Mdtm BSC401 F12DL
Name:________________________ Duration: 60 minutes
Date: _________________________ Point Distribution: 20/10/21/21/21/7
Part A: Multiple Choice. Circle the one best answer.
1. All of the following are reported as current liabilities except
a. accounts payable.
b. bonds payable.
c. notes payable.
d. unearned revenues.
2. The basis of estimating expected uncollectible accounts that emphasizes the matching of
expenses with revenues is the
a. percentage of receivables basis.
b. percentage of sales basis.
c. lower of cost or market basis.
d. direct write-off method.
3. Which of the following is usually not an accrued liability?
a. Interest payable
b. Wages payable
c. Taxes payable
d. Notes payable
4. Interest expense on an interest-bearing note is
a. always equal to zero.
b. accrued over the life of the note.
c. only recorded at the time the note is issued.
d. only recorded at maturity when the note is paid.
5.The entry to record the issuance of an interest-bearing note credits Notes Payable for the note’s
a. maturity value.
b. market value.
c. face value.
d. cash realizable value.
6.A corporation issued $900,000 of 6%, 5-year bonds on January 1, at 102. Interest is paid
semiannually on January 1 and July 1. If the corporation uses the straight-line method of
amortization, the amount of bond interest expense to be recognized on July 1 is
a. $54,000.
b. $27,000.
c. $28,800.
d. $25,200.
7.A $600,000, 5%, 20-year bond was issued at 99. The proceeds received from the bond
issuance are
a. $600,000.
b. $594,000.
c. $612,000.
d. $588,000.
8. A company purchased land for $90,000 cash. Real estate brokers’ commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at
a. $97,000.
b. $90,000.
c. $95,000.
d. $102,000.
9. Equipment was purchased for $72,000 and has a book value of $24,000 and a depreciable
cost of $60,000. The estimated salvage value is
a. $24,000.
b. $48,000.
c. $10,000.
d. $12,000.
10.Depletion expense is computed using the
a. double-declining-balance method.
b. effective interest method.
c. straight-line method.
d. units-of-activity method.
Part B: True/False. For each statement, circle T for True or F for False.
11. T / F Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of the bonds.
12. T / F Sales revenues are earned during the period cash is collected from the buyer.
13. T / F If $150,000 face value bonds are issued at 102, the proceeds received will be $102,000..
14. T / F Accounts receivable are the result of cash and credit sales.
15. T / F If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts.
Part C
1/CDolan Company uses the allowance method to account for uncollectible accounts. Prepare the appropriate journal entries to record the following transactions during 2008. You may omit journal entry explanations.
June 20 The account of Ken Watts for $1,000 was deemed to be uncollectible and is written off
as a bad debt.
Oct. 14 Received a check for $1,000 from Ken Watts, whose account had previously been
written off as uncollectible.
Dec. 31 Use the following information for year-end adjusting entries:
The balance of Accounts Receivable and Allowance for Doubtful Accounts at year end are $131,000 and $2,900, respectively. It is estimated that bad debts will be 4% of accounts receivable.
2/COn December 1, Destin Corporation borrowed $5,000 on a 90-day, 6% note. Prepare the entries to record the issuance of the note, the accrual of interest at year end, and the payment of the note.
A) Dec 1
B) Dec 31
C) Mar 1
3/C Wise Company issued $800,000, 10%, 20-year bonds on January 1, 2003, at 104. Interest is payable semiannually on July 1 and January 1. Wise uses the straight-line method of amortization and has a calendar year end.
Prepare all journal entries made in 2003 related to the bond issue.
(1) January 1,
(2) July 1,
(3) December 31,
4/c On January 1, 2003, Kohl Corporation issued $300,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Kohl Corporation has a calendar year end.
Prepare all entries related to the bond issue on January 1, 2003