ACC/400 Accounting for Decision Making
PLEASE PUT YOUR ANSWERS ON THE EXCEL SPREADSHEET
PART I — MULTIPLE CHOICE -2 pts each (40 points)
Designate the best answer for each of the following questions.
1. A measure of a company’s solvency is the
a. acid-test ratio.
c.times interest earned ratio.
d.asset turnover ratio.
2. Allowance for Doubtful Accounts is presented as a(n)
a.addition to Accounts Receivable on the balance sheet. b.operating expense on the income statement.
c.deduction from Sales on the income statement.
d.contra asset on the balance sheet.
3. The financial statements of the Colter Manufacturing Company reports net sales of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the receivables turnover ratio for Colter? a.6.7 times
4 .Lexter Company has a balance of $65,000 in Accounts Receivable and a $5,000 credit balance in Allowance for Doubtful Accounts. If a specific customer's account with a balance of $500 is written off as uncollectible, the cash (or net) realizable value of the accounts receivable will be a.$64,500.
5. Martin Textile purchased machinery for $50,000 eight years ago. It was expected to have a useful life of ten years, no salvage value, and was depreciated using the straight-line method. At the end of its eighth year of use it was retired from service and given to a junk dealer. The entry to record the retirement includes a a.debit to Loss on Disposal for $10,000.
b.debit to Machinery for $50,000.
c.debit to Depreciation Expense for $10,000.
d.credit to Accumulated Depreciation—Machinery for $40,000.
6. The cost of a patent should be amortized over
b.the shorter of its legal life or its useful life. c.the longer of its legal life or its useful life. d.its useful life.
7. On July 1, 2007, Low Enterprises sold equipment with an original cost of $85,000 for $40,000. The equipment was purchased January 1, 2006, and was depreciated using the straight-line method assuming a five year useful life and $5,000 salvage value. The necessary entries for 2007 include a a.debit to Accumulated Depreciation—Equipment for $16,000. b.credit to Gain on Sale of Equipment for $21,000. c.credit to Cash for $40,000.
d.debit to Depreciation Expense for $8,000.
8. On the Balance Sheet the current portion of long-term debt should a.be paid immediately.
b.be reclassified as a current liability.
c.be classified as a long-term liability.
d.not be separated from the long-term portion of debt.
9. Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called a.options.
b.early retirement bonds.
10. The Muffin Company issued a five-year interest-bearing note payable for $50,000 on January 1, 2005. Each January the company is required to pay $10,000 on the note. How will this note be reported on the December 31, 2006, balance sheet? a.Long-term Debt, $50,000
b.Long-term Debt, $40,000
c.Long-term Debt, $30,000; Long-term Debt due within one year, $10,000 d.Long-term Debt of $40,000; Long-term Debt due within one year, $10,000
11. Toran Manufacturing declared an 10% stock dividend when it had 150,000 shares of $5 par value common stock outstanding. The market price per common share was $12...