1 On January 1, 2011, Ace Electronics purchased a patent for $2,000,000 cash, which allows Ace the exclusive legal right to manufacture a new microchip for the next 20 years. However, Ace thinks that the useful life of the patent is only 5 years because rapid changes in technology will make the microchip obsolete. For 2011, Ace should report___.
A. depreciation expense of $100,000
B. amortization expense of $400,000
C. amortization expense of $100,000
D. depreciation expense of $400,000
2 In February, one of Team Shirts best customers went bankrupt owning Team Shirts $85. Team Shirts uses the sales method estimating bad debts. February sales were $15,000. The accountant has been using 3% of sales as the estimated bad debts percentage. Before adjustment and the write off, the balance in the allowance for uncollectible accounts was $(100). After the write off and adjustment, the balance in the allowance for uncollectible accounts should be___.
A. $365
B. $450
C. $550
D. $465
3 Ace Company sells goods FOB destination. The shiping costs___.
A. appear on Ace's income statement as an operating expense
B. will not be paid by Ace
C. appear on Ace's income statement as a decrease in Net sales
D. appear on Ace's income statement as a decrease in Cost of goods sole
4 Rigby Company purchased merchandise from a supplier in Hong Kong with an invoice cost of $10,000 and shipping terms of FOB destination. The freight costs amount to $1,000. Rigby should record inventory at a cost of__.
A. 9,000
B. 11,000
C. 1,000
D. 10,000
5 Brookes Bikes $11,235 sold worth of mountain bikes to customers using bank credit cards during October. The banks charge a credit card fee of 4% of sales. The amount of sales Brookes Bikes should recognize for October is _________.
A. $11235
B. $11,684.40
C. $449.40
D. $10,785.60