Reference no: EM132582365

Question 1: Under the perpetual inventory system which journal entry would indicate that a company acquired and paid for additional merchandise that increases its inventory?

a. Debit Inventory and credit Cash.

b. Debit Purchases and credit Cash.

c. Debit Costs of Goods Sold and credit Inventory.

d. Debit Inventory and credit Cost of Goods Sold.

Question 2: If a company sells a tangible asset before it's useful life is over, it will:

1. Receive more cash if it uses the Straight Line Method of depreciation.

2. Receive more cash if it uses the Double Declining Balance Method of depreciation.

3. Receive more cash if it uses the Units of Output Method of depreciation.

4. Receive the same amount of cash no matter which depreciation method it uses.

Question 3: A company acquires a new long term asset. At the end of the first year of owning the new asset, the company's net income (profit):

1. Will be higher if it uses the Straight Line Depreciation Method instead of Double Declining Balance.

2. Will be higher if it uses the Double Declining Balance Method instead of Straight Line Depreciation.

3. Will be the same no matter which method of depreciation it uses.

4. None of the above are true.

Question 4: Calculate the total interest that a company will earn on a $5,000 loan that it made to one of its suppliers on January 1. The loan has an interest rate of 6% and a maturity date of June 30.

a. $300

b. $150

c. $75

d. None of the other answers are correct.

Question 5: A company acquires an asset that is estimated to have a useful life of 4 years. If the company uses the "Double-Declining-Balance Method" to depreciate its assets, then it will record annual depreciation expense for this new asset at what percent of the asset's book value?

a. 20%

b. 25%

c. 40%

d. 50%