D2

()

1 MULTIPLE CHOICE40%

1.The interest rate specified on any note is for a

A)day.

B)month.

C)week.

D)year.2. The interest on a $8,000, 6%, 60-day note receivable is

A)$240.

B)$40.

C)$80.

D)$120.3.During 2008, Carbondale Inc. had sales on account of $130,000, cash sales of $54,000, and collections on account of $80,000. In addition, they collected $1,450 which had been written off as uncollectible in 2007. As a result of these transactions, the change in the accounts receivable balance indicates a

A)$100,550 increase.

B)$48,000 increase.

C)$50,000 increase.

D)$102,000 increase.4.ABC Company accepted a national credit card for a $3,000 purchase. The cost of the goods sold is $2,400. The credit card company charges a 2% fee. What is the impact of this transaction on net operating income?

A)Increase by $540B)Increase by $600

C)Increase by $510

D)Increase by $9105.Three accounting issues associated with accounts receivable are

A)depreciating, returns, and valuing.

B)depreciating, valuing, and collecting.

C)recognizing, valuing, and disposing.

D)accrual, bad debts, and disposing.6.All of the following factors in computing depreciation are estimates except

A)cost.

B)residual value.

C)salvage value.

D)useful life.7.The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

A)straight-line.

B)units-of-activity.

C)declining-balance.

D)none of these.

8.The book value of a plant asset is the difference between the

A)replacement cost of the asset and its historical cost.

B)cost of the asset and the amount of depreciation expense for the year.

C)cost of the asset and the accumulated depreciation to date.

D)proceeds received from the sale of the asset and its original cost.

9.Depreciation is a process of

A)asset devaluation.

B)cost accumulation.

C)cost allocation.

D)asset valuation.

10.The declining-balance method of depreciation produces

A)a decreasing depreciation expense each period.

B)an increasing depreciation expense each period.

C)a declining percentage rate each period.

D)a constant amount of depreciation expense each period.11.The entry to record patent amortization usually includes a credit to

A)Amortization Expense.

B)Accumulated Amortization.

C)Accumulated Depreciation.

D)Patents.12.Gains on an exchange of plant assets that has commercial substance are

A)deducted from the cost of the new asset acquired.

B)deferred.

C)not possible.

D)recognized immediately.13.The current portion of long-term debt should

A)be paid immediately.

B)be reclassified as a current liability.

C)be classified as a long-term liability.

D)not be separated from the long-term portion of debt.14.The accounting for warranty costs is based on A)going concern principle.

B)matching principle.

C)conservatism principle.

D)objectivity principle.15. Claims for which formal instruments of credit are issued as proof of the debt are

A)accounts receivable.

B)interest receivable.

C)notes receivable.

D)other receivables.

16. The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the

A)direct write-off method.

B)percentage of receivables basis.

C)percentage of sales basis.

D)percentage of receivables and percentage of sales basis.

17. The percentage of receivables basis for estimating uncollectible accounts emphasizes

A)cash realizable value.

B)the relationship between accounts receivable and bad debts expense.

C)income statement relationships.

D)the relationship between sales and accounts receivable.

18.The maturity value of a $90,000, 10%, 120-day note receivable is

A)$90,000.

B)$99,000.

C)$93,000.

D)$91,500.

19.In the final step of the liquidation process, remaining cash is distributed to partners

A) on an equal basis.

B) on the basis of the income ratios.

C) on the basis of the remaining capital balances.

D) regardless of capital deficiencies.20.In the liquidation of a partnership, any gain or loss on the realization of noncash assets should be allocated

A) first to creditors and the remainder to partners.

B) to the partners on the basis of their capital balances.

C) to the partners on the basis of their income-sharing ratio.

D) only after all creditors have been paid.

Problems60%

1. Kiley Company had a $500 credit balance in Allowance for Doubtful Accounts at December 31, 2008, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:

Estimated Percentage

Uncollectible

Current Accounts$120,0001%

130 days past due12,0002%

3160 days past due10,0006%

6190 days past due5,00010%

Over 90 days past due 8,00030%

Total Accounts Receivable$155,000

Instructions: 9% (a)Prepare the adjusting entry on December 31, 2008, to recognize bad debts expense.

(b)Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $800 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts.

(c)Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2008 were $600,000, and that Allowance for Doubtful Accounts had a $650 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.2. Listed below are two independent situations involving the disposition of receivables. (a)Dylan Company sells $500,000 of its receivables to Speedy Factors, Inc. Speedy Factors assesses a finance charge of 2% of the amount of receivables sold.

Instructions: Prepare the journal entry to record the sale of the receivables on Dylan Company's books. 3%(b) A restaurant is the site for a large company party. The bill totals $3,000 and is charged by the patron on a Visa credit card. 3%Instructions: Assume a 3% service fee is charged by Visa. Record the entry for the transaction on the restaurant's books.3. Tanner Company purchased equipment on January 1, 2007 for $60,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.Instructions: 9%Answer the following independent questions.

(a) Compute the amount of depreciation expense for the year ended December 31, 2007, using the straight-line method of depreciation.

(b)If 16,000 units of product are produced in 2007 and 24,000 units are produced in 2008, what is the book value of the equipment at December 31, 2008? The company uses the units-of-activity depreciation method.

(c)If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated DepreciationEquipment account at December 31, 2009?

4.Tom Byers sells televisions with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $60 per unit. During 2008, 8,000 units were sold at an average price of $400. During the year, repairs were made on 55 units at a cost of $2,000.Instructions: 6% Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year.5. Farr Delivery Company and Bell Delivery Company exchanged delivery trucks on January 1, 2008. Farr's truck cost $80,000, had accumulated depreciation of $60,000, and has a fair market value of $19,000. Bell's truck cost $60,000, had accumulated depreciation of $50,000, and has a fair market value of $19,000.(assume the exchange of delivery trucks that has commercial substance)

Instructions: Journalize the exchange for Farr Delivery Company.5%6. Presented below are selected transactions for Milton Company for 2008. (a) Jan. 1Received $9,000 scrap value on retirement of machinery that was purchased on January 1, 1998. The machine cost $90,000 on that date, and had a useful life of 10 years with no salvage value.

(b) April 30 Sold a machine for $28,000 that was purchased on January 1, 2005. The machine cost $75,000, and had a useful life of 5 years with no salvage value.

(c) Dec. 31Discarded a business automobile that was purchased on October 1, 2004. The car cost $32,000 and was depreciated on a 5-year useful life with a salvage value of $2,000.

Instructions: 15%Journalize all entries required as a result of the above transactions. Milton Company uses the straight-line method of depreciation and has recorded depreciation through December 31, 2007.7. The Smith and Wilson partnership reports net income of $60,000. Partner salary allowances are Smith $18,000 and Wilson $12,000. Any remaining income is shared 60:40.

Instructions: 4% Determine the amount of net income allocated to each partner.

8. Prior to the distribution of cash to the partners, the accounts of ABC Company are: Cash $30,000, Alt Capital (Dr.) $10,000, Bell Capital (Cr.) $25,000, and Cole Capital (Cr.) $15,000. They share income on a 6:2:2 basis.

Instructions: 6%

Prepare entries to record (a) the absorption of Alt's capital deficiency by the other partners and (b) the distribution of cash to the partners with credit balances.

() MULTIPLE CHOICE40%

1.5.

6.10.

11.15.

16.20.

2 Problems60%

1. (9%)(a)

(b)

(c)

2.(6%)(a)

(b)

3. (9%)(a)

(b)

(c)

4. (6%)(a)

(b)

:

5.(5%)

6. (15%)

(a)

(b)

(c)

7.(4%)

8.(6%)(a)

(b)