1.The useful life of a plant asset is:
The length of time it is used productively in a company'soperations
Never related to its physical life
Its productive life, but not to exceed one year
Determined by the FASB
Determined by law
2. Depreciation:
Measures the decline in market value of an asset
Measures physical deterioration of an asset
Is the process of allocating to expense the cost of a plantasset
Is an outflow of cash from the use of a plant asset
Is applied to land
3. Plant assets are
Tangible assets used in the operation of a business that have auseful life of more than one accounting period
Current assets
Held for sale
Intangible assets used in the operations of a business that havea useful life of more than one accounting period
Tangible assets used in the operation of business that have auseful life of less than one accounting period
4. A company has net sales of $870,000 and average accountsreceivable of $174,000. What is its accounts receivable turnoverfor the period?
0.20
5.00
20.0
73.0
1,825
5. FICA taxes include:
Social Security taxes
Charitable giving
Employee income taxes
Unemployment taxes
6. Times interest earned is calculated by:
Multiplying interest expense times income
Dividing interest expense by income before interest expense
Dividing income before interest expense and any income tax byinterest expense
Dividing interest and income tax expense by income beforeinterest and income tax expense
7. Amortization:
Is the systematic allocation of the cost of an intangible assetto expense over its estimated useful life
Is the process of allocating to expense the cost of a plantasset to the accounting periods benefiting from its use
Is the process of allocating the cost of natural resources toperiods when they are consumed
Is an accelerated form of expensing an asset's cost
Is the same as depletion
8. A method of estimating bad debts expense that involves adetailed examination of outstanding accounts and their length oftime past due is the:
Direct write-off method
Aging of accounts receivable method
Percentage of sales method
Aging of investments method
Percent of accounts receivable method
9. A company purchased a tract of land for its natural resourcesat a cost of $1,500,000. It expects to mine 2,000,000 tons of orefrom this land. The salvage value of the land is expected to be$250,000. The depletion expense per ton of ore is:
$0.75
$0.625
$0.875
$6.00
$8.00
10. The matching principle requires:
That expenses be ignored if their effect on the financialstatements are less important than revenues to the financialstatement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad debts
That bad debts be disclosed in the financial statements
That bad debts not be written off
11. Liabilities:
Must be certain
Must sometimes be estimated
Must be for a specific amount
Must always have a definite date for payment
Must involve an outflow of cash
12. In the accounting records of a defendant, lawsuits:
Are estimated liabilities
Should always be recorded
Should always be disclosed
Should be recorded if payment for damages is probable and theamount can be reasonably estimated
13. A contingent liability:
Is always of a specific amount
Is a potential obligation that depends on a future event arisingout of a past transaction or event
Is an obligation not requiring future payment
Is an obligation arising from the purchase of goods or serviceson credit
Is an obligation arising from a future event
14. Total asset turnover is calculated by dividing:
Gross profit by average total assets
Average total assets by gross profit
Net sales by average total assets
Average total assets by net sales
Net assets by total assets
15. If the times interest ratio:
Increases, then risk increases
Increases, then risk decreases
Is greater than 1.5, then the company is in default
Is less than 1.5, the company is carrying too little debt
16. Promissory notes that require the issuer to make a series ofpayments consisting of both interest and principal are:
Debentures
Discounted notes
Installment notes
Indentures
Investment notes
17. A company borrowed $300,000 cash from the bank by signing a5-year, 8% installment note. The present value factor for anannuity at 8% for 5 years is 3.9927. Each annuity payment equals$75,137. The present value of the note is:
$75,137
$94,013
$300,000
$375,685
18. A bond traded at 102
1.The useful life of a plant asset is:
The length of time it is used productively in a company'soperations
Never related to its physical life
Its productive life, but not to exceed one year
Determined by the FASB
Determined by law
2. Depreciation:
Measures the decline in market value of an asset
Measures physical deterioration of an asset
Is the process of allocating to expense the cost of a plantasset
Is an outflow of cash from the use of a plant asset
Is applied to land
3. Plant assets are
Tangible assets used in the operation of a business that have auseful life of more than one accounting period
Current assets
Held for sale
Intangible assets used in the operations of a business that havea useful life of more than one accounting period
Tangible assets used in the operation of business that have auseful life of less than one accounting period
4. A company has net sales of $870,000 and average accountsreceivable of $174,000. What is its accounts receivable turnoverfor the period?
0.20
5.00
20.0
73.0
1,825
5. FICA taxes include:
Social Security taxes
Charitable giving
Employee income taxes
Unemployment taxes
6. Times interest earned is calculated by:
Multiplying interest expense times income
Dividing interest expense by income before interest expense
Dividing income before interest expense and any income tax byinterest expense
Dividing interest and income tax expense by income beforeinterest and income tax expense
7. Amortization:
Is the systematic allocation of the cost of an intangible assetto expense over its estimated useful life
Is the process of allocating to expense the cost of a plantasset to the accounting periods benefiting from its use
Is the process of allocating the cost of natural resources toperiods when they are consumed
Is an accelerated form of expensing an asset's cost
Is the same as depletion
8. A method of estimating bad debts expense that involves adetailed examination of outstanding accounts and their length oftime past due is the:
Direct write-off method
Aging of accounts receivable method
Percentage of sales method
Aging of investments method
Percent of accounts receivable method
9. A company purchased a tract of land for its natural resourcesat a cost of $1,500,000. It expects to mine 2,000,000 tons of orefrom this land. The salvage value of the land is expected to be$250,000. The depletion expense per ton of ore is:
$0.75
$0.625
$0.875
$6.00
$8.00
10. The matching principle requires:
That expenses be ignored if their effect on the financialstatements are less important than revenues to the financialstatement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad debts
That bad debts be disclosed in the financial statements
That bad debts not be written off
11. Liabilities:
Must be certain
Must sometimes be estimated
Must be for a specific amount
Must always have a definite date for payment
Must involve an outflow of cash
12. In the accounting records of a defendant, lawsuits:
Are estimated liabilities
Should always be recorded
Should always be disclosed
Should be recorded if payment for damages is probable and theamount can be reasonably estimated
13. A contingent liability:
Is always of a specific amount
Is a potential obligation that depends on a future event arisingout of a past transaction or event
Is an obligation not requiring future payment
Is an obligation arising from the purchase of goods or serviceson credit
Is an obligation arising from a future event
14. Total asset turnover is calculated by dividing:
Gross profit by average total assets
Average total assets by gross profit
Net sales by average total assets
Average total assets by net sales
Net assets by total assets
15. If the times interest ratio:
Increases, then risk increases
Increases, then risk decreases
Is greater than 1.5, then the company is in default
Is less than 1.5, the company is carrying too little debt
16. Promissory notes that require the issuer to make a series ofpayments consisting of both interest and principal are:
Debentures
Discounted notes
Installment notes
Indentures
Investment notes
17. A company borrowed $300,000 cash from the bank by signing a5-year, 8% installment note. The present value factor for anannuity at 8% for 5 years is 3.9927. Each annuity payment equals$75,137. The present value of the note is:
$75,137
$94,013
$300,000
$375,685
18. A bond traded at 102
Related questions
Question 1Acompany purchased for cash a machine with a list price of $90,000.The machine was shipped FOB shipping point at a cost of $5,000.Installation and test runs of the machine cost $3,000. Therecorded acquisition costof the machine is whichamount?
| 1 | $98,000 |
| 2 | $128,000 |
| 3 | $90,000 |
| 4 | $93,000 |
Question 2Small, ordinary repairs made to keepa truck running over its useful life have been debited to theVehicles account. As a result of this, which of the followingoccurred?
| 1 | The balance in the Vehicles account was correctly stated. |
| 2 | The balance in the Vehicles account was overstated. |
| 3 | The expenses for the period were overstated. |
| 4 | The net income for the period was understated. |
Question 3 Whatis the annual straight-linedepreciation for an asset thatcost $34,600, has an estimated service life of 8 years, and anestimated salvage valueof $1,400?
| 1 | $4,150 |
| 2 | $1,450 |
| 3 | $4,325 |
| 4 | $4,500 |
Question 4An asset cost $50,000, has anestimated salvage valueof $1,500, and an estimated usefullife of 8 years. What is thedouble-declining-balance depreciationrate?
| 1 | 20.0% |
| 2 | 25.0% |
| 3 | 16.0% |
| 4 | 32.5% |
Question 5An asset having a four-year servicelife and a salvage valueof $5,000 was acquired for $45,000cash on June 20. Ignore the half-year convention and calculate the depreciation expense at the end of the first year, December 31?
| 1 | $10,000, under the straight-line method |
| 2 | $22,500, under the double-declining-balance method |
| 3 | $7,000, under the straight-line method |
| 4 | $11,250, under the double-declining-balance method |
Question 6 Publicly traded companies can use adepreciation method that does not conform to generallyaccepted accounting principles but is based on a declining-balancemethod. What is the name of this accelerated depreciation method?
| 1 | Asset Cost Recovery Statement |
| 2 | Asset Cost Recognition System |
| 3 | Modified Accelerated Cost Recovery System |
| 4 | Accelerated Cost Recovery System |
Question 7 OnJune 28, 2011, a business sold for$1,500 a plant assetthat cost $5,000.The asset had a 5-year useful life, nosalvage value, and had been used by the business sinceJanuary 1, 2008. Straight-linedepreciation was used. Thefiscal year ends on December 31. What was the result of selling theplant asset?
| 1 | No gain or loss on the disposal of plant assets |
| 2 | A $1,000 gain on the disposal of plant assets |
| 3 | A $500 loss on the disposal of plant assets |
| 4 | A $500 unrecognized gain on the sale of a plant asset. |
Question 8Your company currently is generatingnormal earnings that are equal to a 12% return on net identifiable assets of $450,000. A comparable company is generatingnormal earnings that are equal to 10% return on net identifiableassets of $450,000. What is the estimated goodwill ofyour company, when compared to the other company?
| 1 | $90,000 |
| 2 | $45,000 |
| 3 | $9,000 |
| 4 | $15,000 |
Question 9The Baker Mining Company acquired aniron ore deposit for $2,000,000. The company's geologist estimatedthe deposit to contain 1,500,000 tons of iron ore. At the end ofthe first year, 60,000 tons had been extracted. The end-of-yearjournal entry to record thedepletion of the iron ore wouldinclude which of the following?
| 1 | A credit to Iron Ore Inventory of $45,000 |
| 2 | A credit to Accumulated Depletion of $80,000 |
| 3 | A debit to Iron Ore Inventory of $50,000 |
| 4 | None the above, until all of the ore is extracted |
Question 10 Which of the following are investing activities?
| 1 | Selling a plant asset |
| 2 | Exchanging an old asset and cash for a new plant asset |
| 3 | Depreciating or amortizing an asset |
| 4 | Both (A) and (B) |
