Penn Foster Exam 061695

1.

A company receives a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the customer owe using a 360-day year?

A. $315.00

B. $354.38

C. $38.84

D. $39.38

2.   Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)

A. $1,584,88.

B. $1,605.00.

C. $20.13.

D. $1,520.13.

3.   Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the following will occur as a result of this mistake?

A. Retained earnings will be overstated by $5,000.

B. The asset will be overstated by $5,000.

C. The asset will be understated by $5,000.

D. Net income will be overstated by $5,000.

4.   Which of the following would not be considered a contingent liability?

A. Pending legal action

B. Potential fines from the EPA

C. Cosigning a loan

D. Mortgage payable

5.   Which of the following would indicate poor internal control over accounts receivable?

A. The same person handling cash receipts also records the accounts receivable transactions.

B. The person who handles accounts receivable wouldn’t write off accounts as uncollectable.

C. The person handling cash receipts passes the receipts to someone who enters them into accounts receivable.

D. The mailroom employees open the mail and give the cash receipts to another employee.

6.   If the amount extracted from a coal mine was different every year for four years, you would

A. debit depletion expense for the same amount each year.

B. credit accumulated depletion—coal mine for the same amount each year.

C. recompute the depletion expense rate per unit each year.

D. use the same depletion expense rate per unit each year.

7.   Margaret is a customer of Tammy Company. The company wrote off her account of $1,200 on August 15. On October 12, she sent in a payment of $560. What will Tammy Company record first to reinstate her account?

A. Debit Uncollectible Accounts Expense; credit Accounts Receivable/Margaret.

B. Debit Cash; credit Accounts Receivable/Margaret.

C. Debit Accounts Receivable/Margaret; credit Allowance for Doubtful Accounts.

D. Debit Allowance for Doubtful Accounts; credit Accounts Receivable/Margaret.

8.   Which of the following would be considered a cash equivalent?

A. Checks

B. Currency

C. Time deposits

D. Money orders

9.   A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the depreciation for 2012 to the nearest dollar will be

A. $4,667.

B. $10,400.

C. $9,333.

D. $5,200.

10.   A warranty is an example of a/an _______ liability.

A. known

B. estimated

C. contingent

D. settled

11.   Research and development costs (R&D) are generally

A. listed as “long-term assets” on the balance sheet.

B. listed as “current assets” on the balance sheet.

C. listed as “other intangibles” on the balance sheet.

D. expensed and become part of the income statement

12.   Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)

A. $2,819.84.

B. $119.84.

C. $2,821.50.

D. $2,943.00.

13.   Cash equivalents are

A. very liquid and carry little risk.

B. not liquid and carry little risk.

C. not liquid and carry high risk.

D. very liquid and carry high risk.

14.   Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey will report this liability as a

A. current liability of $20,000 and a long-term liability of $80,000.

B. current liability of $100,000.

C. current liability of $80,000 and a long-term liability of $20,000.

D. long-term liability of $100,000.

15.   Use the _______ principle to estimate warranty liabilities.

A. objectivity

B. matching

C. conservatism

D. entity

16.   By not accruing warranty expense,

A. reported liabilities will be understated, and net income will be overstated.

B. reported expenses will be overstated, and reported liabilities will be understated.

C. reported liabilities will be overstated, and net income will be understated.

D. reported expenses will be understated, and net income will be understated.

17.   Which of the following would be considered a contingent liability?

A. Pending legal action

B. Mortgage obligation

C. Accounts payable obligation

D. Sales tax obligation

18.   Which marketable securities are reported at cost on the balance sheet date?

A. Available-for-sale securities

B. Trading securities

C. Held-to-maturity securities

D. Trading and held-to-maturity securities

19.   Which of the following is not a benefit to extending credit to customers?

A. Increased profits

B. Increased revenues

C. Bad-debt expenses

D. Wider range of customers

20.   Meranda Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 14,500 units. To the nearest dollar, the depreciation for the first year under the units of production method will be

A. $35,500.

B. $36,250.

C. $31,250.

D. $33,350.