Question

Please answer the following questions:

QUESTION 22

For a liability to exist,

a.	a past transaction or event must have occurred
b.	the exact amount must be known
c.	the identity of the party owed must be known
d.	an obligation to pay cash in the future must exist

QUESTION 23

Which of the following principles best describes the current method of accounting for research and development costs?

a.	Associating cause and effect
b.	Systematic and rational allocation
c.	Income tax minimization
d.	Immediate recognition as an expense

QUESTION 24

The term 'intangible assets' is used in accounting to denote

a.	current or noncurrent property items without physical characteristics
b.	assets with lesser economic significance because of the nature of such assets
c.	properties without physical characteristics that have long-term effects on a business enterprise
d.	such items as patents, copyrights, and claims against customers which can be valued on a monetary basis

QUESTION 25

Which of the following would not be classified as cash?

a.	Personal checks
b.	Travelers checks
c.	Cashier's checks
d.	Postdated checks

QUESTION 26

Debentures are

a.	unsecured bonds
b.	secured bonds
c.	ordinary bonds
d.	serial bonds

QUESTION 27

In theory (disregarding any other marketplace variables), the proceeds from the sale of a bond will be equal to

a.	the face amount of the bond
b.	the present value of the bond maturity value plus the present value of the interest payments to be made during the life of the bond
c.	the face amount of the bond plus the present value of the interest payments made during the life of the bond
d.	the sum of the face amount of the bond nad the periodic interest payments

QUESTION 28

The completed-contract method of accounting for long-term construction-type contracts is preferable when

a.	a contractor is involved in numerous projects
b.	the contracts are of a relatively long duration
c.	estimates of costs to complete and extent of progress toward completion are reasonably dependable
d.	there are inherent uncertainties in the contract beyond normal business risks

QUESTION 29

The FASB specified in Statement No. 140 three conditions that must be met if a transfer of receivables is to be accounted for as a sale. Which of the following is not one of three conditions specified?

a.	The transferred assets have been isolated from the transferor
b.	The transferor's obligation under the recourse provisions can be reasonably estimated
c.	The transferee has the right to pledge or exchange the transferred assets
d.	The transferor does not maintain effective control over the assets through an agreement to repurchase the assets before their maturity

QUESTION 30

A method that ignores salvage value in the early years of the asset's life in calculating periodic depreciation expense is the

a.	productive-output method
b.	group composite method
c.	sum-of-the years'-digits method
d.	double-declining-balance method

QUESTION 31

The entry

Accounts Receivable                                     xxx

Allowance for Uncollectible Accounts                                     xxx

would be made when

a.	a customer pays its account balance
b.	a customer defaults on its account
c.	a previously defaulted customer pays its outstanding balance
d.	estimated uncollectible receivables are too low

Answer 1

Question-22

a. A past transaction or event must have occured.

Inorder to exist a liability, there must be a past transaction or event must have occured.

Question-23

d. Immediate recognition as an expense.

Immediate recognition as an expense is the current method for research and development costs. Every organisation incurres the cost of research and development. This cost should be immediately recognised as an expense when it occures.

Question-24

c. Properties without physical characteristics that have long-term effects on a business enterprise.

Intangible assets have no physical characteristics. It cannot be seen, touch or even smell but its effect can be spread over a long period of time in the enterprise.

Question-25

d. Postdated checks

Postdated checks cannot be classified as cash. Postdated check cannot be encashed over the counter.

Question-26

a. Unsecured bonds

Debentures are unsecured bonds. There is no security given for the debentures. The debenture holders will get an interest in return.

Question-27

b. The present value of the bond maturity value plus the present value of the interest payments to be made during the life of the bond

The proceeds from the sale of a bond will be equal to the present value of the bond maturity value plus the present value of the interest payments to be made during the life of the bond.

Question-28

d. There are inherent uncertainties in the contract beyond normal business risks

The completed- contract method of accounting for long-term construction-type contracts is preferable when there is inherent uncertainties in the contract beyond normal business risks.

Question-29

b. The transferor's obligation under the recourse provisions can be reasonably estimated

It is not included in the three conditions regarding the transfer of receivables is to be accounted for as a sale.

Question-30

d. Double-declining-balance method

Double declining balance method cannot consider the salvage value of fixed asset in the early year's of assets.

Question-31

c. A previously defaulted customer pays its outstanding balance

At that point of time, the accounts receivable have a debit balance and allowance for uncollectible accounts have a credit balance.