1. A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $500. The
journal entry to record this transaction is
A. debit Loss on Disposal $6,000, debit Accumulated Depreciation -Truck for $50,000, and credit Truck for $56,000.
B. debit Cash for $500, debit Loss on Disposal for $55,500, and credit Truck for $56,000.
C. debit Cash for $500, debit Truck for $50,000, debit Loss on Disposal for $5,500, and credit Accumulated Depreciation Truck
D. debit Cash for $500, debit Accumulated Depreciation -Truck for $50,000, debit Loss on Disposal for $5,500, and credit
Truck for $56,000.
2. Cash equivalents are
A. not liquid and carry high risk.
B. not liquid and carry little risk.
C. very liquid and carry high risk.
D. very liquid and carry little risk.
3. By not accruing warranty expense,
A. reported expenses will be overstated, and reported liabilities will be understated.
B. reported liabilities will be understated, and net income will be overstated.
C. reported liabilities will be overstated, and net income will be understated.
D. reported expenses will be understated, and net income will be understated.
4. A patent has amortization this year of $2,300. The journal entry would be
A. debit Amortization Expense -Patent, $2,300; credit Patent, $2,300.
B. debit Amortization Expense -Patent, $2,300; credit Accumulated Depreciation -Patent, $2,300.
C. debit Accumulated Amortization -Patent, $2,300; credit Amortization Expense -Patent, $2,300.
D. debit Accumulated Amortization -Patent, $2,300; credit Patent, $2,300.
5. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the
following will occur as a result of this mistake?
A. Net income will be overstated by $5,000.
B. Retained earnings will be overstated by $5,000.
C. The asset will be understated by $5,000.
D. The asset will be overstated by $5,000.
6. A company receives a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest
cent) will the customer owe using a 360-day year?
7. A repair that extends the useful life of an asset would be considered a/an
A. ordinary repair.
B. extraordinary repair.
C. capital expense.
8. Amanda Industries had total assets of $600,000; total liabilities of $175,000; and total stockholders’
equity of $425,000. Amanda Industries’ debt ratio is
9. Rick Company has cash of $143,000; net accounts receivable of $89,000; short-term investments of
$35,000; and prepaid expenses of $40,000. It also has $50,000 in current liabilities and $80,000 in long-
term liabilities. The quick ratio for Rick Company is
10. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded
to the nearest cent)
11. Which of the following would be considered a cash equivalent?
B. Money orders
D. Time deposits
12. Which of the following would not be a liability according to FASB’s definition of a liability?
A. A note payable with no specified maturity date
B. An obligation to provide goods or services in the future
C. An obligation that’s estimated in amount
D. The signing of a three-year employment contract at a fixed annual salary
13. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B
was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The
amount at which item C should be recorded (rounded to the nearest dollar) is
14. Research and development costs (R&D) are generally
A. expensed and become part of the income statement.
B. listed as “other intangibles” on the balance sheet.
C. listed as “long-term assets” on the balance sheet.
D. listed as “current assets” on the balance sheet.
15. Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey
will report this liability as a
A. current liability of $100,000.
B. long-term liability of $100,000.
C. current liability of $80,000 and a long-term liability of $20,000.
D. current liability of $20,000 and a long-term liability of $80,000.
16. Margaret is a customer of Tammy Company. The company wrote off her account of $1,200 on August
15. On October 12, she sent in a payment of $560. What will Tammy Company record first to reinstate
A. Debit Uncollectible Accounts Expense; credit Accounts Receivable/Margaret.
B. Debit Cash; credit Accounts Receivable/Margaret.
C. Debit Accounts Receivable/Margaret; credit Allowance for Doubtful Accounts.
D. Debit Allowance for Doubtful Accounts; credit Accounts Receivable/Margaret.
17. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value
of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the
depreciation for 2012 to the nearest dollar will be
18. Brandon Corporation purchased a vein of mineral ore for $3,250,000. It is estimated that 15,000,000
tons of ore are available to be extracted. The salvage value is determined to be $400,000. The estimation
depletion expense for this year’s extraction of 1,760,000 tons of ore (rounded to the nearest dollar) is
19. Casey Company’s bank statement shows a bank balance of $43,267. The statement shows a bank
service charge of $50 and a bank collection of $760 in Casey Company’s behalf. Casey’s book balance
should be adjusted by a total of
20. Nick Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of
$15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term
liabilities. The quick ratio for Nick Company is