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Key Accounting concepts

PART I - MULTIPLE CHOICE

Instructions: Designate the best answer for each of the following questions.

Use the following data for questions 1 and 2 below:

Quinn Company bought real estate, on which there was an old office building, for $400,000. They paid $40,000 in cash as a down payment and signed a 10% mortgage for the remainder. They immediately had the old building razed at a net cost of $35,000. Attorneys were paid $6,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Quinn's new office building. $20,000 was paid for excavation for the basement of the new building. $1,400,000 was paid for construction of the new building, and $75,000 was paid for a parking lot and necessary walkways and driveways.

1. The new office building should be recorded at
a. $1,400,000.
b. $1,423,000.
c. $1,420,000.
d. $1,458,000.

2. Land should be recorded at a cost of
a. $435,000.
b. $441,000.
c. $464,000.
d. $461,000.

3. Kotsch Textile purchased machinery for $60,000 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 $12,000.
b. credit to depreciation expense for $6,000.
c. debit to machinery for $60,000.
d. credit to accumulated depreciation-machinery for $48,000.

4. Which of the following should not be included in the plant assets (property, plant, and equipment) classification?
a. Land on which warehouse sits
b. Building housing corporate headquarters
c. Parking lot used by visitors
d. All of the above should be include

5. The three primary accounting problems associated with accounts receivable are
a. valuation, disposition, and statement presentation.
b. recognition, valuation, and statement presentation.
c. recognition, valuation, and disposition.
d. revenue recognition, matching, and statement presentation.

6. 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.

7. Which of the following methods and bases of accounting for uncollectible accounts receivable is inconsistent with the proper application of matching?
a. Direct write-off method
b. Aging of receivables allowance method
c. Percentage of receivables basis
d. Percentage of sales basis
8. Salvage (residual) value is deducted in the computation of depreciation expense in all of the following methods with the exception of

a. straight-line.
b. units-of-activity.
c. declining-balance.
d. All of the above include a deduction of salvage value.

9. When recording exchanges of similar assets,
a. losses are recognized immediately.
b. the gain or loss recorded on the old asset is the difference between its cost and its fair market value.
c. gains are treated as increases in the cost of the new asset.
d. none of the above.

10. The cost of a patent should be amortized over
a. 50 years.
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.

*Please see attachment for complete list of questions

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PART I - MULTIPLE CHOICE

Instructions: Designate the best answer for each of the following questions.

Use the following data for questions 1 and 2 below:

Quinn Company bought real estate, on which there was an old office building, for $400,000. They paid $40,000 in cash as a down payment and signed a 10% mortgage for the remainder. They immediately had the old building razed at a net cost of $35,000. Attorneys were paid $6,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Quinn's new office building. $20,000 was paid for excavation for the basement of the new building. $1,400,000 was paid for construction of the new building, and $75,000 was paid for a parking lot and necessary walkways and driveways.

1. The new office building should be recorded at
a. ...

Solution Summary

This explains the key accounting concepts such as depreciation, accounts reveivable allowances

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