MBA 5100 Accounting Exam Questions
With 100% Correct Answers
Intangibleiassetsiwithiidentifiableiusefulilivesiarei-iCorrectiAnswer-
amortizedioveritheishorteriofitheiriusefuliorilegalilives
showniinitheiassetisectioniofitheibalanceisheet
Theiselleriofiaibondiisicalledithei___iwhileitheibuyeriofiaibondiisicalledith
ei___.i-iCorrectiAnswer-Issuer
Bondholder
Fred'siFansipurchaseditwoiidenticalifansiforiresale.iFani1iwasipurchasedi
iniApriliandicosti$76.iFani2iwasipurchasediiniMayiandicosti$80.iOneiofith
eifansiwasisoldiiniJuneifori$100.iWhichiinventoryicostiflowimethodiwoul
diresultiiniai$20igrossimargin?i-iCorrectiAnswer-Last-in,ifirstiout
$100i-i$80i=i$20
Theicostiofiailong-termiassetiincludesi-iCorrectiAnswer-Installationicosts
Salesitax
,Purchaseiprice
Realtor'siandiattorneyifee's
Givenianiaccountsireceivableiturnoveriratioiofi15.5,iendingiaccountsirec
eivableiofi$150,000,iandiaverageiaccountsireceivableiofi$140,000,itheiav
erageidaysitoicollectireceivablesiisi______idays.i-iCorrectiAnswer-
averageidaysitoicollectireceivablesi=i(365/accountireceiviturnover)
(365/15.5)i=i23.54idays
straight-lineidepreciationimethodi-iCorrectiAnswer-(costi-
iSalvageivalue)i/iUsefulilifeiyears
TheiBlackiLimoiCompanyi(BLC)ipurchasediailimoioniJanuaryi1iofiYeari1.iT
heilimoicosti$48,000.iItihadianiexpectediusefulilifeiofi4iyearsiandiai$8,00
0isalvageivalue.iAssumingiBLCiusesistraight-
lineidepreciation,icashiflowifromioperatingiactivitiesishownionitheiYeari
2istatementioficashiflowsiisi-iCorrectiAnswer-$0
TheicashipaidiforitheilimoiwouldihaveibeenishownionitheiYeari1icashistat
ementiasianiinvestingiactivity.iThereiisinoicashiflowiassociatediwithitheir
ecognitioniofidepreciation.
,But,itheiyearlyidepreciationiamountiwouldibei$10,000.i((Costi-
iSalvageivalue)i/ilifeiyears)
InventoryiTurnover:iNumberiofitimes,iONiAVERAGE,ithatiinventoryiisire
placesiduringitheiyear.i-iCorrectiAnswer-
costiofigoodsisoldi/iaverageiinventory
Theigainiorilossionitheidisposaliofianiassetiisiequalitoitheisalesipriceiminu
si-iCorrectiAnswer-Salesipriceiminusi-iBookivalue
Costiofigoodsiavailableiforisaleiisiallocatedibetweeni-iCorrectiAnswer-
Endingiinventoryiandicostiofigoodsisold
Whenianiintangibleiassetiwithianiidentifiableiusefulilifeiisiamortizedi-
iCorrectiAnswer-Liabilitiesiareinotiaffected
Cashiflowiisinotiaffected
Netiincomeidecreases
Whichiofitheifollowingistatementsiareitrue?i-iCorrectiAnswer-
Theiamountidueiatibondimaturityiisicalleditheifaceivalueiofitheibond.
, Aibondicertificateidescribesitheicompany'siobligationitoirepayitheiprinci
pal.
Cashiinterestipaymentsiareibasedionitheistatediinterestirate.
Recognizingiaccruediinterestiexpenseiaffectsithei-iCorrectiAnswer-
Incomeistatement
Balanceisheet
NOTiTHEiSTATEMENTiOFiCASHiFLOWS
CompaniesithatiuseiLIFOiforiincomeitaxireportingimustiuseitheisameiinv
entoryicostiflowimethodiforitheirifinancialistatements.i-
iCorrectiAnswer-True
CompaniesiusingiLIFOiforitaxireportingiareialsoirequireditoiuseiLIFOiforifi
nancialireporting.
Becauseiitiisihighlyiliquid,iinventoryiisigenerallyipresentediaboveiaccoun
tsireceivableionitheibalanceisheet.i-iCorrectiAnswer-False
Inventoryiisilessiliquidithaniaccountsireceivablei(alsoicash,isecurities,iect
)isoiitiisibelow,inotiabove.
With 100% Correct Answers
Intangibleiassetsiwithiidentifiableiusefulilivesiarei-iCorrectiAnswer-
amortizedioveritheishorteriofitheiriusefuliorilegalilives
showniinitheiassetisectioniofitheibalanceisheet
Theiselleriofiaibondiisicalledithei___iwhileitheibuyeriofiaibondiisicalledith
ei___.i-iCorrectiAnswer-Issuer
Bondholder
Fred'siFansipurchaseditwoiidenticalifansiforiresale.iFani1iwasipurchasedi
iniApriliandicosti$76.iFani2iwasipurchasediiniMayiandicosti$80.iOneiofith
eifansiwasisoldiiniJuneifori$100.iWhichiinventoryicostiflowimethodiwoul
diresultiiniai$20igrossimargin?i-iCorrectiAnswer-Last-in,ifirstiout
$100i-i$80i=i$20
Theicostiofiailong-termiassetiincludesi-iCorrectiAnswer-Installationicosts
Salesitax
,Purchaseiprice
Realtor'siandiattorneyifee's
Givenianiaccountsireceivableiturnoveriratioiofi15.5,iendingiaccountsirec
eivableiofi$150,000,iandiaverageiaccountsireceivableiofi$140,000,itheiav
erageidaysitoicollectireceivablesiisi______idays.i-iCorrectiAnswer-
averageidaysitoicollectireceivablesi=i(365/accountireceiviturnover)
(365/15.5)i=i23.54idays
straight-lineidepreciationimethodi-iCorrectiAnswer-(costi-
iSalvageivalue)i/iUsefulilifeiyears
TheiBlackiLimoiCompanyi(BLC)ipurchasediailimoioniJanuaryi1iofiYeari1.iT
heilimoicosti$48,000.iItihadianiexpectediusefulilifeiofi4iyearsiandiai$8,00
0isalvageivalue.iAssumingiBLCiusesistraight-
lineidepreciation,icashiflowifromioperatingiactivitiesishownionitheiYeari
2istatementioficashiflowsiisi-iCorrectiAnswer-$0
TheicashipaidiforitheilimoiwouldihaveibeenishownionitheiYeari1icashistat
ementiasianiinvestingiactivity.iThereiisinoicashiflowiassociatediwithitheir
ecognitioniofidepreciation.
,But,itheiyearlyidepreciationiamountiwouldibei$10,000.i((Costi-
iSalvageivalue)i/ilifeiyears)
InventoryiTurnover:iNumberiofitimes,iONiAVERAGE,ithatiinventoryiisire
placesiduringitheiyear.i-iCorrectiAnswer-
costiofigoodsisoldi/iaverageiinventory
Theigainiorilossionitheidisposaliofianiassetiisiequalitoitheisalesipriceiminu
si-iCorrectiAnswer-Salesipriceiminusi-iBookivalue
Costiofigoodsiavailableiforisaleiisiallocatedibetweeni-iCorrectiAnswer-
Endingiinventoryiandicostiofigoodsisold
Whenianiintangibleiassetiwithianiidentifiableiusefulilifeiisiamortizedi-
iCorrectiAnswer-Liabilitiesiareinotiaffected
Cashiflowiisinotiaffected
Netiincomeidecreases
Whichiofitheifollowingistatementsiareitrue?i-iCorrectiAnswer-
Theiamountidueiatibondimaturityiisicalleditheifaceivalueiofitheibond.
, Aibondicertificateidescribesitheicompany'siobligationitoirepayitheiprinci
pal.
Cashiinterestipaymentsiareibasedionitheistatediinterestirate.
Recognizingiaccruediinterestiexpenseiaffectsithei-iCorrectiAnswer-
Incomeistatement
Balanceisheet
NOTiTHEiSTATEMENTiOFiCASHiFLOWS
CompaniesithatiuseiLIFOiforiincomeitaxireportingimustiuseitheisameiinv
entoryicostiflowimethodiforitheirifinancialistatements.i-
iCorrectiAnswer-True
CompaniesiusingiLIFOiforitaxireportingiareialsoirequireditoiuseiLIFOiforifi
nancialireporting.
Becauseiitiisihighlyiliquid,iinventoryiisigenerallyipresentediaboveiaccoun
tsireceivableionitheibalanceisheet.i-iCorrectiAnswer-False
Inventoryiisilessiliquidithaniaccountsireceivablei(alsoicash,isecurities,iect
)isoiitiisibelow,inotiabove.
