Test answers for Accounting Skills Test (Assets and Revenue)

Odesk Test answers for Accounting Skills Test (Assets and Revenue) 2015

1. XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000 on its December 31 Year 1 Balance Sheet. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. The company also estimates that its bad debts will be 2 percent of credit sales. What balance would XYZ Company report in Allowance for Uncollectible Accounts on its December 31 Year 2 Balance Sheet?

Answers:

• $26,400

• $32,400

• $36,000

• $42,000

2. A fast food restaurant chain sells a division that operates movie theaters. What type of activity is this?

Answers:

• Primary operating activity, which is recurring

• Primary operating activity, which is nonrecurring

• A recurring activity, which is peripheral to primary operations

• A nonrecurring activity, which is peripheral to primary operations

3. A manufacturing firm sells a parcel of land next to one of its warehouses. What type of activity is this?

Answers:

• Primary operating activity, which is recurring

• Primary operating activity, which is nonrecurring

• A recurring activity, which is peripheral to primary operations

• A nonrecurring activity, which is peripheral to primary operations

74 NOT Answered Yet Test Questions:

(hold on, will be updated soon)

4. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the cost-recovery-first method, how much income would they recognize in Year 3?

Answers:

• $0

• $16,800

• $28,000

• $50,400

5. Small adjustments to and  replacement of plant assets that have little or no effect on useful life are called _______________.

Answers:

• payroll

• repairs

• depreciation

• marketing

6. When a company uses its accounts receivable as collateral for a loan, the transaction is known as a/an _____________________.

Answers:

• factoring of accounts receivable

• assignment of accounts receivable

• pledging of accounts receivable

• sale of accounts receivable

7. XYZ Company had sales of $585,000 during Year 1, $260,000 of which were on account. The account balances in Accounts Receivable and in Allowance for Uncollectible Accounts on December 31 of Year 1 were $78,000 and $10,400 respectively. Past experience indicates that 5 percent of all credit sales will not be collected. An aging of accounts indicated that $19,500 of the receivable balance would not be collected. How much should XYZ Company debit to the Bad Debt Expense Account?

Answers:

• $29,900

• $13,000

• $19,500

• $9,100

8. XYZ Company buys a building on April 1, 2008 for $100,000. The building has a physical life of 50 years, but XYZ Company anticipates using the building for 50 years. At the end of 50 years, the building will have no disposal value, but at the end of 30 years it will have a disposal value of $5,000. If the company uses the straight line method, how much depreciation would be recorded on December 31, 2008?

Answers:

• $3,167

• $2,000

• $1,500

• $2,375

9. Which of the following accounts is credited for depreciation?

Answers:

• Depreciation Expense

• Accumulated Depreciation

• Fixed Assets

• Depletion

10. Early in Year 1, XYZ Company begins construction of an office building. The contract price for the construction is $23,400,000. The project, which is completed in Year 3, incurs costs as follows:

Year 1: $5,200,000
Year 2: $6,500,000
Year 3: $3,900,000

If XYZ Company recognizes income under the completed contract method, how much income would they recognize on the office building contract in Year 1?

Answers:

• $7,800,000

• $5,200,000

• $2,600,000

• $0

11. In the indirect method, which of the following is included in the cash flow from investing activities?

Answers:

• Proceeds from the retirement of plant assets

• Amortization

• Depreciation

• Net Income

12. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the cost-recovery-first method, how much income would they recognize in Year 2?

Answers:

• $0

• $16,800

• $28,000

• $33,600

13. Which of the accounts below would NOT be treated as a reduction in sales revenue on the income statement?

Answers:

• Sales Discounts Taken

• Sales Allowances

• Sales Returns

• Bad Debts Expense

14. XYZ Company generates five new products in 2008. The interest capitalized for these items is referred to as __________________.

Answers:

• self-constructed assets

• purchased fixed assets

• fully depreciated assets

• expensed purchases

15. Assets that can provide future benefits without having physical form are called ___________.

Answers:

• fixed assets

• cash

• intangible assets

• accounts receivable

16. Which of the following is a type of intangible asset that appears on the balance sheet only when one company is acquired by another?

Answers:

• Goodwill

• Capital Assets

• Patents

• Trademarks

17. Which of the following basic patterns would be appropriate for allocation of intangibles?

Answers:

• Expense immediately

• Straight line depreciation

• Accelerated depreciation

• No depreciation

18. The denominator of the sum-of-the-years digits fraction is ______________.

Answers:

• n+n

• n/2

• n+1/2

• n(n+1)/2

19. When the ______________ method is used to estimate uncollectible accounts, the balance in the Allowance for Uncollectible Accounts is adjusted to reflect the desired ending balance.

Answers:

• AP Aging

• Uncollectible Forecasting

• Progressive Aging

• Aging of Accounts Receivable

20. XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000 on its December 31 Year 1 Balance Sheet. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. What is the balance in Accounts Receivable on December 31 of Year 2?

Answers:

• $164,400

• $166,800

• $170,400

• $174,000

21. Which of the following costs would NOT be included in the cost of machinery?

Answers:

• Invoice price

• Installation costs

• Testing of machinery prior to its intended use

• All of the above would be included.

22. Depreciation is not a decline in value, but a process of __________________.

Answers:

• expense

• amortization

• asset building

• liability

23. Which of the following depreciation methods would best match the cost with expected benefits when the rate of usage for an asset varies greatly from period to period?

Answers:

• Straight line method

• Production method

• Declining balance method

• Sum-of-the-years digits method

24. XYZ Company owns machinery with a cost of $100,000 and an accumulated depreciation of $60,000 on January 1, 2007. On July 1, 2007, the machinery is sold for $43,000. The straight line depreciation method has been used during the previous six years of life. How much gain or loss will be recorded on the sale?

Answers:

• $3,000 gain

• $13,000 gain

• $22,000 gain

• $8,000 gain

25. When managers choose estimates that lead to higher current income, analysts refer to those earnings as ________________.

Answers:

• higher quality of earnings

• at par

• off budget

• lower quality of earnings

26. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows:
Year 2: $10,000,000
Year 3: $15,000,000
Year 4: $5,000,000

If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 2?

Answers:

• $4,000,000

• $10,000,000

• $12,000,000

• $14,000,000

27. Natural resources are referred to as __________________.

Answers:

• Intangible assets

• Plant assets

• Wasting assets

• None of the above

28. Which of the following is a characteristic of grouping assets into one of seven life classes?

Answers:

• Sum-of-the-years digits method

• Modified accelerated cost recovery system

• Declining balance method

• None of the above

29. When the ______________ method is used to estimate uncollectible accounts, the provision for uncollectible accounts is added to the existing balance in the Allowance for Uncollectible Accounts.

Answers:

• Progressive Forecast

• Bad Debt Analysis

• Percentage of Sales

• Aging

30. The situation in which a company uses its accounts receivable to obtain a loan is called ___________. In this process, the company usually maintains control of the receivables, collects from customers, and forwards the proceeds to the lending institution to liquidate the loan.

Answers:

• Assigning

• Factoring

• Sales

• Pledging

31. The amortization of natural resources is referred to as __________________.

Answers:

• expense

• depreciation

• capitalization

• depletion

32. If a reasonable estimate of the amount of cash to be received can be made, when should revenue be recognized?

Answers:

• At the time of sale

• At the time of cash collection

• At the time of cash collection, using the cost-recovery-first method

• None of the above

33. The sum-of-the-years digits method is an example of a/an ________________.

Answers:

• accelerated method

• double declining method

• MACRS

• straight line method

34. In 2008, XYZ Company spends $250,000 on research and development to generate new product lines. Of the five projects in progress, one results in a patented item while the other four are considered unsuccessful. According to generally accepted accounting principles, how much of the $250,000 should be recognized as an expense in 2008?

Answers:

• $250,000

• $0

• $200,000

• $50,000

35. Which of the following statements about selecting the best depreciation method for tax purposes is incorrect?

Answers:

• The goal should be to maximize the present value of the tax savings from the depreciation deductions.

• The asset should be written off as soon as possible.

• Earlier depreciation deductions are more valuable than later ones.

• A decelerated depreciation method should be employed.

36. What is the proper accounting for all research and development costs when incurred?

Answers:

• Capitalize

• Liability

• Expense

• Asset

37. The matching of costs with the benefits derived from the use of an asset is ____________.

Answers:

• the goal of depreciation accounting for financial statement purpose

• expensing

• GAAP

• FASB

38. When an asset impairment occurs, a company writes down the asset to _______________.

Answers:

• the sum of its undiscounted cash flows

• its then-current fair value

• zero

• None of the above

39. XYZ Company purchases a piece of equipment on January 1, 2007 at a cost of $100,000. The equipment has a five-year useful life and can be sold for $10,000 at the end of five years. If XYZ Company uses the 200% percent declining balance depreciation method, how much depreciation would be recorded in the second year?

Answers:

• $12,000

• $20,000

• $15,900

• None of the above

40. XYZ Company acquires a machine for $20,000 in 2000 and depreciates it on the straight line basis, no salvage value, for two years based on an estimated ten-year life. In 2002 it was determined that the remaining life was only four years instead of eight. According to generally accepted accounting principles, what amount of depreciation should be recorded for 2002?

Answers:

• $5,000

• $4,000

• $3,333

• $2,000

41. Which of the following is the generally accepted procedure of corrective action for material misestimates involving depreciation?

Answers:

• To spread the remaining un-depreciated balance, less the new estimate of salvage value, over the new estimate of remaining service life of the asset

• To make an adjustment for the past misestimate

• Either a or b

• Neither a or b

42. Which of the following is the same as an outright sale?

Answers:

• Assignment of receivables

• Factoring of receivables

• Pledging of receivables

• Collection of receivables

43. The legal right to future benefits of an invention is referred to as a/an _______________.

Answers:

• expense

• patent

• copyright

• trademark

44. On January 1, 2007, XYZ Company has machinery on the books that originally cost $200,000. In 2007, the following expenditures were made:

Minor Repairs: $5,000
IMproveMents: $10,000
Additions: $37,000

Given the above data, how much would be recorded in the Machinery Account on December 31,2007?

Answers:

• $252,000

• $247,000

• $235,000

• $225,000

45. Which of the following events reduces total assets?

Answers:

• A customer returns merchandise for credit.

• Uncollectible accounts are written off under the allowance method.

• An accounts receivable is collected.

• None of the above

46. Which of the following is NOT an accepted method for financial reporting for wasting assets?

Answers:

• Full costing method

• Successful efforts method

• Units of production method

• Percentage depletion method

47. In which of the following methods may salvage be ignored when calculating depreciation?

Answers:

• Straight line

• Sum-of-the-years digits

• Production method

• MACRS

48. On its December 31 Balance Sheet in Year 1, XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible.

Given the above data, what amount would XYZ Company report as Bad Debt Expense in its Year 2 Income Statement?

Answers:

• $17,040

• $18,000

• $21,600

• $20,640

• $16,440

49. Which of the following factors is an example of a functional cause of depreciation?

Answers:

• Wear and tear

• Inadequate size to meet current needs of the company

• Rust or decay

• Deterioration from wind and rain

50. Which of the following life spans would be used for automobiles if the MACRS method of depreciation is employed?

Answers:

• 3 years

• 5 years

• 10 years

• 15 years

51. The term _______________ refers to "cost less accumulated" depreciation.

Answers:

• fair value

• book value

• market value

• None of the above

52. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows:

Year 2: $10,000,000
Year 3: $15,000,000
Year 4: $5,000,000

If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 3?

Answers:

• $21,000,000

• $12,000,000

• $10,000,000

• $6,000,000

53. The proceeds gained upon disposition of an asset at the end of its useful life are referred to as the asset's _______________.

Answers:

• book value

• fair value

• salvage value

• declining value

54. XYZ Company reports its net assets at a book value of $150,000. Investigation reveals that the net assets had a market value of $175,000. In addition, XYZ Company had been offered $220,000 for the company by ABC Company. What is the amount of goodwill that should be recorded on the books of XYZ Company?

Answers:

• $0

• $25,000

• $45,000

• $70,000

55. Which of the following costs is capitalized for a self-constructed asset?

Answers:

• Interest prior to construction

• Interest during construction

• Interest after construction

• All of the above

56. What occurs when the then-current book value of an asset exceeds the sum of expected undiscounted cash flow?

Answers:

• Salvage

• Fair value

• Impairment

• Depletion

57. Which of the following basic patterns would be appropriate for allocation of land?

Answers:

• Expense immediately

• Straight line depreciation

• Decelerated depreciation

• No depreciation

58. Late in Year 1, XYZ Company signs a contract to construct a bridge for the Florida Dept. of Transportation. The contract price is $42,000,000. The costs during the 3-year construction period are as follows:

Year 2: $10,000,000
Year 3: $15,000,000
Year 4: $5,000,000

If XYZ Company recognizes income under the percentage-of-completion method, how much income would they recognize on the bridge contract in Year 4?

Answers:

• $0

• $2,000,000

• $7,000,000

• $12,000,000

59. XYZ Company sells a residential lot to Mr. A for $140,000. The cost assigned to the lot by XYZ Company is $56,000. The contract calls for five annual payments of $28,000. Each payment is received on time at the end of each of the five years. If XYZ Company recognizes income under the installment method, how much income would they recognize in Year 1?

Answers:

• $140,000

• $84,000

• $28,000

• $16,800

60. Early in Year 1, XYZ Company begins construction of an office building. The contract price for the construction is $23,400,000. The project, which is completed in Year 3, incurs costs as follows:

Year 1: $5,200,000
Year 2: $6,500,000
Year 3: $3,900,000

If XYZ Company recognizes income under the completed contract method, how much income would they recognize on the office building contract in Year 3?

Answers:

• $1,950,000

• $3,900,000

• $5,850,000

• $7,800,000

61. How are property, plant, and equipment and related accumulated depreciation generally disclosed in the Balance Sheet?

Answers:

• By the original cost less the accumulated depreciation

• By the accumulated depreciation and the book value

• By the book value and by providing the detail of cost and accumulated depreciation in the notes

• All of the above methods are used.

62. Which of the following groups assets into one of seven classes for tax depreciation?

Answers:

• MACRS

• Double declining method

• Straight line depreciation

• Accelerated depreciation

63. A Florida hotel chain's properties located on the Emerald Coast are destroyed when the area is devastated by an earthquake. What type of activity is this?

Answers:

• Primary operating activity, which is recurring

• Primary operating activity, which is nonrecurring

• A recurring activity, which is peripheral to primary operations

• A nonrecurring activity, which is peripheral to primary operations

64. In which of the following depreciation methods is the estimate of useful life NOT required?

Answers:

• Straight line

• Sum-of-the-years digits

• 200% declining balance

• MACRS

65. In financial statements, what is the proper handling of the Allowance for Uncollectible Accounts?

Answers:

• A revenue contra account

• A selling expense

• A contra to Accounts Receivable

• A current liability

66. Which term below is used when referring to the write-off of intangible assets?

Answers:

• Amortization

• Depreciation

• Depletion

• Write-off

67. A professional soccer team pays a signing bonus to one of its new players. What type of activity is this?

Answers:

• Primary operating activity, which is recurring

• Primary operating activity, which is nonrecurring

• A recurring activity, which is peripheral to primary operations

• A nonrecurring activity, which is peripheral to primary operations

68. Which of the following methods allows all operating expenses, related with oil and gas exploration, to be capitalized irrespective of whether the exploration is successful or not?

Answers:

• 200% declining balance method

• Fixed value method

• Asset base method

• Full costing method

69. XYZ Company has credit sales of $4,000,000 during Year 1. At December 31 Year 1, the balance in Accounts Receivable is $142,000. The company estimates bad debts to equal 1 percent of credit sales. What effect will the company's December 31 adjusting entry have on the company's Income Statement and Balance Sheet?

Answers:

• Decrease income by $40,000, no effect on balance sheet

• Decrease income by $40,000, decrease assets by $40,000

• No effect on either income statement or balance sheet

• None of the above

70. XYZ Company purchases a machine with a cost of $20,000, a salvage value of $2,000, and life of five years. If the company uses the sum-of-the-years digits method, what would the depreciation charge be for the first year?

Answers:

• $1,200

• $6,000

• $6,667

• $8,000

71. Which of the following is a functional factor in determining depreciation?

Answers:

• Salvage value

• Obsolescence

• Market cost

• Market value

72. Which of the following accounts is debited if depreciation is a production cost?

Answers:

• Finished Goods

• Raw Materials

• COGS

• Work in Process Inventory

73. Which of the following costs is normally expensed when incurred, even though it has future benefits?

Answers:

• Payroll

• COGS

• Office supplies

• Advertising

74. When using the indirect method to determine operating cash flows in a cash flow statement, which of the following would be added to net income?

Answers:

• Amortization

• Depreciation

• Loss on retirement of a plant asset

• All of the above

75. Which of the following statements about MACRS depreciation is NOT true?

Answers:

• It is an accelerated method.

• It is used for tax reporting.

• Salvage cannot be ignored.

• It assumes that all purchases take place at midyear.

76. On its December 31 Balance Sheet in Year 1, XYZ Company reports Accounts Receivable of $60,000 and an Allowance for Uncollectible Accounts of $6,000. During Year 2, credit sales total $1,800,000, collections on account total $1,680,000, and write-offs total $9,600. After aging its Accounts Receivable, XYZ Company estimates that 10 percent of its Accounts Receivable at December 31 of Year 2 will be uncollectible. During year 2, a customer's account for $2,400 is written off as uncollectible. What effect will the write-off have on the company's Income Statement and Balance Sheet?

Answers:

• No effect on income, decrease assets by $2,400

• Decrease income by $2,400, decrease assets by $2,400

• No effect on either Income Statement or Balance Sheet

• None of the above

77. When all else is equal, analysts ____________________.

Answers:

• prefer that firms have high recurring earnings

• will give a higher valuation to a firm with a one-time charge than to a firm that reports an expense that continues year to year

• regard recurring earnings as higher quality than one-shot earnings

• All of the above