Grace123Mercy
Jan 24, 2013, 12:22 AM
I would please like any advise on these questions and my answers; it they are correct or wrong. Thank you.
1. Which statement is false?
A An unrealized gain or loss on hold-to-maturity marketable securities is recognized in income.
B An unrealized gain or loss on trading securities is recognized in income.
C An unrealized gain or loss on a company's common stock held by the owners' of the company is not recognized by the company.
D An unrealized gain or loss on available-for-sale marketable securities is not recognized in income.
Ans: A
2. On June 30, 2000, Microsoft Corporation was holding $4.8 billion of cash that it had collected from customers in advance for future software licenses and the future delivery of other products and services. In its financial statements, Microsoft classified and recorded this amount as:
A part of revenue on its income statement.
B the asset Accounts Receivable on its balance sheet.
C the liability Unearned Revenue on its balance sheet.
D an expense on its income statement.
Ans: C, its an obligation to be performed in the future.
3. In December, a Global Grocer customer pays in time and receives a 2% discounts for prompt payment. The customer had purchased goods worth $500. Which of the possible answers below correctly states the journal entries to record the payment and the discount taken. Previously, Global Grocer had established an allowance for prompt payment discounts.
A Debit Accounts receivable ($500); Credit Cash ($490); credit allowance for discounts ($10).
B Debit Cash ($500); Credit Accounts receivable ($500).
C Debit Cash ($490); Debit Allowance for sales discounts ($10); Credit Accounts receivable ($500)
D None of the above
Ans: C,
4. The major accounting difference between interest incurred during a period and cash dividends declared during the same period is:
A Interest decreases retained earnings while dividend declared increases retained earnings
B Interest reduces net income while dividends declared do not affect net income
C Interest does not affect net income while dividends reduce net income
D There is no major difference. Both are treated identically for accounting purposes.
Ans: D
5. Freeman, Inc. reported net income of $40,000 for 2005. However, the company's income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2006. Assuming a 30% income tax rate, this situation would cause a 2005 deferred tax amount of
A $3,000 asset.
B $3,000 liability
C $ 900 asset.
D $ 900 liability.
Ans: D
6. Goodwill should
A be written off as soon as possible against retained earnings.
B absent impairment, not be written off because it has an indefinite life.
C written off as soon as possible as an expense.
D amortized over a maximum of forty years.
Ans: A, goodwill should be written off against stockbroker's equity.
7. For accounting purposes, goodwill
A is recorded whenever a company achieves a level of net income that exceeds the industry average.
B is recorded when a company purchases another business.
C is expensed in the period it is recorded because benefits from goodwill are difficult to identify.
D is never recorded.
Ans: B; all the other options don't make sense.
8. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the double declining-balance method, how much is the truck's depreciation expense for 2006?
A $11,680
B $12,144
C $10,400
D $11,760
No clue on how to calculate this.
9. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2006 and book value at the end of 2006?
A $7,300 and $58,400
B $6,500 and $60,000
C $6,790 and $62,320
D $6,500 and $66,500
Ans D, Asset cost-Estimated salvage value/useful life of truck
10. Which of the following is/are criteria for recognizing revenue from a sale?
A Title and risks of ownership have been exchanged.
B The company is reasonably assured of collecting the receivable.
C The customer has, in turn, sold the product to its own customer.
D Both title and risks of ownership have been exchanged and the company is reasonably assured of collecting the receivable.
Ans: D
11. The Hastco Company had the following balances in their stockholders' equity accounts as of December 31, 2000:
Paid-in Capital: $53,000
Retained Earnings: $31,000
During the year ended December 31, 2000, The Hastco Company generated $36,000 in net income, and declared and paid $16,000 in Dividends. The ending balance in the retained earnings account at December 31, 1999 was:
A $11,000
B $37,000
C $5,000
D $61,000
Ans: Do not know how to calculate this.
12. Ignoring any related tax implications, what is the effect on a company's balance sheet when depreciation expense is recognized?
A This transaction affects only the income statement, so no change on the balance sheet will occur.
B Total assets and total stockholder's equity will decrease by the same amount.
C There will be no change in the total assets, liabilities and stockholders equity accounts.
D Total liabilities will increase and total stockholder's equity will decrease by the same amount.
Ans: B
13. Which of the following situations will not cause a deferred income tax amount to be recorded?
A An expense that is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
B Interest income from municipal bonds that is recognized in 2005 for financial statement purposes but is tax exempt for income tax purposes.
C A revenue is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
D None of the above situations would cause a deferred income tax amount.
Ans: D
14. On January 1, 2003, Dana Corporation purchased equipment for $450,000. Installation costs were an additional $50,000. The equipment's useful life was estimated at 5 years, with a salvage value of $25,000. The company planned to depreciate the equipment over five years using the straight-line method for reporting purposes and the double declining balance method for tax purposes.
Dana Corporation's accumulated depreciation at December 31,2004 for reporting purposes and for tax purposes, respectively, will be:
A $190,000 and $304,000
B $180,000 and $320,000
C $190,000 and $320,000
Ans: C
15. On June 30, 2001, Cole Inc. exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore's books. Cole should record the patent at:
A $80,000
B $90,000
C $135,000
D $160,000
Ans: D, historical cost
1. Which statement is false?
A An unrealized gain or loss on hold-to-maturity marketable securities is recognized in income.
B An unrealized gain or loss on trading securities is recognized in income.
C An unrealized gain or loss on a company's common stock held by the owners' of the company is not recognized by the company.
D An unrealized gain or loss on available-for-sale marketable securities is not recognized in income.
Ans: A
2. On June 30, 2000, Microsoft Corporation was holding $4.8 billion of cash that it had collected from customers in advance for future software licenses and the future delivery of other products and services. In its financial statements, Microsoft classified and recorded this amount as:
A part of revenue on its income statement.
B the asset Accounts Receivable on its balance sheet.
C the liability Unearned Revenue on its balance sheet.
D an expense on its income statement.
Ans: C, its an obligation to be performed in the future.
3. In December, a Global Grocer customer pays in time and receives a 2% discounts for prompt payment. The customer had purchased goods worth $500. Which of the possible answers below correctly states the journal entries to record the payment and the discount taken. Previously, Global Grocer had established an allowance for prompt payment discounts.
A Debit Accounts receivable ($500); Credit Cash ($490); credit allowance for discounts ($10).
B Debit Cash ($500); Credit Accounts receivable ($500).
C Debit Cash ($490); Debit Allowance for sales discounts ($10); Credit Accounts receivable ($500)
D None of the above
Ans: C,
4. The major accounting difference between interest incurred during a period and cash dividends declared during the same period is:
A Interest decreases retained earnings while dividend declared increases retained earnings
B Interest reduces net income while dividends declared do not affect net income
C Interest does not affect net income while dividends reduce net income
D There is no major difference. Both are treated identically for accounting purposes.
Ans: D
5. Freeman, Inc. reported net income of $40,000 for 2005. However, the company's income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2006. Assuming a 30% income tax rate, this situation would cause a 2005 deferred tax amount of
A $3,000 asset.
B $3,000 liability
C $ 900 asset.
D $ 900 liability.
Ans: D
6. Goodwill should
A be written off as soon as possible against retained earnings.
B absent impairment, not be written off because it has an indefinite life.
C written off as soon as possible as an expense.
D amortized over a maximum of forty years.
Ans: A, goodwill should be written off against stockbroker's equity.
7. For accounting purposes, goodwill
A is recorded whenever a company achieves a level of net income that exceeds the industry average.
B is recorded when a company purchases another business.
C is expensed in the period it is recorded because benefits from goodwill are difficult to identify.
D is never recorded.
Ans: B; all the other options don't make sense.
8. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the double declining-balance method, how much is the truck's depreciation expense for 2006?
A $11,680
B $12,144
C $10,400
D $11,760
No clue on how to calculate this.
9. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.
If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2006 and book value at the end of 2006?
A $7,300 and $58,400
B $6,500 and $60,000
C $6,790 and $62,320
D $6,500 and $66,500
Ans D, Asset cost-Estimated salvage value/useful life of truck
10. Which of the following is/are criteria for recognizing revenue from a sale?
A Title and risks of ownership have been exchanged.
B The company is reasonably assured of collecting the receivable.
C The customer has, in turn, sold the product to its own customer.
D Both title and risks of ownership have been exchanged and the company is reasonably assured of collecting the receivable.
Ans: D
11. The Hastco Company had the following balances in their stockholders' equity accounts as of December 31, 2000:
Paid-in Capital: $53,000
Retained Earnings: $31,000
During the year ended December 31, 2000, The Hastco Company generated $36,000 in net income, and declared and paid $16,000 in Dividends. The ending balance in the retained earnings account at December 31, 1999 was:
A $11,000
B $37,000
C $5,000
D $61,000
Ans: Do not know how to calculate this.
12. Ignoring any related tax implications, what is the effect on a company's balance sheet when depreciation expense is recognized?
A This transaction affects only the income statement, so no change on the balance sheet will occur.
B Total assets and total stockholder's equity will decrease by the same amount.
C There will be no change in the total assets, liabilities and stockholders equity accounts.
D Total liabilities will increase and total stockholder's equity will decrease by the same amount.
Ans: B
13. Which of the following situations will not cause a deferred income tax amount to be recorded?
A An expense that is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
B Interest income from municipal bonds that is recognized in 2005 for financial statement purposes but is tax exempt for income tax purposes.
C A revenue is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.
D None of the above situations would cause a deferred income tax amount.
Ans: D
14. On January 1, 2003, Dana Corporation purchased equipment for $450,000. Installation costs were an additional $50,000. The equipment's useful life was estimated at 5 years, with a salvage value of $25,000. The company planned to depreciate the equipment over five years using the straight-line method for reporting purposes and the double declining balance method for tax purposes.
Dana Corporation's accumulated depreciation at December 31,2004 for reporting purposes and for tax purposes, respectively, will be:
A $190,000 and $304,000
B $180,000 and $320,000
C $190,000 and $320,000
Ans: C
15. On June 30, 2001, Cole Inc. exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore's books. Cole should record the patent at:
A $80,000
B $90,000
C $135,000
D $160,000
Ans: D, historical cost