2. Which of the following would not be considered a contingent liability?
A. Potential fines from the EPA
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Get Help Now!B. Mortgage payable
C. Pending legal action
D. Cosigning a loan
3. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded
to the nearest cent)
A. $2,821.50.
B. $119.84.
C. $2,943.00.
D. $2,819.84.
4. Which of the following would be considered a cash equivalent?
A. Currency
B. Time deposits
C. Checks
D. Money orders
5. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the
following will occur as a result of this mistake?
A. Net income will be overstated by $5,000.
B. The asset will be overstated by $5,000.
C. The asset will be understated by $5,000.
D. Retained earnings will be overstated by $5,000.
6. Which of the following would indicate poor internal control over accounts receivable?
A. The person handling cash receipts passes the receipts to someone who enters them into accounts receivable.
B. The mailroom employees open the mail and give the cash receipts to another employee.
C. The same person handling cash receipts also records the accounts receivable transactions.
D. The person who handles accounts receivable wouldn’t write off accounts as uncollectable.
7. A company receives a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest
cent) will the customer owe using a 360-day year?
A. $354.38
B. $39.38
C. $38.84
D. $315.00
8. Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of
$44,000; and long-term liabilities of $90,000. Jewell Company’s debt ratio is
A. 70.2%.
B. 78.6%.
C. 127.3%.
D. 239.3%.
9. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded
to the nearest cent)
A. $1,520.13.
B. $1,605.00.
C. $20.13.
D. $1,584,88.
10. Brandon Company completed an aging of its accounts receivable and came up with an estimated
amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful
accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectible accounts, how
much will the credit be to the allowance for doubtful accounts if Brandon uses the percent of credit sales as
its method of estimating uncollectible accounts?
A. $4,250
B. $5,067
C. $5,525
D. $7,159
11. Casey Company’s bank statement shows a bank balance of $43,267. The statement shows a bank
service charge of $50. Casey’s book balance shows outstanding checks of $5,288 and deposits in transit of
$9,325. The bank-side reconciliation would show cash of
A. $43,217.
B. $39,230.
C. $47,304.
D. $43,267.
12. By not accruing warranty expense,
A. reported liabilities will be understated, and net income will be overstated.
B. reported expenses will be understated, and net income will be understated.
C. reported liabilities will be overstated, and net income will be understated.
D. reported expenses will be overstated, and reported liabilities will be understated.
13. Brandon Company completed an aging of its accounts receivable and came up with an estimated
amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful
accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts,
how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging
receivables as its method of estimating uncollectable accounts?
A. $5,067
B. $7,159
C. $5,525
D. $4,250
14. Research and development costs (R&D) are generally
A. listed as “current assets” on the balance sheet.
B. expensed and become part of the income statement.
C. listed as “long-term assets” on the balance sheet.
D. listed as “other intangibles” on the balance sheet.
15. A repair that extends the useful life of an asset would be considered a/an
A. ordinary repair.
B. betterment.
C. extraordinary repair.
D. capital expense.
17. Casey Company’s bank statement shows a bank balance of $43,267. The statement shows a bank
service charge of $50 and a bank collection of $760 in Casey Company’s behalf. Casey’s book balance should be adjusted by a total of
A. –$710.
B. +$760.
C. +$710.
D. +$810.
18. A $400,000 issue of bonds that sold for $363,000 matures on August 1, 2015. The journal entry to
End of exam
record the payment of the bond on the maturity date is
A. debit cash, $400,000; credit bonds payable, $400,000.
B. debit bonds payable, $400,000; credit cash, $400,000.
C. debit bonds payable, $363,000; credit cash, $363,000.
D. debit cash, $363,000; credit bonds payable, $363,000.
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