ACCT 305 Week 5 Quiz

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 1.Question :(TCO 6) Which of the following is not a current liability?
Student Answer: Accounts payable.
 A note payable due in 2 years.
 Accrued interest payable.
 Sales tax payable.

 

 2.Question :(TCO 5) When the investor owns 60% of the outstanding stock of another company, the investor should:
Student Answer: Use the equity method.
 Classify the investment as Available-for-Sale.
 Consolidate the investee’s financial statements into their financial statements.
 Classify the investment as Held-to-Maturity.

 

 3.Question :(TCO 6) Which of the following is the best
definition of a current liability?
Student Answer: An obligation payable within one year.
 An obligation payable within one year of the balance sheet date.
 An obligation payable within one year or within the normal operating cycle, whichever is longer.
 An obligation expected to be satisfied with current assets or by the creation of other current liabilities.

 

 4.Question :(TCO 6) A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:
Student Answer: More likely than not and the amount of the loss is known.
 At least reasonably possible and the amount of the loss is known.
 At least reasonably possible and the amount of the loss can be reasonably estimated.
 Probable and the amount of the loss can be reasonably estimated.

 

 

 5.Question :(TCO 6) Panther Co. had a warranty liability of $350,000 at the beginning of 2011, and $310,000 at end of 2011. Warranty expense is based on 4% of sales, which were $50 million for the year. What were the warranty expenditures for 2011?
Student Answer: $0.
 $1,960,000.
 $2,000,000.
 $2,040,000.

 

 6.Question : (TCO 6) All of the following but one represent collections for third parties. Which one of the following is not a collection for a third party?
Student Answer: Sales tax payable.
 Customer deposits.
 Employee insurance deductions.
 Social security taxes deductions.

 

 7.Question :(TCO 5) Which category completely excludes equity securities?
Student Answer: Securities available for sale.
 Consolidating securities.
 Held-to-maturity securities.
 Trading securities.

 

 8.Question :(TCO 5) Securities that are purchased with the intent of selling them in the near future to take advantage of short-term price changes are classified as:
Student Answer: Securities available for sale.
 Consolidating securities.
 Held-to-maturity securities.
 Trading securities.

 

 9.Question :(TCO 5) Investments in securities available for sale are reported at:
Student Answer: Discounted present value.
 Lower of cost or market.
 Historical cost.
 Fair value on the reporting date.

 

 10.Question :(TCO 5) If Pop Company exercises significant influence over Son Company and owns 40% of its common stock, then Pop Company:
Student Answer: Would record dividends received from Son Company as investment revenue.
 Would increase its investment account when Son Company declares dividends.
 Would record 40% of the net income of Son Company as investment income each year.
 All of the above are correct.

 

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