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ACC311_Nuhogli_Exam2 - ACC 311 FALL 2009 EXAM 2 SECTION I...

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ACC 311 FALL 2009 EXAM 2 SECTION I - MULTIPLE CHOICE (50 points - 2 points each). - Please choose the BEST answer for each question and record your answer on the Scantron answer sheet. 1. The books of Lincoln Company provided the following information: Beginning balances: Accounts receivable $ 50,000 Allowances for doubtful accounts (a credit) 3,000 Transactions during the year: Sales revenue (of which 1/2 were on credit) 2,000,000 Collections on accounts receivable 980,000 Accounts written off as uncollectible 4,000 Past collection experience has indicated that 2% of credit sales normally is not collected. Therefore, an adjusting entry for bad debt expense should be made in the amount of A. $10,000. B. $20,000. C. $ 7,000. D. $ 500. E. None of the above is correct. 2. Which of the following is correct when recording the disposal of equipment for a gain? A. A debit to a gain account. B. A credit to the equipment account for the asset's book value. C. A debit to accumulated depreciation for the depreciation accumulated to the time of disposal. D. A debit to the asset account. E. none of the above. 3. The LIFO costing method is more costly and time consuming than a FIFO system. Which of the following would be a valid justification for choosing LIFO? A. It usually provides for more control over inventory B. It usually provides managers with more useful information about the level of inventory by monitoring the cost level in the inventory account C. The tax savings from using LIFO during an inflationary period exceeds the cost of using a LIFO costing system D. It usually produces a higher net income when unit costs of inventory are rising
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4. The main purpose of recording depreciation is to A. allocate the cost of a tangible asset to the periods in which its use contributes to generating revenue. B. estimate the remaining useful life of the asset. C. report the asset on the balance sheet at the estimated amount for which the asset could be sold on the balance sheet date. D. estimate the current replacement cost of the asset. E. both B and C 5. Dunder-Mifflin sells luggage and uses a perpetual LIFO inventory system. Below are some facts for Dunder-Mifflinh: - No beginning inventory - On March 5 they bought 8 pieces of luggage for $80 each - On March 12 they bought 8 pieces of luggage for $100 each - On March 19 they sold 8 pieces of luggage for $120 each. - The market value of pieces of luggage on March 31 is $95. What is the Lower of Cost or Market adjusting entry for March? A. COGS 40 Inventory 40 B. COGS 120 Inventory 120 C. COGS 160 Inventory 160 D. COGS 200 Inventory 200 E. None of the above 6. Failure to make a necessary adjusting entry for accrued interest on a note payable would cause A. an understatement of liabilities and stockholders' equity. B.
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ACC311_Nuhogli_Exam2 - ACC 311 FALL 2009 EXAM 2 SECTION I...

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