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Question 7: After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to:
a.Bank Service Charge Expense
b.Cash
c.Petty Cash
d.Cash Short and Over
e.None of the above
Question 8: Frick Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2010. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year-end. The uncollectible accounts expense for 2010 will be:
a$7,000
b.$10,000
c.$13,000
d.$9,850
e.None of the above

Question 9: Frick Company issued its own $10,000, 90-day, non interest-bearing note to a bank. If the note is discounted at 10 percent, the proceeds to Frick are:
a.$10,000
b.$9,000
c.$9,750
d.$10,250
e.None of the above

Question 10: On 2010 July 1, Frick Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Frick uses the double-declining-depreciation method, the depreciation expense for 2010 is:
a.$88,000
b.$72,000
c.$36,000
d.$44,000
e.$40,000

Question 11: The result of recording a capital expenditure as a revenue expenditure is an:
a.Overstatement of current year’s expense
b.Understatement of current year’s expense
c.Understatement of subsequent year’s net income
d.Overstatement of current year’s net income
e.None of the above

Question 12: A truck costing $45,000 and having an estimated salvage value of $4,500 and an original life of five years is exchanged for a new truck. The cash price of the new truck is $57,000, and a trade-in allowance of $22,500 is received. The old truck has been depreciated for three years using the straight-line method. The new truck would be recorded at:
a.$55,200
b.$57,000
c.$34,500
d.$43,200
e.None of the above

Question 13: Which of the following is not an advantage of the corporate form of organization?
a.Continuous existence of the entity
b.Limited liability of stockholders
c.Government regulation
d.Easy transfer of ownership

Question 14: Treasury stock should be shown on the balance sheet as a(n):
a.Reduction of the corporation’s stockholders’ equity
b.Current asset
c.Current liability
d.Investment asset

Question 15: When the stockholders invest cash in the business, what is the effect?
aLiabilities increase and stockholders’ equity increases
bBoth assets and liabilities increase
cBoth assets and stockholders’ equity increase
dNone of the above

Question 16: The ending balance in retained earnings is shown in the:
a.Income statement
b.Statement of retained earnings
c.Balance sheet
d.Both (b) and (c)
e.Both (a) and (c)
f.(a), (b) and (c)

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