20 mcq’s 136988 | Accounting homework help

1. Which of the following is the fundamental accounting equation?

• Current assets + Current liabilities = Owners’ equity

• Assets + Owners’ equity = Liabilities

• Cash = Debts + Common stock

• Assets = Liabilities + Owners’ equity

2. On December 31, 2004, Track Record Inc.’s sales people have firm outstanding orders totaling $1.66 million, which, it has guaranteed its customers, will be fulfilled during the month of January 2005.

If Track Record includes the $1.66 million in its sales figures for 2004, it will be violating the:

• Materiality concept

• Historical cost concept

• Dual-aspect concept

• Realization concept

3. Which one of the following best describes a balance sheet?

• A description of the entity’s operations over a period of time

• A snapshot at a point in time of an entity’s assets, liabilities and owners’ equity

• A reconciliation of an entity’s bank account balance

• A description of the company’s cash flows over a period of time

4. To be recorded as an asset, an item must meet four specific conditions. Three of them are: it must have been acquired at measurable cost, it must be obtained or controlled by the entity, and it must have been obtained or controlled in a past transaction.

Which one of the following is the fourth condition?

• The item must have a measurable resale value

• It must be expected to have future economic benefits

• It must have been fully paid for

• The entity must have a legal document confirming ownership of the item

1. Most companies that use standards set them at 

A) the normal level. 

B) a conceivable level. 

C) the ideal level. 

D) last year’s level. 

2) Which of the following statements is true? 

A) Variances are the differences between total actual costs and total standard costs. 

B) When actual costs exceed standard costs, the variance is favorable. 

C) An unfavorable variance results when actual costs are decreasing but standards are not changed. 

D) All of the above are true.

3. A project with a zero net present value indicates that it is 

A) unacceptable 

B) profitable 

C) acceptable 

D) going to have an acceptable cash payback period. 

4. Intangible benefits in capital budgeting 

A) should be ignored because they are difficult to determine. 

B) include increased quality or employee loyalty. 

C) are not considered because they are usually not relevant to the decision. 

D) have a rate of return in excess of the company’s cost of capital.

1. Neura Pharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified?

• A current tangible asset

• A non-current tangible asset

• A non-current intangible asset

• A current intangible asset

2. June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.

How would this transaction be recorded by Silica Labs?

• Debit patent account $700,000; credit cash $500,000; credit common stock $200,000

• Debit cash $500,000; debit common stock $200,000; credit patent account $700,000

• Debit cash $500,000; credit patent account $500,000

• Debit patent account $500,000; credit cash $500,000

3. Consider the same scenario as in the previous question:

June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.

Assuming that Silica Labs holds some long-term debt, which of the following describes the effect of the transaction on Silica Labs?

• Current ratio will decrease and total debt to equity ratio will increase

• Current ratio will increase and total debt to equity ratio will decrease

• Current ratio will increase and total debt to equity ratio will increase

• Current ratio will decrease and total debt to equity ratio will decrease

4. Lucky Lee, a video-game store in New York city, purchases a game machine directly from Taiwan for $30,000. In the U.S., the same machine will probably cost at least $36,000. Pick the most appropriate accounting action for Lucky Lee:

• Record the machine at $36,000

• Record the machine at $30,000

• Record the machine for [($30,000+$36,000)/2] = $33,000

• Have the machine examined by an independent appraiser and record it at the appraised value

 

1. Which one of the following is an item of owners’ equity?

• Bank loan

• Suppliers’ monetary claims

• Prepaid expenses

• Earnings generated by the entity

2. Complete the following sentence: The Conservatism Concept directs an entity to consider recognizing a liability when it is __________________.

• absolutely certain economic resources may be sacrificed in the future

• remotely possible economic resources may be sacrificed in the future

• reasonably possible economic resources may be sacrificed in the future

• reasonably certain economic resources may be sacrificed in the future

3. The realization concept states that revenue is recorded when:

• It has been earned and realized or realizable

• All the associated costs have been paid in cash

• It has been received in cash

4. On its June 30, 2005 balance sheet, Barrows Corporation has total assets of $100,000, current liabilities of $40,000, and owners’ equity of $60,000.

Which one of the following statements must be true on June 30, 2005?

• It has current assets of $40,000

• It has no long-term liabilities

• It has a cash balance of $40,000 raised through short-term debt

• None of the above

1. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

• August 5, 2005: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

• August 27, 2005: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

• September 5, 2005: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 5, 2005, which one of the following accounting entries, related to the $10,000 special order, should be recorded in Turnadot’s financial accounting system?

• Debit accounts receivable $10,000; credit revenues $10,000

• Debit cash $3,000; credit revenues $3,000

• Debit cash $3,000; credit a liability ‘advances from customers’ $3,000

• Debit cash $3,000; debit accounts receivable $7,000; credit revenues $10,000

2. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

• August 5, 2005: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

• August 27, 2005: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

• September 5, 2005: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 5, 2005, which one of the following accounting entries, related to the $1,000 deposit paid to the supplier for the planters, should be recorded in Turnadot’s financial accounting system?

• Debit the current asset ‘advances to suppliers’ $1,000; credit cash $1,000

• Debit inventory $1,000; credit cash $1,000

• Debit cost of goods sold $4,000; credit cash $1,000; credit accounts payable $3,000

• Debit cost of goods sold $1,000; credit revenues $1,000

3. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

• August 5, 2005: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

• August 27, 2005: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

• September 5, 2005: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 27, 2005, upon delivery of planters to Turnadot’s warehouse and payment of $3,000 balance due to the supplier, which one of the following journal entries best reflects the economic impact of the transaction?

• Debit inventory $3,000; credit cash $3,000

• Debit inventory $4,000; credit the current asset ‘advances to suppliers’ $1,000; credit cash $3,000

• Debit cost of goods sold $4,000; credit cash $3,000; credit accounts payable $1,000

• Debit inventory $4,000; credit revenues $4,000

4. Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

• August 5, 2005: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

• August 27, 2005: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

• September 5, 2005: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On September 5, 2005, when the planters are delivered and the balance of $7,000 due from the customer is collected, which one of the following journal entries best reflects the full economic impact of the special order on Turnadot’s financial condition?

• Dr. Cash  7,000,  Cr. Revenues  7,000   and

Dr. COGS  4,000,  Cr. Inventory  4,000

• Dr. Cash  7,000,  Cr. Revenues  7,000   and

Dr. Inventory  4,000,  Cr. COGS  4,000

• Dr. Cash  7,000,  Dr. Advances from customers (liability) 3,000,  Cr. Revenues  10,000   and

Dr. COGS  4,000,  Cr. Inventory  4,000

 

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