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Unformatted text preview: 4/25/2007 Anderson ECON 136A--8am Spring 2007 MT1 v. 1 Name _________________________ Complete questions 1-25 on green scantron and the three problems in your blue-book. WRITE YOUR NAME ON THIS EXAM AND TURN IT IN WITH YOUR SCANTRON AND BLUE BOOK. 1. Management realizes during 2005 that they have estimated too long of a useful life for a fixed asset. The asset at the end of 2004 has a historical cost of $100,000 and accumulated depreciation of $35,000. Management now estimates that including 2005, there are 2 years of useful life remaining for this asset and a salvage value of $0. At the time of discovery, the company had already recorded $5,000 of depreciation expense during the first part of 2005. Depreciation expense in 2005 should be: a. $50,000 b. $37,500 c. $32,500 d. $27,500 2. If you pay 12 months of an insurance policy on April 1 for $240,000 and record the following journal entry: Insurance expense $200,000 Prepaid insurance $40,000 Cash $240,000 The journal entry required at the end of the year would: a. Debit prepaid insurance for $20,000 and credit insurance expense for the same amount. b. Debit insurance expense for 180,000 and credit prepaid insurance for the same amount. c. Have no impact on insurance expense, but increase prepaid insurance by $20,000. d. Have no impact on prepaid insurance, but increase insurance expense by $180,000 3. Which of the following items is presented on a "net of tax" basis in the income statement? a. cumulative effect of a change in accounting principle b. extraordinary items c. discontinued operations d. both extraordinary items and discontinued operations Spring 2007 MT1 v. 1--Page 2 4. Under accounting principles generally accepted in the United States of America, which of the following statements are true: a. Revenue is recorded when the payment has been received and expenses are recorded when paid. b. Revenue is recorded when it has been earned and expenses when the associated benefit has been received. c. Revenue is recorded when the expense for the revenue has been paid. d. Revenue is recorded when estimable by the Company's management and expenses are recorded when it is reasonably determined. 5. Real estate is sold for $1 million, payable as follows: $850,000 paid in cash on the day of sale and $150,000 due in five years, bearing interest at 0%. Would the seller compute their gain on the sale of that real estate using a sales price: a. equal to $1 million b. less than $1 million c. more than $1 million d. none of the above 6. In order for an item to be counted as an asset on the balance sheet, it must be: a. Probable b. A result of a past transaction c. Have a future econcomic benefit d. All of these items must be present....
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This note was uploaded on 05/18/2011 for the course ECON 136A taught by Professor Anderson during the Spring '08 term at UCSB.
- Spring '08