1.The ACE Company has five plants nationwide that cost $50 million. The current market value of the plants is $240 million. The plants will be recorded and reported as assets at: a.$240 million. b.$290 million. c.$50 million. d.$190 million. 2.An increase in an expense: a.decreases owner's equity. b.increases assets. c.decreases liabilities. d.increases revenues. 3.A proprietorship business with total owner's equity of $65,000 paid a $15,000 business debt. As a result of this transaction, total owner's equity: a.increased to $65,000. b.increased by $15,000. c.decreased by $15,000. d.did not change. 4.The left side of an account is always: a.the debit side. b.the credit side. c.the balance of that account. d.carried forward to the next accounting period. 5.In a service-type business, revenue is considered earned: a.at the end of the month. b.when the service is performed. c.at the end of the year. d.when cash is received. 6.The purpose of recording depreciation on productive assets is to: a.reflect the decline in the market value of the assets each period. b.reduce income when the company has an exceptionally profitable year. c.allocate the original cost of productive assets to expense over its useful life. d.be in conformity with the revenue recognition principle. 7.Mason Company debited Prepaid Insurance for $1,080 on July 1, 2012, for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an adjusting entry on July 31 for the amount of insurance that has expired would cause: a.assets to be overstated by $1,080 and expenses to be understated by $1,080. b.expenses to be overstated by $90 and assets to be understated by $90. c.expenses to be overstated by $1,080 and assets to be understated by $1,080. d.assets to be overstated by $90 and expenses to be understated by $90. 8.Which one of the following accounts is not closed at the end of an accounting period? a.Owner's Drawing account. b.Owner's Capital account. c.Service Revenue account. d.Insurance Expense account. 9.Jeter Bike Company received a $460 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $640 and a credit to Service Revenue $640. The correcting entry is: a.debit Accounts Receivable, $460; credit Cash, $460. b.debit Service Revenue, $640; credit Accounts Receivable, $180; credit Cash, $460. c.debit Cash, $180; debit Service Revenue, $460; credit Accounts Receivable, $640. d.debit Service Revenue, $640; credit Cash $180; credit Accounts Receivable, $460. 10.During the year, Christa’s Pet Shop’s inventory account balance decreased by $35,000. If the company’s cost of goods sold for the year was $220,000, purchases must have been: a.$255,000. b.$150,000. c.$185,000. d.Unable to determine.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
1.The ACE Company has five plants nationwide that cost $50 million. The current market value of the plants is $240 million. The plants will be recorded and reported as assets at:
a.$240 million.
b.$290 million.
c.$50 million.
d.$190 million.
2.An increase in an expense:
a.decreases owner's equity.
b.increases assets.
c.decreases liabilities.
d.increases revenues.
3.A proprietorship business with total owner's equity of $65,000 paid a $15,000 business debt. As a result of this transaction, total owner's equity:
a.increased to $65,000.
b.increased by $15,000.
c.decreased by $15,000.
d.did not change.
4.The left side of an account is always:
a.the debit side.
b.the credit side.
c.the balance of that account.
d.carried forward to the next accounting period.
5.In a service-type business, revenue is considered earned:
a.at the end of the month.
b.when the service is performed.
c.at the end of the year.
d.when cash is received.
6.The purpose of recording depreciation on productive assets is to:
a.reflect the decline in the market value of the assets each period.
b.reduce income when the company has an exceptionally profitable year.
c.allocate the original cost of productive assets to expense over its useful life.
d.be in conformity with the revenue recognition principle.
7.Mason Company debited Prepaid Insurance for $1,080 on July 1, 2012, for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an
a.assets to be overstated by $1,080 and expenses to be understated by $1,080.
b.expenses to be overstated by $90 and assets to be understated by $90.
c.expenses to be overstated by $1,080 and assets to be understated by $1,080.
d.assets to be overstated by $90 and expenses to be understated by $90.
8.Which one of the following accounts is not closed at the end of an accounting period?
a.Owner's Drawing account.
b.Owner's Capital account.
c.Service Revenue account.
d.Insurance Expense account.
9.Jeter Bike Company received a $460 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $640 and a credit to Service Revenue $640. The correcting entry is:
a.debit
b.debit Service Revenue, $640; credit Accounts Receivable, $180; credit Cash, $460.
c.debit Cash, $180; debit Service Revenue, $460; credit Accounts Receivable, $640.
d.debit Service Revenue, $640; credit Cash $180; credit Accounts Receivable, $460.
10.During the year, Christa’s Pet Shop’s inventory account balance decreased by $35,000. If the company’s cost of goods sold for the year was $220,000, purchases must have been:
a.$255,000.
b.$150,000.
c.$185,000.
d.Unable to determine.
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