QUESTION 2: 14%

FIFO LIFO INVENTORY

In its first month of operations, Bethke Company made three purchases of merchandise in the following sequence: (1) 187 units at $11, (2) 481 units at $12, and (3) 133 units at $13.

Assuming there are 300 units on hand, compute the cost of the ending inventory under the FIFO method and LIFO method. Bethke uses a periodic inventory system.

  

FIFO

 

LIFO

The cost of the ending inventory

 

$

 

$

QUESTION 3: 5%

RECEIVABLES

What is the difference between an account receivable and a note receivable?

QUESTION 4: 9%

PLANT ASSETS & DEPLETION

Corales Company acquires a delivery truck at a cost of $79,800. The truck is expected to have a salvage value of $9,600 at the end of its 4-year useful life.

Compute annual depreciation expense for the first and second years using the straight-line method.

Annual depreciation for the first and second years

 

$

Franceour Mining Co. purchased for $7,107,600 a mine that is estimated to have 35,538,000 tons of ore and no salvage value. In the first year, 5,707,600  tons of ore are extracted and sold.

 

Calculate depletion cost per ton. (Round answer to 2 decimal places, e.g. 0.50.)

Depletion cost per ton

 

$

 

QUESTION 5: 7%

PAYROLL

Beth Corbin’s regular hourly wage rate is $20, and she receives an hourly rate of $30 for work in excess of 40 hours. During a January pay period, Beth works 48 hours. Beth’s federal income tax withholding is $96.00, and she has no voluntary deductions. Use January 15 for the end of the pay period and the payment date.

Prepare the journal entries to record (a) Beth’s pay for the period and (b) the payment of Beth’s wages. (Assume FICA rate of 7.65%. Round your answers to 2 decimal places, e.g. 15.25. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a) 

Jan. 15

      

(b) 

Jan. 15

  

MULTIPLE CHOICE QUESTIONS” 1% each

(There is no QUESTION 6)

Question 7: When the stockholders invest cash in the business, what is the effect?

a    Liabilities increase and stockholders’ equity increases

b    Both assets and liabilities increase

c    Both assets and stockholders’ equity increase

d    None of the above

Question 8: The ending balance in retained earnings is shown in the:

a.       Income statement

b.      Statement of retained earnings

c.       Balance sheet

d.      Both (b) and (c)

e.       Both (a) and (c)

f.       (a), (b) and (c)

Question 9: A cash dividend of $500 was declared and paid to stockholders. The correct journal entry to record the declaration is:

a.   DR Capital stock 500 and CR Cash 500

b.   DR Cash 500 and CR Dividends 500

c.   DR Dividends 500 and CR Cash 500

d.   DR Cash 500 and CR Capital stock 500

Question 10: If $3,000 has been earned by a company’s workers since the last payday in an accounting period, the necessary adjusting entry would be:

a.   Debit an expense and credit a liability.

b.   Debit an expense and credit an asset.

c.   Debit a liability and credit an asset.

d.   Debit a liability and credit an expense.

Question 11: The accrual basis of accounting:

a.   Recognizes revenues only when cash is received

b.   Is used by almost all companies

c.   Recognizes expenses only when cash is paid out

d.   Recognizes revenues when sales are made or services are performed and recognizes expenses only when cash is paid out.

Question 12: The need for adjusting entries is based on:

a.   The matching principle

b.   Source documents

c.   The cash basis of accounting

d.   Activity that has already been recorded in the proper accounts.

Question 13: Which of the following statements is false regarding the closing process?

a.   The Dividends account is closed to Income Summary.

b.   The closing of expense accounts results in a debit to Income Summary.

c.   The closing of revenues results in a credit to Income Summary.

d.   The Income Summary account is closed to the Retained Earnings account.

Question 14: Which of the following statements is true regarding the classified balance sheet?

a.   Current assets include cash, accounts receivable, and equipment.

b.   Plant, property, and equipment is one category of long-term assets.

c.   Current liabilities include accounts payable, salaries payable, and notes receivable.

d.   Stockholders’ equity is subdivided into current and long-term categories.

Question 15: The underlying assumptions of accounting includes all the following except:

a.   Business entity

b.   Going concern

c.   Matching

d.   Money measurement and periodicity

Question 16: Frick Company began the accounting period with $60,000 of merchandise, and net cost of purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end of the period. The cost of goods sold of Frick Company for the period is:

a.   $300,000

b.   $228,000

c.   $252,000

d.   $168,000

e.   None of the above

Question 17: A classified income statement consists of all of the following major sections except for:

a.   Operating revenues

b.   Cost of goods sold

c.   Operating expenses

d.   Non-operating revenues and expenses

e.   Current assets

Question 18: A business purchased merchandise for $12,000 on account; terms are 2/10, n/30. If $2,000 of the merchandise was returned and the remaining amount due was paid within the discount period, the purchase discount would be:

a.   $240

b.   $200

c.   $1,200

d.   $1,000

e.   $3,600

Question 19: Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of ending inventory using weighted-average is:

a.   $114,750

b.   $157,600

c.   $122,400

d.   $109,650

e.   None of the above

Question 20: Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of goods sold using weighted-average is:

a.   $147,200

b.   $160,350

c.   $155,250

d.   $114,000

e.   None of the above

Question 21: During a period of rising prices, which inventory method might be expected to give the highest net income?

a.   Weighted-average

b.   FIFO

c.   LIFO

d.   Specific identification

e.   Cannot determine

Question 22: The following information: related to the bank reconciliation of the Flip Company:

Balance per bank statement

$1,951.20

Balance per ledger

1,869.60

Deposits in transit

271.20

Outstanding checks

427.80

NSF check

61.20

Service charges

13.80

The adjusted/correct cash balance is:

a.   $1,794.60

b.   $1,719.60

c.   $1,638.00

d.   $1,713.00

e.   $1,876.20

Question 23: In a bank reconciliation, deposits in transit should be:

a. nbsp; Deducted from the balance per books 

b.   Deducted from the balance per bank statement

c.   Added to the balance per ledger

d.   Added to the balance per bank statement

e.   Disregarded in the bank reconciliation

Question 24: After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to:

a.   Bank Service Charge Expense

b.   Cash

c.   Petty Cash

d.   Cash Short and Over

e.   None of the above

Question 25: Frick Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2010. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year-end. The uncollectible accounts expense for 2010 will be:

a    $7,000

b.   $10,000

c.   $13,000

d.   $9,850

e.   None of the above

Question 26: Frick Company issued its own $10,000, 90-day, non interest-bearing note to a bank. If the note is discounted at 10 percent, the proceeds to Frick are:

a.   $10,000

b.   $9,000

c.   $9,750

d.   $10,250

e.   None of the above

Question 27: On 2010 July 1, Frick Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Frick uses the double-declining-depreciation method, the depreciation expense for 2010 is:

a.   $88,000

b.   $72,000

c.   $36,000

d.   $44,000

e.   $40,000

Question 28: The result of recording a capital expenditure as a revenue expenditure is an:

a.   Overstatement of current year’s expense

b.   Understatement of current year’s expense

c.   Understatement of subsequent year’s net income

d.   Overstatement of current year’s net income

e.   None of the above

Question 29: A truck costing $45,000 and having an estimated salvage value of $4,500 and an original life of five years is exchanged for a new truck. The cash price of the new truck is $57,000, and a trade-in allowance of $22,500 is received. The old truck has been depreciated for three years using the straight-line method. The new truck would be recorded at:

a.   $55,200

b.   $57,000

c.   $34,500

d.   $43,200

e.   None of the above

Question 30: Which of the following is not an advantage of the corporate form of organization?

a.   Continuous existence of the entity

b.   Limited liability of stockholders

c.   Government regulation

d.   Easy transfer of ownership

Question 31: Treasury stock should be shown on the balance sheet as a(n):

a.   Reduction of the corporation’s stockholders’ equity

b.   Current asset

c.   Current liability

d.   Investment asset

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