Detailed examination of outstanding accounts

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1. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Direct write-off method
Aging of accounts receivable method
Percentage of sales method
Aging of investments method
Percent of accounts receivable method

2. On December 31, 2010, Stable Company sold a piece of equipment that was purchased on January 1, 2005. The equipment originally cost $820,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

$230,000 Gain
$25,000 Loss
$25,000 Gain
$73,750 Gain
$0; no gain or loss

3. Many companies use accelerated depreciation in computing taxable income because: (Points : 2)

It is required by the tax rules
It is required by financial reporting rules
It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due
Using it causes a company to use higher income in the early years of the asset's useful life
The results are identical to straight-line depreciation

4. The matching principle requires:

That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad debts
That bad debts be disclosed in the financial statements
That bad debts not be written off

5. The useful life of a plant asset is:

The length of time it is used productively in a company's operations
Never related to its physical life
Its productive life, but not to exceed one year
Determined by the FASB
Determined by law

6. A copyright:

Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years
Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 17 years?
Is an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years?
Is the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately?
Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years

7. A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period?

0.20
5.00
20.0
73.0
1,825

8. Extraordinary repairs:

Are revenue expenditures
Extend an asset's useful life beyond its original estimate
Are credited to accumulated depreciation
Are additional costs of plant assets that do not materially increase the asset's life
Are expensed as incurred

9. The buyer who pays cash for an account receivable referred to as a:

Payor
Pledgor
Factor
Payee
Pledgee

10. Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is:

0.90
10.1
36.1
50.0
3,686

11. Failure by a promissory notes maker to pay the amount due at maturity is known as:

Protesting a note
Closing a note
Dishonoring a note
Discounting a note
Depreciating a note

12. Cardco Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 5 year life. What is the total depreciation expense for the current year?

$1,900.00
$7,600.00
$2,533.33
$2,800.00
$3,166.67

13. Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Coke has the better turnover for both years
Pepsi has the better turnover for both years
Coke's turnover is improving
Coke's credit policies are too loose
Coke is collecting its receivables more quickly than Pepsi in both years

Reference no: EM139927

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