Question 1. Merchandise inventory is reported on the balance sheet in the section entitled _____.

• current assets
• fixed assets
• current liabilities
• stockholders' equity

Question 2. A machine with a useful life of 10 years and a residual value of $4,000 was purchased for $30,000. What is annual depreciation under the straight-line method?

• $3,000
• $3,400
• $2,600
• $5,200

Question 3. The Drilling Company purchased a mining site for $500,000 on July 1, 2010. The company expects to mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. The estimated residual value of the property is $80,000. During 2010, the company extracted 6,500 tons of ore. The depletion expense for 2010 is

• $37,700
• $42,000
• $32,500
• $27,300

Question 4. What type of account is Allowance for Doubtful Accounts?

• Contra asset
• Asset
• Revenue
• Expense

Question 5. Use the following data to calculate cost of merchandise sold under FIFO method.

September 1 Beginning Inventory 15 units @ $20
September 10 Purchases 20 units @ $25
September 20 Purchases 25 units @ $28
September 30 Ending Inventory 30 units

• $825
• $750
• $675
• $600

Question 6. A 60-day, 10% note for $6,000 dated April 15 is received from a customer on account. The face value of the note is _______.

• $6,100
• $5,400
• $5,900
• $6,000

Question 7. In reference to a promissory note, the person who makes the promise to pay is called the _______.

• maker
• payee
• seller
• receiver

Question 8. The due date of a 60-day note dated July 12 is _______.

• September 11
• September 8
• September 9
• September 10

Question 9. A written promise to pay a sum of money on demand or at a definite time is called a (n) _______.

• default
• deferral
• accrual
• promissory note

Question 10. A note receivable due in 90 days is listed on the balance sheet under _______.

• long-term liabilities
• fixed assets
• current liabilities
• current assets

Question 11. A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Under the straight-line method, what is annual depreciation expense?

• $13,200
• $12,000
• $11,000
• $10,800

Question 12. A note receivable due in five years is listed on the balance sheet under the caption _______.

• investments
• current assets
• fixed assets
• stockholders' equity

Question 13. Goodwill is _______.

• amortized similar to other intangibles
• only written down if an impairment in value occurs
• charged to expense immediately
• amortized over 40 years or its economic life, whichever is shorter

Question 14. The two most widely used methods for determining the cost of inventory are _______.

• FIFO and LIFO
• FIFO and average cost
• LIFO and average cost
• gross profit and average cost

Question 15. Salvage value has a similar meaning as _______.

• residual value
• scrap value
• book value
• both residual value and scrap value

Question 16. Receivables are usually a significant portion of _______.

• total current liabilities
• total liabilities
• total current assets
• total assets

Question 17. The inventory data for an item for November are:

Nov. 1 Inventory 25 units at $20
10 Purchased 30 units at $21
30 Purchased 10 units at $22
Sold 35 units

Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

• $640
• $623
• $600
• $605

Question 18. Intangible assets are used in operations but _______.

• cannot be specifically identified
• cannot be sold
• lack physical substance
• cannot be long-lived

Question 19. Book value is defined as _______.

• current market value less residual value
• cost less residual value
• current market value less accumulated depreciation
• cost less accumulated depreciation

Question 20. To measure depreciation, all of the following must be known EXCEPT:

• Market value
• Residual value
• Historical cost
• Estimated life