True or False. Gross profit is the difference between the selling price and cost of merchandise. 2. The term 'capitalizing'a cost means charging it to an asset account. 3. Depreciation is the allocation of an asset's cost over its useful life. _4. The declining-balance method is an accelerated depreciation method. _ 5. The term "depletion" is applied to intangible assets such as patents. 6. Land is usually depreciated under the straight-line method. _7. Jin a bank reconciliation, permanent differences require an adjusting journal entry. The Bad Debt account is a balance sheet contra account used to determine the estimated realizable account receivables. Jin a bank reconciliation you must examine all outstanding checks to verify that they have been listed on the bank statement at the correct amount. __10. The working capital (current) ratio is an indicator of a company's liquidity. A Company purchases $1,000 of merchandise inventory March 15, terms 2/10, 1/30. If the __11. bill is paid April 10, the amount paid would be $980. Merchandise Inventory would be debited when goods are purchased by a company that uses a perpetual inventory system. __13. Accumulated depreciation is an expense account that appears in the income statement. When machinery is purchased and the buyer pays sales tax, the tax should be charged to an expense account. 15 Merchandise is purchased fob shipping point. This means that the buyer owns the goods as soon as they are shipped. __16. A contingent liability is a potential obligation that depends on a future event. __17. Both a perpetual and periodic inventory system require a year-end count of inventory. _18. A customer who gives our company a note receivable is the maker of the note. in a perpetual inventory system, the recording of a sale requires two entries, one to record the revenue and the other the cost of goods sold. 20 The allowance method for writing off an uncollectible account is in accordance with the matching principle. 21. A payroll tax that would be an employer's expense is: a. Federal Withholding Tax. b. State Withholding Tax. c. Social Security and Medicare. d. All of the Above. 22. A company acquired equipment for $25,000. It paid $2,000 for sales tax, $1,000 for shipping and $2,000 for installation. The equipment a. should be recorded at $25,000. b. should be recorded at $26,000. c. should be recorded at $28,000. d. should be recorded at $30,000. 23. A monthly bank statement provided by ABC bank includes: a. A list of outstanding checks. b. A list of deposits in transit. c. The beginning and the ending balance of the depositor's account d. All of the above. 24. All of the following are acceptable cost allocation methods except: a. Depletion. b. Depreciation. c. Amortization. d. Forminization 25. The depreciation method that initially ignores an asset's residual value is a. Straight line. b. Units of production. c. Declining balance. d. Specific identification 26. Depletion would be computed for: a. Accounts receivable b. An oil field. c. Office equipment. d. Patents. 27. A company has a $100 imprest petty cash account. Currently, the fund has $20 in cash, $50 of receipts for business supplies and $30 for travel. The journal entry to replenish the fund is: a. Debit supplies $50, travel $30 and credit cash $80. b. Debit supplies $50, travel $30 and credit petty cash $80. c. Debit petty cash $20 supplies $50, travel $30 and credit cash $100. d. Debit cash $20 supplies $50, travel $30 and credit petty cash $100. 28. A company's working capital ratio was 2.75:1 in 2017, 3.0:1 in 2018, and 3.75:1 in 2018. This would seem to indicate that: a. Sales are increasing. b. Sales are decreasing c. The company's liquidity seems to be improving d. The company's liquidity seems to be deteriorating 29-31. ABC Inc. purchased a delivery truck on January 1 for $35,000. It was estimated to have a 4-year useful life or 100,000 miles and a residual value of $5,000. 29. If the company used straight-line depreciation, the first-year depreciation is: a. $10,000. b. S 8,750. c. $ 7,500. d. Some other amount. _30. If the company used double declining balance, the first-year depreciation is: a. $20,000. b. $17,500. c. S15,000. d. Some other amount. 31. If the company used an activity depreciation method and the truck was driven 10,000 miles, the first-year depreciation would be: a. S 7.500. b. S 3,500. c. $ 3.000. d. Some other amount. 32. A company's accounts receivable turnover" was 36 days in 2017, 34 days in 2018 and 30 days in 2019. This would seem to indicate that: a. Sales are increasing b. Sales are decreasing. c. It is taking less time to collect accounts receivable. d. It is taking more time to collect accounts receivable _33. The term depreciable cost refers to a. The annual depreciation charge for an asset. b. The total depreciation to be charged over the life of the asset. c. The cost of the asset. d. The difference between cost and accumulated depreciation. 34. When a purchase allowance is granted, a. The buyer returns the goods to the seller. b. The seller gives the buyer a reduction in price and the buyer keeps the goods c. The seller gives the buyer a reduction in price and the buyer returns the goods. d. The buyer commits to purchase a certain amount at a certain price in the future. 35. ABC purchases $10,000 of inventory on March 5. terms 2/10, n/30, fob shipping point. Freight was $100. Payment was made on March 15 for: a $ 9,800. b. S 9.900 c. $10,000. d. $10,100. 36. XYZ purchased goods for $5,000 fo.b. destination, sales tax was $300 and freight $100. Under a perpetual inventory system: a. Debit merchandise inventory credit accounts payable $ 5.000. b. Debit merchandise inventory credit accounts payable $5,300. c. Debit merchandise inventory credit accounts payable S 5,400. d. Debit Purchases credit accounts payable $ 5,400. 37. A retail store had sales of $1,000 and collected 5% sales tax. The amount credited to the Sales Account is: a. S 950. b. S 1,000. c. $ 1.050. d. Some other amount. 38. A set of procedures and approvals for verifying, approving, and recording obligations for payment is referred to as an): a. Internal cash system. b. Petty cash system. c. Cash flow system. d. Voucher system. 39. The maturity date of a note payable is: a. The date of the credit purchase. b. The date the note was signed and replaced the account payable. c. The day the note is due to be repaid. d. The last day of the month. 40. The maturity value of a note payable is: a. The amount on the face of the note. b. The amount of interest expense for the life of the note. c. The face amount plus the interest expense. d. None of the above. _41. A liability can be reported on the balance sheet if: a. The exact amount of the obligation is known. b. The amount of the obligation can be estimated c. Both "a and b". d. It must involve a future outflow of cash. 42-45. The general ledger shows: Accounts Receivable $100,000, Allowance for Doubtful Accounts $5,000 (credit balance) and Sales $1,000,000. 42. If the company wrote off an account as uncollectible for $500, the accounts receivable net realizable value after the write-off would be: a. $99,000. b. $95,000 c. $94,000. d. Some Other Amount 43. If the determination of bad debts was based on 1% of sales, the bad debt expense for the year would be: a. $10,000 b. $ 9,950. c. $ 9,000. d. Some Other Amount. 44. If the determination was based on 10% of accounts receivable, the bad debt expense for the year would be: a. S10,000 b. $ 9,500. c. $ 9,000. d. Some other amount. _45. Whichever method is used in the prior questions to estimate bad debts at the end of the year, the journal entry would include a: a. Debit Bad Debts/ Credit Allowance for Uncollectible Accounts. b. Debit Allowance for Uncollectible Accounts/ Credit Bad Debts. c. Debit Allow. for Uncollectible Accounts/ Credit Accts. Receivable. d. Debit Accounts Receivable Credit Allow. for Uncollectible Accounts _46. Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals: a. $140,200. b. $135,000 c. $132.800. d. $129.800 47. Which of the following statements regarding gross profit is NOT true? a. Gross profit equals net sales less cost of goods sold b. Gross profit less other operating expenses equals income from operations. c. Gross profit is sometimes called Net Income. d. Gross profit must cover all operating expenses to yield a return for the owner(s) of the business. 48. During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should: a. Deduct the check amount from the book balance of cash. b. Add the check amount to the book balance of cash. c. Add the check amount to the bank balance. d. Deduct the check amount from the bank balance. 49. Beginning inventory plus net purchases is: a. Cost of goods sold. b. Merchandise (goods) available for sale. c. Ending inventory. d. Sales. 50. Which of the following is NOT an internal control system objective? a. To protect assets. b. To ensure reliable accounting. c. To guarantee a return to investors. d. To promote efficient operations