Accounting Financial 2301 Northeast College Test III Chapter 9.10 & 11 Name_______________________ Date________________________ MULTIPLE CHOICE 1. A note receivable due in 18 months is listed on the balance sheet under the caption a. long-term liabilities b. fixed assets c. current assets d. investments
2. The receivable that is usually evidenced by a formal instrument of credit is a(n) a. trade receivable. b. note receivable. c. accounts receivable. d. income tax receivable.
3. Which of the following receivables would not be classified as an "other receivable? a. Advance to an employee b. Interest receivable c. Refundable income tax d. Notes receivable
4. Notes or accounts receivables that result from sales transactions are often called a. non-trade receivables. b. trade receivables. c. merchandise receivables. d. sales receivables.
5. The two methods of accounting for uncollectible receivables are the allowance method and the a. equity method b. direct write-off method c. interest method d. cost method
6. The direct write-off method of accounting for uncollectible accounts a. emphasizes balance sheet relationships. b. is not generally accepted as a basis for estimating bad debts. c. emphasizes cash realizable value. d. emphasizes the matching of expenses with revenues.
7. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited a. at the end of each accounting period. b. when a credit sale is past due. c. whenever a pre-determined amount of credit sales have been made. d. when an account is determined to be worthless.
8. An alternative name for Bad Debts Expense is a. Collection Expense. b. Credit Loss Expense. c. Uncollectible Accounts Expense. d. Deadbeat Expense.
9. Two methods of accounting for uncollectible accounts are the a. direct write-off method and the allowance method. b. allowance method and the accrual method. c. allowance method and the net realizable method. d. direct write-off method and the accrual method.
10. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? a. Uncollectible Accounts Payable b. Accounts Receivable c. Allowance for Doubtful Accounts d. Bad Debt Expense 11. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts d. Interest Expense
12. One of the weaknesses of the direct write-off method is that it a. understates accounts receivable on the balance sheet b. violates the matching principle c. is too difficult to use for many companies d. is based on estimates
13. A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is a. $10,000 b. $10,300 c. $450 d. $9,550
14. Receivables are usually listed on the balance sheet after Cash in what order? a. Accounts Receivable, Notes Receivable, Interest Receivable b. Interest Receivable, Notes Receivable, Accounts Receivable c. Notes Receivable, Interest Receivable, Accounts Receivable d. Notes Receivable, Accounts Receivable, Interest Receivable
15. A characteristic of a fixed asset is that it is a. intangible b. used in the operations of a business c. held for sale in the ordinary course of the business d. a long term investment
16. Land acquired so it can be resold in the future is listed in the balance sheet as a(n) a. fixed asset b. current asset c. investment d. intangible asset
17. Which of the following should be included in the acquisition cost of a piece of equipment? a. transportation costs b. installation costs c. testing costs prior to placing the equipment into production d. all are correct
18. Which of the following is included in the cost of constructing a building? a. insurance costs during construction b. cost of paving parking lot c. cost of repairing vandalism damage during construction d. cost of removing the demolished building existing on the land when it was purchased
19. Which of the following is included in the cost of land? a. cost of paving a parking lot b. brokerage commission c. outdoor parking lot lighting attached to the land d. fences on the land
20. Accumulated Depreciation a. is used to show the amount of cost expiration of intangibles
b. is the same as Depreciation Expense c. is a contra asset account d. is used to show the amount of cost expiration of natural resources
21. A building with an appraisal value of $137,000 is made available at an offer price of $142,000. The purchaser acquires the property for $30,000 in cash, a 90-day note payable for $40,000, and a mortgage amounting to $60,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is a. $137,000 b. $142,000 c. $130,000 d. $100,000 22. A capital expenditure results in a debit to
a. an expense account b. a capital account c. a liability account d. an asset account
23. Which of the following below is an example of a capital expenditure? a. cleaning the carpet in the front room b. tune-up for a company truck c. replacing an engine in a company car d. replacing all burned-out light bulbs in the factory
24. In a lease contract, the party who legally owns the asset is the a. lessee b. lessor
c. operator d. banker
25. The maturity value of a $40,000, 90-day, 6% note payable is a. $40,600 b. $42,400 c. $600 d. $2,400
26. Proceeds of $48,750 were received from discounting a $50,000, 90-day note at a bank. The discount rate used by the bank in computing the proceeds was a. 6.25% b. 10.00% c. 10.26% d. 9.75%
27. Miller Co. issued a $35,000, 60-day, discounted note to River City Bank. The discount rate is 6%. What is the maturity value of the note? a. $35,350 b. $37,100 c. $35,000 d. $34,650
28. Chu Co. issued a $50,000, 60-day, discounted note to River City Bank. The discount rate is 6%. The cash proceeds to Chu Co. are a. $50,500
b. $50,250 c. $49,500 d. $50,250
29. The journal entry a company uses to record the issuance of a note for the purpose of converting an existing account payable would be a. debit Cash; credit Accounts Payable b. debit Accounts, Payable; credit Cash c. debit credit Cash; Notes Payable d. debit Accounts Payable; credit Notes Payable
30. The journal entry a company uses to record the issuance of a note for the purpose of borrowing funds for the business is a. debit Accounts Payable; credit Notes Payable b. debit Cash; credit Notes Payable c. debit Notes Payable; credit Cash d. debit Cash and Interest Expense; credit Notes Payable
31. The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is a. debit Cash and Interest Expense; credit Notes Payable b. debit Cash and Interest Payable; credit Notes Payable c. debit Accounts Payable; credit Notes Payable d. debit Notes Payable; credit Cash
32. The journal entry a company uses to record the payment of a discounted note is a. debit Notes Payable and Interest Expense; credit Cash
b. debit Notes Payable; credit Cash c. debit Cash; credit Notes Payable d. debit Accounts Payable; credit Cash
33. The journal entry a company uses to record the payment of an ordinary note is a. debit Cash; credit Notes Payable b. debit Accounts Payable; credit Cash c. debit Notes Payable and Interest Expense; credit Cash d. debit Notes Payable and Interest Receivable; credit Cash
34. A current liability is a debt that can reasonably expected to be paid a. between 6 months and 18 months. b. out of currently recognized revenues. c. within one year. d. out of cash currently on hand.
35. Current liabilities are due a. and receivable within one year. b. but not receivable for more than one year. c. but not payable for more than one year. d. and payable within one year.
36.Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings? a. FICA tax rate b. wage and tax statement c. FUTA tax rate d. wage bracket and withholding table
37. Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. SUTA taxes c. FICA taxes d. all of the above
38. For which of the following taxes is there no ceiling on the amount of employee annual earnings subject to the tax? a. only Social Security tax b. only Medicare tax c. only unemployment compensation tax d. none of the above
39. Most employers are required to withhold from employees which of the following employment taxes? a. FICA tax b. FICA tax, state and federal unemployment compensation tax c. only state unemployment compensation tax d. only federal unemployment compensation tax
40. An employee receives an hourly rate of $25, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee? a. $775.00 b. $752.50 c. $1,225.00 d. $1,102.50
41. An employee receives an hourly rate of $25, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46 federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid the employee? a. $875.00 b. $838.62 c. $857.00 d. $1133.14
42. Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $99,350 and $91,000 respectively. Their earnings for the last completed payroll period of the year are $850 each. The amount of earnings subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax of 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period on the two salary amounts of $850 each? a. $127.50 b. $115.50 c. $112.50 d. $0
43. The total earnings of an employee for a payroll period is referred to as a. take-home pay b. pay net of taxes c. net pay d. gross pay
44. An employee receives an hourly rate of $30, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $300; cumulative earnings for year prior to current week, $90,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid the employee? a. $1,470 b. $1,059.75 c. $1,381.80 d. $1,249.50
45. Payroll taxes levied against employees become liabilities a. the first of the following month b. at the time the payroll is paid c. when earned by the employee d. at the end of an accounting period
46. The following totals for the month of June were taken from the payroll register of ABC Company:
Salaries expense Social security and Medicare Taxes withheld Income Taxes withheld Retirement Savings
$13,000 975 2,600 500
The entry to record the payment of net pay would include a a. debit to Salaries Payable for $13,000 b. Debit to Salaries Payable for $8,925 c. Credit to Salaries Expense for $8,925 d. Credit to Salaries Payable for $8,925
47. Which of the following will have no effect on an employees take-home pay? a. Social security tax b. Unemployment tax c. Marital status d. Number of exemptions claimed
48. Which of the following are included in the employer's payroll taxes? a. SUTA taxes b. FUTA taxes c. FICA taxes d. all of the above
49. Most employers are required to withhold from employees for a. both federal and state unemployment compensation b. only federal unemployment compensation tax c. only federal income tax d. only state unemployment compensation tax
50. Each year there is a ceiling for the amount that is subject to all of the following except
a. Social security tax b. Federal income tax c. federal unemployment tax d. state unemployment tax
BONUS 1. Manning Company has the following information for the pay period of December 15 - 31, 20xx. Gross payroll Social security rate Medicare rate $15,000 6% 1.5% Federal income tax withheld Federal unemployment tax rate State unemployment tax rate $3,000 .8% 5.4%
Salaries Payable would be recorded for a. $15,000 b. $11,100 c. $10,875 d. $9,945