Accounting Quiz 3

Realistic Company purchased a new truck on January 1, 20X1. The truck cost $20,000, has a four-year life, and a $4,000 residual value. The company has a December 31 year-end. If Realistic Company depreciated the truck by the straight-line method. How much should Realistic report as the book value of the truck at the end of 20X3?

• $8,000

• $15,000

• $1,600

• $16,000

• $4,000

Which of the following will be presented in a direct Cash flow Statement?

• Increases in Prepaid expenses

• Increases in account receivable

• Cash received from customers

• Gain in disposal of asset

• Bad debt expense

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is $3,250?

• Debit Prepaid Insurance $4,500 credit Insurance Expense $4,500.

• Debit Insurance Expense $7,750 credit Prepaid Insurance $7,750.

• Debit Insurance Expense $3,250 credit Prepaid Insurance $3,250.

• Debit Cash $7,750. Credit Prepaid Insurance $7,750.

• Debit Insurance Expense $4,500 credit Prepaid Insurance $4,500

Thomas Enterprises purchased a depreciable asset on January 1, 2008 at a cost of $100,000 and uses straight-line method to estimate depreciation expense. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. Balance of accumulated depreciation of this asset at the end of 2009 is:

• $17,000

• $27,540

• $90,000

• $21,600

• $34,000

The following transactions, among others, occurred during August. Which transaction represented an expense during August?

• Rent a space for office on account. The rental amount will be paid in the next 2 months.

• Paid $500 to a garage mechanic for automobile repair work performed in June

• None of these

• Purchased office supplies for $3,000 cash

• Paid $3,300 in settlement of a loan obtained three months earlier

Items used in business operations, such as office pens and paper are several samples of:

• Office equipment

• Prepayment

• Office expense

• Office supplies

• None of these

Which is true about an account balance:

• Is the difference between the total debits and total credits for an account

• Always a credit.

• None of these

• Always a debit.

• Is the difference between the total debits and total credits for an account including the beginning balance

Costs included in the Merchandise Inventory account can include:

• Transportation in.

• Invoice price minus any discount.

• All of these.

• Insurance.

• Storage

Flash had cash inflows from operations $62,500, cash outflows from investing activities of $47,000, and cash inflows from financing of $25,000. Then net change in cash was:

• $134,500 decrease.

• $9,500 increase.

• $40,500 decrease.

• $40,500 increase.

• $134,000 increase

A simple account form widely used in accounting as a tool to understand how debits and credits affect an account balance is called a:

• T-account.

• Balance column sheet.

• Capital account.

• Withdrawals account.

• Drawing account.