General Accounting Assets And Revenue MCQs

1. Which of the following is NOT an accepted method for financial reporting for wasting assets?

2. Which term below is used when referring to the write-off of intangible assets?

3. A fast food restaurant chain sells a division that operates movie theaters. What type of activity is this?

4. When the ______________ method is used to estimate uncollectible accounts, the provision for uncollectible accounts is added to the existing balance in the Allowance for Uncollectible Accounts.

5. A manufacturing firm sells a parcel of land next to one of its warehouses. What type of activity is this?

6. The situation in which a company uses its accounts receivable to obtain a loan is called ___________. In this process, the company usually maintains control of the receivables, collects from customers, and forwards the proceeds to the lending institution to liquidate the loan.

7. When an asset impairment occurs, a company writes down the asset to _______________.

8. Which of the following depreciation methods would best match the cost with expected benefits when the rate of usage for an asset varies greatly from period to period?

9. XYZ Company reports its net assets at a book value of $150,000. Investigation reveals that the net assets had a market value of $175,000. In addition, XYZ Company had been offered $220,000 for the company by ABC Company. What is the amount of goodwill that should be recorded on the books of XYZ Company?

10. Which of the following is the generally accepted procedure of corrective action for material misestimates involving depreciation?

11. XYZ Company had sales of $585,000 during Year 1, $260,000 of which were on account. The account balances in Accounts Receivable and in Allowance for Uncollectible Accounts on December 31 of Year 1 were $78,000 and $10,400 respectively. Past experience indicates that 5 percent of all credit sales will not be collected. An aging of accounts indicated that $19,500 of the receivable balance would not be collected. How much should XYZ Company debit to the Bad Debt Expense Account?

12. XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000 on its December 31 Year 1 Balance Sheet. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. The company also estimates that its bad debts will be 2 percent of credit sales. What balance would XYZ Company report in Allowance for Uncollectible Accounts on its December 31 Year 2 Balance Sheet?

13. A Florida hotel chain's properties located on the Emerald Coast are destroyed when the area is devastated by an earthquake. What type of activity is this?

14. What is the proper accounting for all research and development costs when incurred?

15. XYZ Company purchases a piece of equipment on January 1, 2007 at a cost of $100,000. The equipment has a five-year useful life and can be sold for $10,000 at the end of five years. If XYZ Company uses the 200% percent declining balance depreciation method, how much depreciation would be recorded in the second year?

16. Which of the following is a characteristic of grouping assets into one of seven life classes?

17. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the cost-recovery-first method, how much income would they recognize in Year 2?

18. The sum-of-the-years digits method is an example of a/an ________________.

19. Which of the following statements about selecting the best depreciation method for tax purposes is incorrect?

20. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows: Year 2: $10,000,000 Year 3: $15,000,000 Year 4: $5,000,000 If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 4?

21. In which of the following methods may salvage be ignored when calculating depreciation?

22. On its December 31 Balance Sheet in Year 1, XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. Given the above data, what amount would XYZ Company report as Bad Debt Expense in its Year 2 Income Statement?

23. Which of the following methods allows all operating expenses, related with oil and gas exploration, to be capitalized irrespective of whether the exploration is successful or not?

24. In the indirect method, which of the following is included in the cash flow from investing activities?

25. Which of the following accounts is debited if depreciation is a production cost?

26. XYZ Company purchases a machine with a cost of $20,000, a salvage value of $2,000, and life of five years. If the company uses the sum-of-the-years digits method, what would the depreciation charge be for the first year?

27. If a reasonable estimate of the amount of cash to be received can be made, when should revenue be recognized?

28. Which of the following groups assets into one of seven classes for tax depreciation?

29. Which of the following basic patterns would be appropriate for allocation of land?

30. Which of the following costs is capitalized for a self-constructed asset?

31. When a company uses its accounts receivable as collateral for a loan, the transaction is known as a/an _____________________.

32. Which of the following factors is an example of a functional cause of depreciation?

33. Assets that can provide future benefits without having physical form are called ___________.

34. Small adjustments to and replacement of plant assets that have little or no effect on useful life are called _______________.

35. In financial statements, what is the proper handling of the Allowance for Uncollectible Accounts?

36. In which of the following depreciation methods is the estimate of useful life NOT required?

37. The legal right to future benefits of an invention is referred to as a/an _______________.

38. Which of the following events reduces total assets?

39. XYZ Company generates five new products in 2008. The interest capitalized for these items is referred to as __________________.

40. Which of the following is the same as an outright sale?

41. When the ______________ method is used to estimate uncollectible accounts, the balance in the Allowance for Uncollectible Accounts is adjusted to reflect the desired ending balance.

42. XYZ Company buys a building on April 1, 2008 for $100,000. The building has a physical life of 50 years, but XYZ Company anticipates using the building for 50 years. At the end of 50 years, the building will have no disposal value, but at the end of 30 years it will have a disposal value of $5,000. If the company uses the straight line method, how much depreciation would be recorded on December 31, 2008?

43. When all else is equal, analysts ____________________.

44. Which of the following costs would NOT be included in the cost of machinery?

45. The proceeds gained upon disposition of an asset at the end of its useful life are referred to as the asset's _______________.

46. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows: Year 2: $10,000,000 Year 3: $15,000,000 Year 4: $5,000,000 If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 2?

47. When managers choose estimates that lead to higher current income, analysts refer to those earnings as ________________.

48. Which of the following is a type of intangible asset that appears on the balance sheet only when one company is acquired by another?

49. When using the indirect method to determine operating cash flows in a cash flow statement, which of the following would be added to net income?

50. The term _______________ refers to 'cost less accumulated' depreciation.

51. Natural resources are referred to as __________________.

52. Which of the following life spans would be used for automobiles if the MACRS method of depreciation is employed?

53. The matching of costs with the benefits derived from the use of an asset is ____________.

54. Which of the following costs is normally expensed when incurred, even though it has future benefits?

55. On its December 31 Balance Sheet in Year 1, XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. During year 2, a customer's account for $2,400 is written off as uncollectible. What effect will the write-off have on the company's Income Statement and Balance Sheet?

56. XYZ Company acquires a machine for $20,000 in 2000 and depreciates it on the straight line basis, no salvage value, for two years based on an estimated ten-year life. In 2002 it was determined that the remaining life was only four years instead of eight. According to generally accepted accounting principles, what amount of depreciation should be recorded for 2002?

57. Which of the accounts below would NOT be treated as a reduction in sales revenue on the income statement?

58. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the installment method, how much income would they recognize in Year 1?

59. XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000 on its December 31 Year 1 Balance Sheet. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. What is the balance in Accounts Receivable on December 31 of Year 2?

60. Which of the following is a functional factor in determining depreciation?

61. The amortization of natural resources is referred to as __________________.

62. Which of the following accounts is credited for depreciation?

63. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the cost-recovery-first method, how much income would they recognize in Year 3?

64. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows: Year 2: $10,000,000 Year 3: $15,000,000 Year 4: $5,000,000 If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 3?

65. XYZ Company has credit sales of $4,000,000 during Year 1. At December 31 Year 1, the balance in Accounts Receivable is $142,000. The company estimates bad debts to equal 1 percent of credit sales. What effect will the company's December 31 adjusting entry have on the company's Income Statement and Balance Sheet?

66. An asset impairment occurs when the then-current book value of an asset exceeds ____________.

67. Early in Year 1, XYZ Company begins construction of an office building. The contract price for the construction is $23,400,000. The project, which is completed in Year 3, incurs costs as follows: Year 1: $5,200,000 Year 2: $6,500,000 Year 3: $3,900,000 If XYZ Company recognizes income under the completed contract method, how much income would they recognize on the office building contract in Year 1?

68. On January 1, 2007, XYZ Company has machinery on the books that originally cost $200,000. In 2007, the following expenditures were made: Minor Repairs: $5,000 IMproveMents: $10,000 Additions: $37,000 Given the above data, how much would be recorded in the Machinery Account on December 31,2007?

69. How are property, plant, and equipment and related accumulated depreciation generally disclosed in the Balance Sheet?

70. A professional soccer team pays a signing bonus to one of its new players. What type of activity is this?

71. Early in Year 1, XYZ Company begins construction of an office building. The contract price for the construction is $23,400,000. The project, which is completed in Year 3, incurs costs as follows: Year 1: $5,200,000 Year 2: $6,500,000 Year 3: $3,900,000 If XYZ Company recognizes income under the completed contract method, how much income would they recognize on the office building contract in Year 3?

72. When using the indirect method to determine operating cash flows in a cash flow statement, which of the following would be deducted from net income?

73. XYZ Company owns machinery with a cost of $100,000 and an accumulated depreciation of $60,000 on January 1, 2007. On July 1, 2007, the machinery is sold for $43,000. The straight line depreciation method has been used during the previous six years of life. How much gain or loss will be recorded on the sale?

74. What occurs when the then-current book value of an asset exceeds the sum of expected undiscounted cash flow?

75. Which of the following statements about MACRS depreciation is NOT true?

76. In 2008, XYZ Company spends $250,000 on research and development to generate new product lines. Of the five projects in progress, one results in a patented item while the other four are considered unsuccessful. According to generally accepted accounting principles, how much of the $250,000 should be recognized as an expense in 2008?

77. Depreciation is not a decline in value, but a process of __________________.

78. The denominator of the sum-of-the-years digits fraction is ______________.

79. Which of the following basic patterns would be appropriate for allocation of intangibles?