Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

48 Cards in this Set

  • Front
  • Back
Corrieten Company purchased equipment and incurred these costs:

Cash price $24,000
Sales taxes 1,200
Insurance during transit 200
Installation and testing 400
Total costs $25,800
What amount should be recorded as the cost of the equipment?
Harrington Corporation recently leased a number of trucks from Andre Corporation. In inspecting the books of Harrington Corporation, you notice that the trucks have not been recorded as assets on its balance sheet. From this you can conclude that Harrington is accounting for this transaction as a(n):
operating lease
Depreciation is a process of:
cost allocation
Cuso Company purchased equipment on January 1, 2006, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used?
A company would minimize its depreciation expense in the first year of owning an asset if it used what 3 things?
a high estimated life, a high salvage value, and straight-line depreciation
When there is a change in estimated depreciation what should happen to depreciation?
current and future years' depreciation should be revised.
Additions to plant assets are what kind of expenditures?
are capital expenditures.
Which of the following measures provides an indication of how efficient a company is in employing its assets?
Asset turnover ratio
Pierce Company incurred $150,000 of research and development costs in its laboratory to develop a new product. It spent $20,000 in legal fees for a patent granted on January 2, 2007. On July 31, 2007, Pierce paid $15,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2007?
Where are asset details disclosed?
In the notes to the financial statements
If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?
The company purchased another company.
Kant Enterprises purchased a truck for $11,000 on January 1, 2006. The truck will have an estimated salvage value of $1,000 at the end of 5 years. If you use the units-of-activity method, the balance in accumulated depreciation at December 31, 2007, depreciation can be computed by what formula?
($10,000/Total estimated activity) x Units of activity for 2006 and 2007.
Is land a depreciable asset?
yes, Improvements to land are frequently items consumed or degraded through use and time. Because of this, they should be depreciated to allocate part of the cost to periods that benefited from the land improvements
Should closing costs incurred to purchase a piece of land be included in the cost of the land?
yes, they're considered part of the price of the land
Which value isis equal to acquisition cost less accumulated depreciation?
Book value
Which value is equal to acquisition cost less accumulated depreciation?
Market value
When are revenue expenditures expensed?
When incurred
When are capital expenditures expensed?
They are incorporated into the value of the asset
Research and development costs are expensed as what kind?
Of the following: equipment, buildings, and land which is not a depreciable asset?
Is annual insurance included in the cost of equipment?
Which of the following is not a factor affecting the computation of depreciation?
A. Useful life
B. Salvage value
C. Book value
D. Cost
Book Value
Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?
Declining Balance
When an asset is retired the amount of the gain is equal to what?
Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. The land will be recorded at
Otay Company purchased land for $70,000 on 12/31/06. As of 5/30/07, the land's value had increased to $71,500. On 12/31/07, the land was appraised for $74,000. The Land account should be increased by how much?
A purchase of equipment for $18,000 also involved freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and 4 years, respectively. Under the straight-line method, annual depreciation expense will be how much?
Monthly depreciation expense of $600 is recorded on a truck that was purchased for $27,000 and has a $3,000 estimated salvage value. The annual depreciation rate is what percent?
On September 1, 2007, Dulzura Company purchased an asset for $9,000, with a $1,500 estimated salvage value, and a 4-year useful life. The 2007 depreciation expense using the straight-line method would be how much?
An asset purchased on January 1 for $48,000 has an estimated salvage value of $3,000. The current year's depreciation expense is $5,000 and the balance of the Accumulated Depreciation account, after adjustment, is $20,000. If the company uses the straight-line method, what is the asset's remaining useful life?
5 years
On January 1, 2005, Jamacha Company purchased some equipment for $15,000. The estimated salvage value and useful life are $3,000 and 4 years, respectively. On January 1, 2007, the company determines that the asset's remaining useful life is 3 years. What is the revised depreciation expense for 2007 if the company uses the straight-line method?
On April 1, 2007 La Presa Company sells some equipment for $18,000. The original cost was $50,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. On December 31, 2006 the Accumulated Depreciation account had a balance of $29,400. The gain or loss on the sale was how much?
loss of $850
On March 1, 2007, Moreno Company purchased a patent from another company for $90,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. Amortization expense for 2007 is how much?
20. A company has the following asset account balances:

Buildings and Equipment $9,200,000
Accumulated Depreciation 1,200,000
Patents 750,000
Land Improvements 1,000,000
Land 5,000,000

The total amount reported on the balance sheet under Property, Plant, & Equipment would be how much?
The time period for classifying a liability as current is one year or the operating cycle, whichever is what length?
o be classified as a current liability, a debt must be expected to be paid with what?
by existing assets or by creating a new current liability
Corricten Company borrows $88,500 on September 1, 2007, from Harrington State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2007?
Andre Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, what is the amount to be credited to Sales?
Which of the following is not a measure of liquidity?
A. Debt to total assets ratio.
B. Working capital.
C. Current ratio.
D. Current cash debt coverage.
Debt to total assets ratio
What term is used for bonds that have specific assets pledged as collateral?
Secured Bonds
Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, this indicates what about the rates?
the contractual interest rate exceeds the market interest rate
On January 1, 2007, Scissors Corp. issues $200,000, 5-year, 7% bonds at face value. The entry to record the issuance of the bonds would include what credit?
to bonds payable for $200,000
Kant Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $103,745. The entry to record the redemption will include a debit to what account?
$3,745 to Premium on Bonds Payable
In a recent year Day Corporation had net income of $150,000, interest expense of $30,000, and tax expense of $20,000. What was Day Corporation's times interest earned ratio for the year?
On January 1 Pierce Corporation issues $500,000, 5-year, 12% bonds at 96 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a credit to what account?
Discount on Bonds Payable for $4,000
On January 1 Pierce Corporation issues $500,000, 5-year, 12% bonds at 96 with interest payable on January 1, what is the carrying value of the bonds at the end of the third interest period?
On January 1, Daisey Duke Inc. issued $1,000,000, 9% bonds for $939,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Daisey Duke uses the effective-interest method of amortizing bond discount. At the end of the first year, Daisey Duke should report unamortized bond discount of how much?
On January 1, Anthony Corporation issued $1,000,000, 14%, 5-year bonds with interest payable on December 31. The bonds sold for $1,072,096. The market rate of interest for these bonds was 12%. On the first interest date, using the effective-interest method, the debit entry to Bond Interest Expense is for how much?