Financial Accounting II
ACC/363
Final Exam (58 points)
49 multiple choice - (1 point each) = 49 points.
3 problems (3 each) – 9 points.
1 Interest is usually associated with
a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.
2. A debit balance in the Allowance for Doubtful Accounts
a. is the normal balance for that account.
b. indicates that actual bad debt write-offs have exceeded previous
provisions for bad debts.
c. indicates that actual bad debt write-offs have been less than what was
estimated.
d. cannot occur if the percentage of sales method of estimating bad debts is used.
3. Two methods of accounting for uncollectible accounts are the
a. allowance method and the accrual method.
b. allowance method and the net realizable method.
c. direct write-off method and the accrual method.
d. direct write-off method and the allowance method.
4. If an account is collected after having been previously written off,
a. the allowance account should be debited.
b. only the control account needs to be credited.
c. both income statement and balance sheet accounts will be affected.
d. there will be both a debit and a credit to accounts receivable.
5. The direct write-off method of accounting for bad debts
a. uses an allowance account.
b. uses a contra-asset account.
c. does not require estimates of bad debt losses.
d. is the preferred method under generally accepted accounting principles.
, 6. Winter Furniture factors $400,000 of receivables to Fair Factors, Inc. Fair Factors
assesses a 2% service charge on the amount of receivables sold. Winter Furniture
factors its receivables regularly with Fair Factors. What journal entry does Winter
make when factoring these receivables?
a. Cash ................................................................................. 392,000
Loss on Sale of Receivables ........................................... 8,000
Accounts Receivable .............................................. 400,000
b. Cash ................................................................................. 392,000
Accounts Receivable .............................................. 392,000
c. Cash ................................................................................. 400,000
Accounts Receivable .............................................. 392,000
Gain on Sale of Receivables .................................. 8,000
d. Cash ................................................................................ 392,000
Service Charge Expense ............................................... 8,000
Accounts Receivable ............................................ 400,000
7. Hardy Clinic purchases land for $90,000 cash. The clinic assumes $1,500 in
property taxes due on the land. The title and attorney fees totaled $1,000. The
clinic has the land graded for $2,200. What amount does Hardy Clinic record as
the cost for the land?
a. $92,200.
b. $90,000.
c. $94,700.
d. $92,500.
8. Land improvements should be depreciated over the useful life of the
a. land.
b. buildings on the land.
c. land or land improvements, whichever is longer.
d. land improvements.
9. Equipment was purchased for $45,000. Freight charges amounted to $2,100 and
there was a cost of $6,000 for building a foundation and installing the equipment.
It is estimated that the equipment will have a $9,000 salvage value at the end of
its 5-year useful life. Depreciation expense each year using the straight-line
method will be
a. $10,620.
b. $8,820.
c. $7,380.
d. $7,200.
ACC/363
Final Exam (58 points)
49 multiple choice - (1 point each) = 49 points.
3 problems (3 each) – 9 points.
1 Interest is usually associated with
a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.
2. A debit balance in the Allowance for Doubtful Accounts
a. is the normal balance for that account.
b. indicates that actual bad debt write-offs have exceeded previous
provisions for bad debts.
c. indicates that actual bad debt write-offs have been less than what was
estimated.
d. cannot occur if the percentage of sales method of estimating bad debts is used.
3. Two methods of accounting for uncollectible accounts are the
a. allowance method and the accrual method.
b. allowance method and the net realizable method.
c. direct write-off method and the accrual method.
d. direct write-off method and the allowance method.
4. If an account is collected after having been previously written off,
a. the allowance account should be debited.
b. only the control account needs to be credited.
c. both income statement and balance sheet accounts will be affected.
d. there will be both a debit and a credit to accounts receivable.
5. The direct write-off method of accounting for bad debts
a. uses an allowance account.
b. uses a contra-asset account.
c. does not require estimates of bad debt losses.
d. is the preferred method under generally accepted accounting principles.
, 6. Winter Furniture factors $400,000 of receivables to Fair Factors, Inc. Fair Factors
assesses a 2% service charge on the amount of receivables sold. Winter Furniture
factors its receivables regularly with Fair Factors. What journal entry does Winter
make when factoring these receivables?
a. Cash ................................................................................. 392,000
Loss on Sale of Receivables ........................................... 8,000
Accounts Receivable .............................................. 400,000
b. Cash ................................................................................. 392,000
Accounts Receivable .............................................. 392,000
c. Cash ................................................................................. 400,000
Accounts Receivable .............................................. 392,000
Gain on Sale of Receivables .................................. 8,000
d. Cash ................................................................................ 392,000
Service Charge Expense ............................................... 8,000
Accounts Receivable ............................................ 400,000
7. Hardy Clinic purchases land for $90,000 cash. The clinic assumes $1,500 in
property taxes due on the land. The title and attorney fees totaled $1,000. The
clinic has the land graded for $2,200. What amount does Hardy Clinic record as
the cost for the land?
a. $92,200.
b. $90,000.
c. $94,700.
d. $92,500.
8. Land improvements should be depreciated over the useful life of the
a. land.
b. buildings on the land.
c. land or land improvements, whichever is longer.
d. land improvements.
9. Equipment was purchased for $45,000. Freight charges amounted to $2,100 and
there was a cost of $6,000 for building a foundation and installing the equipment.
It is estimated that the equipment will have a $9,000 salvage value at the end of
its 5-year useful life. Depreciation expense each year using the straight-line
method will be
a. $10,620.
b. $8,820.
c. $7,380.
d. $7,200.
