Accounting Expert Answers & Study Resources : Page 39

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.

41.In accounting, depreciation means the decline in value of an asset. 42.One reason for an asset's limited useful life is obsolescence. 43.Depreciation should not be recorded for a depreciable asset that is increasing in value. 44.Depreciation is a process of allocation, not of valuation. 45.Accelerated methods of depreciation result in lower net income in.

19.Assume that part of accounts and other receivables on Thompson Toys' balance sheet is $16 million as of February 2, 2010. Also assume that Allowance for Uncollectible Accounts has a credit balance of $550,000 and that Thompson estimates its uncollectible accounts as 0.1 percent of net sales and the sales.

71.The theoretical value of an asset is the present value of the expected benefits. 72.In a deferred payment arrangement, interest is charged only if it is stated. 73.An asset purchased according to a deferred payment plan should be recorded based on the total cash paid. 74.A company wishes to make deposits at the.

71.In calculating the depletion of a natural resource, its useful life in years is irrelevant. 72.Under the successful efforts method, the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets. 73.Licenses are properly classified as intangible assets. 74.An intangible asset with a determinable useful life should be.

4.Anson's Auto Parts had cash sales of $10,000 for the month of April. Sales are subject to a 6 1/2 percent sales tax and an 8 percent excise tax. In the journal provided, prepare a compound entry without explanation to record Anson's Auto Parts sales and related sales and excise.

9.For each of the items below, use the following letters to identify the correct treatment in a bank reconciliation. A = Add to balance per bankC = Add to balance per books B = Deduct from balance per bankD = Deduct from balance per books ____ 1. Interest income ____ 2. Outstanding checks ____ 3..

28.Caplan Corporation uses the accounts receivable aging method to account for Uncollectible Accounts Expense. As of December 31, Caplan's accountant prepared the following data about ending receivables: $20,000 was not yet due (1 percent expected not to be collected), $10,000 was 1-60 days past due (4 percent expected not to.

61.When disposing of equipment, Accumulated Depreciation is debited for the existing carrying value. 62.When an asset lasts longer than its estimated useful life, depreciation no longer should be recorded past the point at which its carrying value equals its residual value. 63.Gain on Sale of Machinery is recorded as a debit. 64.A $750.

41.The federal and state unemployment tax rates are identical. 42.The entry that includes a debit to Payroll Taxes and Benefits Expense would also include credits to Social Security Tax Payable and Medicare Tax Payable. 43.An estimated liability is not a definite obligation of the firm because the amount cannot be definitely determined. 44.The.

21.A betterment does not add to the physical layout of an asset. 22.The replacement of tires on a truck is considered an ordinary repair. 23.Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account. 24.Small expenditures for what ordinarily are considered revenue expenditures frequently are treated as capital expenditures. 25.Extraordinary repairs.

22.Assume that part of accounts and other receivables on Thompson Toys' February 2, 2010, balance sheet is comprised of $43,225,000 of notes receivable. Two notes make up the amount. The first note has a face value of $30,000,000 and bears interest at 7 percent for 90 days. The second note.

31.The cost of land would include the cost of a building purchased with the land and torn down because it was not needed. 32.The cost of equipment would include the cost of test runs to see that the equipment is operating properly. 33.Driveways and parking lots are properly included in the Land.

21.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. 22.The declaration of dividends is solely the decision of the corporation's stockholders. 23.The current portion of long-term debt is classified as a current liability only if it.

11.Which of the following descriptions would not fit the definition of a liability? a.Obligation to deliver services already paid for b.Result of past transaction c.Future obligation for future salary payments d.Present obligation for future payment 12.Usually, failure to record a liability means failure to record a(n) a.revenue. b.note. c.expense. d.asset. 13.Which of the following does not represent a liability? a.An obligation.

11.A reduction in carrying value as a result of impairment is recorded as a loss. 12.Depreciation refers to the periodic allocation of the cost of a tangible long-lived asset over its estimated useful life. 13.Intangible assets are subject to a process called depreciation. 14.The basic accounting problems associated with accounting for long-term assets.

17.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? 18.The owner of an amusement park is considering installing a new ride. The ride would cost $10,000, produce a net cash.

8.Hatley Corporation borrowed $10 million to finance the construction of a new building. In addition to the annual interest that is not included in the face, one-tenth of the principal amount borrowed is to be repaid each year. If the borrowing occurred one month prior to year end, how should.

71.Use this information to answer the following question. PeriodsPresent Value of $1 at 7 PercentPresent Value of Ordinary Annuity of $1 at 7 Percent 10.9350.935 20.8731.808 30.8162.624 What is the present value of receiving $400 at the end of each year for three years? a.$1,122.00 b.$326.40 c.$979.20 d.$1,049.60 72.Use this information to answer the following question. PeriodsPresent Value of $1 at.

24.The following totals for the month of March were taken from the payroll register of the Foothill Company: Salaries (all subject to social security and Medicare taxes)$14,000 Federal income taxes withheld3,500 Medical insurance deductions700 Life insurance deductions400 Salaries subject to unemployment taxes11,000 Medicare tax rate1.45% Social security tax rate6.2% Prepare journal entries without explanations to record the following..

6.Why do businesses need to keep some currency on hand? 7.What is a compensating balance? By whom is it required? 8.Compute the correct amount for each letter in the following table: Case 1Case 2Case 3Case 4 Balance per bank statement$ a$17,800$630$3,980 Deposits in transit1,200b100250 Outstanding checks3,0002,000c150 Balance per books6,90018,800450d .

51.A commitment is a legal obligation that does not meet the technical requirements for recognition as a liability. 52.A contingent liability is not entered into the accounting records under any circumstances. 53.A contingent liability is recognized when the amount can be reasonably estimated and the likelihood of loss is probable. 54.The most common.

31.Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company: Salaries expense$12,000 Social security and Medicare taxes withheld550 Income taxes withheld2,500 Medical insurance deductions250 Life insurance deductions200 Salaries subject to federal and state unemployment taxes of 6.2 percent4,000 The journal entry to record.

61.Lester Company purchases a piece of equipment on Jan. 2, 2010, for $30,000. The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $3,000. Lester uses a calendar fiscal year. The entry to record the amount of depreciation  for 2010,.

  1.What is a contingent liability, and how does it relate to the discounting of a note receivable at the bank? 2.What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse? 3.The following data exist for Conner Company: 20102009 Accounts Receivable$ 80,000$ 90,000 Sales510,000410,500 Calculate the receivable turnover and.

21.Prepare journal entries without explanations for the following transactions involving notes payable for Gomez Company, whose fiscal year ends June 30. June20Paid a trade account payable with a 90-day, 9 percent $60,000 note. Interest is in addition to the face value. 30Made end-of-year adjusting entry to accrue interest expense for the note. 30Made.

TRUE/FALSE 1.Working capital equals current assets plus current liabilities. 2.Payables turnover is measured in number of days. 3.The payables turnover is the number of times, on average, that accounts payable are paid in an accounting period. 4.The days' payable shows how long, on average, a company takes to pay its accounts payable. 5.All liabilities involve.

15.On December 31, Alsop Products has a $300 credit balance in Allowance for Uncollectible Accounts. It estimates that 4 percent of the $60,000 in sales are uncollectible. After the appropriate adjusting entry for uncollectible accounts has been made using percentage of net sales method, what will be the balance in.

11.Liabilities generally arise from past transactions. 12.At the time a company signs a contract to pay an employee a certain salary in the future, it records a liability. 13.Lines of credit from the bank need not be disclosed in the financial statements or in the notes. 14.To determine the payables turnover, one first.

30.In the journal provided, prepare the entries for the following transactions. (Omit explanations.) Dec.1Sold merchandise on account to Katurah Wells for $600. 12Received payment of $400 from Katurah Wells. 31Made adjusting entry for Uncollectible Accounts Expense, using the percentage of net sales method. Net sales for the year totaled $14,000, uncollectible accounts are.

  SHORT ANSWER 1.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. 2.Ronald Company has current assets of $115,000 and current liabilities of $75,000 of which accounts payable are $65,000..

12.State whether each situation below implies a definitely determinable liability (D), an estimated liability (E), a contingent liability (C), or no liability at all (X). _____ 1. Lawsuit filed against the company _____ 2. Payroll liabilities _____ 3. Unearned revenues _____ 4. Accounts payable _____ 5. Product warranty liability _____ 6. Dividend to be declared in.

81.A copyright should be amortized over the life of the author, plus 70 years. 82.Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed. 83.The entire cost of developing computer software should be capitalized and amortized over the software's useful life. 84.When a company can.

25.The following information pertains to the bank transactions of Crawford Company: a.Cash on the books as of September 30 was $499. Cash as shown on the bank statement for the same date was $1,330. b.A deposit of $160, representing cash receipts of September 30, did not appear on the bank statement. c.Outstanding checks.

  MULTIPLE CHOICE 1.Which of the following is not a component of free cash flow? a.Purchases of plant assets b.Net income c.Dividends d.Net cash flows from operating activities 2.If net cash flows from operating activities total $104,000, purchases of plant assets total $30,000, dividends total $12,000, and sales of plant assets total $17,000, the free cash flow.

31.Unearned revenue arises from the acceptance of payment in advance for a service to be performed. 32.The product warranty liability is an example of an estimated liability. 33.Current liabilities are classified as either definitely determinable liabilities or contingent liabilities. 34.A liability for dividends exists only when the board of directors declares them. 35.Wages are.

41.All of the following are estimated liabilities except a.liability for vacation pay. b.payroll liabilities. c.product warranty liability. d.property tax liability. 42.During July, Audio City sold 200 radios for $50 each. Each radio had cost Audio City $30 to purchase and carried a two-year warranty. If 5 percent typically need to be replaced over the warranty.

11.Using the following transactions for 2010, show how the T account below would appear after all appropriate postings have been made. Assume an opening balance of $900. Feb.13Wrote off an individual account for $1,000. 21Reinstated the account written off on February 13. July8Wrote off an individual account for $700. Dec.31Made year-end adjustment of $800.

21.Which of the following would be considered a capital expenditure? a.Cost to acquire a printing press b.Cost to lubricate a machine c.Cost to replace some light bulbs d.Cost to paint the factory wall 22.An expenditure to lengthen the useful life of a company vehicle would require a a.credit to Company Vehicles. b.debit to Cash. c.debit to Depreciation Expense. d.debit.

71.Equipment is purchased for $120,000. It has a five-year useful life and a $20,000 residual value. Under the double-declining-balance method, what is the depreciation expense for year 3? a.$17,280 b.$15,360 c.$14,400 d.$12,800 72.Estimated residual value is ignored entirely under which of the following methods of depreciation? a.Production b.Straight-line c.Tax depreciation d.Double-declining-balance 73.When calculating a partial year's depreciation, the length of.

51.A machine was purchased for $40,000. It has a current carrying value of $26,000 and had a depreciable cost of $36,000. Its estimated residual value must have been a.$4,000. b.$10,000. c.$14,000. d.impossible to determine from the facts given. 52.A building was purchased for $230,000. It currently has accumulated depreciation of $40,000 and had a residual.

61.A business accepts a 9 percent, $25,000 note due in 120 days. Assuming simple interest, how much (amount rounded) will the business receive when the note falls due? a.$25,000 b.$25,075 c.$25,740 d.$27,260 62.Which of the following statements is true regarding the time value of money? a.Compound interest will produce equal amounts of interest each period on.

41.Which of the following most appropriately describes depreciation? a.Decline in value of plant asset b.Allocation of cost of plant asset c.Physical deterioration of plant asset d.Gradual obsolescence of plant asset 42.All of the following are needed for the computation of depreciation except a.residual value. b.estimated useful life. c.cost. d.current market value. 43.The depreciable cost of an asset is a.the unexpired cost.

21.Use this information to answer the following question. The transactions below pertain to Broyer Company, whose fiscal year ends September 30. Sept.10Received cash for a 90-day, 12 percent, $25,000 note payable. Interest is in addition to the face value. 30Made end-of-year adjusting entry to accrue interest expense. The September 30 adjusting entry, rounded to.

31.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. 32.The Land account would include all of the following costs except a.drainage costs. b.commissions paid to real estate agents. c.the cost of building a fence. d.the cost of tearing down a building. 33.The Equipment account would include all of the.

  MULTIPLE CHOICE 1.Which of the following is not a component of the operating cycle? a.Sales to customers b.Collection of accounts receivable c.Recognition of depreciation d.Purchases from suppliers 2.All of the following are measures of liquidity except a.the quick ratio. b.return on assets. c.the current ratio. d.working capital. 3.Which of the following most likely would be classified as a current liability? a.Mortgage payable b.Dividends.

TRUE/FALSE 1.Free cash flow is a good measure of a company's ability to finance long-term assets. 2.In the calculation of free cash flow, dividends and sales of plant assets are both deducted. 3.Asset impairment occurs when the fair value of a long-term asset exceeds its carrying value. 4.Fair value is the amount for which.

51.Which of the following most likely is an estimated liability? a.Liability for vacation pay b.Payroll liabilities c.Unearned revenues d.Current portion of long-term debt 52.Which of the following is both an estimated liability and a contingent liability? a.Co signature on $500 loan b.Current portion of long-term debt c.Warranty liability d.Liability for dividends 53.Purchase agreements are a.estimates. b.commitments. c.liabilities. d.contingencies. 54.A customer is injured using a company's.

11.The cost of a long-term asset is expensed a.in the period in which it is sold. b.in the period in which it is acquired. c.as the asset benefits the company. d.when it is paid for. 12.A capital expenditure results in a debit to a(n) a.expense account. b.capital account. c.asset account. d.liability account. 13.An expenditure for which of the following items.

51.When depreciation rates are revised, all years of the asset's life are affected by the new computation. 52.Group depreciation is an appropriate method for a large company calculating depreciation on office equipment. 53.Depreciation for tax purposes is identical to depreciation for financial reporting purposes. 54.Federal tax law allows the rapid write-off of plant.