MGMT 200 EXAM 2 (PURDUE UNIVERSITY)
NEWEST 2024 EXAM 2 AND PRACTICE EXAM
300 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+
The normal balance of the account "Allowance for Uncollectable
Accounts" is a _____ because _____.
A. Debit; it is a contra account to Revenue (a credit account)
B. Credit; it is a contra account to Accounts Receivable (a debit
account)
C. Debit; it is an expense in the income statement
D. Credit; it is a contra account to Bad Debt Expense (a debit account)
- ANSWER >>>B. Credit; it is a contra account to Accounts
Receivable (a debit account)
Many intangible assets are not recorded on the balance sheet at their
estimated market values.
A. True
B. False - ANSWER >>>A. True
Research and development costs should be:
A. Expensed in the period incurred
B. Expensed in the period they are determined to be unsuccessful
C. Deferred pending determination of success
D. Expensed if unsuccessful, capitalized if successful - ANSWER
>>>A. Expensed in the period incurred
Morgan Pharmaceutical spends $50,000 this year in research and
development for a new drug to cure liver damage. By the end of the
year, management feels confident that the new drug will gain FDA
approval and lead to higher future sales. What impact will the $50,000
spedning have on this year's financial statements?
,A. Increase Assets
B. Decrease Revenues
C. Increase Expenses
D. Increase Revenues - ANSWER >>>C. Increase Expenses
The franchisee's initial fee is recorded as an expense on the income
statement.
A. True
B. False - ANSWER >>>B. False (The franchisee's initial fee is
recorded as an intangible asset and then expensed over the life of the
franchise agreement)
In accounting, goodwill
A. May be recorded whenever a company achieves a level of net
income that exceeds the industry average
B. Is amortized over its useful life
C. May be recorded when a company purchases another business
D. Must be expensed in the period it is recorded because benefits
from goodwill are difficult to identify - ANSWER >>>C. Must be
recorded when a company purchases another business
Northern purchased the entire business of Southern including all its
assets and liabilities for $600,000. Below is information related to the
two companies:
Northern
Fair value of assets $1,050,000 $800,000
Fair value of liabilities $575,000 $300,000
Reported assets $800,000 $650,000
Reported liabilities $500,000 $250,000
Net Income for the year $60,000 $50,000
How much goodwill did Northern pay for acquiring Southern?
A. $100,000
B. $300,000
C. $200,000
D. $150,000 - ANSWER >>>A. $100,000
,The purchase of a new cooling system for $150,000 to upgrade an
office building owned by the company would be accounted for as:
A. On-going expense
B. An addition in the Buildings account
C. An expense in the period incurred
D. A patent - ANSWER >>>B. An addition in the Buildings account
Which of the following subsequent expenditures would be capitalized?
A. Ordinary repair
B. Costs that increase the service life of an asset
C. Routine maintenance
D. Ordinary repair and routine maintenance - ANSWER >>>B. Costs
that increase the service life of an asset
Which of the following subsequent expenditures would not be
capitalized?
A. Unsuccessful legal defense of intangible assets
B. Additions
C. Improvements
D. Successful legal defense of intangible assets - ANSWER >>>A.
Unsuccessful legal defense of intangible assets
We capitalize repairs and maintenance expenditures because they
maintain a given level of benefits.
A. True
B. False - ANSWER >>>B. False (We expense repairs and
maintenance expenditures in the period incurred because they
maintain a given level of benefits)
Real Angus Steakhouse purchased land for $75,000 cash. They also
incurred commissions of $4,500, property taxes of $5,000, and title
insurance of $800. The $5,000 in property taxes includes $4,000 in
back taxes paid by Real Angus on behalf of the seller and $1,000 due
for the current year after the purchase date. For what amount should
Real Angus Steakhouse record the land?
A. $83,500
B. $84,300
, C. $85,300
D. $75,000 - ANSWER >>>B. $84,300
Capital Construction purchased a 3-acre tract of land for a building
site for $350,000. The company demolished the old building at cost of
$12,00, but was able to sell scrap from the building for $1,500. The
cost of title insurance was $900 and attorney fees for reviewing the
contract was $500. Property taxes paid were $3,000,of which $250
covered the period after the purchase date. The capitalized cost of the
land is:
A.$366,400
B. $366,150
C. $364,650
D. $231,150 - ANSWER >>>C. $364,650
Purdue Development incurred the following costs associated with the
purchase of a piece of land that it will use to re-build an office building:
Sale price of the land $400,000
Sale of salvaged parts already on land ($20,000)
Demolition of the old building $30,000
Ground breaking ceremony (food and supplies) $1,500
Land preparation and leveling $7,500
Total net costs $419,000
What amount should be recorded for the purchase of the land?
A. $437,500
B. $417,500
C. $439,000
D. $419,000 - ANSWER >>>B. $417,500
Land improvements are recorded separately from the land itself
because, unlike land, these assets are subject to depreciation.
A. True
B. False - ANSWER >>>A. True
Which of the following would be recorded as land improvements?
A. Property taxes
B. Title insurance
NEWEST 2024 EXAM 2 AND PRACTICE EXAM
300 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+
The normal balance of the account "Allowance for Uncollectable
Accounts" is a _____ because _____.
A. Debit; it is a contra account to Revenue (a credit account)
B. Credit; it is a contra account to Accounts Receivable (a debit
account)
C. Debit; it is an expense in the income statement
D. Credit; it is a contra account to Bad Debt Expense (a debit account)
- ANSWER >>>B. Credit; it is a contra account to Accounts
Receivable (a debit account)
Many intangible assets are not recorded on the balance sheet at their
estimated market values.
A. True
B. False - ANSWER >>>A. True
Research and development costs should be:
A. Expensed in the period incurred
B. Expensed in the period they are determined to be unsuccessful
C. Deferred pending determination of success
D. Expensed if unsuccessful, capitalized if successful - ANSWER
>>>A. Expensed in the period incurred
Morgan Pharmaceutical spends $50,000 this year in research and
development for a new drug to cure liver damage. By the end of the
year, management feels confident that the new drug will gain FDA
approval and lead to higher future sales. What impact will the $50,000
spedning have on this year's financial statements?
,A. Increase Assets
B. Decrease Revenues
C. Increase Expenses
D. Increase Revenues - ANSWER >>>C. Increase Expenses
The franchisee's initial fee is recorded as an expense on the income
statement.
A. True
B. False - ANSWER >>>B. False (The franchisee's initial fee is
recorded as an intangible asset and then expensed over the life of the
franchise agreement)
In accounting, goodwill
A. May be recorded whenever a company achieves a level of net
income that exceeds the industry average
B. Is amortized over its useful life
C. May be recorded when a company purchases another business
D. Must be expensed in the period it is recorded because benefits
from goodwill are difficult to identify - ANSWER >>>C. Must be
recorded when a company purchases another business
Northern purchased the entire business of Southern including all its
assets and liabilities for $600,000. Below is information related to the
two companies:
Northern
Fair value of assets $1,050,000 $800,000
Fair value of liabilities $575,000 $300,000
Reported assets $800,000 $650,000
Reported liabilities $500,000 $250,000
Net Income for the year $60,000 $50,000
How much goodwill did Northern pay for acquiring Southern?
A. $100,000
B. $300,000
C. $200,000
D. $150,000 - ANSWER >>>A. $100,000
,The purchase of a new cooling system for $150,000 to upgrade an
office building owned by the company would be accounted for as:
A. On-going expense
B. An addition in the Buildings account
C. An expense in the period incurred
D. A patent - ANSWER >>>B. An addition in the Buildings account
Which of the following subsequent expenditures would be capitalized?
A. Ordinary repair
B. Costs that increase the service life of an asset
C. Routine maintenance
D. Ordinary repair and routine maintenance - ANSWER >>>B. Costs
that increase the service life of an asset
Which of the following subsequent expenditures would not be
capitalized?
A. Unsuccessful legal defense of intangible assets
B. Additions
C. Improvements
D. Successful legal defense of intangible assets - ANSWER >>>A.
Unsuccessful legal defense of intangible assets
We capitalize repairs and maintenance expenditures because they
maintain a given level of benefits.
A. True
B. False - ANSWER >>>B. False (We expense repairs and
maintenance expenditures in the period incurred because they
maintain a given level of benefits)
Real Angus Steakhouse purchased land for $75,000 cash. They also
incurred commissions of $4,500, property taxes of $5,000, and title
insurance of $800. The $5,000 in property taxes includes $4,000 in
back taxes paid by Real Angus on behalf of the seller and $1,000 due
for the current year after the purchase date. For what amount should
Real Angus Steakhouse record the land?
A. $83,500
B. $84,300
, C. $85,300
D. $75,000 - ANSWER >>>B. $84,300
Capital Construction purchased a 3-acre tract of land for a building
site for $350,000. The company demolished the old building at cost of
$12,00, but was able to sell scrap from the building for $1,500. The
cost of title insurance was $900 and attorney fees for reviewing the
contract was $500. Property taxes paid were $3,000,of which $250
covered the period after the purchase date. The capitalized cost of the
land is:
A.$366,400
B. $366,150
C. $364,650
D. $231,150 - ANSWER >>>C. $364,650
Purdue Development incurred the following costs associated with the
purchase of a piece of land that it will use to re-build an office building:
Sale price of the land $400,000
Sale of salvaged parts already on land ($20,000)
Demolition of the old building $30,000
Ground breaking ceremony (food and supplies) $1,500
Land preparation and leveling $7,500
Total net costs $419,000
What amount should be recorded for the purchase of the land?
A. $437,500
B. $417,500
C. $439,000
D. $419,000 - ANSWER >>>B. $417,500
Land improvements are recorded separately from the land itself
because, unlike land, these assets are subject to depreciation.
A. True
B. False - ANSWER >>>A. True
Which of the following would be recorded as land improvements?
A. Property taxes
B. Title insurance
