Reference no: EM13571157

1.Which of the following would not be classified as Inventory?

a. Raw Materials

b. Office Supplies

c. Finished Goods

d. Work in Process

e. All of the above would be classified as Inventory.

2. In a perpetual inventory system,

a. the Inventory and Cost of Goods Sold accounts are updated once a period.

b. temporary accounts, such as Purchases and Purchase Discounts, are used.

c. the availability of computer technology is generally not considered important.

d. a purchase of goods would require a debit to Inventory and a credit to either Cash or Accounts Payable.

e. no entry is made for Cost of Goods Sold expense when goods are sold to customers.

3. Mississippi Pine Warehouse gave Mattingly Furniture terms of 2/10, n/30. Mattingly paid for the coffee tables on April 22. On the 22nd, Mattingly would make which of the following entries?

a. Accounts Payable 20,000

Cash 19,600

Purchases Discounts 400

b. Accounts Payable 20,000

Cash 19,600

Sales Discounts 400

c. Accounts Payable 20,000

Cash 19,600

Inventory 400

d. Accounts Payable 19,600

Purchase Discount 400

Cash 20,000

e. none of the above

4. Which of the following companies are likely to use the specific identification method to value its inventory?

Jewelry Retailer Oil Refinery Car Manufacturer Lumber Company

a. yes no no no

b. yes no yes no

c. no yes no yes

d. no no yes no

e. yes yes yes yes

5. The FIFO method of inventory costing

a. assumes that the goods acquired first are the first ones sold, leaving the oldest costs in ending inventory.

b. uses the per unit costs of the most recently acquired goods to determine the cost of goods sold.

c. requires businesses to sell the oldest inventory units first.

d. yields a lower net income than the LIFO method in an inflationary environment when these methods are applied to the same financial data.

e. assumes that the goods acquired first are the first ones sold, leaving the newest costs in ending inventory.

6. When LIFO perpetual inventory costing is used, which costs are included in ending inventory and cost of goods sold?

Ending inventory Cost of goods sold

a. Newest Oldest

b. Oldest Newest

c. Newest Average

d. Oldest Average

e. Average Average

7. When the moving average inventory valuation method is used, an average per-unit cost is computed

a. after each purchase.

b. before each purchase.

c. after each sale.

d. before each sale.

e. before closing entries are made.

8. When FIFO and LIFO are compared,

a. LIFO yields a higher net income during inflationary times than FIFO does.

b. FIFO yields a lower balance sheet value for ending inventory than LIFO during periods of inflation.

c. FIFO and LIFO show, respectively, the oldest and newest per-unit inventory costs in the ending inventory on the balance sheet.

d. LIFO is generally perceived to better match current dollars of revenues and expenses, giving a profit figure that better reflects a business's economic reality.

e. FIFO is generally preferred by businesses over LIFO in a period of steadily rising prices from a taxation standpoint.

9. Which of the following is not a depreciable asset?

a. Building

b. Equipment

c. Land Improvements

d. Land

e. Both c and d are nondepreciable.

10. A depreciation method in which depreciation expense for any given period is a function of the level of asset usage during that period is the

a. amortization method.

b. double-declining balance method.

c. straight-line method.

d. allowance estimation method.

e. units-of-production method.

11. On April 1, 2010, Pierre Company (a calendar-year firm) purchased a new machine for $12,000. The machine had a useful life of 5 years and a salvage value of $2,000. Pierre uses straight-line depreciation. Depreciation for 2010 is

a. $1,500.

b. $1,800.

c. $2,000.

d. $2,400.

e. none of the above

12. Sean Power Lines purchased a truck on January 1, 2010. The truck cost $75,000 and has an estimated useful life of 5 years or 100,000 miles. The truck's estimated salvage value is $5,000. The truck was driven for 30,000 miles during 2010. Using the units-of-production method, Sean Power Lines' depreciation expense for 2010 is

a. $14,000.

b. $15,000.

c. $21,000.

d. $22,500.

e. $30,000.

13. Which of the following intangible assets have legally established useful lives? Goodwill Trademarks Copyrights Patents

a. no no no no

b. no no no yes

c. no no yes yes

d. yes yes no yes

e. yes yes yes yes

Chapter 7

14. Which of the following are classified as liabilities? Accumulated Depreciation Unearned Revenue Bonds Payable Additional Paid-in Capital

a. yes yes yes yes

b. yes no no yes

c. no yes yes no

d. no no yes yes

e. no yes no yes

15. Which of the following is(are) characteristic of liabilities?

#1 They must be unavoidable obligations.

#2 They are obligations that require settlement by a future transfer of cash, goods, or services.

#3 They must be settled by using cash, goods, or services that were earned by an entity in the performance of its normal business operations.

#4 The underlying transaction creating the obligation must have already occurred.

a. #1, 2, and 3.

b. #1, 2, and 4.

c. #2, 3, and 4.

d. #1, 3, and 4.

e. #1, 2, 3, and 4.

16. Amounts owed by a business to its suppliers of inventory and debts documented by a promissory obligations are termed, respectively,

a. Accounts Receivable and Notes Receivable

b. Accounts Payable and Notes Payable

c. Accounts Payable and Notes Receivable

d. Notes Receivable and Accounts Receivable

e. Notes Payable and Accounts Payable

17. Bonds that are collateralized by specific assets are called

Secured bonds Debentures Mortgage bonds Indenture bonds

a. no no yes no

b. no yes no yes

c. yes yes no no

d. yes no yes yes

e. yes no yes no

18. Which of the following items does not influence the market price of a company's bonds?

a. The issuing firm's financial condition

b. The level of interest rates in the economy

c. Investor's preferences as to risk

d. Length of time to bond maturity

e. Par value of the firm's common stock

19. Alpha Corporation sold 100, $1,000 bonds at 103. The appropriate journal entry to record the sale of these bonds is

a. Cash 103,000

Bonds Payable 100,000

Interest Revenue 3,000

b. Cash 103,000   

Bonds Payable 100,000   

Gain on Sale of Bonds Payable 3,000

c. Cash 100,000

Interest Expense 3,000

Bonds Payable 100,000

Premium on Bonds Payable 3,000

d. Cash 103,000

Bonds Payable 100,000

Unearned Interest 3,000

e. Cash 103,000

Bonds Payable 100,000

Premium on Bonds Payable 3,000

20. Alpha Corporation sold 100, $1,000 bonds at 96. What is the appropriate journal entry to record the sale of these bonds?

a. Cash 96,000

Bonds Payable 96,000

b. Cash 96,000

Loss on Bonds Payable 4,000

Bonds Payable 100,000

c. Cash 96,000

Interest Expense 4,000

Bonds Payable 100,000

d. Cash 96,000

Discount on Bonds Payable 4,000

Bonds Payable 100,000

e. Cash 96,000

Prepaid Interest 4,000

Bonds Payable 100,000

Chapter 8

21. The class of stock comprising the residual ownership interest in a corporation is called

a. common stock.

b. issued stock.

c. preferred stock.

d. treasury stock.

e. collateralized stock.

22. The class of stock that has certain advantages relative to the residual ownership interest in a corporation is called

a. common stock.

b. issued stock.

c. preferred stock.

d. treasury stock.

e. collateralized stock

23. Taewon Corp. is authorized to issue 5,000,000 shares of common stock. The company sold 1,300,000 shares and repurchased 145,000 of those shares. Which of the following describes the correct amount of the type of shares indicated?

Authorized but Unissued Issued Outstanding

a. 5,000,000 1,300,000 1,155,000

b. 5,000,000 1,155,000 1,155,000

c. 3,700,000 1,300,000 1,300,000   

d. 3,700,000 1,300,000 1,155,000

e. 3,845,000 1,155,000 145,000

24. Redwing Corporation issued 500 shares of $1 par value common stock for $22 per share. Because of this transaction, Redwing's

a. cash account balance will increase by $500.

b. common stock account balance will increase by $11,000.

c. additional paid-in capital account balance will increase by $10,500.

d. common stock account should be debited for $500.

e. cash account should be credited for $11,000.

25. How will the Retained Earnings account be affected by each of the following? Stock dividend Stock split Issuance of common stock Purchase of treasury stock

a. decrease decrease increase decrease

b. no effect decrease no effect decrease

c. decrease no effect no effect no effect

d. increase increase increase decrease

e. increase no effect increase no effect\