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Acc 291 Final Exam

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  • September 2012
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1) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $300,000 and credit sales are $1,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense? Debit Bad Debt Expense $12,000, Credit – Allowance for Doubtful Accounts $12,000

2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period? Answer: B - $12,000

3) Intangible assets
Answer: B - should be reported as a separate classification on the balance sheet

4) Intangible assets are the rights and privileges that result from ownership of long-lived assets that Answer: C - do not have physical substance

5) The book value of an asset is equal to the
Answer: D - asset’s cost less accumulated depreciation

6) Gains on an exchange of plant assets that has commercial substance are Answer: D – recognized immediately

7) Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as D. revenue expenditures (WRONG)

8) Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as Answer: A – capital expenditures

9) When an interest-bearing note matures, the balance in the Notes Payable account is C. equal to the amount repaid by the owner (WRONG)

10) The interest charged on a $200,000 note payable, at a rate of 6%, on a 2-month note would be Answer: D - $2,000

11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? D. $210,000

12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the company...