14 May ACC291 Principles Of Accounting II Final Exam
1) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $300,000 and credit sales are $1,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?
A.
Bad Debts Expense ……………. ……………. $15,000
Allowances for Doubtful Accounts ……………. ……………. $15,000
B.
Bad Debts Expense ……………. ……………. $12,000
Allowances for Doubtful Accounts ……………. ……………. $12,000
C.
Bad Debts Expense ……………. ……………. $12,000
Accounts Receivable ……………. ……………. …………….. $12,000
D.
Bad Debts Expense ……………. ……………. $15,000
Accounts Receivable ……………. ……………. …………….. $15,000
2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period?
A.
$15,000
B.
$12,000
C.
$18,000
D.
$8,000
3) Intangible assets
A.
should be reported under the heading Property, Plant, and Equipment
B.
should be reported as a separate classification on the balance sheet
C.
should be reported as Current Assets on the balance sheet
D.
are not reported on the balance sheet because they lack physical substance
4) Intangible assets are the rights and privileges that result from ownership of long-lived assets that
A.
must be generated internally
B.
are depletable natural resources
C.
do not have physical substance
D.
have been exchanged at a gain
5) The book value of an asset is equal to the
A.
asset’s market value less its historic cost
B.
blue book value relied on by secondary markets
C.
replacement cost of the asset
D.
asset’s cost less accumulated depreciation
6) Gains on an exchange of plant assets that has commercial substance are
A.
deducted from the cost of the new asset acquired
B.
deferred
C.
not possible
D.
recognized immediately
7) Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as
A.
capital expenditures
B.
expense expenditures
C.
improvements
D.
revenue expenditures
8) Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as
A.
capital expenditures
B.
expense expenditures
C.
ordinary repairs
D.
revenue expenditures
9) When an interest-bearing note matures, the balance in the Notes Payable account is
A.
less than the total amount repaid by the borrower
B.
the difference between the maturity value of the note and the face value of the note
C.
equal to the total amount repaid by the owner
D.
greater than the total amount repaid by the owner
10) The interest charged on a $200,000 note payable, at a rate of 6%, on a 2-month note would be
A.
$12,000
B.
$6,000
C.
$3,000
D.
$2,000
11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?
A.
$3,000,000
B.
$90,000
C.
$300,000
D.
$210,000
12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the company is required to pay $75,000 on the note. How will this note be reported on the December 31, 2012 balance sheet?
A.
Long-term debt, $300,000.
B.
Long-term debt, $225,000.
C.
Long-term debt, $150,000; Long-term debt due within one year, $75,000.
D.
Long-term debt, $225,000; Long-term debt due within one year, $75,000.
13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2011 for 648,666, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is
A.
$30,000
B.
$24,000
C.
$32,434
D.
$25,946
14) When the effective-interest method of bond discount amortization is used
A.
the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date
B.
the carrying value of the bonds will decrease each period
C.
interest expense will not be a constant dollar amount over the life of the bond
D.
interest paid to bondholders will be a function of the effective-interest rate on the date the bonds were issued
15) If a corporation has only one class of stock, it is referred to as
A.
classless stock
B.
preferred stock
C.
solitary stock
D.
common stock
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