Question 1

Which of the following are assets?

Accepted Answer

D

Question 2

A current asset must
I. be easily converted into cash.
II. have future economic benefit.
III. be used up or converted into cash within the next year or operating cycle, whichever is shorter.
A) I is true.
B) I and II are true.
C) II and III are true.
D) I and III are true.
E) I, II, and III are true.

Accepted Answer

B

Question 3

Which of the following statements is false?
A) A business's operating cycle is the average time a company takes to buy inventory, sell that inventory, and collect cash from customers.
B) Operating cycles can be shorter or longer than one year.
C) A current asset is cash or any other asset that will be converted into cash, sold, or used up within the next year.
D) Cash and inventory are current assets.
E) Current assets are listed in descending order of liquidity.

Accepted Answer

C

Question 4

Amounts owed to a business by customers are called
A) cash.
B) short-term investments.
C) accounts payable.
D) accounts receivable.
E) revenue.

Accepted Answer

Accounts receivable are amounts owed to a business by its customers for goods or services that have been delivered or used but not yet paid for.

Question 5

Q Company paid $3,600 for a two-year insurance policy on January 2, 2010. On that date, Q Company considers the $3,600 payment a(an)
A) account payable.
B) prepaid asset.
C) expense.
D) revenue.
E) short-term investment.

Accepted Answer

The $3,600 payment for a two-year insurance policy is considered a prepaid asset because it represents a future economic benefit to Q Company over the policy period. Prepaid expenses are assets because they are expected to provide benefits in the future, in this case, insurance coverage.

Question 6

On May 15, 2010, R Co. purchased land for $150,000. R Co. intends to build a new headquarters building on that land in 2015. On May 15, 2010, R Co. considers the land a(an)
A) prepaid asset.
B) property, plant and equipment item.
C) expense.
D) short-term investment.
E) long-term investment.

Accepted Answer

Land is a long-term investment because it is not expected to be sold or used up within one year.

Question 7

Which of the following statements about property, plant, and equipment and depreciation is true?
A) Plant, property, and equipment assets are sold to customers in the normal course of business.
B) Accounting requires that the cost of a depreciable asset be recorded as an expense over time periods benefited by that asset.
C) Accumulated depreciation is the total amount of depreciation that has been recorded on a depreciable asset in the current period.
D) Accounting and general usages of the term depreciation are the same.
E) All of the above statements are true.

Accepted Answer

Depreciable assets, such as property, plant, and equipment, are capitalized and their cost is allocated over their useful lives as depreciation expense. This reflects the usage and economic benefits derived from the asset over time, rather than being expensed immediately when purchased.

Question 8

On Jan. 2, 2010, Sivan Corporation acquires a truck for $500,000. Cash of $400,000 is paid and a note payable for the remaining $100,000 was signed at acquisition. The truck is depreciated over a 10 year period at $50,000 per year. What is the historical cost recorded on the year-end 2013 balance sheet?
A) $ 50,000
B) $150,000
C) $350,000
D) $400,000
E) $500,000

Accepted Answer

The historical cost of an asset is the original cost at which it was acquired. In this case, the truck was acquired for $500,000, which is the historical cost recorded on the balance sheet. Depreciation affects the book value, not the historical cost.

Question 9

On Jan. 2, 2010, Sivan Corporation acquires a truck for $500,000. Cash of $400,000 is paid and a note payable for the remaining $100,000 was signed at acquisition. The truck is depreciated over a 10 year period at $50,000 per year. What is the accumulated depreciation at January 1, 2012?
A) $ 50,000
B) $100,000
C) $150,000
D) $400,000
E) $500,000

Accepted Answer

The accumulated depreciation at January 1, 2012, would be $100,000 because the truck is depreciated at $50,000 per year for 2 years (2010 and 2011).

Question 10

On Jan. 2, 2010, Wright Construction Co. purchased equipment for $50,000. Wright expects to use the equipment for three years, at which time it will have an estimated salvage value of $27,500. What is the depreciation expense for 2010?
A) $ 7,500
B) $ 9,167
C) $16,667
D) $27,500
E) $50,000

Accepted Answer

Depreciation expense = (Cost - Salvage value) / Useful life= (50,000 - 27,500) / 3= $7,500

Question 11

On Jan. 2, 2010, Doric Company purchased a machine for $75,000. Doric expects the machine to have a useful life of 10 years and $5,000 salvage value. What is the book value of machine at the end of 2011?
A) $56,000
B) $60,000
C) $61,000
D) $70,000
E) $75,000

Accepted Answer

The answer of On Jan. 2, 2010, Doric Company purchased...

Question 12

On Jan. 2, 2010, Doric Company purchased a new machine for $75,000. Doric expects the machine to have a useful life of 10 years and $5,000 salvage value. What is the accumulated depreciation on the machine at the end of 2012?
A) $ 7,000
B) $ 7,500
C) $14,000
D) $21,000
E) $22,500

Accepted Answer

The machine has a cost of $75,000 and a salvage value of $5,000, leaving a depreciable amount of $70,000 over a useful life of 10 years. This results in an annual depreciation of $7,000 ($70,000 / 10 years). Over 3 years (2010, 2011, and 2012), the accumulated depreciation is $21,000 ($7,000 per year * 3 years).

Question 13

Which of the following are examples of intangible assets?

Accepted Answer

The answer of Which of the following are examples of...

Question 14

Amounts owed by businesses to third parties are known as
A) assets.
B) liabilities.
C) stockholders' equity.
D) revenues.
E) expenses.

Accepted Answer

Liabilities represent amounts owed by businesses to third parties, such as loans from banks, accounts payable to suppliers, and other financial obligations.

Question 15

A debt or obligation that will be eliminated by giving up current assets or incurring a current liability is a
A) prepaid asset.
B) current asset.
C) current liability.
D) long-term asset.
E) long-term liability.

Accepted Answer

A current liability is a debt or obligation that is due within one year and will typically require the use of current assets or the creation of another current liability to be settled.

Question 16

When a company determines that there is an amount that it currently owes but has not yet recorded, that company will record a(an)
A) prepaid asset acount.
B) current asset account.
C) intangible asset account.
D) accrued liability account.
E) equity account.

Accepted Answer

An accrued liability account is used to record amounts that a company owes but has not yet paid or recorded. This is in line with the accrual basis of accounting, where expenses are recognized when incurred, not necessarily when paid.

Question 17

Lima Co. has received $12,000 for future subscriptions to The Bean Magazine. Lima should record this amount as a(an) A) long-term investment. B) earned revenue. C) account receivable. D) expense. E) unearned revenue.

Accepted Answer

This amount should be recorded as unearned revenue because it represents money received for services or products that have not yet been delivered or fulfilled.

Question 18

In 2007, Alca Co. issued a long-term note payable that would come due on May 15, 2011. On its December 31, 2010 balance sheet, this note should be classified as a(an)
A) long-term liability.
B) short-term liability.
C) intangible asset.
D) long-term investment.
E) expense.

Accepted Answer

Since the note is due within the next year (from December 31, 2010, to May 15, 2011), it should be classified as a short-term liability on the balance sheet.

Question 19

The owners' interest in a corporation is represented by
A) total assets.
B) long-term liabilities.
C) total stockholders' equity.
D) common stock.
E) revenues.

Accepted Answer

The owners' interest in a corporation is represented by total stockholders' equity, which includes common stock, retained earnings, and other equity components.

Question 20

A share of ownership in a corporation is known as
A) common stock.
B) par value.
C) additional paid-in capital.
D) retained earnings.
E) an expense.

Accepted Answer

Common stock represents a share of ownership in a corporation, giving the shareholder a proportionate claim on the company's profits (dividends) and assets.

Quiz 2: Concepts and Elements Underlying Accounting

Which of the following are assets?

A current asset must I. be easily converted into cash. II. have future economic benefit. III. be used up or converted into cash within the next year or operating cycle, whichever is shorter.

Which of the following statements is false?

Amounts owed to a business by customers are called

Q Company paid $3,600 for a two-year insurance policy on January 2, 2010. On that date, Q Company considers the $3,600 payment a(an)

On May 15, 2010, R Co. purchased land for $150,000. R Co. intends to build a new headquarters building on that land in 2015. On May 15, 2010, R Co. considers the land a(an)

Which of the following statements about property, plant, and equipment and depreciation is true?

On Jan. 2, 2010, Sivan Corporation acquires a truck for $500,000. Cash of $400,000 is paid and a note payable for the remaining $100,000 was signed at acquisition. The truck is depreciated over a 10 year period at $50,000 per year. What is the accumulated depreciation at January 1, 2012?

On Jan. 2, 2010, Wright Construction Co. purchased equipment for $50,000. Wright expects to use the equipment for three years, at which time it will have an estimated salvage value of $27,500. What is the depreciation expense for 2010?

On Jan. 2, 2010, Doric Company purchased a machine for $75,000. Doric expects the machine to have a useful life of 10 years and $5,000 salvage value. What is the book value of machine at the end of 2011?

On Jan. 2, 2010, Doric Company purchased a new machine for $75,000. Doric expects the machine to have a useful life of 10 years and $5,000 salvage value. What is the accumulated depreciation on the machine at the end of 2012?

Which of the following are examples of intangible assets?

Amounts owed by businesses to third parties are known as

A debt or obligation that will be eliminated by giving up current assets or incurring a current liability is a

When a company determines that there is an amount that it currently owes but has not yet recorded, that company will record a(an)

Lima Co. has received $12,000 for future subscriptions to The Bean Magazine. Lima should record this amount as a(an)

In 2007, Alca Co. issued a long-term note payable that would come due on May 15, 2011. On its December 31, 2010 balance sheet, this note should be classified as a(an)

The owners' interest in a corporation is represented by

A share of ownership in a corporation is known as