Accounting CLEP Review 2 Jeopardy

1

100

All of the following expenditures should be charged to an asset account rather than to an expense account of the current period EXCEPT the cost of a) overhauling a delivery truck, which extends its useful life by two years b) purchasing a new component for a machine, which serves to increase the productive capacity of the machine c) constructing a parking lot for a leased building d) installing a new equipment item e)replacing worn-out tires on a delivery truck

What is replacing worn out tires on a delivery truck?

200

The balance sheet of Harold Company shows current assets of $200,000 and current liabilities of $100,000. The company uses cash to acquire merchandise inventory. As a result of this transaction, which of the following is true of working capital and the current ratio? a) both are unchanged b) working capital is unchanged, the current ratio increases c) both decrease d) working capital decreases, the current ratio increases e) working capital decreases, the current ratio is unchanged

What is both are unchanged?

300

In the preparation of the statement of cash flows, which of the following transactions will NOT be reported as a financing activity? a) sale of common stock b) sale of bonds c) issuance of long-term note to bank d) issuance of 30-day note to trade creditor e) purchase of treasury stock

What is issuance of 30-day note to trade creditor?

400

On December 31, before making year-end adjusting entries, Accounts Receivable had a debit balance of $80,000, and the allowance for uncollectible accounts had a credit balance of $3,500. Credit sales for the year were $600,000. If credit losses are estimated at 1/2 percent of credit sales, which of the following is true? a) The balance of the Allowance for Uncollectible Accounts will be $500 after adjustment b) The balance of the Allowance for Uncollectible Accounts will be $3,500 after adjustment c) The balance of the Allowance for Uncollectible Accounts will be $6,500 after adjustment d) The Uncollectible Accounts Expense for the year will be $500 e) The Uncollectible Accounts Expense for the year will be $6,200

What is The balance of the Allowance for Uncollectible Accounts will be $6,500 after adjustment?

500

A company bought a patent at a cost of $180,000. The patent had an original legal life of 17 years. The remaining legal life is 10 years, but the company expects its useful life will only be 6 years. When should the cost of the patent be charged to expenses? a) immediately b) over the next 6 years c) over the next 10 years d) over the next 17 years e) over the next 40 years

What is over the next 6 years?

2

100

How is treasury stock reported on the balance sheet? a) as an increase in liabilities b) as an increase in assets c) as a decrease in assets d) as an increase in stockholders' equity e) as a decrease in stockholders' equity

What is as a decrease in stockholders' equity?

200

Cash: $40,000 Accounts receivable: $120,000 Inventory: $300,000 Prepaid rent: $2,000 Accounts payable: $150,000 Salaries Payable: $7,000 Long-term bonds payable: $200,000 The selected accounts above are from TJ Supply's balance sheet. What is TJ Supply's working capital? a) $40,000 b) $105,000 c) $160,000 d) $305,000 e) $462,000

What is $305,000?

300

A machine with a useful life of eight years was purchased for $600,000 on January 1. The estimated salvage value is $50,000. What is the first year's depreciation by using the double declining-balance method? a) $50,000 b) $68,000 c) $75,000 d) $137,500 e) $150,000

What is $150,000?

400

Newman Corporation uses the allowance method of accounting for its accounts receivable. The company currently has a $100,000 balance in accounts receivable and a $5,000 balance in its allowance for uncollectible accounts. The company decides to write off $4,000 of its accounts receivable. What would be the balance in its net accounts receivable before and after the write-off? a) Before $95,000 After $91,000 b) Before $95,000 After $95,000 c) Before $100,000 After $96,000 d) Before $105,000 After $101,000 e)Before $105,000 After $105,000

What is Before $95,000 After $95,000?

500

Trading securities must be reported on the balance sheet at a) historical cost b) cost plus earnings minus dividends c) book value d) fair market value e) net present value

What is fair market value?

3

100

An accrued expense is a) liability b) revenue c) prepaid expense d) unearned revenue e) contra owner's equity account

What is a liability?

200

The L Company purchased new machinery and incurred the following costs: Invoice Price $30,000 Freight (F.O.B. shipping point) $2,000 Foundation for machinery $1,000 Installation costs $900 Annual maintenance of machinery $600 The recorded costs of the machinery is a) $30,000 b) $31,900 c) $32,000 d) $33,900 e) $34,500

What is $33,900?

300

ABC Company issued $5,000,000 of bonds on January 1, the date of record, receiving cash of $5,300,000. Which of the following is true about the bonds? a)The bonds were issued at a discount b) The bonds were not interest bearing c)The market value of bonds on the date of issue was $5,100,000 d)The market quote for the bonds was 108 e)The amount of annual interest expense will be less than the amount of interest paid annually in cash.

What is The amount of annual interest expense will be less than the amount of interest paid annually in cash?

400

Brock Company purchased a patent for $72,000 from Carter Company. The patent has a remaining legal life of 6 years, with an expected useful life of 4 years. The first year's amortization is a) $0 b) $6,000 c) $12,000 d) $18,000 e) $24,000

What is $18,000?

500

Which of the of annual deprecation expense? a)It represents the amount required for annual maintenance of a long-term asset b)It represents the annual revenue earned by an asset c)It allocates the cost of use of a long-term asset to the revenue that it generates d)It is required to fulfill the economic entity assumption e)It reduces cash

What is It allocates the cost of use of a long-term asset to the revenue that it generates?

4

100

Information in Covington's Corporation accounting records concerning its common stock shows that there are 100,000 shares authorized, 80,000 shares issues, and 5,000 shares held as treasury stock. If a $3.00 per share dividend is declared by the board of directors, the total amount of the cash dividend would be. a)$15,000 b) $225,000 c) $240,000 d) $300,000 e) $315,000

What is $225,000?

200

The matching concept matches a)customers with businesses b)expenses with revenues c)assets with liabilities d)creditors with businesses e)debits with credits

What is expenses with revenues?

300

Cindy Company is preparing a bank reconciliation. Which of the following should be subtracted from the balance per bank statement to arrive at the adjusted cash balance? a) deposits in transit b) bank service charge c) interest credited to the account d) outstanding checks e) customer check returned for insufficient funds

What is outstanding checks?

400

Which of the following equals the net assets of a company? a)current assets minus current liabilities b)total assets minus current liabilities c)retained earnings d)long-term assets minus accumulated depreciation e)stockholders' equity

What is stockholders equity?

500

New World, Inc. purchased $30,000 in goods on account that in turn were sold on account for $35,000. If New World uses accrual accounting, how much should they record in expenses and revenue? a)$35,000 in revenue but no expenses b)$30,000 in expenses but no revenue c)$35,000 in revenue and $30,000 in expenses d)$30,000 in revenue and $30,000 in expenses e)$5,000 in revenue but no expenses

What is $35,000 in revenue and $30,000 in expenses?

5

100

Sonny Corporation has a simple capital structure of 100,000 shares of $1 par common stock and 20,000 shares of 5% perferred stock, $50 par. Both classes of stock were outstanding for the entire year. During the year, the company reported net income of $550,000 and declared dividends of $75,000 and $50,000 on the common stock and the preferred stock, respectively. Sonny's earnings per share for the year were a)$4.25 b) $4.58 c) $4.75 d) $5.00 e) $5.50

What is $5.00?

200

A machine that cost $25,000 three years ago is sold in the current year for $6,000. The accumulated depreciation taken on the machine was $20,000. This sale would be reported in the current year's statement of cash flows as a)$25,000 outflow in the cash from investing activities section b)$6,000 inflow in the cash from investing activities section c)$1,000 inflow in the cash from investing activities section d)$1,000 inflow in the cash from operations section e)$1,000 inflow in the cash from financing activities section

What is $6,000 inflow in the cash from investing activities section?

300

Which of the following balance sheet entries should be considered part of the asset category "Investments"? a) land held for possible future expansion b) treasury stock c) machinery used in the business d) short-term notes receivable e) patents

What is land held for possible future expansion?

400

During the past year, a company reported net income of $230,000. Depreciation expense was $22,000. In December the company received $7,000 representing rent for the next year on a vacant warehouse. What is the amount of cash provided by operating activities that should appear on a statement of cash flows? a)$215,000 b)$237,000 c)$245,000 d)$252,000 e)$259,000

What is $259,000?

500

Ling is an accountant at a publicly traded corporation. She recently discovered in the accounting records a material error that affected last year's financial statements and will affect this year's statements. If the error is not corrected, it will reverse itself this year and probably no one else will discover it. Even though last year's net income will be materially understated, the overall effect on the two years combined net incomes is that the overstatement and the understatement will completely offset each other. Which of the following is the best action that Ling should take? a)do nothing, since no one will be harmed because of the offset b)immediately inform the local law enforcement agency c)place a phone call to the local nespaper to inform the public about the error d)immediately contact the securities and exchange commission, since she is not sure what action her supervisor will take e)inform her immediate supervisor and help correct last year's statements

What is inform her immediate supervisor and help correct last year's statements?