Question

63. ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years.

Using the straight-line method, depreciation expense for 2018 would be:

A) $60,000.                       B) $11,000.                      C) $12,000.                                          D) None of these.

64. ABC reports income tax expense of $800,000. Income tax payable at the beginning and end of the year are $50,000 and $70,000, respectively. What is the amount of cash paid for income taxes?

A) $800,000.                     B) $870,000.                    C) $780,000.                                          D) $820,000.

73. Which is easier to calculate
    1. A firm's Cash Flow                                               B) A firm's Net Income
74. ABC's beginning inventory is $2,000 and its ending inventory is $1,000. The inventory turnover is 6 times. Cost of goods sold for the year must equal:

2.

221. The correct order from the smallest number of shares to the largest number of shares is:
     1. Issued, authorized, and outstanding.                     B) Authorized, issued, and outstanding.

C) Issued, outstanding, and authorized.                     D) Outstanding, issued, and authorized.

221. ABC has the following current assets: cash, $102 million; receivables, $94 million; inventory,

$182 million; and other current assets, $18 million. ABC also has the following liabilities: accounts payable, $98 million; current portion of long-term debt, $35 million; and long-term debt,

$23 million. Based on these amounts, what is the current ratio?

A) 4.04.                            B) 2.84.                            C) 2.98.                                          D) 2.54.

222. Which of the following are made AFTER the financial statements are prepared?
     1. Transaction Entries                   B) Adjusting Entries C) Closing Entries
223. Which of the following is a positive sign that a company is selling its inventory quickly?
     1. Both a high inventory turnover ratio and a low average days in inventory.
     2. A low inventory turnover ratio.
     3. A low average days in inventory.
     4. A high inventory turnover ratio.

221. For a journal entry with only two lines, the following entry is valid: Decrease in Owners' Equity, Increase in Expense.
     1. True                                                                       B) False
222. On January 1, ABC sold $30,000 in products to a customer on account. Then on January 10, ABC collected the cash on that account. What is the impact on ABC's accounting equation from the collection of cash on January 10?
     1. No net effect on the accounting equation.
     2. Assets increase and stockholders' equity increases.
     3. Assets decrease and liabilities decrease.
     4. Assets increase and liabilities decrease.
223. The balance sheet of ABC reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is ABC's stockholders' equity?

224. A) $800,000                      B) $1,000,000                  C) $320,000                                          D) $2,000,000

221. When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to:
     1. Rent Receivable.                                                  B) Cash.

C) Rent Expense.                                                      D) Rent Payable.

Answer 1

1.

Annual depreciation = (Cost price - Residual value)/Useful life

= (60,000 - 5,000)/5

= $11,000

Using the straight-line method, depreciation expense for 2018 would be = $11,000

Correct option is (B)

2.

Cash payment for income tax = Income tax expense + Beginning income tax payable - Ending income tax payable

= 800,000 + 50,000 - 70,000

= $780,000

Correct option is (C)

3.

A firm's net income is easier to calculate as compared to firm's cash flow.

Correct option is (B)

4.

Average inventory = (Beginning inventory + Ending inventory)/2

= (2,000 + 1,000)/2

= $1,500

Inventory turnover = Cost of goods sold/Average inventory

6 = Cost of goods sold/1,500

Hence, cost of goods sold = $9,000

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