MBA560 module 3 quiz

MBA560 module 3 quiz

Victorino Company accepted a credit card payment in exchange for $10,000 of services provided to a customer. The credit card company charges a 5% service charge. The collection of cash from the credit card company when it settles the account receivable balance will: (Points : 2) increase assets by $9,500.
decrease assets and equity by $500.
increase assets by $10,000.
none of the above.

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Question 2. 2. December 31, 2010, Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method for uncollectible accounts. February 15, 2011, Landon wrote off the account of one customer, in the amount of $2,500. April 7, 2011, the customer paid the account in full. Which of the following answers correctly shows the effect of the December 31, 2010 adjusting entry for uncollectible accounts on the financial statements of Landon Corporation?
Row Assets = Liab. + Equity Rev. – Exp. = Net Inc. Cash Flow
One (6,450) = 6,450 + NA NA – NA = NA NA
Two 6,450 = (6,450) + NA NA – NA = NA (6,450)OA
Three 6,450 = NA + 6,450 NA – (6,450) = 6,450 6,450 FA
Four (6,450) = NA + (6,450) NA – 6,450 = (6,450) NA
(Points : 2)
Row One
Row Two
Row Three
Row Four

Question 3. 3. On December 31, 2010, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2011, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2011, the customer paid the account in full.
Which of the following answers correctly states the effect of the reinstatement of the receivable on April 7, 2011?
Row Assets = Liabilities + Equity Revenue – Expenses = Net Inc. Cash
One (2,500) = 2,500 + NA NA – NA = NA (2,500) OA
Two 2,500 = NA + 2,500 2,500 – NA = 2,500 2,500 OA
Three NA = NA + NA NA – NA = NA NA
Four (2,500) = NA + (2,500) NA – 2,500 = (2,500) NA
(Points : 2)
Row One
Row Two
Row Three
Row Four

Question 4. 4. To estimate the amount of its uncollectible accounts receivable, a company might: (Points : 2)
consult industry publications.
look at its past history of uncollectible accounts.
take into account the current condition of the economy.
all of the above.
Question 5. 5. For a business, the advantage of offering credit to customers is that it: (Points : 2)
increases the amount of sales.
increases cash flow from financing activities.
decreases cost of goods sold.
decreases the amount of inventory the company needs to carry.

Question 6. 6. On December 31, 2010, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2011, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2011, the customer paid the account in full.
Which of the following correctly states the answer on the effect of Landon’s write-off entry on
February 15, 2011?
Row Assets = Liab. + Equity Revenue – Expenses = Net Inc. Cash
One (2,500) = NA + (2,500) NA – 2,500 = (2,500) (2,500)OA
Two NA = NA + NA NA – NA = NA NA
Three NA = 2,500 + (2,500) NA – 2,500 = (2,500) NA
Four 2,500 = NA + 2,500 NA – (2,500) = 2,500 2,500 OA
(Points : 2)
Row One
Row Two
Row Three
Row Four

Question 7. 7. Which of the following is not considered a cost of extending credit to customers? (Points : 2)
The implicit interest charge
The increased sales resulting from the extension of credit
Keeping the records for accounts receivable
The possibility of unpaid account

Question 8. 8. The net realizable value of accounts receivable is calculated: (Points : 2)
Accounts Receivable + Uncollectible Accounts Expense.
Accounts Receivable + Notes Receivable.
Accounts Receivable – Allowance for Doubtful Accounts.
365/Accounts Receivable.
Question 9. 9. On January 1, 2009, Plitkin Manufacturing Company spent $3,000 on an asset (equipment) to improve its quality but not its useful life. The asset had been purchased on January 1, 2006 for $14,000. The asset had a $2,000 salvage value and a 6-year life. Plitkin Manufacturing uses straight-line depreciation. What would be the amount of depreciation expense for 2010? (Points : 2)
$4,500
$3,000
$6,000
$7,200

Question 10. 10. On September 10, 2009, Barden Company sold a piece of equipment for $3,000. The equipment had an original cost of $17,000 and accumulated depreciation of $15,500 at the time of the sale. Which of the following correctly shows the effect of the sale on the 2009 financial statements?

Row Assets = Liabilities + Equity Revenues or Gains – Expenses or Losses = Net Inc. Cash
One 1,500 NA 1,500 1,500 NA 1,500 3,000 OA
Two (1,500) NA (1,500) NA 1,500 (1,500) 3,000 IA
Three 1,500 NA 1,500 NA (1,500) 1,500 NA
Four 1,500 NA 1,500 1,500 NA 1,500 3,000 IA
(Points : 2)
Row One
Row Two
Row Three
Row Four

Question 11. 11. Which of the following is considered an accelerated depreciation method? (Points : 2)
Straight line
Units of production
LIFO
Double declining balance

Question 12. 12. On January 1, 2009, Rowley Company purchased a truck that cost $22,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. The amount of depreciation expense recognized in 2010 assuming that Rowley uses the double declining balance method is: (Points : 2)
$4,320
$5,280
$7,200
$8,800

Question 13. 13. Which of the following would be classified as a long-term operational asset? (Points : 2)
Accounts Receivable
Cash
Office Equipment
Inventory

Question 14. 14. Which of the following statements is correct regarding accounting treatment of goodwill? (Points : 2)
Goodwill is recorded as an asset and then amortized over a period of 5 years.
Goodwill is recorded as an asset. It is not amortized but must be tested for impairment each year.
Goodwill is recorded as an asset and amortized over 40 years unless its value decreases.
Goodwill is expensed immediately in the year of purchase.

Question 15. 15. The recognition of depletion expense acts to: (Points : 2)
decrease assets and equity and increase cash flow from operating expenses.
increase cash flow from operating activities and does not affect the amount of total assets.
increase assets, equity, and cash flow from operating activities.
decrease assets and equity, with no effect on cash flow.

Question 16. 16. Which of the following terms is used to identify the expense recognition for intangible assets? (Points : 2)
Amortization
Depletion
Depreciation
Allocation

Question 17. 17. Which of the following would most likely not be depreciated or amortized using the straight-line method? (Points : 2)
Copyrights
Franchise
Timber reserves
Trademark

Question 18. 18. In a period of rising prices, which inventory cost flow method will produce the lowest amount of cost of goods sold? (Points : 2)
FIFO
Weighted average
LIFO
All methods will produce the same amount of cost of goods sold

Question 19. 19. Frye Company uses the LIFO cost flow method. They had no beginning inventory and Frye purchased 500 units of inventory that cost $4.00 each. At a later date, the company purchased an additional 600 units of inventory that cost $4.50 each. If Frye sold 800 units of the inventory, the amount of ending inventory appearing on the balance sheet would be: (Points : 2)
$1,400
$1,350
$1,200
$1,450

Question 20. 20. GAAP requires a company to provide financial statement users with information about the accounting methods it has selected (including inventory cost flow methods) this is called the: (Points : 2)
consistency principle.
financial statement discipline principle.
full disclosure principle.
cost flow and other inventory principles.