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WorksheetsUnit 3 Review (Ch6-8)
Total questions: 37
Worksheet time: 19mins
Name
Class
Date
1.
a)
$1,650
b)
$1,800
c)
$4,200
d)
$4,350
2.
Inventory is defined as:
a)
Items a company intends for sale to customers.
b)
Any assets of the company that can be sold.
c)
The amount of cash received from the sale of goods to customers during the year.
d)
The cost of goods sold to customers during the year.
3.
Which of the following represents the balance of Cost of Goods Sold at the end of the year?
a)
The cost of inventory not yet sold by the end of the year.
b)
The cost of inventory purchased during the year.
c)
The cost of inventory at the beginning of the year.
d)
The cost of inventory sold during the year.
4.
Operating income is defined as:
a)
All revenues minus all expenses.
b)
Sales Revenue minus Cost of Goods Sold.
c)
Gross Profit minus Operating Expenses.
d)
Income before Income Tax Expense.
5.
A multiple-step income provides the advantage of:
a)
Placing all revenues before all expenses.
b)
Separating revenues and expenses based on their different types of activities.
c)
Placing all revenues after all expenses.
d)
Excluding the effects of income taxes in the calculation of net income
6.
Net income is defined as:
a)
All revenues minus all expenses.
b)
Sales Revenue minus Cost of Goods Sold.
c)
Gross Profit minus Operating Expenses.
d)
Income before Income Tax Expense.
7.
Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?
a)
LIFO.
b)
FIFO.
c)
Weighted-average.
d)
Income will be the same under each assumption.
8.
Which cost flow assumption must be used for financial reporting if it is also used for tax reporting?
a)
LIFO.
b)
FIFO.
c)
Weighted-average.
d)
Any assumption can be used regardless of the tax reporting.
9.
Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:
a)
Accounts Payable.
b)
Inventory.
c)
Cost of Goods Sold.
d)
Purchases.
10.
The entry to write down inventory from cost to net realizable value at the end of the year includes a:
a)
Debit to Inventory.
b)
Credit to Sales Revenue.
c)
Debit to Cost of Goods Sold.
d)
Credit to Accounts Payable.
11.
At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjustment to write down inventory to net realizable value?
a)
Decrease in net income.
b)
Increase in net income.
c)
Increase in cost of ending inventory.
d)
No effect on net income or ending inventory.
12.
A company’s inventory turnover ratio measures:
a)
The profitability on sales of inventory during the year.
b)
The number of times the company sells its average inventory balance during the year.
c)
The average cost at which inventory was purchased during the year.
d)
The quantity of inventory remaining at the end of the year.
13.
If a company understates in ending inventory in the current period, what effect will this have on cost of goods sold in the following period?
a)
Overstate cost of goods sold.
b)
Understate cost of goods sold.
c)
Have no effect on cost of goods sold.
d)
Not possible to determine with information given.
14.
A long-term asset is recorded at the:
a)
Cost of the asset.
b)
Additional costs to get the asset ready for use.
c)
Cost of the asset plus all costs necessary to the asset ready for use.
d)
Cost of the asset less all costs necessary to the asset ready for use.
15.
Which of the following expenditures should be recorded as an asset?
a)
Interest costs during the construction period of a new building.
b)
Repair of a machine.
c)
Property taxes incurred on an existing building.
d)
Depreciation during the first year of an existing building.
16.
Which of the following is properly recorded as an intangible asset?
a)
An internally developed trademark.
b)
A piece of land.
c)
A purchased patent.
d)
An internally developed copyright.
17.
Which of the following is not recorded as an intangible asset on the balance sheet?
a)
Patents.
b)
Research and development.
c)
Trademarks.
d)
Goodwill.
18.
Which of the following expenditures should be recorded as an expense?
a)
An addition.
b)
An improvement.
c)
Ordinary repairs and maintenance.
d)
Successful legal defense of an intangible asset.
19.
Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset’s life?
a)
Straight-line method.
b)
Activity-based method.
c)
Double declining balance method.
d)
Each method will result in the same depreciation during the first year.
20.
Which of the following correctly describes the nature of depreciation?
a)
Depreciation represents the valuation of property, plant, and equipment over its service life.
b)
Depreciation represents the valuation of an intangible asset over its service life.
c)
Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.
d)
Depreciation represents the allocation of the cost of an intangible asset over its service life.
21.
Accumulated depreciation is
a)
An expense account.
b)
An asset.
c)
A contra-asset.
d)
A liability.
22.
The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?
a)
100000.0
b)
82000.0
c)
80000.0
d)
60000.0
23.
Over the entire service life of an asset, which depreciation method records the highest total depreciation?
a)
The straight-line method.
b)
The double declining method.
c)
The activity-based method.
d)
All the methods result in the same total depreciation.
24.
Which of the following statements is false regarding the amortization of intangible assets?
a)
Intangible assets with a limited useful life are amortized.
b)
The service life of an intangible asset is always equal to its legal life.
c)
The expected residual value of most intangible assets is zero.
d)
Goodwill is the most common intangible asset with an indefinite useful life.
25.
Which of the following intangible assets are not amortized?
a)
Goodwill.
b)
Patents.
c)
Copyrights.
d)
Franchises.
26.
Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:
a)
A loss of $5,000.
b)
A gain of $5,000.
c)
A loss of $70,000.
d)
A gain of $70,000.
27.
Which of the following represents a characteristic of a liability?
a)
A probable future sacrifice of economic benefits.
b)
Arising from present obligations to other entities.
c)
Resulting from past transactions or events.
d)
All of these are characteristics of a liability.
28.
In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.
a)
one; two
b)
one; one
c)
two; two
d)
one; ten
29.
Which of the following is not a current liability?
a)
Notes payable due in six months.
b)
Current portion of long-term debt.
c)
An unused line of credit.
d)
Deferred revenue to be earned in nine months
30.
Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record?
a)
Debit Cash, $5,000; Credit Notes Receivable, $5,000.
b)
Debit Notes Receivable, $5,000; Credit Cash, $5,000.
c)
Debit Cash, $5,000; Credit Notes Payable, $5,000.
d)
Debit Notes Payable, $5,000; Credit Cash, $5,000.
31.
Interest expense is recorded in the period in which:
a)
The interest is paid.
b)
The interest is incurred.
c)
The interest is paid or incurred.
d)
The interest is paid and incurred.
32.
Which of the following is paid by both the employee and the employer?
a)
FICA taxes.
b)
Federal unemployment taxes.
c)
State unemployment taxes.
d)
Personal income taxes.
33.
Which of the following increases an employer’s payroll costs?
a)
FICA withholding from the employee.
b)
State income tax.
c)
Federal income tax.
d)
Employer’s FICA contribution.
34.
When a customer pays in advance for a product or service, the advance payment received by the company is recorded as:
a)
A debit to an asset and a credit to a liability account.
b)
A debit to a revenue and a credit to an asset account.
c)
A debit to an asset and a credit to a revenue account.
d)
A debit to a liability and a credit to a revenue account.
35.
A contingent liability that is probable and can be reasonably estimated must be
a)
Disclosed.
b)
Not disclosed.
c)
Recorded.
d)
Paid.
36.
Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman’s attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?
a)
$2.0 million.
b)
$1.8 million.
c)
$1.5 million.
d)
0.0
37.
a)
$102,000
b)
$100,800
c)
$106,000
d)
$80,000
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