Question 16

A company has the following account balances. What is the acid-test ratio? (Please round to two decimal places.)

Cash	$50,000
Short-term investments	85,000
Net current receivables	120,000
Inventory	145,000
Total current liabilities	275,000

	A.	.64
	B.	.93
	C.	1.45
	D.	1.76

Question 17

Book value is defined as:

	A.	current market value minus accumulated amortization.
	B.	current market value minus residual value.
	C.	cost minus residual value.
	D.	cost minus accumulated amortization.

Question 18

It is necessary for the owners and top managers to demonstrate the importance of internal controls in order to expect the employees to take the controls seriously.

	A.	True
	B.	False

Question 19

The following data are available for Remas Designs for October:

Book balance, October 31	$5,600
Outstanding cheques	584
Deposits in transit	2,500
Service charges	75
Interest revenue	25

What is the adjusted book balance on October 31 for Remas Designs based on the above data?

	A.	$7,466
	B.	$5,500
	C.	$5,550
	D.	$4,966

Question 20

Which amortization method generally results in the greatest amortization expense in the first full year of an asset's life?

	A.	units-of-production
	B.	double-declining-balance
	C.	straight-line
	D.	either straight-line or double-declining

Question 21

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to reinstate her account involves:

	A.	a debit to Smith's account receivable and a credit to allowance for doubtful accounts.
	B.	a debit to bad-debt expense and a credit to Smith's account receivable.
	C.	a debit to allowance for doubtful accounts and a credit to Smith's account receivable.
	D.	a debit to Smith's account receivable and a credit to bad-debt expense.

Question 22

The employee who processes cash payments should have nothing to do with the approval process. This is a part of which characteristic of internal control?

	A.	competent, reliable, and ethical personnel
	B.	assignment of responsibilities
	C.	proper authorization
	D.	separation of duties

Question 23

Cycle Company Ltd. made a lump-sum purchase of land, buildings, and equipment for $630,000. The appraised market values for the items are respectively, $210,000, $322,000, and $168,000. Cycle Company Ltd. should debit the equipment account for:

	A.	$151,200.
	B.	$289,800.
	C.	$168,000.
	D.	$189,000.

Question 24

Patents and copyrights are examples of:

	A.	property, plant, and equipment assets.
	B.	intangible assets.
	C.	goodwill.
	D.	current assets.

Question 25

Incorrectly treating a repair expenditure as a betterment:

	A.	understates expenses and understates owner's equity.
	B.	overstates assets and overstates owner's equity.
	C.	understates expenses and understates assets.
	D.	overstates expenses and understates net income.

Question 26

Amortizable cost equals cost minus:

	A.	residual value.
	B.	accumulated amortization.
	C.	current year's amortization expense.
	D.	book value.

Question 27

Match the following.

	Process of explaining the reasons for the difference between a depositor's records and the bank's records about the depositor's bank account
	Document for a particular bank account showing its beginning and ending balances and listing the month's transactions that affected the account
	Fund containing a small amount of cash that is used to pay minor expenditures
	The cumulative sum of all amortization expense from the date of acquiring a property, plant, and equipment asset
	Expenditure that merely maintains an asset in its existing condition or restores the asset to good working order
	Length of the service that a business expects to get from an asset

A.	bank statement
B.	accumulated amortization
C.	repair
D.	bank reconciliation
E.	estimated useful life
F.	petty cash

Question 28

The interest on a $32,000 note at 9% for three months is:

	A.	$710.
	B.	$2,880.
	C.	$1,440.
	D.	$720.

Question 29

The Calder Company received a bank statement showing a balance of $60,300. Reconciling items included outstanding cheques of $1,450 and a deposit in transit of $8,500. What is the company's adjusted bank balance?

	A.	$60,300
	B.	$68,800
	C.	$58,850
	D.	$67,350

Question 30

All amounts paid to acquire an asset and to get it ready for its intended use are referred to as:

	A.	salvage expenditures.
	B.	equity expenditures.
	C.	the cost of an asset.
	D.	revenue expenditures.