Costs and Expenses

Question 1

What are economic sacrifices incurred by firms for goods and services used in their business?

Answer 1

Costs

Question 2

Do both expenses and losses provide a benefit to the firm?

Answer 2

No, only expenses. These finance the ongoing primary operations of the entity. Losses are incidental to the primary operations.

Question 3

What account is credited in subsequent monthly property tax accrual entries after the tax bill is paid?

Answer 3

Prepaid Property Taxes

Question 4

Does the capitalization of interest reflect the concept of matching or asset definition?

Answer 4

It reflects the concept of matching.

Question 5

What is the accounting treatment for most advertising costs?

Answer 5

Immediate expensing or expense when first advertising occurs

Question 6

Over what period are property taxes accrued?

Answer 6

Over the fiscal year of the taxing authority

Question 7

Does accounting for research and development reflect the concept of matching or asset definition?

Answer 7

It reflects asset definition

Question 8

What is the accounting treatment for direct response advertising programs?

Answer 8

Capitalize then amortize as advertising expense

Question 9

Define “property taxes”

Answer 9

Taxes levied by the local government to support schools and other activities