1. On July 1, 2010, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 2010 is (Points : 5)
$1,800.
$1,050.
$900.
$600.

Question 2.2. A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. To record this transaction, the accountant would debit (Points : 5)
Equipment for $6,180, credit Interest Expense for $180, and credit Notes Payable for $6,000.
Equipment for $6,000 and credit Notes Payable for $6,000.
Equipment for $6,000, debit Interest Expense for $180, and credit Notes Payable for $6,180.
Equipment for $6,000 and credit Accounts Payable for $6,000.

Question 3. 3. Compute the maturity value of a 90-day, 10 percent note with a face value of $1,000. (Points : 5)

Question 4. 4. Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. Equipment purchased for $104,000 on January 3, 2011, has an estimated life of 5 years and an estimated salvage value of $9,000. The firm uses the straight-line method of depreciation. Determine the adjustment for the month ended January 31, 2011. (Points : 5)

Question 5.5. Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is (Points : 5)
$1,300.
$1,000.
$300.
$700.

Question 6.6. When a company issues a promissory note, the accountant records an entry that includes a credit to Note Payable for the (Points : 5)
maturity value of the note.
face value less the interest that will accrue.
face value of the note plus the interest that will accrue.
face value of the note.

Question 7.7. The amount of principal and interest that must be paid when a note comes due is the (Points : 5)
Maturity Value
Face Value
Loan Value
Historic Value

Question 8.8. The four assumptions financial statement users should be able to assume that preparers of the statements have made in preparing the statements that are listed by the FASB’s conceptual framework are (Points : 5)
separate economic entity, going concern, monetary unit, and periodicity of income.
conservatism, matching principle, revenue recognition principle, and periodicity of income.
conservatism, cost-benefit test, full disclosure principal, and industry practice constraint.
historical cost basis, materiality realization, and transparency.

Question 9.9. The total that must be paid when a note becomes due is known as the (Points : 5)
maturity value.
note value.
principle.
face value.

Question 10.10. Notes Payable and Notes Receivable are generally recorded on the balance sheet in the (Points : 5)
Current liabiity or current assets section.
Income section.
Long-term liability or long-term asset section.
Owner’s Equity section.

Question 11.11. A one-month note dated October 15, would be due on November (Points : 5)
17.
15.
14.
16.

Question 12.12. firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for (Points : 5)
$1,500.
$3,000.
$1,200.
$1,800.

Question 13.13. With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale (Points : 5)
on the date the account is collected in full.
each time a payment on an account balance is received.
on the date of the sale.
either on the date of the sale or when the amount of the sale is collected.

Question 14. 14. At the end of the current year, the trial balance of Kerry Hardware included the accounts and balances shown below. Credit sales were $7,000,000. Returns and allowances on these sales were $55,000. Assume that the firm bases its estimate of the loss from uncollectible accounts on 0.4 percent of net credit sales.
Accounts Receivable $650,000 Dr.
Allowance for Doubtful Accounts $4,500 Cr.
What is the estimated loss from uncollectible accounts for the current year?
What amount will be used in the adjusting entry for the estimated loss from uncollectible accounts?
(Points : 5)

Question 15.15. How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year? (Points : 5)
$450.
$900.
$300.
$1,800.

Question 16.16. Which of the following statements is not correct? (Points : 5)
The entry to record the issuance of a promissory note includes a credit to Interest Payable for the amount of interest that will accrue on the note until it is paid at maturity.
The Notes Payable account is always debited or credited for the face value of a note.
The entry to record the issuance of a promissory note includes a credit to the Notes Payable account.
All of these statements are correct.

Question 17. 17. Compute the amount of interest owed on a 3-month, 7 percent note for $12,000. (Points : 5)

Question 18.18. Depreciating equipment over its useful life is an example of (Points : 5)
applying the matching principle.
applying the realization principle.
following the objectivity assumption.
applying the conservatism convention.

Question 19. 19. Compute the amount of interest owed on a 60-day, 8 percent note for $9,000. (Points : 5)

Question 20.20. The adjusting entry to record estimated losses from uncollectible accounts consists of a debit to (Points : 5)
Accounts Receivable and a credit to Allowance for Doubtful Accounts.
Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
Allowance for Doubtful Accounts and a credit to Accounts Receivable.
Uncollectible Accounts Expense and a credit to Accounts Receivable.

Question 21.21. A 30-day note dated October 15, would be due on November (Points : 5)
15.
17.
16.
14.

Question 22.22. On January 2, 2011, a firm purchased equipment for $8,500. Depreciation expense for 2011, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is (Points : 5)
$1,200.
$1,500.
$1,400.
$1,700.

Question 23.23. On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An aging analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for (Points : 5)
$800.
$1,000.
$200.
$1,200.

Question 24.24. The Financial Accounting Standards Board is (Points : 5)
a branch of the SEC.
a branch of the IRS.
an independent organization.
a branch of the AICPA.

Question 25.25. The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is (Points : 5)
$4,100.
$3,900.
$4,400.
$4,000.

Question 26.26. Financial report users need information about (Points : 5)
profits
economic resources (assets)
claims against the assets (liabilities and owner’s equity)
All of the above.

Question 27.27. The Financial Accounting Standards Board is (Points : 5)
an independent organization.
a branch of the IRS.
a branch of the SEC.
a branch of the AICPA.

Question 28.28. Depreciating equipment over its useful life is an example of (Points : 6)
applying the matching principle.
applying the conservatism convention.
following the objectivity assumption.
applying the realization principle.

Question 29.29. Investors and creditors expect to receive a cash flow directly or indirectly from the business entity (Points : 6)
directly from the distribution of the company’s earnings.
indirectly through the disposition of their interests for cash.
Both of the above.
Neither of the above.

Question 30.30. In order to ensure that they are meaningful and useful, financial statements should be prepared (Points : 6)
on a daily basis.
on a timely basis.
in accordance with section 108 of the Sarbarnes-Oxley Act.
using generally accepting accounting principles (GAAP).

Question 31. 31. Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. Equipment purchased for $104,000 on January 3, 2011, has an estimated life of 5 years and an estimated salvage value of $9,000. The firm uses the straight-line method of depreciation. Determine the adjustment for the month ended January 31, 2011. (Points : 5)

Question 32.32. The adjusting entry to record accrued interest on a note payable requires a debit to (Points : 6)
Interest Expense and a credit to Cash.
Interest Income and a credit to Notes Payable.
Interest Payable and a credit to Interest Expense.
Interest Expense and a credit to Interest Payable.

Question 33.33. On November 1, 2010, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 2010, is (Points : 5)
$30.
$90.
$75.
$15.

Question 34.34. On May 1, 2011, a firm purchased a 1-year insurance policy for $3,600 and paid the full premium in advance. The insurance expense associated with this policy for 2011 is (Points : 5)
$3,600.
$2,400.
$2,100.

$1,200.

Question 35.35. Accrued expenses are (Points : 6)
paid for and recorded in one period but not fully used until a later period.
used in one period but not paid for or recorded until a later period.
paid for, recorded, and used in one period.
budgeted but not paid for or used during the period.

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