Ais 100 exam 2 review packet

AIS 100 Exam 2 Review Packet
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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 a) Face value of the bonds will decrease b) Carrying value of the bonds will increase c) Interest expense will increase d) Unamortized discount will increase 3. If a company fails to record the adjusting entry for estimated uncollectible accounts receivable at the end of the year, a) Total assets are understated b) Total revenues are understated c) Total Receivables are understated d) Net income is overstated 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 a) Subtracted from the balance per bank b) Added to the balance per bank c) Added to the balance per books d) Subtracted from the balance per books 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? a) $330,000 b) $30,000 c) $370,000 d) $70,000 7. The sale of bonds above face value a) Has a total cost of borrowing of zero b) Will cause the total cost of borrowing to be more than the bond interest paid c) Will cause the total cost of borrowing to be equal to the total bond interest paid if the bonds are held to maturity d) Will cause the total cost of borrowing to be less than the bond interest paid
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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 a) $10,000 b) $840 c) $9,160 d) $10,840 9. The financial statements of the Bolton Manufacturing Company reports net credit sales of $500,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the receivables turnover ratio for Bolton?
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