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Principles of Accounting

1. A company receives a 10%, 90-day note for $1,500. The total interest due on the maturity date is:

A. $ 50.00
B. $150.00.
C. $ 75.00.
D. $ 37.50.
E. $ 87.50.

2. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

A. $12,050
B. $12,275
C. $10,550
D. $12,825
E. $13,100

3. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

A. 2 years.
B. 5 years.
C. 7 years.
D. 8 years.
E. 10 years.

4. An asset's book value is $18,000 on June 30, 2007. The asset is being depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, 2008 for $15,000, the company should record:

A. A loss on sale of $1,500.
B. A gain on sale of $1,500.
C. Neither a gain nor a loss is recognized on this type of transaction.
D. A gain on sale of $3,000.
E. A loss on sale of $3,000.

5. A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:

A. .13
B. .80
C. 7.75
D. 8.00
E. 10.00

6. A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is:

A. 0.40
B. 2.50
C. 1:2.5
D. 2.5:1
E. 0.50

7. A contingent liability:

A. Is always of a specific amount.
B. Is a potential obligation that depends on a future event arising out of a past transaction or event.
C. Is an obligation not requiring future payment.
D. Is an obligation arising from the purchase of goods or services on credit.
E. Is an obligation arising from a future event

8. Unearned revenue is initially recognized with a:

A. Credit to unearned revenue.
B. Credit to revenue.
C. Debit to revenue payable.
D. Debit to revenue.
E. Debit to unearned revenue

9. A capital deficiency means that:

A. The partnership has a loss.
B. The partnership has more liabilities than assets.
C. At least one partner has a debit balance in his/her capital account.
D. At least one partner has a credit balance in his/her capital account.
E. The partnership has been sold at a loss.

10. A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a:

A. Partnership.
B. Limited partnership.
C. Limited liability partnership.
D. General partnership.
E. Limited liability company

11. Accounts payable:

A. Are amounts owed to suppliers for products and/or services purchased on credit.
B. Are long-term liabilities.
C. Are estimated liabilities.
D. Do not include specific due dates.
E. Must be paid within 30 days

12. Times interest earned is calculated by:

A. Multiplying interest expense times income.
B. Dividing interest expense by income before interest expense.
C. Dividing income before interest expense and any income tax by interest expense.
D. Dividing interest expense by income before interest expense.
E. Dividing income before interest expense by interest expense and income taxes.

13. Partnership accounting:

A. Is the same as accounting for a sole proprietorship.
B. Is the same as accounting for a corporation.
C. Is the same as accounting for a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.
D. Is the same as accounting for an S corporation.
E. Is the same as accounting for a corporation, except that retained earnings is used to keep track of partners' withdrawals.

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1. A company receives a 10%, 90-day note for $1,500. The total interest due on the maturity date is:

A. $ 50.00
B. $150.00.
C. $ 75.00.
D. $ 37.50.
E. $ 87.50.

Ans: B
Exp: The 10% is an annual rate, so, Take 10% of 1500 and divide that amunt by (90days/360days).

2. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

A. $12,050
B. $12,275
C. $10,550
D. $12,825
E. $13,100

Ans:C
Exp: Find the Future value of $10,000 at 11% for 180 days or .5 years.

3. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

A. 2 years.
B. 5 years.
C. 7 years.
D. 8 years.
E. 10 years.

Ans:C
Exp: This leads back to GAAP rules on changes in accounting estimates like depreciation.

4. An asset's book value is $18,000 on June 30, 2007. The asset is being depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, 2008 for $15,000, the company should record:

A. A loss on sale of $1,500.
B. A gain on ...

Solution Summary

The solution specifies the answer for each question and explains the answer and any sources that might have contributed to reaching the answer.

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