GAINS ON AN EXCHANGE OF PLANT ASSETS THAT HAS COMMERCIAL SUBSTANCE

20 Jul GAINS ON AN EXCHANGE OF PLANT ASSETS THAT HAS COMMERCIAL SUBSTANCE

1) Hahn Company uses the percentage of sales method forrecording bad debts expense. For the year, cash sales are $300,000and credit sales are $1,200,000. Management estimates that 1% isthe sales percentage to use. What adjusting entry will Hahn Companymake to record the bad debts expense?

A. Bad Debts Expense 15000 Allowances for Doubtful Accounts15000

B. Bad Debts Expense 12000 Allowances for Doubtful Accounts12000

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 baddebts expense, estimated uncollectible accounts are $15,000. If thebalance of the Allowance for Doubtful Accounts is $3,000 creditbefore adjustment, what is the amount of bad debts expense for thatperiod?

A. $15,000

B. $12,000

C. $18,000

D. $8,000

3) Intangible assets

A. should be reported under the heading Property, Plant, andEquipment

B. should be reported as a separate classification on the balancesheet

C. should be reported as Current Assets on the balance sheet

D. are not reported on the balance sheet because they lack physicalsubstance

4) Intangible assets are the rights and privileges that result fromownership 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 operatingefficiency 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 usefullife 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 NotesPayable account is

A. less than the total amount repaid by the borrower

B. the difference between the maturity value of the note and theface 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 of6%, on a 2-month note would be

A. $12,000

B. $6,000

C. $3,000

D. $2,000