ACC-504-
1. The Modified Accelerated Cost
Recovery System (MACRS) specifies which of the following depreciation methods
for buildings?

A. 150% declining-balance.

B. Double-declining-balance.

C. Straight line.

D. Buildings are not depreciable assets.

2. The Modified Accelerated Cost
Recovery System (MACRS) specifies which of the following depreciation methods
for land?

A. 150% declining-balance.

B. Double-declining-balance.

C. Straight line.

D. Land is not a
depreciable asset.

3. If an organization has an obligation
to pay $5,000 to a supplier two years from now, the present value of the
obligation:

A. is less than $5,000.

B. is $5,000.

C. is more than $5,000.

D. could be calculated using an annuity factor from the present value
tables.

4. Depreciation, in accounting, is a process that results in:

A. depreciable assets being reported in the balance sheet at their fair
market value.

B. accumulating cash for the replacement of the asset.

C. an accurate measurement of the economic usefulness of an asset.

D. spreading the cost of an
asset over its useful life to the entity.

Use the
below present value tables for problems 5, 6 and 7
  
 5. The present value of $3,000 to be
received in 7 years at 10% is:

A. $616.22

B. $1,539.60

C. $3,000.00

D. $5,845.67

6. The present value of $3,000 to be
received every year for 9 years, at 10%, is:

A. $7,073.80

B. $12,273.00

C. $17,277.00

D. $27,000.00

7. The present value of an obligation of
$4,000 payable in 7 years at 8% is:

A. $1,760

B. $2,334

C. $3,206

D. $3,680

8. A particular common stock has an
annual cash dividend of $2.00 per share and is predicted to have a market value
of $30 per share 5 years from now. Assuming a discount rate of 10%, a fair
market price for the stock today is:

A. $20.00

B. $26.21

C. $37.58

D. $56.21
 
9. Psyche Company wants to acquire Trim
Company. Trim’s ROI has been above average for its industry; net income has
averaged $70,000 a year more than the industry average. These
“excess” earnings are expected to continue at this amount for 5
years. Assuming a discount rate of 8%, how much goodwill will arise from
Psyches’ purchase of Trim?

A. $40,836

B. $88,157

C. $279,489

D. $350,000

10. Leasehold is an example of which of
the following types of assets?

A. Current asset.

B. Property, plant and equipment.

C. Goodwill.

D. Intangible asset.
11. The principal challenge to
calculating depletion is estimating:

A. the cost of the asset.

B. the salvage value of the exploration equipment.

C. the demand for the product.

D. the quantity of material
to be recovered.

12. Long-lived, intangible assets such as leasehold improvements, patents,
and copyrights are all subject to:

A. depreciation

B. amortization

C. depletion

D. consolidation

13. When a depreciable asset is sold:

A. a gain arises if the
sales proceeds exceed the net book value.

B. a loss arises if the sales proceeds exceed the net book value.

C. any cash received results in a gain.

D. depreciation expense is adjusted so there is no gain or loss.

14. Goodwill is an asset that arises because the present value of an
acquired company’s estimated future earnings, discounted at the acquiring
firm’s ROI:

A. is less than the fair market value of the net assets of
the acquired company.

B. is more than
the fair market value of the net assets of the acquired company.

C. is more than the fair market value of the net assets of
the acquiring company.

D. is less than the fair market value of the net assets of
the acquiring company.

15. The intangible asset “goodwill:”

A. represents the management team’s assessment of its value to the
company.

B. may arise when one
company purchases another company.

C. arises because the market value of a company’s assets is greater than
cost.

D. all of the above are correct.

16. Many current liabilities are
affected by accrual accounting entries. This happens because:

A. liabilities are usually paid when they are incurred.

B. accrual accounting
involves recognizing liabilities before they are paid.

C. the only way to reduce a liability account balance is with an adjusting
entry.

D. accrual accounting frequently involves recognizing liabilities before
they are incurred.

17. Which of the following is not usually associated with
bonds?

A. Coupon rate.

B. Maturity value.

C. Face amount.

D. Maturity rate.

18. An Accounts Payable could result
from which of the following transactions?

A. Purchasing accounts for cash.

B. Purchasing property, plant and equipment on credit.

C. Purchasing goods and
services from suppliers on credit.

D. All of the above.

19. The current liability for Wages
Payable (or Accrued Payroll) represents the:

A. gross pay earned by employees for which they have not yet been paid.

B. net pay earned by
employees for which they have not yet been paid.

C. employer’s federal and state payroll tax obligation.

D. employer’s liability for various with holdings taken out of the gross
pay earned by employees.

20. The financial leverage characteristic of long-term debt results
in:

A. a reduction of the risk that creditors will not be paid.

B. a magnification of ROE
relative to what it would be without long-term debt.

C. a magnification of ROI relative to what it would be without long-term
debt.

D. the deductibility, for income tax purposes, of dividends to
stockholders.

21. When a company issues a bond at a premium:

A. the company is more profitable than most companies in its industry.

B. investors perceive the bond to be a very safe investment.

C. the investors’ interest
income will be less than the interest received each year.

D. the investors’ interest income will be more than the interest received
each year.

22. Which of the following is not sometimes associated with
bonds?

A. Debenture.

B. Callable.

C. Cumulative.

D. Convertible
 
23. If the market price of a bond
exceeds its face amount:

A. the coupon rate is less than the market interest rate.

B. the coupon rate is more
than the market interest rate.

C. the company’s ROI and working capital have been increasing over time.

D. the maturity rate has been declining.

24. The market value of a bond is the sum of the present value of future
interest payments and the present value of the amount to be repaid at maturity,
discounted at:

A. the market rate.

B. the coupon rate.

C. the dividend rate.

D. the prime rate.

25. Financial leverage refers to which of the following?

A. The difference between
the rate of return earned on assets (ROI) and the rate of return earned on
owners’ equity (ROE).

B. The difference between the rate of return earned on current assets and
the rate of return earned on retained earnings.

C. The leverage a firm obtains from increasing production.

D. Decreasing fixed costs per unit by increasing production.

26. When a company issues a bond at a discount:

A. the company will pay less than the face amount of the bond at its
maturity.

B. the company will pay more than the face amount of the bond at its
maturity.

C. the company’s interest expense will be less than the interest paid each
year.

D. the company’s interest
expense will be more than the interest paid each year.

27. When bonds are issued at a premium:

A. interest expense on the
bonds will be less than the interest paid.

B. interest expense on the bonds will be more than the interest paid.

C. the bonds are sold for less than their face amount.

D. the coupon interest rate is less than the market interest rate.

28. Which of the following is (are) a
true statement(s) pertaining to bonds?

A. Bonds can be sold at a discount, par, or payable.

B. Bonds can be sold at a
discount, par, or premium.

C. The SEC sets the market price of a bond.

D. The issuing firm sets the price of a bond.

E. None of the above.

29. Which of the following is true regarding bond discounts and/or
premiums?

A. Bond discount is amortized but bond premium is not.

B. Bond premium is amortized but bond discount is not.

C. Neither bond discount nor premium is amortized.

D. Both bond discount and
premium are amortized.
 
30. The amortization of bond
discount:

A. increases the cash paid to bondholders for interest.

B. results in bond interest
expense being greater than the interest paid to bondholders.

C. results in bond interest expense being less than the interest paid to
bondholders.

D. reduces the carrying value of bonds payable on the balance sheet.

31. Factors that usually affect retained earnings directly include:

A. net income or loss, and
dividends.

B. extraordinary items and losses from discontinued operations.

C. stock dividends and gains or losses from the sale of treasury stock.

D. net income or loss, and the issuance of stock at an amount in excess of
par value.

32. In comparison to the owners’ equity section of a corporation’s balance
sheet, owners’ equity of a proprietorship or partnership:

A. normally does not make a distinction between invested capital and retained
earnings.

B. normally uses “Capital” accounts for each individual owner,
rather than a “Retained Earnings” account for all of the owners.

C. normally uses a “Drawings” account for each individual owner,
rather than a “Dividends” account for all of the owners.

D. all of the above.

33. The declaration of a cash dividend by the directors
results in:

A. a decrease in cash and a decrease in retained earnings.

B. a decrease in retained
earnings and an increase in current liabilities.

C. a decrease in net income and a decrease in cash.

D. a decrease in net income and an increase in current liabilities.
 
34. In most states, par value of issued
shares represents:

A. Legal capital.

B. No par capital.

C. Noncontrolling capital.

D. Corporate capital.

35. The term preemptive right pertains to which of the following?

A. The Board of Directors rights in liquidation.

B. Present shareholders
right to purchase shares from any additional share issuances.

C. Present shareholders right to purchase treasury shares when reissued.

D. Preferred stockholders right to dividends.

36. Balance sheet disclosures for preferred stock include all of the
following except:

A. The number of shares issued.

B. The number of shares outstanding.

C. The liquidating or redemption value.

D. The credit or market
value.

E. The number of shares authorized.
 
37. The declaration date pertains
to:

A. The date used to determine who receives dividends.

B. The date on which the board of directors declares it’s going to
liquidate the firm.

C. The date on which the
board of directors declares a dividend.

D. The date a dividend is paid.

38. Fred Jones owns 56 shares of the Robust Corporation’s stock. Robust
announces a 3 for 2 stock split. How many shares will Fred have after this
split?

A. 178 shares.

B. 112 shares.

C. 84 shares.

D. 56 shares.

39. Braco has 40,000 shares of $100 par
value common stock outstanding, and 10,000 shares in the treasury. The number
of additional shares that would be issued in a 5% stock dividend is:

A. 500

B. 1,000

C. 1,500

D. 2,000

40. When a stock dividend is declared and issued:

A. total paid-in capital does not change.

B. total owners’ equity
does not change.

C. the balance in the retained earnings account is decreased by the par
value of the shares issued in the dividend.

D. total paid-in capital is decreased by the market value of the shares
issued in the dividend.

41. When a company splits its common stock 3 for 1:

A. total paid-in capital increases by a factor of 3.

B. the balance in the retained earnings account is decreased by the market
value of the shares issued.

C. the market value of the
company’s stock falls by two-thirds.

D. the shareholders are assured of receiving larger cash dividends.
 
42. The principal reason for a company
having a common stock split is to:

A. increase the total cash dividends paid to stockholders.

B. capitalize retained earnings.

C. decrease total owners’ equity.

D. decrease the market
value per share of common stock.

43. When a firm purchases its own shares for the treasury:

A. total owners’ equity is
decreased.

B. total owners’ equity is increased.

C. the balance in the retained earnings account is decreased.

D. paid-in capital is decreased.

44. If a firm sells treasury stock for
more than its cost:

A. a gain is recognized in the income statement.

B. the balance in the retained earnings account is increased.

C. additional paid-in
capital is increased.

D. total owners’ equity does not change.

45. The statement of changes in retained earnings for the year shows:

A. the retained earnings
balance at the beginning of the year.

B. amounts received from the sale of additional common stock during the
year.

C. extraordinary gains or losses during the year.

D. the effect of a stock split during the year.