1. What is the effect of writing off an account receivable on total assets?A. Total assets increaseB. Total assets decreaseC. Total assets don’t changeD. Cannot be determined without additional information2. Under the periodic inventory system:A. A transaction by transaction unit inventory record is maintainedB. A separate account for purchases is usedC. The cost of goods sold for each sale is recorded at the time each sale is madeD. A continuous inventory record provides the amount of ending inventory and the cost of goods sold throughout the period3. When sales discounts in the current year exceed sales discounts in the prior year, assuming all else remains unchanged, what is the effect on the gross profit percentage? (GPP= Gross Profit / Net Sales)A. The percentage will not changeB. The percentage will increaseC. The percentage will decreaseD. Either A or B4. Boone Industries purchased a truck for $35,000 on January 1, 2009. The truck had an estimated useful life of 80,000 miles and an estimated residual value of $8000. In the secondyear of ownership (2010), the car was driven 25,000 miles. Using the units of production method, the amount of depreciation expense for 2010 was?A. $10,938B. $8,438C. $9,538D. $11,2385. The accounting characteristic consistency, also known as time-series analysis, assumes that?A. Users can compare financial data across businessesB. Accounting data should be based on objective data and transactionsC. Accounting data should be supported by appropriate documents when possibleD. Information can be compared over time because similar accounting methods have been applied from year to year6. Which of the following terms is used to describe the cost associated with intangible assets?A. DepletionB. DepreciationC. ImpairmentD. Amortization7. When goods are sold to a customer with credit terms of 2/10, n/30, the customer will?A. Receive a 10% discount if they pay within 2 daysB. Receive a 2% discount if they pay 10% of the amount due within 30 daysC. Receive a 10% discount if they pay within 30 daysD. Receive a 2% discount if they pay within 10 days8. Cyclone Inc. purchased a machine which cost $50,000. Cyclone estimates that the machine has a useful life of 10 years and a salvage value of $5000. Assuming that Cyclones uses the double-declining balance depreciation method, what is the amount of accumulated depreciation related to the machine at the end of the second year after purchase?A. $5000B. $8000C. $10,000D. $18,0009. Veishea Inc. had the following information related to its inventory during 2009.Beginning Inventory 200 units @ $35Purchase #1 800 units @ $37Sale #1 500 units @$60Purchase #2 600 units @ $39Sale #2 700 units @ $60What is the amount of cost of goods sold and ending inventory which should be reported on the 2009 financial statements assuming Veishea uses the periodic LIFO method?Cost of Goods Sold Ending InventoryA. $44, 800 $15,200B. $45,200 $14,800C. $45,600 $14,400D. $46,000 $14,00010. A company has an asset turnover ratio of 1.15. Which of the following statements is true? (ATO= Net sales revenue / Average total assets)A. The company generates $1.15 of net income for every $1 in reported assetsB. The company generates $1.15 of sales revenue for every $1 in reported assetsC. The company buys assets more frequently than it sells themD. This is an improvement over the previous period when the asset turnover rate was 1.711. On December 31, 2010, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5,000,000 and its accumulated depreciation equaled $4,200,000 on December 31, 2010; they had been using the straight-line depreciation method. The estimated residual value was zero and its useful life was 25 years. What is the gain or loss on the equipment on December 31, 2010?A. $250,000 lossB. $400,000 gainC. $200,000 lossD. $200,000 gain12. Why do we need internal control systems?A. To safeguard the assets of the businessB. To ensure the accuracy of its financial recordsC. To ensure the reliability of financial statementsD. All of the above are correct13. Which of the following is not a necessary condition for an accounting fraud to be committed?A. IncentiveB. OpportunityC. IgnoranceD. Character14. Assume Thomas Trucks Corporation uses the allowance method. During the year, Thomas made credit sales of $3,000,000. At the end of the year, $500,000 still remained to be collected on the credit sales and the allowance for doubtful accounts had a balance of $15,000. If Thomas estimates 3% of all credit sales will be uncollectible, what amount of bad debt expense should Thomas recognize for the year?A. $15,000B. $75,000C. $90,000D. $120,00015. Straight-line depreciation:A. Results in higher net income numbers in early years than accelerated methodsB. Results in higher expense in early years than accelerated methodsC. Results in less total depreciation during the entire life of an asset than accelerated methodsD. Results in a lower tax burden in early years16. Assume that a company uses the periodic inventory method and has the following inventory records for May:May 1 On hand, 20 units @ $4.00 eachMay 5 Purchased 100 units @ $4.10 eachMay 6 Sold 85 units @ $8.00 eachMay 14 Purchased 80 units @ $4.20 eachMay 17 Sold 85 units @ $8.00 eachIf the company uses the FIFO inventory method, the amount assigned to the May 31 inventory would be:A. $86.00B. $123.00C. $126.00D. $147.0017. Nell Computers, Inc. purchased a new machine which cost $25,000. In addition, Nell had to pay shipping charges related to the computer of $500. Training costs for employees related to using the machine totaled $1500. Finally, Nell paid an additional $250 per year to insure the machine. At what amount should the machine be recorded?A. $25,000B. $25,500C. $27,000D. $27,25018. On July 1, 2008, Icespresso Inc. signed a two-year $8,000 note receivable with 9% interest. At its due date, July 1, 2010, the principal and interest will be received in full. Interest revenue should be reported on Icespresso’s income statement for the year ended December 31, 2008, in the amount of:A. $1440B. $720C. $420D. $36019. Company A has a debt-to-asset ratio of 0.73 while Company B has a debt-to-asset ratio of 0.45. Which of the following is true?A. Stockholders own a smaller proportion of Company A than Company BB. Company A must make less profit than Company B.C. Creditors own a smaller proportion of Company A than