Acc 422 Part two questions 28-54
Acc 422 Part two questions 28-54
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Date Created: 11/13/15
Acc 422 Part two questions 28) Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues? A. Immediate recognition B. Partial recognition C. Associating cause and effect D. Systematic and rational allocation 29) For income statement purposes, depreciation is a variable expense if the depreciation method used is A. sum-of-the-years'-digits. B. declining-balance. C. units-of-production. D. straight-line. 30) Which of the following most accurately reflects the concept of depreciation as used in accounting? A. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved. B. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets. C. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred. D. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to A. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved. benefit from the use of the asset. 31) Harrison Company purchased a depreciable asset for $100,000. The estimated salvage value is $10,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset? A. $90,000 B. $100,000 C. $9,000 D. $10,000 32) Bigbie Company purchased a depreciable asset for $600,000. The estimated salvage value is $30,000, and the estimated useful life is 10,000 hours. Bigbie used the asset for 1,100 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset? A. $66,000 B. $570,000 C. $57,000 D. $62,700 33) Starr Company purchased a depreciable asset for $150,000. The estimated salvage value is $10,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? A. $28,125 B. $37,500 C. $17,500 D. $26,250 34) The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be A. added to factory overhead and allocated to production of the purchaser's product. B. amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product. C. charged off in the current period. D. amortized over the legal life of the purchased patent. 35) Riser Corporation was granted a patent on a product on January 1, 1998. To protect its patent, the corporation purchased on January 1, 2007 a patent on a competing product which was originally issued on January 10, 2003. Because of its unique plant, Riser Corporation does NOT feel the competing patent can be used in producing a product. The cost of the competing patent should be A. amortized over a maximum period of 11 years. B. expensed in 2007. A. amortized over a maximum period of 11 years. C. amortized over a maximum period of 20 years. D. amortized over a maximum period of 16 years. 36) Factors considered in determining an intangible asset’s useful life include all of the following EXCEPT A. any provisions for renewal or extension of the asset’s legal life B. the expected use of the asset. C. any legal or contractual provisions that may limit the useful life. D. the amortization method used. 37) Fleming Corporation acquired Out-of-Sight Products on January 1, 2008 for $4,000,000, and recorded goodwill of $750,000 as a result of that purchase. At December 31, 2008, the Out-of-Sight Products Division had a fair value of $3,400,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $2,900,000 at that time. What amount of loss on impairment of goodwill should Fleming record in 2008? A. $350,000 B. $ -0- C. $250,000 D. $600,000 38) General Products Company bought Special Products Division in 2006 and appropriately booked $250,000 of goodwill related to the purchase. On December 31, 2007, the fair value of Special Products Division is $2,000,000 and it is carried on General Product’s books for a total of $1,700,000, including the goodwill. An analysis of Special Products Division’s assets indicates that goodwill of $200,000 exists on December 31, 2007. What goodwill impairment should be recognized by General Products in 2007? A. $50,000. B. $0. C. $200,000. D. $300,000. 39) Twilight Corporation acquired End-of-the-World Products on January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as a result of that purchase. At December 31, 2008, the End-of-the-World Products Division had a fair value of $1,700,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $1,450,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2008? A. $175,000 B. $ -0- C. $125,000 D. $300,000 40) When a patent is amortized, the credit is usually made to A. a Deferred Credit account. B. the Patent account. C. an Accumulated Amortization account. D. an expense account. 41) The intangible asset goodwill may be A. capitalized only when created internally. B. capitalized only when purchased. C. capitalized either when purchased or created internally. D. written off directly to retained earnings. 42) Easton Company and Lofton Company were combined in a purchase transaction. Easton was able to acquire Lofton at a bargain price. The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. After revaluing noncurrent assets to zero, there was still some "negative goodwill." Proper accounting treatment by Easton is to report the amount as A. a deferred credit and amortize it. B. an extraordinary gain. C. part of current income in the year of combination. D. paid-in capital. Among the shortterm obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Madison National Bank. These are 90day notes, renewable for another 90day period. These notes should be classified on the balance sheet of Lance Company as A. longterm liabilities. B. current liabilities. C. deferred charges. D. intermediate debt. 44) Stock dividends distributable should be classified on the A. balance sheet as a liability. B. income statement as an expense. C. balance sheet as an asset. D. balance sheet as an item of stockholders' equity. 45) If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information EXCEPT A. the terms of any equity security issued or to be issued. B. a general description of the financing arrangement. C. the terms of the new obligation incurred or to be incurred. D. the number of financing institutions that refused to refinance the debt, if any. 46) Simson Company has 35 employees who work 8hour days and are paid hourly. On January 1, 2006 the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2006 may first be taken on January 1, 2007. Information relative to these employees is as follows: Yea Hourly Vacation Days Earned by Each Vacation Dayse Used by Each r Wages Employee Employee 2006 $28.50 10 0 2007 $27.00 10 8 2008 $28.50 10 10 What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2008? A. $79,800. B. $94,920. C. $90,720. D. $95,760. A. $79,800. 47) Simson Company has 35 employees who work 8hour days and are paid hourly. On January 1, 2006 the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2006 may first be taken on January 1, 2007. Information relative to these employees is as follows: Yea Hourly Vacation Days Earned by Each Vacation Dayse Used by Each r Wages Employee Employee 2006 $28.50 10 0 2007 $27.00 10 8 2008 $28.50 10 10 What is the amount of expense relative to compensated absences that should be reported on Simson’s income statement for 2006? A. $75,600. B. $0. C. $68,880. D. $72,240. 48) A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2007. Historically, 10% of customers mail in the rebate form. During 2007, 4,000,000 packages of light bulbs are sold, and 140,000 $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2007 financial statements dated December 31? A. $260,000; $260,000 B. $400,000; $400,000 C. $400,000; $260,000 D. $140,000; $260,000 49) Which of the following is the proper way to report a gain contingency? A. As an account receivable with additional disclosure explaining the nature of the contingency. B. As deferred revenue. C. As an accrued amount. D. As a disclosure only. 50) A contingency can be accrued when A. the amount of the loss can be reasonably estimated and it is probable that an asset has been impaired or a liability incurred. B. an asset may have been impaired. C. it is certain that funds are available to settle the disputed amount. D. it is probable that an asset has been impaired or a liability incurred even though the amount of the loss cannot be reasonably estimated. 51) Which of the following sets of conditions would give rise to the accrual of a contingency under current generally accepted accounting principles? A. Event is unusual in nature and occurrence of event is probable. B. Amount of loss is reasonably estimable and occurrence of event is probable. C. Amount of loss is reasonably estimable and event occurs infrequently. D. Event is unusual in nature and event occurs infrequently. 52) An example of an item which is NOT a liability is A. accrued estimated warranty costs. B. advances from customers on contracts. C. dividends payable in stock. A. accrued estimated warranty costs. D. the portion of longterm debt due within one year. 53) Bonds that pay no interest unless the issuing company is profitable are called A. revenue bonds. B. debenture bonds. C. collateral trust bonds. D. income bonds. 54) Bonds for which the owners' names are NOT registered with the issuing corporation are called A. debenture bonds. B. term bonds. C. bearer bonds. D. secured bonds.
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