AC 113 UNIT 8 EXAM Exam 1. Question : When an account is written off under the allowance method, Student Answer: the write-off is taken against the allowance account. bad debt expense is increased. accounts receivable remains unchanged. accounts receivable increases. Question 2. Question : To measure depreciation, all of the following must be known EXCEPT: Student Answer: Market value Residual value Historical cost Estimated life Question 3. Question : Merchandise inventory is reported on the balance sheet in the section entitled _______. Student Answer: current assets fixed assets current liabilities stockholders’ equity Question 4. Question : The inventory data for an item for November are: Nov. 1 Inventory 25 units at $20 10 Purchased 30 units at $21 30 Purchased 10 units at $22 Sold 35 units Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30? Student Answer: $640 $605 $623 $660 Question 5. Question : A capital expenditure would appear on the _______. Student Answer: income statement under operating expenses balance sheet under fixed assets balance sheet under current assets income statement under other expenses Question 6. Question : The process of a company selling its accounts receivable to another company is referred to as _______. Student Answer: discounting adjusting assignment factoring Question 7. Question : Which of the following expenditures would NOT be included in the cost of an asset? Student Answer: Freight costs Vandalism Sales tax Surveying fees Question 8. Question : A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset? Student Answer: $2,500 loss $1,500 loss $2,500 gain $1,500 gain Question 9. Question : A note receivable due in 90 days is listed on the balance sheet under _______. Student Answer: long-term liabilities fixed assets current liabilities current assets Question 10. Question : A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Under the straight-line method, what is annual depreciation expense? Student Answer: $13,200 $12,000 $11,000 $10,800 Question 11. Question : The inventory data for an item for November are: Nov. 1 Inventory 25 units at $20 10 Purchased 30 units at $21 30 Purchased 10 units at $22 Sold 35 units Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30? Student Answer: $640 $623 $600 $605 Question 12. Question : Fixed assets are ordinarily presented in the balance sheet _______. Student Answer: at current market values at replacement costs at cost less accumulated depreciation in a separate section along with intangible assets Question 13. Question : A note receivable due in five years is listed on the balance sheet under the caption _______. Student Answer: investments current assets fixed assets stockholders’ equity Question 14. Question : The two methods of accounting for uncollectible receivables are the allowance method and the _______. Student Answer: equity method direct write-off method interest method cost method Question 15. Question : Other descriptive titles for fixed assets would include _______. Student Answer: plant assets property, plant, and equipment other long-term assets both plant assets and property, plant, and
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