Chap 9
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
Chap 10
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