MD University College BMGT ACCT 220 QUIZ 3 (2016)

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1 .Internal control is defined, in part, as a plan that safeguards
a. all balance sheet accounts.
b. assets.
c. liabilities.
d. capital stock.
2. Having one person responsible for the related activities of ordering merchandise,
receiving goods, and paying for them
a. increases the potential for errors and fraud.
b. decreases the potential for errors and fraud.
c. is an example of good internal control.
d. is a good example of safeguarding the company’s assets.
3.Control over cash disbursements is generally more effective when
a. all bills are paid in cash.
b. disbursements are made by the accounts payable subsidiary clerk.
c. payments are made by check.
d. all purchases are made on credit.
4. An employee authorized to sign checks should not record
a. owner cash contributions.
b. mail receipts.
c. cash disbursement transactions.
d. sales transactions.
5..The relationship between current liabilities and current assets is
a. useful in determining income.
b. useful in evaluating a company’s liquidity.
c. called the matching principle.
d. useful in determining the amount of a company’s long-term debt.
6. In preparing its bank reconciliation for the month of April 2014, Delano, Inc. has available
the following information.
Balance per bank statement, 4/30/14
NSF check returned with 4/30/14 bank statement
Deposits in transit, 4/30/14
Outstanding checks, 4/30/14
Bank service charges for April

$78,600
940
10,000
10,400
60

What should be the adjusted cash balance at April 30, 2014?
a. $77,260.
b. $77,600.
c. $78,020.
d. $78,200.
7. Which one of the following items is not considered a part of the cost of a truck purchased
for business use?
a. Sales tax
b. Truck license
c. Freight charges
d. Cost of lettering on side of truck
8.The four subdivisions for plant assets are
a. land, land improvements, buildings, and equipment.

b. intangibles, land, buildings, and equipment.
c. furnishings and fixtures, land, buildings, and equipment.
d. property, plant, equipment, and land.
9.
a.
b.
c.
d.

A current liability is a debt that can reasonably be expected to be paid
within one year or the operating cycle, whichever is longer.
between 6 months and 18 months.
out of currently recognized revenues.
out of cash currently on hand.

10. Depreciation is the process of allocating the cost of a plant asset over its service life in
a. an equal and equitable manner.
b. an accelerated and accurate manner.
c. a systematic and rational manner.
d. a conservative market-based manner.
11 .The book value of an asset is equal to the
a. asset’s fair value less its historical cost.
b. blue book value relied on by secondary markets.
c. replacement cost of the asset.
d. asset’s cost less accumulated depreciation.
12. A company purchased factory equipment on April 1, 2014 for $160,000. It is estimated
that the equipment will have a $20,000 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, 2014 is
a. $16,000.
b. $14,000.
c. $10,500.
d. $12,000.
13. The units-of-activity method is generally not suitable for
a. airplanes.
b. buildings.
c. delivery equipment.
d. factory machinery.
14. A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the end
of its 8-year useful life. The annual depreciation expense recorded for the third year
using the double-declining-balance method would be
a. $24,120.
b. $40,500.
c. $35,436.
d. $27,570.
15. A factory machine was purchased for $375,000 on January 1, 2014. It was estimated
that it would have a $75,000 salvage value at the end of its 5-year useful life. It was also
estimated that the machine would be run 40,000 hours in the 5 years. The company ran
the machine for 4,000 actual hours in 2014. If the company uses the units-of-activity
method of depreciation, the amount of depreciation expense for 2014 would be
a. $37,500.
b. $60,000.
c. $75,000.
d. $30,000.

16. A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been
recorded was disposed of for $18,000 cash. The entry to record this event would
include a
a. gain of $6,000.
b. loss of $6,000.
c. credit to the Equipment account for $12,000.
d. credit to Accumulated Depreciation for $60,000.
17.

The following totals for the month of April were taken from the payroll register of
Asplend Company.
Salaries and wages
$72,000
FICA taxes withheld
5,508
Income taxes withheld
15,000
Medical insurance deductions
2,700
Federal unemployment taxes
192
State unemployment taxes
1,296
The entry to record the payment of net payroll would include a
a. debit to Salaries and Wages Payable for $47,304.
b. debit to Salaries and Wages Payable for $48,792.
c. debit to Salaries and Wages Payable for $43,284.
d. credit to Cash for $54,300.

Watunga County Bank agrees to lend Hoffman Granite Company $600,000 on
January 1. Hoffman Granite Company signs a $600,000, 8%, 9-month note:
18.

The entry made by Hoffman Granite on January 1 to record the proceeds and
issuance of the note is
a. Interest Expense…………………………………………………………..
36,000
Cash…………………………………………………………………………… 564,000
Notes Payable………………………………………………………
600,000
b. Cash…………………………………………………………………………… 600,000
Notes Payable………………………………………………………
600,000
c. Cash…………………………………………………………………………… 600,000
Interest Expense…………………………………………………………..
36,000
Notes Payable………………………………………………………
636,000
d. Cash…………………………………………………………………………… 600,000
Interest Expense…………………………………………………………..
36,000
Notes Payable………………………………………………………
600,000
Interest Payable……………………………………………………
36,000

19.

What is the adjusting entry required if Hoffman Granite Company prepares financial
statements on June 30?
a. Interest Expense…………………………………………………………..
24,000
Interest Payable……………………………………………………
24,000
b. Interest Expense…………………………………………………………..
24,000
Cash……………………………………………………………………
24,000
c. Interest Payable……………………………………………………………
24,000
Cash……………………………………………………………………
24,000
d. Interest Payable……………………………………………………………
24,000
Interest Expense…………………………………………………..
24,000

20.

What entry will Hoffman Granite make to pay off the note and
assuming that interest has been accrued to September 30?
a. Notes Payable………………………………………………………………
Cash……………………………………………………………………
b. Notes Payable………………………………………………………………
Interest Payable……………………………………………………………
Cash……………………………………………………………………
c. Interest Expense…………………………………………………………..
Notes Payable………………………………………………………………
Cash……………………………………………………………………
d. Interest Payable……………………………………………………………
Notes Payable………………………………………………………………
Interest Expense…………………………………………………………..
Cash……………………………………………………………………

interest at maturity
636,000
636,000
600,000
36,000
636,000
36,000
600,000
636,000
24,000
600,000
12,000
636,000

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