Reference no: EM132749383
Questions - Write your answers for each of the following multiple-choice questions in the spaces provided:
Use the following data for questions 1 and 2 below:
Chan Company bought real estate, on which there was an old office building, for $700,000. They paid $70,000 in cash as a down payment and signed a 6% mortgage for the remainder. They immediately had the old building razed at a net cost of $35,000. Lawyers were paid $6,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Chan's new office building. $20,000 was paid for excavation for the basement of the new building, $1,500,000 was paid for construction of the new building, and $75,000 was paid for a parking lot and necessary walkways and driveways.
Q1. The new office building should be recorded at
a. $1,500,000.
b. $1,523,000.
c. $1,520,000.
d. $1,558,000.
Q2. Land should be recorded at a cost of
a. $735,000.
b. $741,000.
c. $764,000.
d. $761,000.
Q3. Friedmans Corporation borrowed $180,000 on March 1, 2001, signing a one year, 10% note payable to Canada Bank. The adjusting entry required on December 31, 2001, includes a
a. debit to Interest Expense of $15,000.
b. debit to Cash of $180,000.
c. credit to Interest Revenue of $15,000.
d. debit to Interest Payable of $18,000.
Q4. Mandatory payroll deductions include
a. federal and provincial income tax withholdings, deductions for charitable contri-butions, and Employment Insurance (EI).
b. federal and provincial income tax withholdings, Employment Insurance (EI), and union dues.
c. federal and provincial income tax withholdings, pension plan deductions (CPP or QPP), and Employment Insurance (EI).
d. federal and provincial income tax withholdings, pension plan deductions (CPP or QPP), and private health insurance remittances.
Q5. When recording assets in a basket purchase, the cost of each asset is determined by
a. multiplying total cost by the proportion that each asset is of the total appraisal value.
b. dividing the total cost equally between the assets.
c. using the appraisal values as the initial cost of each asset.
d. none of the above methods.
Q6. Gains on sales of assets
a. are reported on the income statement for the period when the sale takes place.
b. are equal to the difference between the cost of the asset sold and its net book value.
c. are treated as a reduction in the operating costs of the period.
d. occur if the net book value of the asset sold is more than its fair market value.
Q7. Contingent liabilities
a. need not be disclosed if the possibility that the contingency will occur is remote.
b. are recorded as liabilities if they can be estimated and are remote.
c. are disclosed only if they are probable.
d. are always recorded as liabilities if the possibility that the contingency will occur is high.
Q8. On June 30, 2001, Darjani Enterprises sold equipment with an original cost of $99,000 for $40,000. The equipment was purchased January 1, 2000, and was amortized using the straight-line method assuming a five year useful life and $9,000 salvage value. The necessary entries for 2001 include a;
a. debit to Accumulated Amortization-Equipment for $18,000.
b. credit to Gain on Sale of Equipment for $32,000.
c. credit to Cash for $40,000.
d. debit to Amortization Expense for $9,000.
Q9. Which of the following is not an intangible asset?
a. Research and development costs
b. Copyrights
c. Organization costs
d. Goodwill
Q10. Svenson Company signed a $3,000 six-month note payable on October 1 that bears interest at a rate of 8%. The total interest to be accrued on this note at December 31 is
a. $30.
b. $60.
c. $240.
d. $120.
Q11. Which of the following is false?
a. Current assets are listed in the order of magnitude.
b. Obligations expected to be paid after one year are classified as long-term liabilities.
c. Intangible assets are noncurrent resources that do not have physical substance.
d. Property, plant, and equipment are tangible resources of a relatively permanent nature that are used in the business and not intended for sale.
Q12. Rhome Corp. issued $300,000 of 8%, 5-year bonds at 102 on January 1, 2001. The straight-line method of amortization is used and the bonds pay interest annually on January 1. The amount of bond interest expense that Rhome should report on its 2001 income statement is
a. $24,000.
b. $24,480.
c. $22,800.
d. $25,200.
Q13. Todd Corporation issues long-term bonds at a discount. Amortization of the discount will
a. decrease bond interest expense.
b. increase bond interest expense.
c. decrease the carrying value of the bonds on the balance sheet.
d. be reported as a loss on the income statement.
Q14. Under the equity method of accounting, the equity investment is initially recorded at cost and the investment account is subsequently
a. credited for cash dividends received.
b. debited for the investor's share of investee net income.
c. debited for cash dividends received and credited for the investor's share of investee net income.
d. both a and b.
Q15. Cash provided by operating activities
a. may be larger than net income.
b. equals the change in cash for the year.
c. summarizes cash flows relating to the purchase and sale of long-lived assets.
d. decreases when long-term debt is repaid.