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ACC 101 Quiz 3

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Question 1

 

Asset turnover is computed by dividing average total assets by cost of sales. Select one:

True False

 

Question 2

 

A copyright: Select one:

a.Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.

  1. b.  Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years.

c.Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years.

  1. d.  Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately.
  2. e.  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.

 

Question 3

 

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not matured in the Notes Receivable account.

Select one: True False

 

Question 4

 

Information on a depreciable asset owned by Wilson Engineering is as follows:

 
   

 

 

 

If the asset is sold on July 1, 2012 for $20,000, the journal entry to record the sale will include:

Select one:

a.A credit to cash for $20,000.

  1. b.  A debit to accumulated depreciation for $22,500.

c.A debit to loss on sale for $10,000.

  1. d.  A credit to loss on sale for $10,000.
  2. e.  A debit to gain on sale for $2,500.

 

Question 5

 

The interest accrued on $6,500 at 6% for 60 days is: Select one:

a. $ 36.

b. $ 42.

c. $ 65. d. $180. e. $420.

 

Question 6

 

The purchase of a property that included land, building, and improvements is called a lump-sum purchase.

Select one: True False

 

Question 7

 

Net realizable value for damaged or obsolete goods is sales price plus the cost of making the sale.

Select one: True False

 

Question 8

 

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Select one: True False

 

Question 9

 

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Select one: True False

 

Question 10

 

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit.

Calculate the value of this company's inventory at the lower of cost or market. Select one:

a. $2,550.

b. $2,600.

c. $2,700.

d. $3,000.

e. $3,200.

 

 Question 11

 

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

Select one: True False

 Question 12

 

A company's old machine that cost $40,000 and had accumulated depreciation of

$30,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $50,000. The company also paid $43,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

Select one: a. $40,000. b. $47,000. c. $50,000. d. $53,000. e. $10,000.

 

 Question 13

 

On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available: Beginning inventory, July 1: $4,000

Net sales: $40,000

Net purchases: $41,000

The company's gross margin ratio is 15%. Using the gross profit method, the cost of goods sold would be:

Select one:

a. $ 4,000.

b. $ 5,000. c. $21,000. d. $25,000. e. $34,000.

 Question 14

 

Notes receivable are classified as current liabilities. Select one:

True False

 

 

 Question 15

 

The Allowance for Doubtful Accounts: Select one:

a.Is a contra asset account.

  1. b.  Is used instead of reducing accounts receivable directly.

c.Is debited when uncollectible accounts are written off.

  1. d.  All of these.
  2. e.  Only A and B.

 

 Question 16

 

If a customer owes interest on accounts receivable, Interest Revenue is debited and Accounts Receivable is credited.

Select one: True False

 Question 17

 

The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Select one: True False

 

 Question 18

 

MixRecording Studios purchased $7,800 in electronic components from TechCom. MixRecording Studios signed a 60-day, 10% promissory note for

$7,800. TechCom's journal entry to record the sales portion of the transaction is: Select one:

a.Accounts Receivable....7,800 Sales.....7,800

  1. b.  Accounts Receivable....7,930 Sales.....7,930

c.Notes Receivable....7,800 Sales.....7,800

  1. d.  Notes Receivable....7,930 Sales....7,930
  2. e.  Notes Receivable....7,800 Interest Receivable.............. 130

Sales....7,930

 Question 19

 

Inadequacy refers to: Select one:

a.The insufficient capacity of a company's plant assets to meet the company's growing production demands.

  1. b.  An asset that is worn out.

c.An asset that is no longer useful in producing goods and services.

  1. d.  The condition where the salvage value is too small to replace the asset.
  2. e.  The condition where the asset's salvage value is less than its cost. 

 

A company had a bulldozer destroyed by fire. The bulldozer originally cost

$125,000 with accumulated depreciation of $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

Select one:

a.A loss of $25,000.

  1. b.  A gain of $25,000.

c.A loss of $65,000.

  1. d.  A gain of $65,000.
  2. e.  A gain of $90,000.

Question 21

 

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory turnover of $1,965 million. Its days' sales in inventory equals:

Select one:

a. 0.21.

b. 4.51.

c. 4.79.

  1. d.  76.1 days.
  2. e.  80.9.days.

 

 

Question 22

 

Costs included in the Merchandise Inventory account can include: Select one:

a.Invoice price minus any discount.

  1. b.  Transportation-in.

c.Storage.

  1. d.  Insurance.
  2. e.  All of these.

 Question 23

 

Revenue expenditures are additional costs of plant assets that materially increase the assets' life or productive capabilities.

Select one: True False

 Question 24

 

The reasoning behind the retail inventory method is that if we can get a good estimate of the cost-to-retail ratio, we can multiply ending inventory at retail by this ratio to estimate ending inventory at cost.

Select one: True False

 

 

Question 25

 

The accounts receivable turnover is calculated by: Select one:

a.Dividing net sales by average accounts receivable.

  1. b.  Dividing net sales by average accounts receivable and multiplying by 365.

c.Dividing average accounts receivable by net sales.

  1. d.  Dividing average accounts receivable by net sales and multiplying by 365.
    1. e.  Dividing net income by average accounts receivable.

 

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