AIS 100 Exam 2 Review Packet - 1 I MULTIPLE CHOICE 1 The...

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1 I. MULTIPLE CHOICE 1. The book value of a plant asset is the difference between the a) Cost of the asset and the yearly depreciation expense b) Replacement cost of the asset and its historical cost c) Proceeds received from the sale of the asset and its original cost d) Purchase price of the asset and the sum of the yearly depreciation to date 2. If bonds are issued at a discount, then over the life of the bonds, the 3. If a company fails to record the adjusting entry for estimated uncollectible accounts receivable at the end of the year, 4. A company writes a check for $167 but incorrectly records the amount in its ledger as $176. On the bank reconciliation, the error should be 5. Bond discounts and premiums should be amortized to comply with a) The revenue recognition principle b) The matching principle c) Conservatism d) The historical cost principle 6. Meghan Macramé Company incurred $300,000 of research and development costs in its laboratory to develop a new macramé weaver. The company spent $40,000 in legal fees for a patent granted on January 2, 2007. On July 31, 2007, Meghan Macramé paid $30,000 for legal fees in a successful defense of the patent. Assuming the company doesn’t adjust for amortization until the end of the calendar year, what is the total amount that should be debited to Patents through July 31, 2007? 7. The sale of bonds above face value
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2 8. A corporation issues $100,000, 10%, 5-year bonds on January 1, 2007, for $95,800. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2007’s adjusting entry is
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