	how much earnings the company has for outstanding shares
   	d.	how much the company paid in dividends for outstanding common shares

7. Which of the following statements is characteristic of the cost flows in accounting?

   	a.	The flow of inventory costs will match the physical flow of the merchandise.
   	b.	Alternative inventory cost flow assumptions have the same effect on the amount of net income reported.
   	c.	Accounting standards require that merchandise costs be specifically traced to units left in inventory and to units that have been sold.
   	d.	Accountants have developed methods that make assumptions concerning how costs should be assigned to inventory and cost of goods sold.