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Multiple choice

9. A company's account balances at December 31, 2007 for Accounts Receivable and the related Allowance for Doubtful Accounts are $460,000 debit and $700 credit, respectively. From an aging of accounts receivable, it is estimated that $12,500 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for:

a. $12,500.
b. $13,200.
c. $11,800.
d. $700.
e. None of the above
f. Answer cannot be determined from the information provided

10. Gross billings for merchandise sold by a company to its customers last year amounted to $15,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for the company were:

a. $15,720,000.
b. $15,350,000.
c. $15,175,000.
d. $15,035,000.
e. None of the above
f. Answer cannot be determined from the information provided

11. A company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000. Ignoring income taxes, what total amount should the company report as extraordinary losses?

a. $ -0-.
b. $185,000.
c. $233,000.
d. $298,000.
e. None of the above
f. Answer cannot be determined from the information provided

12. A company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $363,000. What total amount should the company report as stockholders' equity?

a. $898,000.
b. $998,000.
c. $1,098,000.
d. $1,198,000.
e. None of the above
f. Answer cannot be determined from the information provided

13. A corporation reports:

Cash provided by operating activities $250,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 70,000

What is the corporation's ending cash balance?

a. $280,000.
b. $350,000.
c. $500,000.
d. $570,000.
e. None of the above
f. Answer cannot be determined from the information provided

14. A company will invest $300,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is:

a. $300,000.
b. $390,000.
c. $401,469.
d. $402,087.
e. None of the above
f. Answer cannot be determined from the information provided

15. A corporation will invest $25,000 every January 1st for the next six years (2006 - 2011). If it will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

a. $102,785.
b. $115,120.
c. $202,880.
d. $227,225.
e. None of the above
f. Answer cannot be determined from the information provided

16. What amount should be recorded as the cost of a machine purchased December 31, 2006, which is to be financed by making 8 annual payments of $6,000 each beginning December 31, 2007 if the applicable interest rate is 8%?

a. $42,000
b. $37,481
c. $63,820
d. $34,480
e. None of the above
f. Answer cannot be determined from the information provided

17. A company uses the percentage-of-completion method of accounting. In 2007, the company began work on a contract it had received which provided for a contract price of $15,000,000. Other details follow:

2007
Costs incurred during the year $7,200,000
Estimated costs to complete as of December 31 4,800,000
Billings during the year 6,600,000
Collections during the year 3,900,000
What should be the gross profit recognized in 2007?

a. $600,000
b. $7,800,000
c. $1,800,000
d. $3,000,000
e. None of the above
f. Answer cannot be determined from the information provided

18. A company began work in 2007 on contract #3814, which provided for a contract price of $7,200,000. Other details follow:

2007 2008
Costs incurred during the year $1,200,000 $3,675,000
Estimated costs to complete,
as of December 31 3,600,000 0
Billings during the year 1,350,000 5,400,000
Collections during the year 900,000 5,850,000

Assume that the company uses the completed-contract method of accounting. The portion of the total gross profit to be recognized as income in 2008 is:

a. $900,000.
b. $1,725,000.
c. $2,325,000.
d. $7,200,000.
e. None of the above
f. Answer cannot be determined from the information provided

20. A company sold some of its plant assets during 2008. The original cost of the plant assets was $750,000 and the accumulated depreciation at the date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company's statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

a. subtraction from net income of $55,000 and a $55,000 increase in cash flows from financing activities.
b. addition to net income of $55,000 and a $105,000 decrease in cash flows from investing activities.
c. subtraction from net income of $55,000 and a $105,000 increase in cash flows from investing activities.
d. addition of $105,000 to net income.
e. none of the above
f. answer cannot be determined from the information provided

Solution Summary

The solution explains various questions relating to allowance for uncollectible, net sales, extraordinary loss, FV, cost of asset and cash flows

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