ACC 231 ASU Wolfe Exam Questions and
Answers
Page 1 of 100
,Question 1
Suppose Quick Travel pays $70 million to buy Lone Moon Overnight. The fair
value of Lone Moon's assets is $76 million, and the fair value of its liabilities
is $20 million. How much goodwill did Quick Travel purchase in its acquisition
of Lone Moon Overnight?
Correct Answer
$14 million
[Amount Paid - (Fair Value of Assets - Fair Value of Liabilities)]
[70 million - (76 million - 20 million)]
[14 million]
Question 2
Cash and cash equivalents do NOT include:
-Petty cash
-Time deposits
-High-grade U.S. government securities maturing in 5 years
-Bank checking account
Correct Answer
High-grade U.S. government securities maturing in 5 years
Question 3
Taylor Company purchased a machine for $9,800 on January 1, 2019. The
machine has been depreciated using the straight-line method assuming it
has a five-year life with a $1,400 residual value. Taylor sold the machine on
January 1, 2021, for $7,600. What is the book value of the machine on
December 31, 2020.
Correct Answer
$6,440
[(Purchase Price - Residual Value) / Lifespan = Annual Depreciation]
[(9,800 - 1,400) / 5 = 1,680]
[9,800 - 1,680 (from 2019) - 1,680 (from 2020) = 6,440]
Page 2 of 100
,Question 4
Matches the most current cost of goods sold against sales revenue
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 5
Results in an old measure of the cost of ending inventory
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 6
Paid $148,000 to tear down old building on new plant site
-Capital expenditure
-Immediate expense
-Neither
Correct Answer
Capital expenditure
Page 3 of 100
, Question 7
Generally associated with saving income taxes
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 8
Accounts payable would be an example of a cash equivalent (T or F)
Correct Answer
False
[is an asset but not a cash equivalent]
Question 9
Companies are required to estimate sales returns and allowances in the
current period in which the related sales are made (T or F)
Correct Answer
True
Question 10
A company has $28,000 in cash and cash equivalents, $88,000 in short-term
investments, $122,000 in net current receivables, $64,000 in inventory,
$14,000 of prepaid insurance and $11,000 of supplies. The total current
liabilities of the firm are $304,000. The quick ratio of the company is:
Correct Answer
0.78
[28,000 + 88,000 + 122,000 = 238,000]
[238,000/304,000]
[0.78]
Page 4 of 100
Answers
Page 1 of 100
,Question 1
Suppose Quick Travel pays $70 million to buy Lone Moon Overnight. The fair
value of Lone Moon's assets is $76 million, and the fair value of its liabilities
is $20 million. How much goodwill did Quick Travel purchase in its acquisition
of Lone Moon Overnight?
Correct Answer
$14 million
[Amount Paid - (Fair Value of Assets - Fair Value of Liabilities)]
[70 million - (76 million - 20 million)]
[14 million]
Question 2
Cash and cash equivalents do NOT include:
-Petty cash
-Time deposits
-High-grade U.S. government securities maturing in 5 years
-Bank checking account
Correct Answer
High-grade U.S. government securities maturing in 5 years
Question 3
Taylor Company purchased a machine for $9,800 on January 1, 2019. The
machine has been depreciated using the straight-line method assuming it
has a five-year life with a $1,400 residual value. Taylor sold the machine on
January 1, 2021, for $7,600. What is the book value of the machine on
December 31, 2020.
Correct Answer
$6,440
[(Purchase Price - Residual Value) / Lifespan = Annual Depreciation]
[(9,800 - 1,400) / 5 = 1,680]
[9,800 - 1,680 (from 2019) - 1,680 (from 2020) = 6,440]
Page 2 of 100
,Question 4
Matches the most current cost of goods sold against sales revenue
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 5
Results in an old measure of the cost of ending inventory
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 6
Paid $148,000 to tear down old building on new plant site
-Capital expenditure
-Immediate expense
-Neither
Correct Answer
Capital expenditure
Page 3 of 100
, Question 7
Generally associated with saving income taxes
-FIFO
-LIFO
-Specific-identification
-Average-cost
-All 4 methods
Correct Answer
LIFO
Question 8
Accounts payable would be an example of a cash equivalent (T or F)
Correct Answer
False
[is an asset but not a cash equivalent]
Question 9
Companies are required to estimate sales returns and allowances in the
current period in which the related sales are made (T or F)
Correct Answer
True
Question 10
A company has $28,000 in cash and cash equivalents, $88,000 in short-term
investments, $122,000 in net current receivables, $64,000 in inventory,
$14,000 of prepaid insurance and $11,000 of supplies. The total current
liabilities of the firm are $304,000. The quick ratio of the company is:
Correct Answer
0.78
[28,000 + 88,000 + 122,000 = 238,000]
[238,000/304,000]
[0.78]
Page 4 of 100
