1. In a Financing Lease the Lessee records an Asset and a Liability
   1. False B) True

2. The balance sheet of ABC reports total assets of $1,500,000 and $1,700,000 at the beginning and end of the year, respectively. Net income and sales for the year are $240,000 and $2,000,000, respectively. What is ABC's return on assets?

A) 16%. B) 15%. C) 12%. D) 14.12%.

3. ABC purchases inventory for $2,000 and incurs shipping costs of $100 for the goods to be delivered. To record this transaction, the company debits Inventory for $2,000, debits Selling Expenses for $100, and credits Cash for $2,100. Which of the following statements is correct?
   1. Net income is overstated. B) Assets are understated.

C) Revenues are understated. D) All accounts are accurately stated.

4. ABC spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?
   1. Increase Expenses. B) Decrease Revenues.

C) Increase Revenues. D) Increase Assets.

5. For a journal entry with only two lines, the following entry is valid: Decrease in Owners' Equity, Increase in Dividends.
   1. True B) False

6. Return on assets equals:
   1. Profit margin Inventory turnover. B) Gross profit ratio Asset turnover.

C) Gross profit ratio Inventory turnover. D) Profit margin Asset turnover.

7. On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2019?

A) $301,250. B) $300,000. C) $307,500. D) $306,250.

8. Research and development costs should be capitalized when the:
   1. Future benefit is probable and the amount cannot be reasonably estimated.
   2. Future benefit is reasonably possible and the amount can be reasonably estimated.
   3. Future benefit is probable and the amount can be reasonably estimated.
   4. None of these.

9. ABC purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. ABC should record:
   1. neither a gain nor a loss - the gain that occurred in this case would not be recognized.
   2. a gain of $1,000.
   3. a loss of $1,000.
   4. neither a gain nor a loss - the computer was sold at its book value.

10. In Cash Flow reporting Accounts Receivable is measured at
    1. Benefit Value B) $0

C) It depends on the measuring system D) Sacrifice Value

11. For a journal entry with only two lines, the following entry is valid: Decrease in Revenue, Decrease in Expense.
    1. True B) False

12. Can a firm earn 36% risk free
    1. Yes, by paying after the sales discount period
    2. Yes, by paying within the sales discount period
    3. No
    4. Yes, by offering sales discounts

13. Under the principle of lower of cost and net realizable value, when a company has 10 units of inventory A with net realizable value of $50 and a cost of $60, what is the adjustment?
    1. Debit Cost of Goods Sold $500; credit Inventory $500.
    2. Debit Inventory $100; credit Cost of Goods Sold $100.
    3. Debit Inventory $500; credit Cost of Goods Sold $500.
    4. Debit Cost of Goods Sold $100; credit Inventory $100.