saint MBA560 module 3 quiz (taken on 25 January 2014)

saint MBA560 module 3 quiz (taken on 25 January 2014)

Question
	1.
					 					Victorino Company accepted a credit card payment in exchange
for $10,000 of services provided to a customer. The credit card company
charges a 5% service charge. The collection of cash from the credit card
 company when it settles the account receivable balance will:
											(Points : 2)




  increase assets by $9,500.

  decrease assets and equity by $500.

  increase assets by $10,000.

  none of the above.

















 

 

 

	 

 

 

			

				

										 Question 2.
					 2.
					 					December 31, 2010, Landon Corporation estimated that 3% of
its credit sales of $215,000 would be uncollectible. Landon used the
allowance method for uncollectible accounts. February 15, 2011, Landon
wrote off the account of one customer, in the amount of $2,500. April 7,
 2011, the customer paid the account in full. Which of the following
answers correctly shows the effect of the December 31, 2010 adjusting
entry for uncollectible accounts on the financial statements of Landon
Corporation?
 
Row
Assets
=
Liab.
+
Equity
Rev.
-
Exp.
=
Net Inc.
Cash Flow
One
(6,450)
=
6,450
+
NA
NA
-
NA
=
NA
NA
Two
6,450
=
(6,450)
+
NA
NA
-
NA
=
NA
(6,450)OA
Three
6,450
=
NA
+
6,450
NA
-
(6,450)
=
6,450
6,450 FA
Four
(6,450)
=
NA
+
(6,450)
NA
-
6,450
=
(6,450)
NA
											(Points : 2)
									
			
		
	 
  Row One

  Row Two

  Row Three

  Row Four
 
	

 
 
 













 

 

 

	 

 

 

			

				

										 Question 3.
					 3.
					 					On December 31, 2010, the Landon Corporation estimated that
3% of its credit sales of $215,000 would be uncollectible. Landon used
the allowance method of accounting for uncollectible accounts. On
February 15, 2011, Landon wrote off the account of one of its customers,
 in the amount of $2,500. On April 7, 2011, the customer paid the
account in full. 
Which of the following answers correctly states the effect of the reinstatement of the receivable on April 7, 2011?
 
	Row
Assets
=
Liabilities
+
Equity
Revenue
-
Expenses
=
Net Inc.
Cash
One
(2,500)
=
2,500
+
NA
NA
-
NA
=
NA
(2,500) OA
Two
2,500
=
NA
+
2,500
2,500
-
NA
=
2,500
2,500 OA
Three
NA
=
NA
+
NA
NA
-
NA
=
NA
NA
Four
(2,500)
=
NA
+
(2,500)
NA
-
2,500
=
(2,500)
NA
											(Points : 2)
									
			
		
	 
  Row One

  Row Two

  Row Three

  Row Four

 
 
 













 

 

 

	 

 

 

			

				

										 Question 4.
					 4.
					 					To estimate the amount of its uncollectible accounts receivable, a company might:
											(Points : 2)
									
			
		
	 
  consult industry publications.

  look at its past history of uncollectible accounts.

  take into account the current condition of the economy.

  all of the above.
		

 
 
 













 

 

 

	 

 

 

			

				

										 Question 5.
					 5.
					 					For a business, the advantage of offering credit to customers is that it:
											(Points : 2)
									
			
		
	 
  increases the amount of sales.

  increases cash flow from financing activities.

  decreases cost of goods sold.

  decreases the amount of inventory the company needs to carry.

 
 
 













 

 

 

	 

 

 

			

				

										 Question 6.
					 6.
					 					On December 31, 2010, the Landon Corporation estimated that
3% of its credit sales of $215,000 would be uncollectible. Landon used
the allowance method of accounting for uncollectible accounts. On
February 15, 2011, Landon wrote off the account of one of its customers,
 in the amount of $2,500. On April 7, 2011, the customer paid the
account in full. 
Which of the following correctly states the answer on the effect of Landon’s write-off entry on
 February 15, 2011?
 
Row
Assets
=
Liab.
+
Equity
Revenue
-
Expenses
=
Net Inc.
Cash
One
(2,500)
=
NA
+
(2,500)
NA
-
2,500
=
(2,500)
(2,500)OA
Two
NA
=
NA
+
NA
NA
-
NA
=
NA
NA
Three
NA
=
2,500
+
(2,500)
NA
-
2,500
=
(2,500)
NA
Four
2,500
=
NA
+
2,500
NA
-
(2,500)
=
2,500
2,500 OA
											(Points : 2)
									
			
		
	 
  Row One

  Row Two

  Row Three

  Row Four

 
 
 













 

 

 

	 

 

 

			

				

										 Question 7.
					 7.
					 					Which of the following is not considered a cost of extending credit to customers?
											(Points : 2)
									
			
		
	 
  The implicit interest charge

  The increased sales resulting from the extension of credit

  Keeping the records for accounts receivable

  The possibility of unpaid account

 
 
 













 

 

 

	 

 

 

			

				

										 Question 8.
					 8.
					 					The net realizable value of accounts receivable is calculated:
											(Points : 2)
									
			
		
	 
  Accounts Receivable + Uncollectible Accounts Expense.

  Accounts Receivable + Notes Receivable.

  Accounts Receivable – Allowance for Doubtful Accounts.

  365/Accounts Receivable.
		

 
 
 













 

 

 

	 

 

 

			

				

										 Question 9.
					 9.
					 					On January 1, 2009, Plitkin Manufacturing Company spent
$3,000 on an asset (equipment) to improve its quality but not its useful
 life. The asset had been purchased on January 1, 2006 for $14,000. The
asset had a $2,000 salvage value and a 6-year life. Plitkin
Manufacturing uses straight-line depreciation. What would be the amount
of depreciation expense for 2010?
											(Points : 2)
									
			
		
	 
  $4,500

  $3,000

  $6,000

  $7,200

 
 
 













 

 

 

	 

 

 

			

				

										 Question 10.
					 10.
					 					On September 10, 2009, Barden Company sold a piece of
equipment for $3,000. The equipment had an original cost of $17,000 and
accumulated depreciation of $15,500 at the time of the sale. Which of
the following correctly shows the effect of the sale on the 2009
financial statements? 
Row
Assets
=
Liabilities
+
Equity
Revenues or Gains
-
Expenses or Losses
=
Net Inc.
Cash
One
1,500
NA
1,500
1,500
NA
1,500
3,000 OA
Two
(1,500)
NA
(1,500)
NA
1,500
(1,500)
3,000 IA
Three
1,500
NA
1,500
NA
(1,500)
1,500
NA
Four
1,500
NA
1,500
1,500
NA
1,500
3,000 IA
											(Points : 2)
									
			
		
	 
  Row One

  Row Two

  Row Three

  Row Four

 
 
 













 

 

 

	 

 

 

			

				

										 Question 11.
					 11.
					 					Which of the following is considered an accelerated depreciation method?
											(Points : 2)
									
			
		
	 
  Straight line

  Units of production

  LIFO

  Double declining balance

 
 
 













 

 

 

	 

 

 

			

				

										 Question 12.
					 12.
					 					On January 1, 2009, Rowley Company purchased a truck that
cost $22,000. The truck had an expected useful life of 5 years and a
$4,000 salvage value. The amount of depreciation expense recognized in
2010 assuming that Rowley uses the double declining balance method is:
											(Points : 2)
									
			
		
	 
  $4,320

  $5,280

  $7,200

  $8,800

 
 
 













 

 

 

	 

 

 

			

				

										 Question 13.
					 13.
					 					Which of the following would be classified as a long-term operational asset?
											(Points : 2)
									
			
		
	 
  Accounts Receivable

  Cash

  Office Equipment

  Inventory

 
 
 













 

 

 

	 

 

 

			

				

										 Question 14.
					 14.
					 					Which of the following statements is correct regarding accounting treatment of goodwill?
											(Points : 2)
									
			
		
	 
  Goodwill is recorded as an asset and then amortized over a period of 5 years.

  Goodwill is recorded as an asset. It is not amortized but must be tested for impairment each year.

  Goodwill is recorded as an asset and amortized over 40 years unless its value decreases.

  Goodwill is expensed immediately in the year of purchase.

 
 
 













 

 

 

	 

 

 

			

				

										 Question 15.
					 15.
					 					The recognition of depletion expense acts to:
											(Points : 2)
									
			
		
	 
  decrease assets and equity and increase cash flow from operating expenses.

  increase cash flow from operating activities and does not affect the amount of total assets.

  increase assets, equity, and cash flow from operating activities.

  decrease assets and equity, with no effect on cash flow.

 
 
 













 

 

 

	 

 

 

			

				

										 Question 16.
					 16.
					 					Which of the following terms is used to identify the expense recognition for intangible assets?
											(Points : 2)
									
			
		
	 
  Amortization

  Depletion

  Depreciation

  Allocation

 
 
 













 

 

 

	 

 

 

			

				

										 Question 17.
					 17.
					 					Which of the following would most likely not be depreciated or amortized using the straight-line method?
											(Points : 2)
									
			
		
	 
  Copyrights

  Franchise

  Timber reserves

  Trademark

 
 
 













 

 

 

	 

 

 

			

				

										 Question 18.
					 18.
					 					In a period of rising prices, which inventory cost flow method will produce the lowest amount of cost of goods sold?
											(Points : 2)
									
			
		
	 
  FIFO

  Weighted average

  LIFO

  All methods will produce the same amount of cost of goods sold

 
 
 













 

 

 

	 

 

 

			

				

										 Question 19.
					 19.
					 					Frye Company uses the LIFO cost flow method. They had no
beginning inventory and Frye purchased 500 units of inventory that cost
$4.00 each. At a later date, the company purchased an additional 600
units of inventory that cost $4.50 each. If Frye sold 800 units of the
inventory, the amount of ending inventory appearing on the balance sheet
 would be:
											(Points : 2)
									
			
		
	 
  $1,400

  $1,350

  $1,200

  $1,450

 
 
 

















 

 

			

				

										 Question 20.
					 20.
					 					GAAP requires a company to provide financial statement users
with information about the accounting methods it has selected (including
 inventory cost flow methods) this is called the:
											(Points : 2)
									
			
		
	 
  consistency principle.

  financial statement discipline principle.

  full disclosure principle.

  cost flow and other inventory principles.