A) Increase the current ratio and increase the acid-test ratio.
B) No change to the current ratio and decrease the acid-test ratio.
C) Decrease the current ratio and decrease the acid-test ratio.
D) Decrease the current ratio and increase the acid-test ratio.
Answer: B
A) Current assets divided by current liabilities.
B) Cash and short-term investments divided by current liabilities.
C) Cash, short-term investments, and accounts receivable divided by current liabilities.
D) Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.
Answer: C
A) Working capital.
B) Current ratio.
C) Acid-test ratio.
D) They all control for the relative size of the company.
Answer: A
A) Receivables turnover
B) Debt to equity ratio
C) Return on assets
D) Current ratio
Answer: D
A) Current assets divided by current liabilities.
B) Current assets minus current liabilities.
C) Cash, short-term investments, and accounts receivable divided by current liabilities.
D) Cash, short-term investments, and accounts receivable minus current liabilities.
Answer: B
A) Current assets divided by current liabilities.
B) Cash and short-term investments divided by current liabilities.
C) Cash, short-term investments, and accounts receivable divided by current liabilities.
D) Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.
Answer: A
A) The current ratio will always be equal to or larger than the acid-test ratio for a specific company.
B) The acid-test ratio will always be equal to or larger than the current ratio for a specific company.
C) Either the current ratio or the acid-test ratio could be larger for a specific company.
D) One ratio will always exceed 1.0, while the other will always be less than 1.0.
Answer: A
A) Ability to collect accounts receivable.
B) Ability to sell inventory efficiently.
C) Ability to generate profits from operations.
D) Ability to pay currently maturing debts.
Answer: D
A) A low current ratio generally indicates the ability to pay current liabilities on a timely basis.
B) A low acid-test ratio generally indicates the ability to pay current liabilities on a timely basis.
C) All current assets are due within one year and therefore have essentially equal liquidity.
D) A high working capital generally indicates the ability to pay current liabilities on a timely basis.
Answer: D
A) Unified does not record any loss Northeast records a $5,000,000 gain.
B) Neither company records a loss or gain.
C) Unified records a $5,000,000 loss Northeast records a $5,000,000 gain.
D) Unified records a $5,000,000 loss Northeast does not record any gain.
Answer: B
A) 2.54.
B) 2.98.
C) 4.04.
D) 2.84.
Answer: B
A) 1.47.
B) 2.00.
C) 2.84.
D) 3.86.
Answer: A
A) A high current ratio generally indicates the ability to pay current liabilities on a timely basis.
B) A high acid-test ratio generally indicates the ability to pay current liabilities on a timely basis.
C) All current assets are due within one year and therefore have essentially equal liquidity.
D) As a rule of thumb, a current ratio of 1 or higher often reflects an acceptable level of liquidity.
Answer: C
A) The company is being sued and a loss is reasonably possible and reasonably estimable.
B) The company deducts life insurance premiums from employees' paychecks.
C) The company offers a two-year warranty and the expenses can be reasonably estimated.
D) It is probable that the company will receive $100,000 in settlement of a lawsuit.
Answer: C
A) Unified does not record any loss Northeast records a $5,000,000 gain.
B) Unified records a $5,000,000 loss Northeast does not record any gain.
C) Unified records a $5,000,000 loss Northeast records a $5,000,000 gain.
D) Neither company records a loss or gain.
Answer: B
A) Reported in the income statement and disclosed.
B) Offset against stockholders' equity.
C) Disclosed, but not recognized in the income statement.
D) Reported in the income statement, but not disclosed.
Answer: C
A) The likelihood of a loss is remote.
B) The likelihood of a loss is reasonably possible.
C) The likelihood of a loss is probable.
D) The likelihood of a loss is eighty percent.
Answer: B
A) When the equipment is sold.
B) When the repairs are performed.
C) When payments are made to the service firm.
D) Evenly over the life of the warranty.
Answer: A
A) $44,000.
B) $80,000.
C) $36,000.
D) $480,000.
Answer: C
A) Only if the amount is known.
B) Only if the amount is known or reasonably estimable.
C) Unless the amount is not reasonably estimable.
D) Even if the amount is not reasonably estimable.
Answer: D
A) The gain is certain.
B) The amount is reasonably estimable.
C) The gain is reasonably possible and the amount is reasonably estimable.
D) The gain is probable and the amount is reasonably estimable.
Answer: A
A) At least remotely possible and the amount of the loss is known.
B) At least reasonably possible and the amount of the loss is known.
C) At least reasonably possible and the amount of the loss is reasonably estimable.
D) Probable and the amount of the loss can be reasonably estimated.
Answer: D
A) Stockholders' equity decreases.
B) Stockholders' equity increases.
C) Liabilities increase.
D) Liabilities decrease.
Answer: D
A) Warranty Expense of $2,000.
B) Warranty Liability of $2,000.
C) Warranty Liability of $3,000.
D) Warranty Expense of $3,000.
Answer: D
A) $2,250.
B) $3,375.
C) $5,625.
D) None, all expected returns from warranties have been received.
Answer: B
A) is adjusted at the end of the year.
B) is closed at the end of the year.
C) has a year-end credit balance equal to the cost of warranty repairs made during the year.
D) is credited each time a warranty repair is made.
Answer: A
A) $0.
B) $16,000.
C) $7,000.
D) $9,000.
Answer: B
A) $0.
B) $16,000.
C) $7,000.
D) $9,000.
Answer: C
A) A decrease in assets and decrease in stockholders' equity.
B) No journal entry is necessary until products under warranty are returned.
C) An increase in stockholders' equity and a decrease in liabilities.
D) A decrease in stockholders' equity and an increase in liabilities.
Answer: D
A) Record decrease stockholders' equity and increase liabilities.
B) Record increase stockholders' equity and decrease liabilities.
C) Disclose no effect in the balance sheet.
D) Disclose decrease stockholders' equity and decrease liabilities.
Answer: C
A) Amplify, Inc. would record a loss and contingent liability for $50,000.
B) Sound City would record a gain and lawsuit receivable for $50,000.
C) Sound City would record nothing.
D) Amplify, Inc. would record a loss and contingent liability for $50,000 Sound City would record nothing.
Answer: D
A) Net gain for $4,000.
B) Loss for $6,000.
C) Net Loss for $4,000.
D) Gain for $10,000.
Answer: B
A) Raider reports a loss Palmer reports nothing.
B) Raider reports nothing Palmer reports nothing.
C) Raider reports nothing Palmer reports a gain.
D) Raider reports a loss Palmer reports a gain.
Answer: A
A) $5.3 million.
B) $7.2 million.
C) $9.0 million.
D) $27.0 million.
Answer: B
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
Answer: A
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
Answer: D
A) As a receivable for $100,000 with disclosure of the range.
B) As a receivable for $150,000 with disclosure of the range.
C) As a receivable for $200,000 with disclosure of the range.
D) As a disclosure only. No receivable is reported.
Answer: D
A) Remote and the amount is reasonably estimable.
B) Probable and the amount is reasonably estimable.
C) Reasonably possible and the amount is reasonably estimable.
D) Probable and the amount is not reasonably estimable.
Answer: B
A) The amount that will be paid within one year of the balance sheet date.
B) Reported as an asset.
C) Reported as a long-term liability.
D) None of the other answer choices is correct.
Answer: A
A) $50 million current liability in the balance sheet.
B) $50 million long-term liability in the balance sheet.
C) $10 million current liability and a $40 million long-term liability in the balance sheet.
D) $40 million current liability and a $10 million long-term liability in the balance sheet.
Answer: C
A) $5 million current liability.
B) $5 million long-term liability.
C) $1 million current liability and a $4 million long-term liability.
D) $4 million current liability and a $1 million long-term liability.
Answer: C
A) Disclosed, but not reported as a liability.
B) Disclosed and reported as a liability.
C) Neither disclosed nor reported as a liability.
D) Reported as a liability, but not disclosed.
Answer: A
A) Disclosed, but not reported as a liability.
B) Disclosed and reported as a liability.
C) Neither disclosed nor reported as a liability.
D) Reported as a liability, but not disclosed.
Answer: B
A) $600
B) $280
C) $318
D) $300
Answer: D
A) $500,000.
B) $518,128.
C) $520,000.
D) $551,200.
Answer: C
A) $51,200.
B) $33,272.
C) $31,200.
D) $551,200.
Answer: C
A) Reported as a current liability in the balance sheet.
B) Reported as a long-term liability in the balance sheet.
C) Combined with the rest of the long-term debt in the balance sheet.
D) Paid immediately.
Answer: A
A) increase decrease
B) increase increase
C) decrease increase
D) decrease decrease
Answer: B
A) $8.39 for lunch and $0.42 for sales tax.
B) $8.39 for lunch and no sales tax.
C) $8.81 for lunch and $0.42 for sales tax.
D) $7.99 for lunch and $0.40 for sales tax.
Answer: D
A) Debit to Sales Tax Payable for $75.
B) Debit to Cash of $1,000.
C) Credit to Sales Revenue of $2,700.
D) Debit to Accounts Receivable of $1,620 and a debit to Cash of $1,080.
Answer: D
A) $23.75 for dinner and $1.90 for sales tax.
B) $23.75 for dinner and no sales tax.
C) $21.85 for dinner and $1.90 for sales tax.
D) $21.99 for dinner and $1.76 for sales tax.
Answer: D
A) Debit Deferred Revenue, $50 credit Sales Revenue, $50.
B) Debit Sales Revenue, $50 credit Cash, $50.
C) Debit Cash, $750 credit Sales Revenue, $750.
D) No journal entry is necessary.
Answer: A
A) $2,000.
B) $1,800.
C) $1,600.
D) $400.
Answer: D
A) A debit to an expense account.
B) A credit to a revenue account.
C) A debit to a revenue account.
D) A credit to a liability account.
Answer: D
A) A debit to Sales Tax Expense and a credit to Sales Tax Payable.
B) A debit to Cash and a credit to Sales Tax Payable.
C) A debit to Sales Tax Payable and a credit to Sales Tax Expense.
D) A debit to Sales Tax Payable and a credit to Cash.
Answer: B
A) Liabilities until the product or service is provided.
B) A component of stockholders' equity.
C) Long-term assets until the product or service is provided.
D) Revenue upon receipt of the advance payment.
Answer: A
A) Deferred revenues.
B) Sales tax payable.
C) Current portion of long-term debt.
D) Contingencies.
Answer: A
A) A debit to a revenue account and a credit to a liability account.
B) A debit to a revenue account and a credit to an asset account.
C) A debit to an asset account and a credit to a revenue account.
D) A debit to a liability account and a credit to a revenue account.
Answer: D
A) The inability of the company to satisfy its obligation to customers that have previously purchased gift cards.
B) The point in time when gift cards expire or when the likelihood of redemption by customers is viewed as remote.
C) The time at which customers redeem their previously purchased gift cards for goods and services.
D) Companies selling gift cards to customers on account and then those customers failing to pay the amount owed.
Answer: B
A) Debit Cash, $1,200 credit Sales Revenue, $1,200.
B) Debit Sales Revenue, $1,200 credit Cash, $1,200.
C) Debit Cash, $1,200 credit Deferred Revenue, $1,200.
D) No journal entry is necessary.
Answer: C
A) $1,377.
B) $3,141.
C) $2,061.
D) $684.
Answer: C
A) Liability account.
B) Asset account.
C) Stockholders' equity account.
D) Revenue account.
Answer: A
A) Debit Cash, $500 credit Subscription Revenue, $500.
B) Debit Cash, $500 credit Deferred Revenue, $500.
C) Debit Subscription Revenue, $500 credit Cash, $500.
D) No journal entry is necessary.
Answer: B
A) Debit Cash, $50 credit Sales Revenue, $50.
B) Debit Cash, $50 credit Deferred Revenue, $50.
C) Debit Sales Revenue, $20 credit Cash, $20.
D) No journal entry is necessary.
Answer: B
A) Debit Deferred Revenue, $50 credit Sales Revenue, $50.
B) Debit Deferred Revenue, $20 credit Sales Revenue, $20.
C) Debit Sales Revenue, $20 credit Deferred Revenue, $20.
D) No journal entry is necessary.
Answer: B
A) $2,610.
B) $10,571.
C) $13,770.
D) None of the other answer choices are correct.
Answer: B
A) Social Security will be withheld through the month of September.
B) Social Security will be withheld through the entire year.
C) Social Security will be withheld through the month of January.
D) Social Security will be withheld through the month of October.
Answer: A
A) $5,404.
B) $5,708.
C) $4,792.
D) $8,000.
Answer: B
A) $612.
B) $1,224.
C) $916.
D) $304.
Answer: C
A) $13,923.
B) $12,843.
C) $5,157.
D) $18,000.
Answer: B
A) Employer portion of FICA taxes.
B) Federal unemployment taxes.
C) State unemployment taxes.
D) State income taxes.
Answer: D
A) Employer portion of FICA taxes.
B) Federal unemployment taxes.
C) State unemployment taxes.
D) All of the other answer choices are correct.
Answer: D
A) $34,800.
B) $42,761.
C) $183,600.
D) None of the other answer choices are correct.
Answer: B
A) Social Security will be withheld only in January.
B) Social Security will be withheld through the entire year.
C) Social Security will be withheld through the month of March.
D) Social Security will be withheld through the month of June.
Answer: A
I. FICA taxes.
II. Federal and state unemployment taxes.
III. Federal and state income taxes.
IV. Employee portion of health insurance.
A) I, II, and IV
B) I, III, and IV
C) I and IV
D) II and III
Answer: B
A) FICA taxes are paid only by the employee.
B) FICA taxes are paid only by the employer.
C) FICA taxes are paid in equal amounts by the employee and the employer.
D) FICA taxes are paid in different amounts by the employee and the employer.
Answer: C
I. FICA taxes.
II. Federal and state unemployment taxes.
III. Federal and state income taxes.
IV. Employer contributions to a retirement plan.
A) I and IV
B) I, III, and IV
C) I, II, and IV
D) II and III
Answer: C
A) FICA taxes.
B) Federal and state unemployment taxes.
C) Federal and state income taxes.
D) Employee portion of health insurance.
Answer: B
A) $8,000.
B) $30,000.
C) $5,000.
D) $25,000.
Answer: C
A) $8,000.
B) $30,000.
C) $5,000.
D) $25,000.
Answer: D
A) To borrow funds at a lower rate than through a bank.
B) To borrow funds when they cannot obtain a loan from a bank.
C) Because they can't borrow anywhere else.
D) To improve their credit rating.
Answer: A
A) A line of credit.
B) Commercial Paper.
C) A debt covenant.
D) Working capital.
Answer: A
A) FICA taxes.
B) Federal and state unemployment taxes.
C) Federal and state income taxes.
D) Employer contributions to a retirement plan.
Answer: C
A) $300,000.
B) $301,250.
C) $306,250.
D) $307,500.
Answer: D
A) Debit Interest Expense and credit Interest Payable, $2,000.
B) Debit Interest Expense and credit Cash, $2,000.
C) Debit Interest Expense and credit Interest Payable, $6,000.
D) Debit Interest Expense and credit Cash, $6,000.
Answer: A
A) $200,000.
B) $202,000.
C) $204,000.
D) $206,000.
Answer: D
A) $0.
B) $1,000.
C) $2,000.
D) $6,000.
Answer: C
A) $0.
B) $4,000.
C) $2,000.
D) $6,000.
Answer: B
A) $0.
B) $1,000.
C) $2,000.
D) $3,000.
Answer: B
A) Debit Interest Expense, $2,000.
B) Debit Interest Expense, $1,000.
C) Debit Interest Payable, $2,000.
D) Debit Interest Expense, $3,000.
Answer: A
A) $0.
B) $1,500.
C) $3,000.
D) $4,500.
Answer: C
A) Debit Interest Expense, $3,000.
B) Debit Interest Expense, $1,500.
C) Debit Interest Payable, $1,500.
D) Debit Interest Expense, $4,500.
Answer: B
A) Debit Interest Expense and credit Interest Payable, $7,500.
B) Debit Interest Expense and credit Cash, $7,500.
C) Debit Interest Expense and credit Interest Payable, $1,250.
D) Debit Interest Expense and credit Cash, $1,250.
Answer: C
A) Debit Cash, $50,000 Credit Notes Receivable, $50,000.
B) Debit Notes Receivable, $50,000 Credit Cash, $50,000.
C) Debit Cash, $50,000 Credit Notes Payable, $50,000.
D) Debit Notes Payable, $50,000 Credit Cash, $50,000.
Answer: C
A) Debit Cash, $50,000 Credit Notes Receivable, $50,000.
B) Debit Notes Receivable, $50,000 Credit Cash, $50,000.
C) Debit Cash, $50,000 Credit Notes Payable, $50,000.
D) Debit Notes Payable, $50,000 Credit Cash, $50,000.
Answer: B
A) Debit Cash, $8,000 Credit Notes Receivable, $8,000.
B) Debit Notes Receivable, $8,000 Credit Cash, $8,000.
C) Debit Cash, $8,000 Credit Notes Payable, $8,000.
D) Debit Notes Payable, $8,000 Credit Cash, $8,000.
Answer: C
A) Debit Cash, $8,000 Credit Notes Receivable, $8,000.
B) Debit Notes Receivable, $8,000 Credit Cash, $8,000.
C) Debit Cash, $8,000 Credit Notes Payable, $8,000.
D) Debit Notes Payable, $8,000 Credit Cash, $8,000.
Answer: B
A) Notes payable.
B) Current portion of long-term debt.
C) An unused line of credit.
D) Deferred revenue.
Answer: C
A) Resources owed by an entity as a result of past transactions.
B) Resources owned by an entity as a result of past transactions.
C) Selling products and services to customers in the current period.
D) Costs of running the business in the current period.
Answer: A
A) It represents a probable, future sacrifice of economic benefits.
B) It must be payable in cash.
C) It arises from present obligations to other entities.
D) It results from past transactions or events.
Answer: B
A) Accounts payable.
B) A note payable due in 2 years.
C) Current portion of long-term debt.
D) Sales tax payable.
Answer: B
A) one two
B) one one
C) two two
D) one ten
Answer: B
A) It may cause the firm to appear less risky to investors and creditors.
B) It may reduce interest rates on borrowing.
C) It may cause the company to appear more stable, commanding a higher stock price for new stock listings.
D) All of the other answer choices are correct.
Answer: D
A) It may cause the firm to appear less risky to investors and creditors.
B) It may increase interest rates on borrowing.
C) It may cause the company to appear more stable commanding a higher stock price for new stock listings.
D) It may reduce interest rates on borrowing.
Answer: B
A) Would record no impairment loss on the equipment.
B) Would record an $8 million impairment loss on the equipment.
C) Would record a $20 million impairment loss on the equipment.
D) Would record a $2 million impairment loss on the equipment.
Answer: A
A) Would record no impairment loss on the patent.
B) Would record a $7 million impairment loss on the patent.
C) Would record a $15 million impairment loss on the patent.
D) Would record a $31 million impairment loss on the patent.
Answer: C
C-Stop reports the following information at year-end:
Estimated
Book Value Cash Flows Fair Value
Building $ 500,000 $ 380,000 $ 360,000
Patent $ 35,000 $ 40,000 $ 38,000
Copyright $ 40,000 $ 38,000 $ 39,000
Machine $ 100,000 $ 120,000 $ 85,000
A) $141,000.
B) $126,000.
C) $123,000.
D) $122,000.
Answer: A
Maple Inc. has the following information regarding its assets:
Estimated
Book Value Cash Flows Fair Value
Equipment $ 35,000 $ 30,000 $ 28,000
Building $ 68,000 $ 70,000 $ 65,000
Patent $ 30,000 $ 34,000 $ 32,000
A) $10,000.
B) $9,000.
C) $8,000.
D) $7,000.
Answer: D
Estimated
Asset Fair value cash flows Book value
Equipment $ 25,000 $ 36,000 $ 30,000
Truck $ 34,000 $ 45,000 $ 42,000
Building $ 135,000 $ 138,000 $ 140,000
A) $5,000.
B) $23,000.
C) $13,000.
D) $18,000.
Answer: A
A) Carrying value.
B) Future cash flows.
C) Fair value.
D) Future revenues.
Answer: C
A) Involves a two-step process to first test for impairment and then record the loss.
B) Applies only to depreciable, operational assets.
C) Applies only to assets with finite lives.
D) All of these.
Answer: A
A) Asset's book value exceeds the present value of its expected future cash flows.
B) Expected future cash flows exceeds the asset's book value.
C) Present value of expected future cash flows exceeds its carrying value.
D) Asset's book value exceeds the expected future cash flows.
Answer: D
A) 1.6 times.
B) 1.8 times.
C) 1.5 times.
D) 0.2 times.
Answer: A
A) $5,000,000.
B) $55,000.
C) $5,500,000.
D) $50,000.
Answer: D
A) Original cost.
B) Fair value.
C) Future cash flows.
D) Accumulated depreciation.
Answer: C
A) 0.5 times.
B) 20.0 times.
C) 10.0 times.
D) 2.0 times.
Answer: D
A) $4,500,000.
B) $170,000.
C) $4,250,000.
D) $85,000.
Answer: B
A) 10%.
B) 20%.
C) 160%.
D) 18%.
Answer: B
A) 10%.
B) 12.5%.
C) 18%.
D) 22%.
Answer: B
A) 15%.
B) 14.12%.
C) 16%.
D) 12%.
Answer: A
A) 15%.
B) 14.12%.
C) 16%.
D) 12%.
Answer: D
A) 1.25 times.
B) 1.33 times.
C) 8.33 times.
D) 0.80 times.
Answer: A
A) 10%.
B) 20%.
C) 200%.
D) 5%.
Answer: A
A) 5%.
B) 10%.
C) 20%.
D) 50%.
Answer: A
A) Debit Loss $5,000.
B) Credit Gain $5,000.
C) Credit Accumulated Depreciation $40,000.
D) Credit Equipment $5,000.
Answer: A
A) Are the excess of the book value over the cash received.
B) Are recorded as a debit.
C) Are reported on a net-of-tax basis, if material.
D) Are the excess of the cash received over the book value.
Answer: D
A) Are the excess of the book value over the cash received.
B) Are recorded as a credit.
C) Are reported on a net-of-tax basis, if material.
D) Are the excess of the cash received over the book value.
Answer: A
A) Net Income divided by total assets.
B) Net Income divided by average total assets.
C) Net Income divided by ending total assets.
D) Ending total assets divided by net income.
Answer: B
A) Profit margin plus asset turnover.
B) Profit margin minus asset turnover.
C) Profit margin times asset turnover.
D) Profit margin divided by asset turnover.
Answer: C
A) A gain of $5,000.
B) A loss of $5,000.
C) Neither a gain nor a loss since the equipment was sold at its book value.
D) Neither a gain nor a loss since the gain would not be recognized.
Answer: B
A) Gain of $2,000.
B) Loss of $9,500.
C) Gain of $9,500.
D) Loss of $2,000.
Answer: A
A) Credit Gain $5,000.
B) Debit Loss $5,000.
C) Credit Accumulated Depreciation $40,000.
D) Credit Equipment $100,000.
Answer: B
A) Gain, $22,000.
B) Loss, $18,000.
C) Gain, $5,000.
D) Loss, $3,000.
Answer: D
A) Gain, $22,000.
B) Loss, $18,000.
C) Gain, $5,000.
D) Loss, $3,000.
Answer: C
A) Gain, $5,000.
B) Loss, $18,000.
C) Loss, $38,000.
D) Loss, $3,000.
Answer: C
A) Gain, $5,000.
B) Loss, $18,000.
C) Loss, $38,000.
D) Loss, $3,000.
Answer: D
A) Gain of $5,000.
B) Loss of $5,000.
C) Neither a gain nor a loss since the equipment was sold at its book value.
D) Neither a gain nor a loss since the gain would not be recognized.
Answer: A
A) Gain of $20,000.
B) Loss of $5,000.
C) Loss of $35,000.
D) Gain of $5,000.
Answer: B
A) Gain of $10,000.
B) Loss of $15,000.
C) Loss of $35,000.
D) Gain of $15,000.
Answer: D
A) a gain of $1,000.
B) a loss of $1,000.
C) neither a gain nor a loss—the computer was sold at its book value.
D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.
Answer: A
A) a loss of $1,000.
B) a gain of $1,000.
C) neither a gain nor a loss—the computer was sold at its book value.
D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.
Answer: A
A) $21,000.
B) $33,000.
C) $24,000.
D) $26,000.
Answer: C
A) $0.
B) $28,000.
C) $40,000.
D) $240,000.
Answer: C
A) $120,000.
B) $80,000.
C) $240,000.
D) $160,000.
Answer: D
A) The company sold the asset for more than its fair value.
B) The company sold the asset for more than its book value.
C) The company sold the asset before its useful life was over.
D) The company sold the asset for more than it was worth.
Answer: B
A) The company sold the asset for less than accumulated depreciation.
B) The company sold the asset for less than fair value.
C) The company sold the asset for less than book value.
D) The company sold the asset before the useful life was over.
Answer: C
A) $0.
B) $2,000.
C) $3,333.
D) $10,000.
Answer: D
A) $0.
B) $10,000.
C) $50,000.
D) $40,000.
Answer: D
A) $10,000.
B) $40,000.
C) $50,000.
D) $30,000.
Answer: D
A) $0.
B) $8,000.
C) $16,000.
D) $40,000.
Answer: B
A) Straight-line.
B) Double-declining-balance.
C) Activity-based.
D) A combination of methods.
Answer: A
A) The expected residual value of most intangible assets is zero.
B) The service life of an intangible asset is always equal to its legal life.
C) Intangible assets with a limited useful life are not amortized.
D) In recording amortization, an accumulated amortization account is always used.
Answer: A
A) Patents.
B) Copyrights.
C) Franchises.
D) Goodwill.
Answer: D
A) $87,500.
B) $80,000.
C) $50,000.
D) $75,000.
Answer: B
A) $108,333.
B) $106,667.
C) $122,500.
D) $81,667.
Answer: C
A) Patents.
B) Copyrights.
C) Franchises.
D) Goodwill.
Answer: D
A) Patents.
B) Copyrights.
C) Goodwill.
D) Trademarks.
Answer: D
A) $9,200.
B) $9,040.
C) $12,000.
D) $11,040.
Answer: C
A) $11,000.
B) $18,500.
C) $7,500.
D) $16,000.
Answer: A
A) $43,750.
B) $90,000.
C) $75,000.
D) $31,200.
Answer: C
A) $38,000.
B) $6,000.
C) $16,000.
D) $10,000.
Answer: C
A) $8,000.
B) $7,000.
C) $5,600.
D) $6,400.
Answer: D
Best Construction purchased a delivery truck on June 1, 2021. The following information is available:
Cost = $90,000
Estimated service life = 5 years
Estimated residual value = $15,000
A) $8,750.
B) $15,000.
C) $6,250.
D) $18,000.
Answer: B
Best Construction purchased a delivery truck on June 1, 2021. The following information is available:
Cost = $90,000
Estimated service life = 5 years
Estimated residual value = $15,000
A) $21,250.
B) $17,500.
C) $23,750.
D) $30,000.
Answer: C
A) $41,250.
B) $22,500.
C) $88,750.
D) $18,750.
Answer: A
A) $41,000.
B) $60,000.
C) $36,000.
D) $24,000.
Answer: A
A) $64,000.
B) $76,000.
C) $82,000.
D) $54,000.
Answer: A
A) $1,500.
B) $7,500.
C) $2,250.
D) $2,500.
Answer: C
A) $33,333.
B) $40,000.
C) $30,000.
D) $25,000.
Answer: D
Cost = $90,000
Estimated service life = 5 years
Estimated residual value = $15,000
Calculate depreciation expense for the year ended December 31, 2021, using straight-line depreciation.
A) $8,750.
B) $15,000.
C) $6,250.
D) $18,000.
Answer: A
A) $0.
B) $2,000.
C) $4,000.
D) $6,000.
Answer: B
A) $44,000.
B) $32,000.
C) $36,000.
D) $42,000.
Answer: C
A) $8,400.
B) $7,700.
C) $9,100.
D) $7,000.
Answer: B
A) $22,000.
B) $13,200.
C) $14,400.
D) $24,000.
Answer: C
Kansas Enterprises purchased equipment for $60,000 on January 1, 2021. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years.
A) $21,600.
B) $24,800.
C) $36,000.
D) $45,600.
Answer: A
A) $9,000.
B) $6,000.
C) $7,500.
D) $3,000.
Answer: B
A) $44,000.
B) $49,000.
C) $55,000.
D) $60,000.
Answer: B
A) $12,000 and $36,000.
B) $12,000 and $31,000.
C) $11,000 and $33,000.
D) $11,000 and $38,000.
Answer: D
A) $24,000.
B) $22,000.
C) $19,000.
D) $20,000.
Answer: A
A) Deferred Revenue.
B) Goodwill.
C) Accumulated Depreciation.
D) Cost of Goods Sold.
Answer: C
A) Cost, residual value, and physical life.
B) Cost, residual value, and service life.
C) Fair value, residual value, and economic life.
D) Cost, replacement value, and service life.
Answer: B
A) Its service life.
B) The amount allowable under tax depreciation methods.
C) The difference between its replacement value and cost.
D) The asset's cost minus its estimated residual value.
Answer: D
A) Straight-line.
B) Double-declining balance.
C) Activity-based.
D) Capitalization.
Answer: B
A) $12,000.
B) $11,000.
C) $60,000.
D) None of these.
Answer: B
A) Repairs Expense.
B) Maintenance Expense.
C) Equipment.
D) Gain from Repairs.
Answer: C
A) Unsuccessful legal defense of intangible assets.
B) Additions.
C) Improvements.
D) Successful legal defense of intangible assets.
Answer: A
I. Depreciation is used to allocate the cost of the asset over periods benefited.
II. Depreciation is used to track the fair value of the asset.
III. The book value of an asset is its original cost less accumulated depreciation.
A) I and III
B) I and II
C) II and III
D) All of these statements are correct.
Answer: A
A) It is the fair value of the asset if the asset is sold.
B) It reflects the original cost of the asset less accumulated depreciation.
C) It is the original cost of the asset minus the depreciation expense for that asset during the year.
D) It is the original cost at which the asset was purchased.
Answer: B
A) Ordinary repairs and maintenance.
B) Additions.
C) Improvements.
D) Capitalized costs.
Answer: A
A) Ordinary repairs and maintenance.
B) Additions.
C) Improvements.
D) Successful legal defense of intangible assets.
Answer: A
A) Repairs and maintenance.
B) Improvements.
C) Additions.
D) An expenditure that only benefits the current period.
Answer: B
A) Repairs and maintenance.
B) Additions.
C) Improvements.
D) An expenditure that only benefits the current period.
Answer: B
A) Goodwill.
B) An addition in the Buildings account.
C) An expense in the period of the purchase.
D) A patent.
Answer: B
A) No, the repair was accounted for correctly.
B) Yes, the error overstated assets and net income.
C) Yes, in the years following, net income will be overstated.
D) Yes, the error understated net income.
Answer: B
Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $850,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were:
Book Value Fair Value
Current assets (net) $ 130,000 $ 125,000
Property, plant, equip. (net) 600,000 750,000
Liabilities 175,000 175,000
A) $0.
B) $150,000.
C) $345,000.
D) $850,000.
Answer: B
A company has the following expenditures during the year.
Advertising $ 100,000
Employee training 80,000
Customer outreach and consultation 50,000
A) $0.
B) $80,000.
C) $230,000.
D) $325,000.
Answer: A
A) Ordinary repair.
B) Costs that increase the service life of an asset.
C) Routine maintenance.
D) Ordinary repair and routine maintenance.
Answer: B
A) Ordinary repairs and maintenance.
B) Additions.
C) Improvements.
D) Additions and improvements.
Answer: D
Northern purchased the entire business of Southern including all its assets and liabilities for $600,000. Below is information related to the two companies:
Northern Southern
Fair value of assets $ 1,050,000 $ 800,000
Fair value of liabilities 575,000 300,000
Reported assets 800,000 650,000
Reported liabilities 500,000 250,000
Net Income for the year 60,000 50,000
A) $100,000.
B) $300,000.
C) $200,000.
D) $150,000.
Answer: A
Vikings Inc. reports the following amounts:
Book Value Fair Value
Assets $ 400,000 $ 500,000
Liabilities 45,000 45,000
Net income 25,000
A) $255,000.
B) $280,000.
C) $180,000.
D) $100,000.
Answer: C
A) Is never recorded.
B) May be recorded when a company's level of net income exceeds the industry average.
C) Must be expensed in the period when it is acquired.
D) May be recorded when the company purchases another business.
Answer: D
A) Goodwill can never be recorded.
B) Goodwill is recorded when a company is purchased for more than the fair value of its identifiable net assets.
C) Goodwill is recorded when the market value of a company exceeds the fair value of its identifiable net assets.
D) Goodwill is recorded as a revenue in the income statement.
Answer: B
A) $3,600.
B) $5,000.
C) $20,000.
D) $23,600.
Answer: C
A) Assets $600,000 Expenses $0.
B) Assets $250,000 Expenses $350,000.
C) Assets $350,000 Expenses $250,000.
D) Assets $0 Expenses $600,000.
Answer: C
A) Future benefit is probable and the amount can be reasonably estimated.
B) Future benefit is reasonably possible and the amount can be reasonably estimated.
C) Future benefit is probable and the amount cannot be reasonably estimated.
D) None of these answer choices are correct.
Answer: D
A) $0.
B) $150,000.
C) $300,000.
D) $450,000.
Answer: D
A) Amortized over the greater of its estimated life or forty years.
B) Only recorded by the seller of a business.
C) The value of a business as a whole, over and above the value of its net identifiable assets.
D) Recorded when created internally through advertising expense.
Answer: C
A) May be recorded whenever a company achieves a level of net income that exceeds the industry average.
B) Is amortized over its useful life.
C) May be recorded when a company purchases another business.
D) Must be expensed in the period it is recorded because benefits from goodwill are difficult to identify.
Answer: C
A) Expensed in the period incurred.
B) Expensed in the period they are determined to be unsuccessful.
C) Deferred pending determination of success.
D) Expensed if unsuccessful, capitalized if successful.
Answer: A
A) Increase Assets.
B) Decrease Revenues.
C) Increase Expenses.
D) Increase Revenues.
Answer: C
A) Evenly over the period 2022-2026.
B) Full amount in 2026.
C) Evenly over the period 2021-2025.
D) Full amount in 2021.
Answer: D
A) $100,000.
B) $80,000.
C) $20,000.
D) $0.
Answer: A
A) Forty years.
B) Twenty years.
C) Life of the inventor plus fifty years.
D) Indefinite.
Answer: B
A) Patent.
B) Copyright.
C) Trademark.
D) Franchise.
Answer: A
A) Patent.
B) Copyright.
C) Trademark.
D) Franchise.
Answer: B
A) Patent.
B) Copyright.
C) Trademark.
D) Franchise.
Answer: C
A) Patent.
B) Copyright.
C) Trademark.
D) Franchise.
Answer: D
