1. If a unit
of inventory has declined in value below original cost, but the market value
exceeds net realizable value, the amount to be used for purposes of inventory
valuation is
A) net
realizable value.
B) original
cost.
C) market
value.
D) net realizable
value less a normal profit margin.
2. Which of
the following best describes current practice in accounting for leases?
A) Leases are
not capitalized.
B) Leases
similar to installment purchases are capitalized.
C) All
long-term leases are capitalized.
D) All leases
are capitalized.
3. On
January 1, 2008, the Accumulated Depreciation-Machinery account of a particular
company showed a balance of $370,000. At the end of 2008, after the adjusting
entries were posted, it showed a balance of $395,000. During 2008, one of the
machines which cost $125,000 was sold for $60,500 cash. This resulted in a loss
of $4,000. Assuming that no other assets were disposed of during the year, how
much was depreciation expense for 2008?
A) $85,500
B) $93,500
C) $25,000
D) $60,500
4. The Lease
Liability account should be disclosed as
A) all
current liabilities.
B) all
noncurrent liabilities.
C) current
portions in current liabilities and the remainder in noncurrent liabilities.
D) deferred
credits.
5. A plant
asset has a cost of $24,000 and a salvage value of $6,000. The asset has a
three-year life. If depreciation in the third year amounted to $3,000, which
depreciation method was used?
A) Straight-line
B) Declining-balance
C) Sum-of-the-years’-digits
D) Cannot
tell from information given
6. Which of
the following methods of determining annual bad debt expense best achieves the
matching concept?
A) Percentage
of sales
B) Percentage
of ending accounts receivable
C) Percentage
of average accounts receivable
D) Direct
write-off
7. On
September 1, 2007, Looper Co. issued a note payable to National Bank in the
amount of $1,200,000, bearing interest at 12%, and payable in three equal
annual principal payments of $400,000. On this date, the bank’s prime rate was
11%. The first payment for interest and principal was made on September 1,
2008. At December 31, 2008, Looper should record accrued interest payable of
A) $48,000.
B) $44,000.
C) $32,000.
D) $29,334.
8. Malrom
Manufacturing Company acquired a patent on a manufacturing process on January
1, 2007 for $10,000,000. It was expected to have a 10 year life and no residual
value. Malrom uses straight-line amortization for patents. On December 31,
2008, the expected future cash flows expected from the patent were expected to
be $800,000 per year for the next eight years. The present value of these cash
flows, discounted at Malrom’s market interest rate, is $4,800,000. At what
amount should the patent be carried on the December 31, 2008 balance sheet?
A) $10,000,000
B) $8,000,000
C) $6,400,000
D) $4,800,000
Recent Comments