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146. A company wishes to make annual contributions into a fund intended to retire $700,000 in debt five years from now. The amount to contribute each year equals $700,000 A. divided by the appropriate future value of an ordinary annuity factor.B. times the appropriate present value of an ordinary annuity factor.C. times the appropriate future.
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110. The construction of a new wing on an existing building is described as a(n) A. addition.B. extraordinary repair.C. revenue expenditure.D. betterment. 111. It is necessary to distinguish between capital and revenue expenditures because of which of the following accounting rules or principles? A. MatchingB. Full disclosureC. MaterialityD. Consistency 112. If a capital expenditure is incorrectly recorded on a company's books as a revenue expenditure,.
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100. Which of the following items would be considered a revenue expenditure? A. Plant assetsB. Routine maintenanceC. AdditionD. Betterment 101. The primary difference between ordinary and extraordinary repairs is that extraordinary repairs A. are an expense of the current period.B. are periodic in nature.C. are necessary to maintain the asset in good operational condition.D. extend the useful life or increase the residual value.
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11. Commercial paper normally is issued by companies with poor credit ratings.  12. When a business sells an item and collects a state sales tax on it, a current liability to the state arises.  13. If any portion of a long-term debt is to be paid in the next year, that portion should be classified.
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119. Brashear Corporation engaged in the following transactions involving promissory notes in 2014 and 2015. Journalize these transactions in the journal provided. (Omit explanations.) Round to nearest whole dollar. 2014 Sept. 1 Sold land to Wayne Petry for $30,000. A six-month, 10 percent note was received in exchange (no gain or loss realized). Nov. 1 Received a 30-day,.
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51. When an asset lasts longer than its estimated useful life, depreciation no longer should be recorded.  52. Gain on Sale of Machinery is recorded as a debit.  53. A $750 gain on the sale of an asset means that $750 in cash was received.  54. When the trade-in allowance exceeds the carrying value of an asset.
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223. Preston Corporation purchased a truck for $40,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the second year, the truck was driven 27,500 miles. Compute the depreciation for the second year under.
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81. Customer lists are classified as intangible assets.  82. The costs associated with the development of software, for sale or internal use, should be expensed in the period incurred.  83. Noncompete covenants should be amortized over the specified life of the contract.  84. In the calculation of free cash flow, dividends and sales of plant assets are.
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1. Asset impairment occurs when the fair value of a long-term asset exceeds its carrying value.  2. Fair value is the amount for which an asset could be bought or sold in a current transaction.  3. Book value is another term for carrying value.  4. A tractor held by a farm equipment company for sale to farmers.
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31. The cost of land should not include accrued property taxes paid by the purchaser.  32. The cost of repairing a machine damaged during installation should be charged as an operating expense.  33. Accelerated methods of depreciation result in lower net income in the last years of an asset's life compared to the straight-line method.  34. One.
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214. Discuss the difference between the successful efforts and full-costing methods of accounting for oil and gas resources. What type of company is most likely to use each method? 215. What is goodwill and when may it be recorded? 216. What commitments must a company account for in determining its free cash flow? 217. For each description,.
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159. A company enters into a contract to purchase a certain quantity of goods from another company during the following month. At this point, would a liability exist? Explain why or why not. 160. McAfee Corporation borrowed $20 million to finance the construction of a new building. In addition to the annual interest.
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31. Based on past experience, it should be possible to estimate the amount that a product warranty will cost the company in the future.  32. If the amount of a liability cannot be exactly determined, it should not be recorded.  33. Product warranties are an expense of the period in which the related product is.
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130. All of the following are used in estimating a depreciable asset's useful life except A. the asset's present condition.B. the useful life required by the government for tax purposes.C. experience with similar assets.D. current technology and industry trends. 131. Salvage value is not the same as A. carrying value.B. residual value.C. disposal value.D. scrap value. 132. Equipment was purchased for $117,000. It had an.
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11. Inventory is classified as a long-term asset.  12. The replacement of tires on a truck is considered an ordinary repair.  13. Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account.  14. Small expenditures for what ordinarily are considered capital expenditures frequently are treated as revenue expenditures.  15. Extraordinary repairs are recorded with a debit.
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218. Grannis Corporation purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred by the company were as follows: purchase price, $40,000; broker's fees, $7,000; title search and other fees, $6,000; demolition of an old building on the property, $3,700; grading, $1,200; digging foundation for the.
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61. When compound interest is used, interest accumulates less quickly than when simple interest is used.  62. The annual interest earned on an amount deposited into a bank account will increase each year when simple interest is used.  63. The annual interest earned on an amount deposited into a bank account will be the same.
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229. On October 1, 2012, Biff's Auto Repair purchased diagnostic equipment for $13,600. The equipment had an estimated residual value of $4,000 and an eight-year life and was sold on April 1, 2014. Assuming that the company depreciates the asset on a straight-line basis and reports on a calendar-year basis, journalize.
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164. Identify and briefly discuss the three approaches for determining fair value identified by the FASB. 165. You win the grand prize and can choose between receiving $100,000 today or $20,000 per year for seven years. Ignoring income taxes, how would you go about making your decision? 166. Explain why a creditor would be concerned.
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71. The copyright granting the exclusive rights to sell artistic materials and computer programs ends with the author’s life.  72. The exclusive right to use an identifying symbol is called a patent.  73. A patent has a legal life of 20 years.  74. Goodwill represents the excess paid for a business over the fair value of its.
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120. The Land account would include all of the following costs except A. grading the land.B. lawyers’ fees.C. the cost of adding a parking lot.D. the cost of tearing down a building. 121. The Equipment account would include all of the following costs except A. installation costs.B. maintenance costs.C. equipment test runs.D. freight charges. 122. A company purchases land and a building on the land..
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21. A capital expenditure is an expenditure that benefits only the current accounting period.  22. A revenue expenditure results in the recognition of an asset.  23. The cost of a sewage system should be included in the Land Improvements account.  24. Improvements to real estate are never subject to depreciation.  25. Leasehold improvements become the property of the lessor.
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86. Sales Tax Payable is an example of a(n) A. estimated liability.B. contingent liability.C. trade liability.D. definitely determinable liability. 87. A company receives $200, of which $8 is for sales tax and $12 is for excise tax. The journal entry to record the sale is: A. Cash      180     Sales            180B. Excise Tax Expense      12Sales Tax Expense      8Cash            180     Sales     .
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116. When accounting for property taxes, which of the following accounts normally would not be credited? A. Prepaid Property TaxesB. CashC. Estimated Property Taxes PayableD. Property Taxes Expense 117. Flint Company produces widgets that cost $30 each and have a 5 percent failure rate. If 500 widgets are sold, the entry to record the estimated product warranty expense.
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174. Prepare journal entries for the following transactions involving notes payable for Homer Company, whose fiscal year ends June 30. Omit explanations. June 20 Paid a trade account payable with a 90-day, 9 percent $60,000 note. Interest is in addition to the face value. 30 Made end-of-year adjusting entry to accrue interest expense for the.
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96. Which of the following taxes is not subject to a maximum amount per employee per year? A. State unemployment taxB. Federal unemployment taxC. Social security taxD. Medicare tax 97. All of the following can be employee payroll withholdings except A. state income taxes.B. medical insurance premium payments.C. charitable contributions.D. federal unemployment tax. 98. Which of the following is a tax borne by the employer.
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200. According to generally accepted accounting principles, the proper accounting treatment of the cost of developing intangible assets is to A. carry the cost as an asset indefinitely.B. amortize the cost over five years.C. amortize the cost over a reasonable life.D. write off the cost immediately. 201. Which of the following is not a component of free cash.
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180. In 2014, Barnes Enterprises purchased an oil well for $12,000,000. It is estimated that 80,000,000 barrels can be extracted from the well. Depletion expense during 2015, when 2,000,000 barrels were extracted and sold, totaled A. $30,000.B. $300,000.C. $33,333.D. $3,333,333. 181. Plant assets used in conjunction with a natural resource typically are depreciated A. using income tax depreciation.B. using an accelerated.
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61. Under the successful efforts method, the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.  62. Natural resources are classified as intangible assets on the balance sheet.  63. Drilling equipment with a ten-year useful life is used solely in conjunction with an oil well that has an eight-year.
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76. Which of the following most likely would be classified as a current liability? A. Mortgage payableB. Dividends payableC. Five-year notes payableD. Bonds payable 77. A liability is recognized when A. the exact due date is known.B. it is paid for.C. an obligation has arisen.D. the exact amount of the liability is known. 78. On January 2, 2014, Lionel Company issued $40,000 of notes payable,.
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41. Commercial paper consists of secured loans that are sold to the public.  42. For notes payable whose interest is stated separately, the adjusting entry would consist of a debit to Interest Expense and a credit to Interest Payable.  43. The declaration of dividends is solely the decision of the corporation's board of directors.  44. The current.
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126. Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements? A. Possible warranty claimsB. Guarantees of the debt of other companiesC. Possible bankruptcy of an important customer whose account is currentD. Estimated income taxes for the current year 127. Which of the following is a contingent.
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41. Depreciation for tax purposes is identical to depreciation for financial reporting purposes.  42. Federal tax law does not allow the rapid write-off of plant assets.  43. For tax purposes, small businesses may expense the first $250,000 of equipment expenditures, rather than having to allocate their costs over a number of years.  44. Under tax depreciation, estimated.
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150. Equipment is purchased for $60,000. It has a five-year useful life and a $10,000 residual value. Under the double-declining-balance method, what is the depreciation expense for year 3? A. $6,400B. $7,200C. $7,680D. $8,640 151. When calculating a partial year's depreciation, the length of time an asset has been owned usually is rounded to the nearest month. This.
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227. Joe Quizenberry owns Quizenberry Gravel Company. On January 3, 2014, Joe purchased a piece of property with gravel deposits for $3,155,000. He estimated that the gravel deposits contained 4,700,000 cubic yards of gravel. The gravel is used for making roads. After the gravel is gone, the land, which is in.
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51. Potential vacation pay should be accounted for as a commitment.  52. Lawsuits against a company in connection with an industrial accident would not be listed in the contingent liabilities section on the balance sheet.  53. When a company discounts a note receivable at the bank, it has a contingent liability.  54. All factors in a future.
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106. Use this information to answer the following question.Panadora Company has the following information for the pay period of January 1-15, 2014. Payment occurs on January 20. Gross payroll $32,000 Federal income taxes withheld $3,600 Social security and Medicare rate 7.65% Federal unemployment tax rate 0.8% State unemployment tax rate 5.4% Salaries Payable would be recorded for A. $21,520.B. $23,968.C. $25,952.D. $28,400. 107. Use this information to answer the.
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136. Use this information to answer the following question. Periods Present Value of $1 at 7 Percent Present Value of Ordinary Annuity of $1 at 7 Percent 1 0.935 0.935 2 0.873 1.808 3 0.816 2.624 4 0.763 3.387 5 0.713 4.100 You have the opportunity to purchase a machine for $10,000. After careful study of expected costs and revenues, you estimate that the machine will produce a net cash.
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90. Which of the following assets is not subject to depreciation, depletion, or amortization? A. Land improvements, such as parking lots and fencesB. Gas fieldsC. LandD. Patents 91. The term used to describe the allocation of the cost of an intangible asset to the periods it benefits is A. depletion.B. apportionment.C. amortization.D. depreciation. 92. Which of the following is not classified properly as property, plant,.
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190. When an intangible asset becomes worthless, A. it should remain on the books at its existing carrying value.B. its remaining carrying value should be written off immediately as a loss.C. prior years' accounting records should be adjusted retroactively.D. its remaining carrying value should be amortized over 20 years. 191. When a list of customers or subscribers is.
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220. Mercado Photography purchased photographic equipment for $75,000. The equipment was to be used for ten years and had a $5,000 estimated residual value. After the company took three years of straight-line depreciation, it decided that the equipment would instead have a $2,000 residual value and a total useful life of.
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1. Because failure to record a liability generally leads to failure to record an expense, it usually results in an overstatement of income.  2. Because accounting measures should be verifiable, liabilities should not be estimated.  3. A liability must never be classified as current if it is due in more than one year.  4. The classification of.
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21. The entry that includes a debit to Payroll Taxes and Benefits Expense also includes credits to Federal Unemployment Tax Payable and State Unemployment Tax Payable.  22. The amount recorded for Payroll Taxes and Benefits Expense is borne entirely by the employee.  23. Social Security and Medicare taxes are borne entirely by the employee.  24. Gross earnings.
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