Reference no: EM13500557

1. A company purchased factory equipment on June 1, 2013, for $80,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2013, is
a. $3,125.
b. $4,375.
c. $7,500.
d. $3,750

2. Kingston Company purchased a piece of equipment on January 1, 2012. The equipment cost $120,000 and had an estimated life of 8 years and a salvage value of $15,000. What was the depreciation expense for the asset for 2013 under the double-declining-balance method?
a. $13,000.
b. $22,500.
c. $23,438.
d. $30,000.

3. The cost of successfully defending a patent in an infringement suit should be
a. deducted from the book value of the patent.
b. charged to Legal Expenses.
c. added to the cost of the patent.
d. recognized as a loss in the current period.

4. If disposal of a plant asset occurs during the year, depreciation is
a. recorded for the fraction of the year to the date of the disposal.
b. not recorded if the asset is scrapped.
c. not recorded for the year.
d. recorded for the whole year.

5. The four subdivisions for plant assets are
a. property, plant, equipment, and land.
b.land, land improvements, buildings, and equipment.
c.intangibles, land, buildings, and equipment.
d.furnishings and fixtures, land, buildings, and equipment.

6. The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is
a. none of these.
b. declining-balance.
c. straight-line.
d. units-of-activity.

7. Don's Copy Shop bought equipment for $150,000 on January 1, 2012. Don estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2013, Don decides that the business will use the equipment for 5 years. What is the revised depreciation expense for 2013?
a.$37,500
b.$20,000
c.$50,000
d. $25,000

8. Aire Corporation retires its bonds at 106 on January 1, following the payment of semi-annual interest. The face value of the bonds is $600,000. The carrying value of the bonds at the redemption date is $631,500. The entry to record the redemption will include a
a. credit of $31,500 to Loss on Bond Redemption.
b. credit of $5,250 to Gain on Bond Redemption.
c. debit of $31,500 to Premium on Bonds Payable.
d. debit of $36,000 to Premium on Bonds Payable.

9. If bonds are issued at a discount, it means that the
a.financial strength of the issuer is suspect.
b.market interest rate is lower than the contractual interest rate.
c.bondholder will receive effectively less interest than the contractual interest rate.
d.market interest rate is higher than the contractual interest rate.

10. Farris Company borrowed $800,000 from BankTwo on January 1, 2012 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 9.5%. What is the balance in the notes payable account at December 31, 2013?
a. $522,729
b.$667,651
c.$800,000
d.$648,000

11. A current liability is a debt that can reasonably be expected to be paid
a.out of cash currently on hand.
b.within one year or the operating cycle, whichever is longer.
c.between 6 months and 18 months.
d.out of currently recognized revenues

12. The market rate of interest for a bond issue which sells for more than its face value is
a.equal to the interest rate stated on the bond.
b. higher than the interest rate stated on the bond.
c. less than the interest rate stated on the bond.
d. independent of the interest rate stated on the bond.

13. Corporations are granted the power to issue bonds through
a. federal security laws.
b. tax laws.
c. state laws.
d. bond debentures.

14. Sales taxes collected by a retailer are expenses
a. of the customers.
b. of the government.
c. that are not recognized by the retailer until they are submitted to the government.
d. of the retailer.

15. When an interest-bearing note matures, the balance in the Notes Payable account is
a.the difference between the maturity value of the note and the face value of the note.
b. equal to the total amount repaid by the borrower.
c. less than the total amount repaid by the borrower.
d.greater than the total amount repaid by the borrower