Week 7 Quiz Questions

Multiple Choice Question 178

To qualify as natural resources in the accounting sense, assets must be

A

replaceable.

B

underground.

C

of a mineral nature.

D

physically extracted in operations.

Multiple Choice Question 122

Sargent Corporation bought equipment on January 1, 2013. The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The book value of the equipment at the beginning of the third year using straight-line depreciation would be

A

$180,000.

B

$130,000.

C

$150,000.

D

$50,000.

Multiple Choice Question 207

Rooney Company incurred $420,000 of research and development cost in its laboratory to develop a patent granted on January 1, 2013. On July 31, 2013, Rooney paid $63,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2013, should be:

A

$420,000.

B

$63,000.

C

$483,000.

D

$357,000.

Multiple Choice Question 92

Useful life is expressed in terms of use expected from the asset under the

A

straight-line method.

B

declining-balance method.

C

units-of-activity method.

D

none of these.

Multiple Choice Question 114

Moreno Company purchased equipment for $675,000 on January 1, 2012, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $30,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2014 will be

A

$75,000.

B

$51,660.

C

$45,000.

D

$81,660.

Multiple Choice Question 158

The book value of an asset will equal its fair market value at the date of sale if

A

a gain on disposal is recorded.

B

the plant asset is fully depreciated.

C

no gain or loss on disposal is recorded.

D

a loss on disposal is recorded.

Multiple Choice Question 154

If disposal of a plant asset occurs during the year, depreciation is

A

not recorded if the asset is scrapped.

B

recorded for the fraction of the year to the date of the disposal.

C

recorded for the whole year.

D

not recorded for the year.

Multiple Choice Question 141

A major disadvantage resulting from the use of bonds is that

A

interest must be paid on a periodic basis.

B

bondholders have voting rights.

C

taxes may increase.

D

earnings per share may be lowered.

Multiple Choice Question 173

A $600,000 bond was retired at 103 when the carrying value of the bond was $622,000. The entry to record the retirement would include a

A

gain on bond redemption of $18,000.

B

gain on bond redemption of $4,000.

C

loss on bond redemption of $18,000.

D

loss on bond redemption of $12,000.

Multiple Choice Question 199

The 2013 financial statements of Marker Co. contain the following selected data (in millions).

Current Assets

$75

Total Assets

140

Current Liabilities

40

Total Liabilities

95

Cash

8

The debt to total assets ratio is

A

67.9%.

B

256%.

C

28.6%.

D

96.4%.

On September 1, Joe’s Painting Service borrows $100,000 from National Bank on a 4-month, $100,000, 6% note. What entry must Joe’s Painting Service make on December 31 before financial statements are prepared?

A

Interest Expense2,000

Notes Payable2,000

B

Interest Expense2,000

Interest Payable2,000

C

Interest Payable2,000

Interest Expense2,000

D

Interest Expense6,000

Interest Payable6,000

Multiple Choice Question 65

The relationship of current assets to current liabilities is used in evaluating a company’s

A

long-range solvency.

B

operating cycle.

C

revenue-producing ability.

D

short-term debt paying ability.

Multiple Choice Question 160

Each of the following accounts is reported as long-term liabilities except

A

Discount on Bonds Payable.

B

Bonds Payable.

C

Premium on Bonds Payable.

D

Interest Payable.

Multiple Choice Question 67

In most companies, current liabilities are paid within

A

the operating cycle through the creation of other current liabilities.

B

one year through the creation of other current liabilities.

C

one year or the operating cycle out of current assets.

D

the operating cycle out of current assets.

Multiple Choice Question 157

Hernandez Corporation issues 3,000, 10-year, 8%, $1,000 bonds dated January 1, 2013, at 98. The journal entry to record the issuance will show a

A

debit to Cash for $2,960,000.

B

debit to Cash of $3,000,000.

C

credit to Discount on Bonds Payable for $60,000.

D

credit to Bonds Payable for $3,040,000.