Question
1.Bay Company began using the allowance method in 2010. On January 1, 2010, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2010, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account. The balance in Accounts Receivable as of December 31, 2010 was: (Points : 2)

$7,000
$4,000
$8,000
$500

2.Bay Company began using the allowance method in 2010. On January 1, 2010, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2010, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of uncollectible accounts expense to recognize on the 2010 income statement is: (Points : 2)

$80
$250
$480
$500

3.Accounts receivable turnover is computed by dividing: (Points : 2)

365 by accounts receivable.
sales by accounts receivable.
accounts receivable by net income.
accounts receivable by sales.

4.The amount of accounts receivable that is actually expected to be collected is known as: (Points : 2)

net realizable value.
uncollectible accounts expense.
accounts receivable turnover.
allowance for doubtful accounts.

5.The net realizable value of accounts receivable is calculated: (Points : 2)

Accounts Receivable + Uncollectible Accounts Expense.
Accounts Receivable + Notes Receivable.
Accounts Receivable Allowance for Doubtful Accounts.
365/Accounts Receivable.

6.Howard Company accepts a credit card as payment for $950 of services provided to a customer. The credit card company charges a 4% fee for its services. Select the answer that shows how the entry to record the service revenue would affect Barlett's financial statements.
Row Assets = Liab. + Equity Rev. – Exp. = Net Inc. Cash Flow One 912 = NA + 912 950 – 38 = 912 NA Two 912 = 38 + 874 912 – NA = 912 NA Three 912 = NA + 912 912 – NA = 912 912 OA Four 950 = NA + 950 950 – NA = 950 950 OA

(Points : 2)

Row One
Row Two
Row Three
Row Four

7.The practice of reporting the net realizable value of receivables in the financial statements is commonly called: (Points : 2)

the cash flow method of accounting for uncollectible accounts.
the direct write-off method of accounting for uncollectible accounts.
the allowance method of accounting for uncollectible accounts.
both A and B are correct.

8.For a business, the advantage of offering credit to customers is that it: (Points : 2)

increases the amount of sales.
increases cash flow from financing activities.
decreases cost of goods sold.
decreases the amount of inventory the company needs to carry.

9.On March 1, Zane Company purchased a new stamping machine with a list price of $24,000. The company paid cash for the machine; therefore, it was allowed a 3% discount. Other costs associated with the machine were: transportation costs, $1,270; sales tax paid, $1,680; installation costs, $450; routine maintenance during the first month of operation, $500. The cost recorded for the machine was: (Points : 2)

$23,730
$24,000
$25,960
$26,680

10.On September 10, 2009, Barden Company sold a piece of equipment for $3,000. The equipment had an original cost of $17,000 and accumulated depreciation of $15,500 at the time of the sale. Which of the following correctly shows the effect of the sale on the 2009 financial statements?

Row Assets = Liabilities + Equity Revenues or Gains – Expenses or Losses = Net Inc. Cash One 1,500 NA 1,500 1,500 NA 1,500 3,000 OA Two (1,500) NA (1,500) NA 1,500 (1,500) 3,000 IA Three 1,500 NA 1,500 NA (1,500) 1,500 NA Four 1,500 NA 1,500 1,500 NA 1,500 3,000 IA

(Points : 2)

Row One
Row Two
Row Three
Row Four

11.Which of the following is an intangible asset with an identifiable useful life? (Points : 2)

Copyrights
Renewable franchises
Goodwill
Trademarks

12.Which of the following measurements would not be affected by the choice of depreciation methods? (Points : 2)

Debt to assets ratio
Total assets
The ratio of current assets to current liabilities
Return on equity ratio

13.Rouse Company owned an asset that had cost $32,000. The company sold the asset on January 1, 2009 for $8,000. Accumulated depreciation on the day of sale amounted to $26,000. Based on this information, the sale would result in a(n): (Points : 2)

$8,000 increase in total assets.
$6,000 cash inflow in the financing activities section of the cash flow statement.
$2,000 decrease in total assets.
$8,000 cash inflow in the investing activities section of the cash flow statement.

14.The recognition of depletion expense acts to: (Points : 2)

decrease assets and equity and increase cash flow from operating expenses.
increase cash flow from operating activities and does not affect the amount of total assets.
increase assets, equity, and cash flow from operating activities.
decrease assets and equity, with no effect on cash flow.

15.Parker Company purchased Eynon Corporation in 2004, recording $80,000 in goodwill at the time of purchase. In January, 2009, Parker decides that the value of the goodwill has declined substantially due to local economic and demographic changes. Parker estimates that the true value of the goodwill should only be $30,000. Which of the following shows the effect of this situation on the financial statements?
Row Assets = Liabilities + Equity Revenue – Expenses = Net Inc. Cash One – = + + NA NA – NA = NA NA Two – = NA + – NA – + = NA – IA Three NA = NA + NA NA – NA = NA NA Four – = NA + – NA – + = – NA

(Points : 2)

Row One
Row Two
Row Three
Row Four

16.Which one of the following would not be classified as an intangible operational asset? (Points : 2)

Patent
Copyright
Iron Ore Deposit
Goodwill

17.On January 1, 2008, Stetson Company paid $160,000 to obtain a patent. Stetson expected to use the patent for 5 years before it became technologically obsolete. Based on this information, the amount of amortization expense on the December 31, 2010 income statement and the book value of the patent on the December 31, 2010 balance sheet would be: (Points : 2)

$32,000 / $64,000
$32,000 / $96,000
$64,000 / $64,000
$64,000 / $96,000.

18.Frye Company uses the LIFO cost flow method. They had no beginning inventory and Frye purchased 500 units of inventory that cost $4.00 each. At a later date, the company purchased an additional 600 units of inventory that cost $4.50 each. If Frye sold 800 units of the inventory, the amount of ending inventory appearing on the balance sheet would be: (Points : 2)

$1,400
$1,350
$1,200
$1,450

19.The inventory records for Freer reflected the following:
Jan 1 Beginning Inventory 300 units @ $2.10 Jan 12 First Purchase 400 units @ $2.40 Jan 21 Second Purchase 600 units @ $2.50 Jan 31 Sales 800 units @ $5.00

Assuming Freer uses a FIFO cost flow method, the ending inventory on January 31 is: (Points : 2)

$1,110
$980
$880
$1,250

20.The inventory records for Freer reflected the following:
Jan 1 Beginning Inventory 300 units @ $2.10 Jan 12 First Purchase 400 units @ $2.40 Jan 21 Second Purchase 600 units @ $2.50 Jan 31 Sales 800 units @ $5.00

Assuming that Freer uses a FIFO cost flow method, the cost of goods sold for January is: (Points : 2)

$1,590
$1,840
$1,740
$1,680

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