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176 Cards in this Set

  • Front
  • Back
In an exchange of plant assets that has commercial substance, a gain on disposal is:
Recognized Immediately
In exchanges of plant assets that have commercial susbstance:
Both Gains & Losses are recognized
The asset turnover ratio is computed by dividing:
Net Sales / Average Total Assets
Companies amortize the cost of a patent over its:
Legal life or its useful life, whichever is shorter
A gain on sale of a plant asset occurs when the proceeds of the sale exceed the:
Book Value of the Asset Sold
Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as:
Revenue Expenditures
The method that ignores salvage value in determining the amount of depreciation is the:
Declining-Balance Method
The depreciation method that produces a decreasing annual depreciation expense over an asset's useful life is the:
Declining-Balance Method
Depreciable cost is the:
cost of an asset - its salvage value
The accounts receivable turnover ratio is computed by dividing:
Net Credit Sales / Average Net Accounts Receivable
The entry to record the dishonor of a note receivable assuming the payee expects eventual collection includes a debit to:
Accounts Receivable
Which of the following approaches for bad debts is best described as a balance sheet method?
Percentage-of-receivables basis
Compensating balances
Minimum cash balances required by a bank in support of bank loans.
Voucher system
A network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper.
A credit balance in Cash Over and Short is reported as a:
Miscellaneous Revenue
Entries are made to the Petty Cash account when:
Establishing the Fund
A bank may issue a credit memoranda for:
the collection of a note receivable for the depositor by the bank
Interest is usually associated with:
Notes Receivable
The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the:
Percentage of Receivables basis (The existing balance is ignored when using the sales basis)
Payee
The party to whom payment of a promissory note is to be made.
Percentage-of-receivables basis
Management estimates what percentage of receivables will result in losses from uncollectible accounts.
Percentage-of-sales basis
Management estimates what percentage of credit sales will be uncollectible.
Accelerated-depreciation method:
Depreciation method that produces higher depreciation expense in the early years than in the later years.
Additions and improvements:
Costs incurred to increase the operating efficiency
Amortization:
The allocation of the cost of an intangible asset to expense over its useful life in a systematic and rational manner.
Asset turnover ratio:
A measure of how efficiently a company uses its assets to generate sales; calculated as net sales divided by average total assets.
Capital expenditures:
Expenditures that increase the company's investment in productive facilities.
Declining-balance method:
Depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the useful life of the asset.
Depletion:
The allocation of the cost of a natural resource to expense in a rational and systematic manner over the resource's useful life.
Going-concern assumption:
States that the company will continue in operation for the foreseeable future.
Goodwill:
The value of all favorable attributes that relate to a business enterprise.
Intangible assets:
Rights
Materiality principle:
If an item would not make a difference in decision making
Ordinary repairs:
Expenditures to maintain the operating efficiency and productive life of the unit.
Plant assets:
Tangible resources that are used in the operations of the business and are not intended for sale to customers.
Revenue expenditures:
Expenditures that are immediately charged against revenues as an expense.
Straight-line method:
Depreciation method in which periodic depreciation is the same for each year of the asset's useful life.
Units-of-activity method:
Depreciation method in which useful life is expressed in terms of the total units of production or use expected from an asset.
Accounts receivable turnover ratio
A measure of the liquidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable
Allowance method
A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period
Average collection period
The average amount of time that a receivable is outstanding; calculated by dividing 365 days by the accounts receivables turnover ratio
Bad Debts Expense
An expense account to record uncollectible receivables
Direct write-off method
A method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible
Factor
A finance company or bank that buys receivables from businesses and then collects the payments directly from the customers
Maker
The party in a promissory note who is making the promise to pay
Notes receivable
Claims for which formal instruments of credit are issued as proof of the debt
There are two parties to a check: the maker and the payee
False
The lack of agreement between the bank balance and the book balance is due to time lags and errors
True
A company records each reconciling item used to determine the adjusted cash balance per books.
True
The principles of internal control include all of the following except:
Combining of Duties
Controls that relate primarily to the safeguarding of assets are:
Physical Controls
Making payments from a petty cash fund requires:
No accounting entry to record a payment when it is made from petty cash.
The party who issues a check is the:
Maker
All of the following would involve a debit memorandum except:
Interest Earned
Journal entries are required by the depositor for all of the following except:
Bank Errors
Cash equivalents include all of the following except:
Restricted Cash
Under the percentage-of-receivables basis:
The amount of bad debt expense is the difference between the required balance and the existing balance in the allowance account.
Companies report short-term notes receivable at their cash (net) realizable value.
True
A dishonored note receivable is no longer negotiable and the payee has no claim against the maker of the note.
False
Accounting issues associated with accounts receivable include all of the following except:
Analyzing accounts receivable
Allowance for Doubtful Accounts is:
A contra asset account
Writing off an uncollectible account under the allowance method requires a debit to:
Allowance for Doubtful Accounts
The percentage-of-sales basis of estimating uncollectibles:
Results in a better matching of expenses with revenues
The percentage-of-receivables basis of estimating uncollectibles:
Produces a better estimate of cash realizable value
The direct write-off method:
Shows only actual losses from uncollectible accounts
Sales resulting from the use of Visa and MasterCard credit cards are considered:
Cash Sales
The entry to record the dishonor of a note receivable assuming the payee expects eventual collection includes a debit to:
Accounts Receivable
The accounts receivable turnover ratio is computed by dividing:
Net Credit Sales / Average Net Accounts Receivable
The cost of land includes closing costs such as title and attorney's fees.
True
The declining-balance method is considered an accelerated-depreciation method.
True
The collection of an account receivable from a customer would:
Not affect liabilities
Which of the following accounts is increased with a debit?
Owner’s Withdrawals
Which of the following accounts is increased with a credit?
Fees Earned
Failure to make an adjusting entry to recognize accrued salaries payable would cause an:
Understatement of expenses and liabilities and an overstatement of stockholders' equity.
True statements of the balance sheet equation:
Assets - Liabilities = Owner's Equity; Assets = Liabilities + Owner's Equity; Assets - Owner's Equity = Liabilities
Which pair of accounts follows the rules of debit and credit in the same manner?
Prepaid Rent & Advertising Expense
An investment by the owners in a business increases:
Assets & Owner's Equity
The purchase of an asset for cash:
Leaves total assets unchanged
The payment of a liability:
Decreases assets & liabilities
A dividend that is declared and paid:
Decreases assets & owner's equity
A company that receives money in advance of performing a service:
Debits Cash & Credits Unearned Fees
An expense which is incurred:
Decreases Owner's Equity
What item does not affect owner's equity?
Land purchased
The statement of owner's equity would not show:
Revenues & Expenses
Unearned Revenues are recorded by companies that:
Receive money in advance of the performance of a service
When a company has performed a service but has not yet received payment
it:
When collection is made on Accounts Receivable:
Total assets will remain the same
Payment on a portion of Accounts Payable will:
Not affect owner's equity
When a company receives an electric bill but will not be paying it right away it should:
Debit Utilities Expense and credit Accounts Payable
A transaction in which six months' rent is paid in advance results in a Decrease to Cash and a increase to:
Prepaid Rent
A company that receives money in advance of performing a service:
Increase Cash and Increase Unearned Fees
When a service has been performed but no cash has been received:
The entry includes a increase to Accounts Receivable
Which of the following transactions results in the recognition of an expense?
Expiration of usefulness of equipment during the accounting period
When a magazine company receives an advance payment for a subscription it:
Debits Cash & Credits Unearned Subscriptions Revenue
Which of the following transactions results in an increase in expenses?
Payment of wages
Which of the following is an example of a deferral?
A commission collected in advance
Which of the following is an example of an accrual?
Interest earned but not yet received
An adjusting entry made to record accrued interest on a note payable due next year consists of a:
Increase to Interest Expense & an Increase to Interest Payable
In accounting
depreciation refers to the:
What account is a contra account?
Accumulated Depreciation; Office Furniture
Which account would not likely need to be adjusted at year-end?
Land
The carrying value of a depreciable asset equals:
Original cost - Accumulated Depreciation
Failure to adjust for accrued wages at year end will result in an:
Overstatement of Net Income
The adjustment for that portion of revenue received in advance which has now been earned is to debit:
Unearned Revenue & Credit Service Revenue
Failure to record depreciation at year end will result in an:
Overstatement of total assets
If an adjusting entry were not made at the end of a period to remove the earned revenue from the Unearned Revenue account:
Liabilities would be overstated
An adjusting entry made to record accrued interest on a note payable due next year consists of a debit to:
Interest Expense & a Credit to Interest Payable
In November
cash is received in advance of rendering services. Assuming that the services have been performed by December 31; the adjusting entry would be a:
In July
a company pays two years' insurance in advance. The December 31 adjusting entry is a:
An important purpose of closing entries is to:
Set income statement account balances to zero to begin the next period
A deposit in transit on a bank (cash) reconciliation should be:
Added to the bank balance shown for the depositor
Assuming the allowance method for bad debts is used; when a customer's uncollectible account is written off; a decrease should be made to:
Accounts Receivable
Which generally accepted accounting principle best supports the need for the account Allowance for Doubtful Accounts?
Matching Principle
Credit terms of 2/10; n/30 means that a:
2% discount for early payment is available for a period up to ten days following the date of the invoice
When the allowance method is used
the entry which is appropriate when a particular account is written off as an uncollectible should include a:
A Company that sells magazines collects subscription fees prior to the publication and distribution of the magazine should be recording a increase to Cash and a increase to:
Unearned Revenue
The cost of goods sold account is an:
Expense
Which of the following is most likely to appear on the balance sheet as a current asset?
Accounts Receivable
What would be deducted from the balance per books on a bank reconciliation?
Service charges
What would be added to the balance per books on a bank reconciliation?
Notes collected by the bank
What would be added to the balance per bank?
Deposit in transit
What would be deducted from the balance per bank?
Outstanding checks
A check (written by the company) for $125 is incorrectly recorded by a company as $152. On the bank reconciliation the $27 error should be:
Added to the balance per books
What bank reconciliation item would not result in an adjusting entry?
Outstanding checks
On a bank reconciliation interest earned on a checking account should be:
Added to the balance per books
Which bank reconciliation items would result in an adjusting entry?
(1) Service charge (2) Collection of a note by the bank (3) NSF check of customer
What item on a bank reconciliation would require an adjusting entry on the company's books?
A bank service charge
A company issues a check for $142 but records it as $124. On the bank reconciliation the $18 error should be:
Deducted from the balance per books.
All of the following bank reconciliation items would result in an adjusting entry on the company's books:
(1) NSF check of customer (2) Fee for collection of note by bank (3) Interest earned
The allowance for uncollectible accounts is necessary because:
When recording uncollectible accounts expense it is not possible to know which specific accounts will not be collected
The account Allowance for Uncollectible Accounts is classified as a:
Contra Account to Accounts Receivable
Under the perpetual inventory system in addition to making the entry to record a sale a company would:
Debit Cost of Goods Sold & Credit Merchandise Inventory
Under the allowance method; Uncollectible Accounts Expense is recorded:
For an estimated amount
The matching concept:
Necessitates the recording of an estimated amount for bad debts
Suppose estimated uncollectible accounts are $25
000. If the normal balance of the allowance for uncollectible accounts is $9
Under the Allowance Method when a year-end adjustment is made for estimated uncollectible accounts:
Total Assets Decrease
A decrease in the Allowance for Uncollectible Accounts would indicate that:
More has been written off than had been estimated
Bottle Inc. purchased an asset on January 1
1997. Bottle chose the straight-line method of depreciation. If Bottle had chosen an accelerated depreciation method:
An understatement of the ending inventory in 1991 (if not corrected) will cause:
1991 net income to be understated & 1992 net income overstated
The collection of a $400 account within the 2 percent discount period would result in a:
Debit to Sales Discounts for $8
When prices are increasing:
FIFO will result in higher income and a higher inventory valuation than will LIFO
Problem Company purchased a machine in 1993 for $10
000. The company bookkeeper incorrectly used a 6-year life instead of a 5-year life to depreciate the machine. The effect of this error on the 1993 financial statements would be an:
If a company sold an operational asset at a price equal to its book value the selling company would record:
No gain or loss
Depletion is recorded for:
Natural resources
The book value of a tangible operating asset is:
Acquisition Cost - Balance in Accumulated Depreciation
Recording depreciation expense:
Reduces net income but does not affect the amount of cash generated by a company
Which of the following is a current asset?
Inventory
If the effective (market) rate of interest for a bond is higher than the stated interest rate the bond will sell at:
A Discount
If a company issues bonds at a premium then:
The stated rate of interest was higher than the market rate on the date of issue
Bonds payable are usually classified on the balance sheet as:
Long-term liabilities
Publics issued bonds payable at 98 but at year-end the bonds were selling in the bond market at 99. What entry would Publics make at year-end to record the change in selling price?
No entry needed
The journal entry to record the issuance of bonds at a discount should include a:
Debit to Cash for the face amount of the bonds - the amount of discount
On the maturity date of bonds payable
the issuing company will:
On July 1 1987 AJ Company issued 300 $1000 five-year 9% bonds at 103. The reason AJ issued the bonds at a premium was:
The stated rate of interest was higher than the rate being paid on investments with comparable risk.
If a bond payable is sold (issued) at a premium the amount of carrying value (the net long-term liability) reported on the subsequent balance sheets:
Decreases each year
If a bond is sold at 98 its stated rate of interest would be:
Lower than the market rate
Retained Earnings can best be described as:
The sum of ALL Net Income - ALL Dividends paid in the history of the company
Treasury stock is stock that has been:
Issued & repurchased by the company
Preferred stock is stock:
Whose owners receive their dividends before the common stockholders receive dividends
Dividends are considered:
A distribution of earnings
Which of the following is not a part of owners’ equity in a corporation?
Bonds Payable
Which of the following would not cause stockholder’s equity to change?
Collection of an Account Receivable
Sausage inc. sold & issued 10000 shares of its $10 par value common stock for $15 per share. The entry to record the stock issue would include:
An Increase to Common Stock for 100000
Embro Corporation received $50000 cash invested by its owners in the company. The effect on the accounting equation was:
Owner’s equity & Assets each increased by $50000
Conributed Capital
Assets - Liabilities - Retained Earnings
Total Assets - Total Liabilities =
Stockholder's Equity
Retained Earnings (Jan 1) + Net Income - Dividends =
Retained Earnings (Dec 31)
Net Income
Revenues - Expenses
Retained Earnings
Net Income - Dividends
Capital
Total Assets - Total Liabilities
Supplies Expense
Supplies Purchased - Ending Supplies Inventory + Supplies Debit Balance
Cost of Goods Sold
Beginning Inventory + Purchases - Ending Inventory
Cost of Goods Sold - Beginning Inventory + Ending Inventory =
Purchases
Gross Margin =
Net Sales - Cost of Goods Sold
Uncollectible Accounts Expense =
Uncollectible Account Recievables - Normal Balance of Allowence for Uncollectible Accounts
Gross Margin % x Sales =
Cost of Goods Sold