Accountancy Final Exam Questions
1) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $300,000 and credit sales are $1,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?
Debit Bad Debt Expense $12,000, Credit – Allowance for Doubtful Accounts $12,000
2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period?
Answer: B - $12,000
3) Intangible assets
Answer: B - should be reported as a separate classification on the balance sheet
4) Intangible assets are the rights and privileges that result from ownership of long-lived assets that
Answer: C - do not have physical substance
5) The book value of an asset is equal to the
Answer: D - asset’s cost less accumulated depreciation
6) Gains on an exchange of plant assets that has commercial substance are
Answer: D – recognized immediately
7) Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as
D. revenue expenditures (WRONG)
8) Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as
Answer: A – capital expenditures
9) When an interest-bearing note matures, the balance in the Notes Payable account is
C. equal to the amount repaid by the owner (WRONG)
10) The interest charged on a $200,000 note payable, at a rate of 6%, on a 2-month note would be
Answer: D - $2,000
11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?
D. $210,000
12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the
Debit Bad Debt Expense $12,000, Credit – Allowance for Doubtful Accounts $12,000
2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period?
Answer: B - $12,000
3) Intangible assets
Answer: B - should be reported as a separate classification on the balance sheet
4) Intangible assets are the rights and privileges that result from ownership of long-lived assets that
Answer: C - do not have physical substance
5) The book value of an asset is equal to the
Answer: D - asset’s cost less accumulated depreciation
6) Gains on an exchange of plant assets that has commercial substance are
Answer: D – recognized immediately
7) Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as
D. revenue expenditures (WRONG)
8) Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as
Answer: A – capital expenditures
9) When an interest-bearing note matures, the balance in the Notes Payable account is
C. equal to the amount repaid by the owner (WRONG)
10) The interest charged on a $200,000 note payable, at a rate of 6%, on a 2-month note would be
Answer: D - $2,000
11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?
D. $210,000
12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the