ACCT 2301 Questions from Exam 2 – Flashcards

The direct write-off method of accounting for bad debts a. uses an allowance account b. uses a contra asset account c. does not require estimates of bad debt losses d. is the preferred method under generally accepted accounting principles

Notes or accounts receivables that result from sales transactions are often called a. sales receivable b. non-trade receivables c. trade receivables d. merchandise receivables

Under the allowance method, when a specific account is written off a. total assets will be unchanged b. net income will decrease c. total assets will decrease d. total assets will increase

An aging of company's accounts receivables indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense fro $4,500 b. debit to Allowance for Doubtful Accounts for $5,700 c. debit to Bad Debt Expense for $5,700 d. credit to Allowance for Doubtful Accounts for $4,500

When applying the lower cost or market rule to inventory valuation, market generally means a. current replacement cost b. original cost c. resale value d. original cost, less physical deterioration

If goos in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered b. the buyer has legal title to the goods until they are delivered c. the transportation company has legal title to the goods while the goods are in transit d. no one has legal title to the goods until they are delivered

In period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a. FIFO b. LIFO c. Average cost method d. Income tax expense for the period will be the same under all assumptions

The cost flow method that often parallels the actual physical flow of merchandise is the: a. FIFO method b. LIFO method c. average cost method d. gross profit method

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

National Molding is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true? a. Excavation fees are capitalized but building permit fees are not b. Architect fess are capitalized but building permit fees are not c. Interest is capitalized during the construction as part of the cost of the building d. The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds

Which of the following is not true of ordinary repairs? a. They primarily benefit the current accounting period b. They can be referred to as revenue expenditures c. They maintain the expected productive life of the asset d. They increase the productive capacity of the asset

Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits b. Time valuation c. Straight-line d. Declining-balance