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Multiple Choice questions in Accounting (ACC363)

See attached file:

1. Interest is usually associated with

a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.

2. When an account becomes uncollectible and must be written off,

a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debts Expense should be credited.
d. Sales should be debited.

3. When the allowance method of accounting for uncollectible accounts is used, Bad Debts Expense is recorded

a. in the year after the credit sale is made.
b. in the same year as the credit sale.
c. as each credit sale is made.
d. when an account is written off as uncollectible.

4. A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at

a. $77,000.
b. $70,000.
c. $75,000.
d. $82,000.

5. Belle Company buys land for $50,000 on 12/31/06. As of 3/31/07, the land has appreciated in value to $50,500. On 12/31/06, the land has an appraised value of $51,800. By what amount should the Land account be increased in 2007?

a. $0.
b. $500.
c. $1,300.
d. $1,800.

6. Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

a. $14,160.
b. $11,760.
c. $9,840.
d. $9,600.

7. The relationship between current liabilities and current assets is

a. useful in determining income.
b. useful in evaluating a company's liquidity.
c. called the matching principle.
d. useful in determining the amount of a company's long-term debt.

8. From a liquidity standpoint, it is most desirable for a company to have current

a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.

9. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $168,000, what is the amount of the sales taxes owed to the taxing agency?

a. $160,000.
b. $168,000.
c. $8,400.
d. $8,000.

10. Which one of the following would not be considered an advantage of the corporate form of organization?

a. Limited liability of owners
b. Separate legal existence
c. Continuous life
d. Government regulation

11. Which of the following statements concerning taxation is accurate?

a. Partnerships pay state income taxes but not federal income taxes.
b. Corporations pay federal income taxes but not state income taxes.
c. Corporations pay federal and state income taxes.
d. Only the owners must pay taxes on corporate income.

12. Dividends are declared out of

a. Capital Stock.
b. Paid-in Capital in Excess of Par Value.
c. Retained Earnings.
d. Treasury Stock.

13. The statement of cash flows should help investors and creditors assess each of the following
except the

a. entity's ability to generate future income.
b. entity's ability to pay dividends.
c. reasons for the difference between net income and net cash provided by operating activities.
d. cash investing and financing transactions during the period.

14. Meyer Company reported net income of $30,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is

a. $25,000.
b. $45,000.
c. $29,000.
d. $30,000.

15. Which of the following adjustments to convert net income to net cash provided by operating activities is not added to net income?

a. Gain on Sale of Equipment
b. Depreciation Expense
c. Patent Amortization Expense
d. Depletion Expense

Attachments

Solution Preview

Please see the attached file. Answers with explanations are in blue

1. Interest is usually associated with

a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.

2. When an account becomes uncollectible and must be written off,

a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debts Expense should be credited.
d. Sales should be debited.

When accounts receivable is credited, the balance reduces

3. When the allowance method of accounting for uncollectible accounts is used, Bad Debts Expense is recorded

a. in the year after the credit sale is made.
b. in the same year as the credit sale.
c. as each credit sale is made.
d. when an account is written off as uncollectible.

Under the matching principle, the expense should be recorded when the sale is made

4. A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at

a. $77,000.
b. $70,000.
c. $75,000.
d. $82,000.

Land would be recorded at ...

Solution Summary

The solution has various multiple choice question in accounting relating to interest, bad debts, basis, dividends, cash flow

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