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ACCT 382 - Week 6 - Test 3

ACCT 382 - Week 6 - Test 3
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ACCT 382 - Week 6 - Test 3

1.Over the life of a particular account receivable, the same total amount of gross profit is recognized under the installment method and the cost recovery method.

  • True
  • False

           

2.Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs. 

  • True
  • False

           

3.Estimated losses on long-term contracts are recognized as ratable over the contract term regardless of the revenue recognition method used.

  • True
  • False

           

4.Return on shareholders' equity is increased if a firm can maintain its return on assets but increase its leverage. 

  • True
  • False

           

5.Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and:

  • Revenue is realized.
  • Any receivable is collected.
  • Collection is reasonably certain.
  • Collection is absolutely assured.

 

6.Slick's Used Cars sells pre-owned cars on the installment basis and carries its own notes because its customers typically cannot qualify for a bank loan. Default rates tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the cars without loss. The revenue method Slick would use is the: 

  • Installment sales method.
  • Point of sales method.
  • Cost recovery method.
  • Installment sales method or cost recovery method.

 

7. In 2013, Rigsby would recognize realized gross profit of:

  • $500,000.
  • $0.
  • $900,000.
  • $100,000.

 

8.In 2014, Rigsby would recognize realized gross profit of:

  • $0.
  • $450,000.
  • $300,000.
  • $400,000.

 

9.In 2012, Reliable would recognize gross profit of: 

  • $0.
  • $25,000.
  • $8,090.
  • $8,333.

 

10.In 2013, Reliable would recognize gross profit of:

  • $0.
  • $6,000.
  • $5,000.
  • $10,000.

 

11.In 2014, Reliable would recognize gross profit of:

  • $0.
  • $6,000.
  • $8,000.
  • $20,000.

 

12.In 2012, Reliable would recognize gross profit of: 

  • $0.
  • $25,000.
  • $8,090.
  • $8,333.

 

13.In 2013, Reliable would recognize gross profit of:

  • $0.
  • $6,000.
  • $5,000.
  • $10,000.

 

14.In 2012, JRE2 would report (rounded to the nearest thousand) gross profit (loss) of: 

  • $0.
  • $(100,000).
  • $56,000.
  • $73,000.

 

15.In 2013, JRE2 would report (rounded to the nearest thousand) gross profit (loss) of:

  • $(223,000).
  • $(150,000).
  • $(206,000).
  • $0.

 

16.With an annuity due, a payment is made or received on the date the agreement begins. 

  • True
  • False

       

17.A deferred annuity is one in which interest charges are deferred for a stated time period.

  • True
  • False

 

18.Today, Thomas deposited $100,000 in a three-year, 12% CD that compounds quarterly. What is the maturity value of the CD?

  • $109,270.
  • $119,410.
  • $142,576.
  • $309,090.

 

19.Carol wants to invest money in a 6% CD account that compounds semiannually. Carol would like the account to have a balance of $50,000 five years from now. How much must Carol deposit to accomplish her goal?

  • $35,069.
  • $43,131.
  • $37,205.
  • $35,000.

 

20.Shane wants to invest money in a 6% CD account that compounds semiannually. Shane would like the account to have a balance of $100,000 four years from now. How much must Shane deposit to accomplish his goal?

  • $88,849.
  • $78,941.
  • $25,336.
  • $22,510.

 

21.Shelley wants to cash in her winning lottery ticket. She can either receive ten $100,000 semiannual payments starting today, or she can receive a lump-sum payment now based on a 6% annual interest rate. What is the equivalent lump-sum payment? 

  • $853,020.
  • $801,969.
  • $744,090.
  • $878,611.

 

22.Micro Brewery borrows $300,000 to be paid off in three years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment? 

  • $55,379.
  • $106,059.
  • $30,138.
  • $60,276.

 

23.How much must be invested now at 9% interest to accumulate to $10,000 in five years?

  • $9,176.
  • $6,499.
  • $5,500.
  • $5,960.

 

24.An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this investment should produce a rate of return of 12%, compounded annually, what's the most the investor should be willing to pay for the investment?

  • $15,146.
  • $13,523.
  • $42,000.
  • $130,446.

 

25.Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be:

  • Earlier than Loan B.
  • Later than Loan B.
  • The same as Loan B.
  • Indeterminate with respect to loan B.