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1) Equipment was purchased for $17,000


1) Equipment was purchased for $17,000. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

a. $3,940.

b. $3,340.

c.   $2,860.

d. $2,800.



2. All of the following are intangible assets except

    1. patents.
    2. land improvements.
    3. goodwill.
    4. franchises.


  1. If the market rate of interest is lower than the stated rate, bonds will sell at an amount
    1. equal to face value.
    2. not determinable from the given information.
    3. lower than face value.
    4. higher than face value.



  1. Which of the following is not a characteristic of a corporation?
    1. Ability to acquire capital easily
    2. Separate legal existence
    3. Unlimited liability for stockholders
    4. Easy transfer of ownership interests


  1. Which of the following is not a stockholder right?

a.The right to participate in management decisions

  1. The preemptive right
  2. The right to share in dividends
  3. The right to vote in the election for the board of directors


  1. Which of the following decreases when a corporation purchases treasury stock?
    1. Authorized shares
    2. Issued shares
    3. Treasury shares
    4. Outstanding shares



  1. What is the effect on total paid-in capital of a stock dividend and a stock split, respectively?

Stock Dividend          Stock Split

    1. Increase         No effect
    2. No effect       No effect
    3. Decrease        No effect
    4. Decrease        Decrease



  1. Which of the following does not affect retained earnings?
    1. Net Income
    2. Net Loss
    3. Dividends
    4. Additional investment by stockholders


  1. The statement of cash flows is a(n)
    1. required supplemental financial statement.
    2. required basic financial statement.
    3. optional basic financial statement.
    4. optional supplementary statement.


  1. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is
    1. cash flows from operating activities.
    2. cash flows from investing activities.
    3. cash flows from financing activities.
    4. usually different from year to year.


  1. Investing activities include
    1. collecting cash on loans made.
    2. obtaining cash from creditors.
    3. obtaining capital from owners.
    4. repaying money previously borrowed.


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