Acc557 Financial Accounting: Week 7 Study Guide (Chapters 9 and 10) - Version 3

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Acc557 Financial Accounting
Week 7 Study Guide (Chapters 9 and 10) - Version 3

Multiple Choice Question 214
1. A company has the following assets:
Buildings and Equipment, less accumulated depreciation of $2,000,000 $ 7,600,000 Copyrights 960,000
Patents 4,000,000
Timberlands, less accumulated depletion of $2,800,000 4,800,000
The total amount reported under Property, Plant, and Equipment would be
$16,400,000.
$13,360,000.
$12,400,000.
$17,360,000.


Multiple Choice Question 144
2. Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally
expensed when incurred.
not recorded until they become material in amount.
capitalized as a part of the cost of the asset.
debited to the Accumulated Depreciation account

Multiple Choice Question 149
3. A gain or loss on disposal of a plant asset is determined by comparing the
original cost of the asset with the proceeds received from its sale.
book value of the asset with the asset's original cost.
book value of the asset with the proceeds received from its sale.
replacement cost of the asset with the asset's original cost.
IFRS Multiple Choice Question 326
4. Salem Company hired Kirk Construction to construct an office building for £8,000,000 on land costing £2,000,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2013 and it has a useful life of 40 years. The price of the building included land improvements costing £600,000 and personal property costing £750,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What is the net amount reported for the building on Salem Company's December 31, 2013 statement of financial position?
£7,573,750
£6,483,750
£7,800,000
£7,665,000

Multiple Choice Question 77
5. Yocum Company purchased equipment on January 1 at a list price of $100,000, with credit terms 2/10, n/30. Payment was made within the discount period and Yocum was given a $2,000 cash discount. Yocum paid $5,000 sales tax on the equipment, and paid installation charges of $1,760. Prior to installation, Yocum paid $4,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?
$104,760
$108,760
$110,760
$101,000

Multiple Choice Question 98
6. A company purchased factory equipment for $350,000. It is estimated that the equipment will have a $35,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be
$84,000.
$140,000.
$126,000.
$60,480.

Multiple Choice Question 175
7. On a balance sheet, natural resources may be described more specifically as all of the following except
oil reserves.
timberlands.
land improvements.
mineral deposits.

Multiple Choice Question 98
8. On January 1, 2013, Donahue Company, a calendar-year company, issued $500,000 of notes payable, of which $125,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2013, is
Current Liabilities, $125,000; Long-term Debt, $375,000.
Current Liabilities, $375,000; Long-term Debt, $125,000.
Current Liabilities, $500,000.
Long-term Debt , $500,000.

Multiple Choice Question 76
9. When an interest-bearing note matures, the balance in the Notes Payable account is
less than the total amount repaid by the borrower.
the difference between the maturity value of the note and the face value of the note.
equal to the total amount repaid by the borrower.
greater than the total amount repaid by the borrower

Multiple Choice Question 125
10. From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that
interest must be paid on a periodic basis regardless of earnings.
the bondholders do not have voting rights.
income to stockholders may increase as a result of trading on the equity.
bond interest is deductible for tax purposes.

Multiple Choice Question 194
11. The times interest earned ratio is computed by dividing
income before interest expense by interest expense.
net income by interest expense.
income before income taxes and interest expense by interest expense.
income before income taxes by interest expense.

Multiple Choice Question 152
12. If the market interest rate is greater than the contractual interest rate, bonds will sell
at a discount.
only after the stated interest rate is increased.
at face value.
at a premium.

Multiple Choice Question 158
13. The market interest rate is often called the
coupon rate.
contractual rate.
stated rate.
effective rate.

Multiple Choice Question 78
14. On October 1, Steve's Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. The entry by Steve's Carpet Service to record payment of the note and accrued interest on January 1 is
Notes Payable 255,000
Cash 55,000

Notes Payable 250,000
Interest Payable 5,000
Cash 255,000

Notes Payable 250,000
Interest Payable 20,000
Cash 270,000

Notes Payable 250,000
Interest Expense 5,000
Cash 5,000


Multiple Choice Question 61
15. Most companies pay current liabilities
by creating long-term liabilities.
out of current assets.
by issuing interest-bearing notes payable.
by issuing stock.
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