Acc557 Financial Accounting: Week 7 Study Guide (Chapters 9 and 10) - Version 1

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Acc557 Financial Accounting
Week 7 Study Guide (Chapters 9 and 10) - Version 1

Multiple Choice Question 178
To qualify as natural resources in the accounting sense, assets must be
replaceable.
underground.
of a mineral nature.
physically extracted in operations.

Multiple Choice Question 122
Sargent Corporation bought equipment on January 1, 2013. The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The book value of the equipment at the beginning of the third year using straight-line depreciation would be
$180,000.
$130,000.
$150,000.
$50,000.

Multiple Choice Question 207
Rooney Company incurred $420,000 of research and development cost in its laboratory to develop a patent granted on January 1, 2013. On July 31, 2013, Rooney paid $63,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2013, should be:
$420,000.
$63,000.
$483,000.
$357,000.

Multiple Choice Question 92
Useful life is expressed in terms of use expected from the asset under the
straight-line method.
declining-balance method.
units-of-activity method.
none of these.

Multiple Choice Question 114
Moreno Company purchased equipment for $675,000 on January 1, 2012, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $30,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2014 will be
$75,000.
$51,660.
$45,000.
$81,660.

Multiple Choice Question 158
The book value of an asset will equal its fair market value at the date of sale if
a gain on disposal is recorded.
the plant asset is fully depreciated.
no gain or loss on disposal is recorded.
a loss on disposal is recorded.

Multiple Choice Question 154
If disposal of a plant asset occurs during the year, depreciation is
not recorded if the asset is scrapped.
recorded for the fraction of the year to the date of the disposal.
recorded for the whole year.
not recorded for the year.

Multiple Choice Question 141
A major disadvantage resulting from the use of bonds is that
interest must be paid on a periodic basis.
bondholders have voting rights.
taxes may increase.
earnings per share may be lowered.

Multiple Choice Question 173
A $600,000 bond was retired at 103 when the carrying value of the bond was $622,000. The entry to record the retirement would include a
gain on bond redemption of $18,000.
gain on bond redemption of $4,000.
loss on bond redemption of $18,000.
loss on bond redemption of $12,000.

Multiple Choice Question 199
The 2013 financial statements of Marker Co. contain the following selected data (in millions).
Current Assets $75
Total Assets 140
Current Liabilities 40
Total Liabilities 95
Cash 8
The debt to total assets ratio is
67.9%.
256%.
28.6%.
96.4%.

On September 1, Joe's Painting Service borrows $100,000 from National Bank on a 4-month, $100,000, 6% note. What entry must Joe's Painting Service make on December 31 before financial statements are prepared?
Interest Expense 2,000
Notes Payable 2,000

Interest Expense 2,000
Interest Payable 2,000

Interest Payable 2,000
Interest Expense 2,000

Interest Expense 6,000
Interest Payable 6,000

Multiple Choice Question 65
The relationship of current assets to current liabilities is used in evaluating a company's
long-range solvency.
operating cycle.
revenue-producing ability.
short-term debt paying ability.

Multiple Choice Question 160
Each of the following accounts is reported as long-term liabilities except
Discount on Bonds Payable.
Bonds Payable.
Premium on Bonds Payable.
Interest Payable.

Multiple Choice Question 67
In most companies, current liabilities are paid within
the operating cycle through the creation of other current liabilities.
one year through the creation of other current liabilities.
one year or the operating cycle out of current assets.
the operating cycle out of current assets.

Multiple Choice Question 157
Hernandez Corporation issues 3,000, 10-year, 8%, $1,000 bonds dated January 1, 2013, at 98. The journal entry to record the issuance will show a
debit to Cash for $2,960,000.
debit to Cash of $3,000,000.
credit to Discount on Bonds Payable for $60,000.
credit to Bonds Payable for $3,040,000.
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