Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Which
of the following is not defined as Cash? a. | checks | b. | compensating
bank balances | c. | money orders | d. | cash-in-bank | | |
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2.
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The
cash account in the depositor's ledger is a(n): a. | asset with a debit balance | b. | asset with a
credit balance | c. | liability with a debit balance | d. | liability with a
credit balance | | |
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3.
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The
debit balance in Cash Short and Over at the end of an accounting period is reported
as: a. | an expense on
the income statement | b. | income on the income statement | c. | an asset on the
balance sheet | d. | a liability on the balance sheet | | |
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4.
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EFT: a. | means Efficient Funds Transfer | b. | can process
certain cash transactions at less cost than by using the mail | c. | makes it easier
to document purchase and sale transactions | d. | means Effective Funds Transfer | | |
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5.
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A
voucher: a. | is received from
customers to explain the purpose of a payment | b. | is normally
prepared in the Accounting Department | c. | system is used to control cash
receipts | d. | system is an internal control procedure to verify that the
assets in the ledger are the ones the company owns | | |
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6.
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The
person who signs the check is called the: a. | drawee | b. | drawer | c. | payee | d. | bank
examiner | | |
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7.
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The
party to whose order a check is written is called the: a. | payer | b. | drawer | c. | drawee | d. | payee | | |
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8.
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The
bank on which a check is drawn is called the: a. | drawer | b. | payee | c. | drawee | d. | creditor | | |
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9.
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Accompanying the bank statement was a debit memorandum for bank service charges.
What entry is required in the depositor's accounts? a. | debit
Miscellaneous Administrative Expense; credit Cash | b. | debit Cash;
credit Other Income | c. | debit Cash; credit Accounts Payable | d. | debit Accounts
Payable; credit Cash | | |
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10.
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Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts
journal as $5,700. What entry is required in the depositor's accounts? a. | debit Sales;
credit Cash | b. | debit Cash; credit Accounts
Receivable | c. | debit Cash; credit Sales | d. | debit Accounts
Receivable; credit Cash | | |
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11.
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Accompanying the bank statement was a credit memorandum for a short-term note
collected by the bank for the customer. What entry is required in the depositor's
accounts? a. | debit Notes
Receivable; credit Cash | b. | debit Cash; credit Miscellaneous
Income | c. | debit Cash; credit Notes Receivable | d. | debit Accounts
Receivable; credit Cash | | |
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12.
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Accompanying the bank statement was a debit memorandum for an NSF check received from
a customer. What entry is required in the depositor's accounts? a. | debit Other
Income; credit Cash | b. | debit Cash; credit Other Income | c. | debit Cash;
credit Accounts Receivable | d. | debit Accounts Receivable; credit
Cash | | |
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13.
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A
check drawn by a depositor in payment of a voucher for $925 was recorded in the journal as $295. What
entry is required in the depositor's accounts? a. | debit Accounts Payable; credit Cash | b. | debit Cash;
credit Accounts Receivable | c. | debit Cash; credit Accounts Payable | d. | debit Accounts
Receivable; credit Cash | | |
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14.
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The
debit recorded in the journal to reimburse the petty cash fund is to: a. | Petty
Cash | b. | Accounts
Receivable | c. | Cash | d. | various accounts for which the petty cash was
disbursed | | |
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15.
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Cash
equivalents include: a. | checks | b. | coins and
currency | c. | money market accounts and commercial
paper | d. | stocks and short-term bonds | | |
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16.
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The
doomsday ratio is: a. | current assets divided by current
liabilities | b. | total assets divided by current
liabilities | c. | cash and cash equivalents divided by current
liabilities | d. | current liabilities as a percent of cash and cash
equivalents | | |
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17.
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A
note receivable due in 60 days is listed on the balance sheet under the caption: a. | long-term
liabilities | b. | fixed assets | c. | current
assets | d. | current liabilities | | |
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18.
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A
note receivable due in 2 years is listed on the balance sheet under the caption: a. | current
assets | b. | investments | c. | fixed
assets | d. | owner's equity | | |
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19.
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Internal control over receivables is achieved when the employee who handles the
accounting for receivables: a. | also is involved with the operating aspects of
approving credit | b. | also is involved with the operating aspects of
collecting receivables | c. | is not involved with the operating aspects of
approving credit | d. | also is involved with authorizing adjustments to
receivables | | |
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20.
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The
two methods of accounting for uncollectible receivables are the allowance method and
the: a. | equity
method | b. | direct write-off method | c. | interest
method | d. | cost method | | |
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21.
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Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year
(before adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts
of $15,000. Which of the following entries records the proper provision for doubtful
accounts? a. | debit
Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800 | b. | debit
Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200 | c. | debit Allowance for Doubtful Accounts, $800; credit
Uncollectible Accounts Expense, $800 | d. | debit Allowance for Doubtful Accounts, $15,800; credit
Uncollectible Accounts Expense, $15,800 | | |
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22.
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Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year
(before adjustment), and an analysis of customers' accounts indicates doubtful accounts of
$17,900. Which of the following entries records the proper provision for doubtful
accounts? a. | debit Allowance
for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense,
$16,400 | b. | debit Allowance for Doubtful Accounts, $19,400; credit
Uncollectible Accounts Expense, $19,400 | c. | debit Uncollectible Accounts Expense, $19,400; credit Allowance
for Doubtful Accounts, $19,400 | d. | debit Uncollectible Accounts Expense, $16,400; credit Allowance
for Doubtful Accounts, $16,400 | | |
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23.
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What
is the type of account and normal balance of Allowance for Doubtful Accounts? a. | Contra asset,
credit | b. | Asset, debit | c. | Asset,
credit | d. | Contra asset, debit | | |
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24.
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If
the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible? a. | Uncollectible
Accounts Expense | b. | Accounts Receivable | c. | Allowance for
Doubtful Accounts | d. | Interest Expense | | |
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25.
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In
reference to a promissory note, the person who makes the promise to pay is called
the: a. | maker | b. | payee | c. | seller | d. | drawee | | |
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26.
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In
reference to a promissory note, the person who is to receive payment is called the: a. | maker | b. | payee | c. | seller | d. | payor | | |
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27.
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The
due date of a 60-day note dated March 10 is: a. | May 7 | b. | May
8 | c. | May
9 | d. | May
10 | | |
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28.
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A
60-day, 12% note for $15,000, dated May 1, is received from a customer on account. The maturity
value of the note is: a. | $14,700 | b. | $15,000 | c. | $15,300 | d. | $16,200 | | |
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29.
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The
journal entry to record a note received from a customer to apply on account is: a. | debit Notes
Receivable; credit Accounts Receivable | b. | debit Accounts Receivable; credit Notes
Receivable | c. | debit Cash; credit Notes Receivable | d. | debit Notes
Receivable; credit Notes Payable | | |
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30.
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A
$6,000, 30-day, 12% note recorded on November 21 is not paid by the maker at maturity. The
journal entry to recognize this event is: a. | debit Cash, $6,060; credit Notes Receivable,
$6,060 | b. | debit Accounts Receivable, $6,060; credit Notes Receivable,
$6,000; Credit Interest Receivable, $60 | c. | debit Notes Receivable, $6,060; credit Accounts Receivable,
$6,060 | d. | debit Accounts Receivable, $6,060; credit Notes Receivable,
$6,000; Credit Interest Revenue, $60 | | |
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31.
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Receivables are usually listed on the balance sheet after Cash in what
order? a. | Accounts
Receivable, Notes Receivable, Interest Receivable | b. | Interest
Receivable, Notes Receivable, Accounts Receivable | c. | Notes
Receivable, Interest Receivable, Accounts Receivable | d. | Notes
Receivable, Accounts Receivable, Interest Receivable | | |
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32.
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Accounts Receivable Turnover measures: a. | how frequently
during the year the accounts receivable are converted to cash | b. | the number of
days outstanding | c. | the fair market value of accounts
receivable | d. | the efficiency of the accounts payable
function | | |
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33.
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The
term "inventory" indicates: a. | merchandise held for sale in the normal course
of business | b. | materials in the process of production or held
for production | c. | both a and b | d. | neither a nor
b | | |
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34.
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Under
a perpetual inventory system, the amount of each type of merchandise on hand is available in
the: a. | customer's
ledger | b. | creditor's ledger | c. | inventory
ledger | d. | merchandise inventory account | | |
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35.
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The
inventory method that considers the inventory to be composed of the units of merchandise acquired
earliest is called: a. | first-in, first-out | b. | last-in,
first-out | c. | average cost | d. | retail
method | | |
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36.
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The
inventory data for an item for November are:
Nov. 1 Inventory......... 20 units at
$20
4 Sold.............. 10
units
10 Purchased......... 30 units at
$21
17 Sold.............. 20
units
30 Purchased......... 10 units at
$22
Using the perpetual system, costing by the
first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November
30?
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37.
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The
inventory data for an item for November are:
Nov. 1 Inventory......... 20 units at
$20
4 Sold.............. 10
units
10 Purchased......... 30 units at
$21
17 Sold.............. 20
units
30 Purchased......... 10 units at
$22
Using the perpetual system, costing by the
last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November
30?
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38.
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The
inventory data for an item for the month of May are as follows:
May 1 Inventory......... 20 units at
$50
5 Sold.............. 15
units
10 Purchased......... 30 units at
$55
20 Sold.............. 30
units
29 Purchased......... 20 units at
$60
What is the cost of the merchandise inventory of
25 units on May 31 by the last-in, first-out method if the periodic system is used? a. | $1,750 | b. | $1,275 | c. | $1,450 | d. | $1,700 | | |
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39.
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The
following lots of a particular commodity were available for sale during the
year:
Beginning inventory........ 10 units at
$61
First purchase............. 25 units at $63
Second
purchase............ 30 units at $64
Third purchase............. 15 units at
$73
The firm uses the periodic system and there are
20 units of the commodity on hand at the end of the year. What is the amount of the inventory
at the end of the year according to the average cost method? a. | $1,300 | b. | $1,305 | c. | $1,415 | d. | $1,236 | | |
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40.
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The
following lots of a particular commodity were available for sale during the
year:
Beginning inventory........ 10 units at
$60
First purchase............. 25 units at $63
Second
purchase............ 30 units at $64
Third purchase............. 15 units at
$70
The firm uses the periodic system and there are
20 units of the commodity on hand at the end of the year. What is the amount of the inventory
at the end of the year according to the lower of cost or market, using the first-in, first-out
method, if the current replacement cost is $64 a unit? a. | $1,200 | b. | $1,230 | c. | $1,280 | d. | $1,370 | | |
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41.
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During a period of consistently rising prices, the method of inventory that will
result in reporting the greatest cost of merchandise sold is: a. | fifo | b. | lifo | c. | average cost | d. | weighted
average | | |
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42.
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If
merchandise inventory is being valued at cost and the price level is consistently rising, which
method of costing will yield the largest gross profit? a. | average
cost | b. | lifo | c. | fifo | d. | weighted average | | |
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43.
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Damaged merchandise that can be sold only at prices below cost should be valued
at: a. | net realizable
value | b. | lifo | c. | fifo | d. | average | | |
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44.
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Merchandise Inventory is reported on the balance sheet in the section
entitled: a. | current
assets | b. | fixed assets | c. | current
liabilities | d. | owner's equity | | |
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45.
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If
the estimated rate of gross profit is 40%, what is the estimated cost of the merchandise inventory on
June 30, based on the following data?
June
1 Merchandise inventory | $ 75,000 | June
1-30 Purchases (net) | 150,000 | June
1-30 Sales (net) | 135,000 | | |
a. | $144,000 | b. | $140,000 | c. | $
81,000 | d. | $ 54,500 | | |
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46.
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Inventory turnover: a. | is computed by dividing average inventory by cost of
merchandise sold | b. | measures the relationship between the volume of goods sold and
amount of inventory carried | c. | increases the risk of loss from damaged
merchandise | d. | is computed by dividing the beginning inventory plus the ending
inventory by two | | |
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47.
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A
building with an appraisal value of $157,000 is made available at an offer price of $152,000.
The purchaser acquires the property for $50,000 in cash, a 90-day note payable for $40,000, and a
mortgage amounting to $60,000. The cost basis recorded in the buyer's accounting records to recognize
this purchase is: a. | $157,000 | b. | $152,000 | c. | $100,000 | d. | $150,000 | | |
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48.
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What
is the journal entry a company would record when it acquires equipment and issues a promissory note
for the entire purchase price? a. | debit Purchases; credit Notes Payable | b. | debit Equipment;
credit Cash | c. | debit Equipment; credit Accounts
Payable | d. | debit Equipment; credit Notes Payable | | |
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49.
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A
machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 5
years or 15,000 hours. It is to be depreciated by the units-of-production method. What is the
amount of depreciation for the second full year, during which the machine was used 5,000
hours? a. | $8,000 | b. | $20,000 | c. | $12,000 | d. | $21,667 | | |
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50.
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Equipment purchased May 1, 200X, for $90,000 has an estimated residual value of $6,000
and an estimated life of 4 years. What is the amount of depreciation for the second full year, using
the declining-balance method at double the straight-line rate? a. | $30,000 | b. | $28,000 | c. | $22,500 | d. | $21,000 | | |
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51.
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Expenditures that increase operating efficiency or capacity for the remaining useful
life of fixed assets are called: a. | current expenditures | b. | revenue
expenditures | c. | ordinary maintenance | d. | betterments | | |
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52.
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When
a company exchanges machinery and receives a trade-in allowance greater than the book value, this
transaction would be recorded with the following entry: a. | debit Machinery
and Accumulated Depreciation; credit Machinery, Cash, and Gain on Disposal | b. | debit Machinery
and Accumulated Depreciation; credit Machinery and Cash | c. | debit Cash and
Machinery; credit Accumulated Depreciation | d. | debit Cash and Machinery; credit Accumulated Depreciation and
Machinery | | |
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53.
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All
leases are classified as either: a. | capital leases or long-term leases | b. | capital leases
or operating leases | c. | operating leases or current leases | d. | long-term leases
or current leases | | |
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54.
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The
journal entry for recording an operating lease payment would: a. | be a memo entry
only | b. | debit the fixed
asset and credit Cash | c. | debit an expense and credit Cash | d. | debit a
liability and credit Cash | | |
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55.
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Which
one of the following is not an internal control procedure for fixed assets? a. | ensuring that
fixed assets are acquired at the lowest possible costs | b. | training
employees to properly operate fixed assets | c. | tagging assets as they are acquired | d. | recording assets
in the subsidiary ledger only at year end | | |
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56.
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The
accumulated depletion account is: a. | an expense account | b. | an intangible
asset account | c. | reported on the income statement as other
expense | d. | reported on the balance sheet as a deduction from the cost of
the mineral deposit | | |
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57.
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Which
of the following is classified as an intangible asset on the balance sheet? a. | Goodwill | b. | Buildings | c. | Machinery | d. | Land Held for Future Use | | |
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58.
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Patents are reported on the balance sheet in the: a. | intangible
assets section | b. | current assets section | c. | property, plant,
and equipment section | d. | investments section | | |
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59.
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Fixed
assets are ordinarily presented in the balance sheet: a. | at current
market values | b. | at replacement costs | c. | at cost less
accumulated depreciation | d. | in a separate section along with intangible
assets | | |
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60.
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All
thing being equal except the ratio of fixed assets to long-term liabilities, a lender would prefer to
lend to a company whose ratio is:
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