ACCT 211 Final Exam Study Guide
1. All of the following statements regarding increases in the value of plant assets under U.S. GAAP and IFRS are true except:
a. U.S. GAAP prohibits companies to record increases in the value of plant assets.
b. IFRS permits upward asset revaluations.
c. Under IFRS, a company can reverse an impairment and record that increase in income.
d. Under U.S. GAAP, a company can reverse an impairment and can include it in comprehensive income.
e. Under IFRS, an impairment increase beyond as asset’s original cost can be recorded in comprehensive income.
2. Revenue expenditures:
a. Are additional costs of plant assets that do not materially increase the asset’s life or its productive capabilities.
b. Are known as balance sheet expenditures.
c. Extend the asset’s useful life.
d. Substantially benefit future periods.
e. Are debited to asset accounts.
3. Obsolescence:
a. Occurs when an asset is at the end of its useful life.
b. Refers to a plant asset that is no longer useful in producing goods and services with a competitive advantage.
c. Refers to the insufficient capacity of a company’s plant assets to meet the company’s productive demands.
d. Occurs when an asset’s salvage value is less than its replacement cost.
e. Does not affect plant assets.
4. Extraordinary repairs:
a. Are revenue expenditures.
b. Extend an asset’s useful life beyond its original estimate.
c. Are credited to accumulated depreciation.
d. Are additional costs of plants assets that do not materially increase the asset’s life.
e. Are expensed as incurred.
5. A copyright:
a. Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
b. Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years.
c. Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years.
d. Is the amount by which the value of a company exceeds the fair market value of a company’s net assets if purchased separately.
e. Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.
6.. Plant assets are:
a. Tangible assets used in the operation of a business that have a useful life of more than one accounting period.
b. Current assets.
c. Held for sale.
d. Intangible assets used in the operations of a business that have a useful life of more than one accounting period.
e. Tangible assets used in the operation of business that have a useful life of less than one accounting period.
7.. Betterments:
a. Are expenditures making a plant asset more efficient or productive.
b. Are also called improvements.
c. Do not always increase an asset’s life.
d. Are capital expenditures.
e. All of the choices are betterments.
8.. Intangible assets include:
a. Patents.
b. Copyrights.
c. Trademarks.
d. Goodwill.
e. All of the choices are examples of intangible assets.
9. A total asset turnover ratio of 3.5 indicates that:
a. For every $1 in sales, the firm acquired $3.50 in assets during the period.
b. For every $1 in assets, the firm produced $3.50 in net sales during the period.
c. For every $1 in assets, the firm earned gross profit of $3.50 during the period.
d. For every $1 in assets, the firm earned $3.50 in net income.
e. For every $1 in assets, the firm paid $3.50 in expenses during the period.
10. Inadequacy refers to:
a. The insufficient capacity of a company’s plant assets to meet the company’s growing production demands.
b. An asset that is worn out.
c. An asset that is no longer useful in producing goods and services.
d. The condition where the salvage value is too small to replace the asset.
f. The condition where the asset’s salvage value is less than its cost.
11. An unincorporated association of two or more persons to carry on a business for profit as co-owners is a:
a. Partnership.
b. Proprietorship.
c. Contractual company.
d. Mutual agency.
e. Voluntary organization.
12. Partnership accounting:
a. Is the same as accounting for a sole proprietorship.
b. Is the same as accounting for a corporation.
c. Is the same as accounting for a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.
d. Is the same as accounting for an S corporation.
e. Is the same as accounting for a corporation, except that retained earnings is used to keep track of partners’ withdrawals.
13. A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a:
a. Mutual agency partnership.
b. Limited partnership.
c. Limited liability partnership.
d. General partnership.
e. Limited liability company.
14. A partner can withdraw from a partnership by:
a. Selling his/her interest to another person for cash.
b. Selling his/her interest to another person in exchange for assets.
c. Receiving cash from the partnership in the amount of his/her interest.
d. Receiving assets from the partnership in the amount of his/her interest.
e. All of the options are correct.
15. A partnership agreement:
a. Is not binding unless it is in writing.
b. Is the same as a limited liability partnership.
c. Is binding even if it is not in writing.
d. Does not generally address the issue of the rights and duties of the partners.
e. Is also called the articles of incorporation.
16. Disadvantages of a partnership include:
a. Limited life.
b. Mutual agency.
c. Unlimited liability.
d. Co-ownership of property.
e. All of the choices are disadvantages.
17. In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner’s investment, the interest allowance:
a. Is ignored when earnings are not sufficient to pay interest.
b. Can make up for unequal capital contributions.
c. Is an expense of the business.
d. Must be paid because the partnership contract has unlimited life.
e. Legally becomes a liability of the general partner.
18. Partners’ withdrawals of assets are:
a. Credited to their withdrawals accounts.
b. Debited to their withdrawals accounts.
c. Credited to their retained earnings.
d. Debited to their retained earnings.
e. Debited to their asset accounts.
19. David and Jeannie formed This & That as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:
a. An S corporation.
b. A C corporation.
c. A non-taxable entity.
d. A joint venture.
e. A partnership.
20. Mutual agency means
a. Creditors can apply their claims to partners’ personal assets.
b. Partners are taxed on partnership withdrawals.
c. All partners must agree before the partnership can act.
d. The partnership has a limited life.
e. A partner can commit or bind the partnership in any contract within the scope of the partnership business.
21. Short-term notes payable:
a. Can replace an account payable.
b. Can be issued in return for money borrowed from a bank.
c. Are negotiable.
d. Are an unconditional promise to pay.
e. All of the choices are correct.
22. Amounts received in advance from customers for future products or services:
a. Are revenues.
b. Increase income.
c. Are liabilities.
d. Are not allowed under GAAP.
e. Require an outlay of cash in the future.
23. Recording employee payroll deductions may involve:
a. Liabilities to individual employees.
b. Liabilities to federal and state governments.
c. Liabilities to insurance companies.
d. Liabilities to labor unions.
e. All of the choices are correct.
24. If a company uses a special payroll bank account:
a. The company does not need to issue paychecks.
b. The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.
c. The company must use a federal depository bank for the payroll bank account.
d. There is no need for a payroll register.
e. There is no need to issue W-2’s.
25. Advance ticket sales totaling $6,000,000 cash would be recognized as follows:
a. Debit Sales, credit Unearned Revenue.
b. Debit Unearned Revenue, credit Sales.
c. Debit Cash, credit Unearned Revenue.
d. Debit Unearned Revenue, credit Cash.
e. Debit Cash, credit Revenue.
26. Phil Phoenix is paid monthly. For the month of January of the current year, he earned a total of $8,288. The FICA tax for social security is 6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The amount of federal income tax withheld from his earnings was $1,375.17. His net pay for the month is:
a. $5,190.83
b. $5,844.79
c. $6,278.79
d. $6,566.00
e. $6,792.64
27. Uncertainties such as natural disasters:
a. Are not contingent liabilities because they are future events not arising from past transactions or events.
b. Are contingent liabilities because they are future events arising from past transactions or events.
c. Should be disclosed because of their usefulness to financial statements.
d. Are estimated liabilities because the amounts are uncertain.
e. Arise out of transactions such as debt guarantees.
28. On March 17, Grady Company agrees to accept a 60-day, 10%, $4,500 note from Alert Company to extend the due date on an overdue account. What is the journal entry needed to record the payment of the note by Alert Company on the maturity date?
a. Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575.
b. Debit Notes Payable $4,500; credit Interest Expense $75, credit Cash $4,425.
c. Debit Cash $4,575; credit Interest Revenue $75; credit Notes Payable $4,500.
d. Debit Notes Payable $4,500; debit Interest Expense $112; credit Cash $4,612.
e. Debit Cash $4,575; credit Interest Revenue $75; credit Notes Receivable $4,500.
29. The Wage and Tax Statement is:
a. Form 940.
b. Form 941.
c. Form 1040.
d. Form W-2.
e. Form W-4.
30. In the accounting records of a defendant, lawsuits:
a. Are estimated liabilities.
b. Should always be recorded.
c. Should always be disclosed.
d. Should be recorded if payment for damages is probable and the amount can be reasonably estimated.
e. Should never be recorded.