Final

Question 1

Physical assets such as equipment, buildings, land, machinery, and vehicles are ___ assets

Answer 1

Tangible (Fixed) assets

Question 2

No physical substance such as brand names, trademarks, and licensing rights are ___ assets

Answer 2

Intangible assets

Question 3

Long lived assets: business assets acquired for…

Answer 3

use over 1+ years

Question 4

General rule for tangible assets under the cost principle is that all reasonable and necessary costs to ___ and ___ an asset for use should be recorded as a cost of the asset

Answer 4

acquire; prepare

Question 5

Costs have been ___ when they are recorded as assets, rather than expenses

Answer 5

capitalized

Question 6

(increases/decreases)
Capitalizing costs ___ assets, and ___ expenses

Answer 6

increases; decreases

Question 7

What costs should be capitalized when Land is acquired?

Answer 7

purchase cost, legal fees, survey fees, title search fees

Question 8

What costs should be capitalized when Buildings are acquired?

Answer 8

purchase/construction cost, legal fees, appraisal fees, architect fees

Question 9

What costs should be capitalized when Equipment is acquired?

Answer 9

purchase/construction cost, sales taxes, transportation costs, installation costs

Question 10

Maintenance costs incurred during use of tangible assets

Answer 10

ordinary repairs, extraordinary repairs and maintenance

Question 11

What is a basket purchase?

Answer 11

purchase of more than one asset at the same time for one purchase price

Question 12

Cedar Fair paid $10 million for a hotel and the land surrounding it, based on an appraisal that estimates the land contributes 40% of the property’s value and the building contributes 60%.
How would Cedar Fair distribute these costs?

Answer 12

record 40% of the total cost as land ($4 million), and the other 60% as buildings ($6 million)

Question 13

Why do you need to split the purchase price in a basket purchase?

Answer 13

splitting the purchase price among individual assets is necessary because they may be used over different periods

Question 14

What is an example of an ordinary repair and maintenance?

Answer 14

oil changes for your car

Question 15

What is an example of an extraordinary repair, replacement, and addition?

Answer 15

additions, major overhauls, complete reconditioning, and major replacements and improvements such as the replacement of the passenger train on a rollercoaster

Question 16

Are extraordinary repairs capitalized?

Answer 16

yes. Since these costs increase the usefulness of tangible assets, they are added to the appropriate long-lived asset accounts, “capital expenditures”

Question 17

(Expense/Capitalize)
Replacing electrical wiring throughout the building

Answer 17

Capitalize

Question 18

(Expense/Capitalize)
Repairing the hinge on the front door of the building

Answer 18

Expense

Question 19

(Expense/Capitalize)
Yearly cleaning of the building’s air-conditioning filters

Answer 19

Expense

Question 20

(Expense/Capitalize)
Replacing load-bearing walls with a laminated beam

Answer 20

Capitalize

Question 21

When does a company report depreciation expense?

Answer 21

a company reports depreciation expense every period buildings and equipment are used to generate revenue

Question 22

Accumulated Depreciation is under the ___ of the Balance Sheet, ___ with the amount of Accumulated Depreciation, as it ___ the Property and Equipment Asset

Answer 22

Assets; decreasing; decreases

Question 23

Asset cost includes the asset’s capitalized costs:

Answer 23

purchase cost, sales tax, legal fees, and other costs needed to acquire and prepare the asset for use

Question 24

Useful life is an estimate of the asset’s useful economic life to the company. May be expressed in terms of ___ or ___ of capacity

Answer 24

years; units

Question 25

___ is the only tangible asset that’s assumed to have an unlimited useful life, therefore land is not depreciated

Answer 25

Land

Question 26

Residual (salvage) value is an ___ of the amount the company will received when it ___ of the asset

Answer 26

estimate; disposes

Question 27

Amount to be depreciated over the asset’s life is the difference between its cost and residual value, an amount called ___ Cost.

Answer 27

Depreciable

Question 28

___ - ___ ___ = Depreciable Cost

Answer 28

Cost - Residual Value

Question 29

___ - ___ ___ = Book Value

Answer 29

Cost - Accumulated Depreciation

Question 30

Straight-line method is used when usage is the ___ each period

Answer 30

same

Question 31

Straight-line Depreciation Expense formula

Answer 31

(Cost - Residual Value) x (1 / Useful Life) = Depreciation Expense

Question 32

In the straight-line method, Depreciation Expense is a ___ amount each year
Accumulated Depreciation ___ by an equal amount each year
Book Value ___ by the same equal amount each year

Answer 32

constant; increases; decreases

Question 33

Units-of-product method is used when usage ___ each period

Answer 33

varies

Question 34

Units-of-production Depreciation Expense formula

Answer 34

(Cost - Residual Value) x (Actual Production This Period / Estimated Total Production) = Depreciation Expense

Question 35

Units-of-production Depreciation Rate formula

Answer 35

(Cost - Residual Value) / Estimated Total Production

Question 36

The Depreciation Expense, Accumulated Depreciation, and Book Value ___ from period to period, depending on the number of units ___

Answer 36

vary; produced

Question 37

Declining-balance method is used when the asset is more ___ in early years but less so over time; also used for ___

Answer 37

efficient; tax

Question 38

Declining-balance Depreciation Expense formula

Answer 38

(Cost - Accumulated Depreciation) x (2 / Useful Life) = Depreciation Expense

Question 39

Declining-balance speeds up depreciation reporting, so it is sometimes called an ___ method

Answer 39

accelerated

Question 40

Because the 2/Useful Life rate used in the formula is double the straight-line rate, this particular version of the declining-balance method is called the ___-declining balance depreciation method

Answer 40

double

Question 41

For partial-year depreciation calculations, the straight-line and declining-balance methods, the annual depreciation is multiplied by the ___ of the year for which depreciation is being calculated

Answer 41

fraction

Question 42

These partial-year modifications are not required in the___ __ ___ method because that method is based on actual production for the period

Answer 42

units-of-production

Question 43

Fixed asset turnover ratio

Answer 43

Net Revenue / Average Net Fixed Assets

Question 44

A higher fixed asset turnover ratio implies ___ efficiency

Answer 44

greater

Question 45

Depletion is the process of allocating a natural resource’s cost over the period of its ___ or ___

Answer 45

extraction; harvesting

Question 46

An asset is purchased on January 1 for $40,000. It is expected to have a useful life of five years after which it will have an expected residual value of $5,000. The company uses the straight-line method. If it is sold for $30,000 exactly two years after it is purchased, the company will record a:

Answer 46

Gain of $4,000

Question 47

Martin Company’s building has a 20-year useful life and a residual value equal to 20% of the building’s original cost. If the double-declining balance method is used, what depreciation rate would be used?

Answer 47

10%

Question 48

Capitalizing a cost means to record it as an ___

Answer 48

asset

Question 49

Tolleson Enterprises buys a computer system for $2,400,000 and pays the vendor $160,000 to install the computer system. Tolleson should record:

Answer 49

$2,560,000 as equipment.

Question 50

A trucking company sold its fleet of trucks for $55,000. The trucks originally cost $1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date of disposal. What gain or loss did the trucking company record when it sold the fleet of trucks?

Answer 50

Loss of $86,000.

Question 51

A company sells equipment for $450,000 when the book value of the equipment is $400,000. The company would record the extra $50,000 as:

Answer 51

a gain, increasing net income and stockholders’ equity.

Question 52

Hearth Company uses the units-of-production method to estimate depreciation. The company purchased a new machine for $45,000 that will produce an estimated 100,000 units over its useful life. The estimated residual value of the machine is $5,000. What is the depreciation rate per unit?

Answer 52

$0.40

Question 53

Your company rents computers to local businesses and schools. You have 1,000 computers with a book value of $160,000. As a result of changing technology, your computers are more difficult to rent so you must drastically reduce your rental price, which causes a decrease in estimated future cash flows. The fair value of the computers is estimated to be $125,000 because of their outdated technology. Your company should report an asset impairment loss of:

Answer 53

$35,000.

Question 54

A company bought a piece of equipment for $40,000 and expects to use it for eight years. The company then plans to sell it for $3,500. The company has already recorded depreciation of $35,995. Using the double-declining-balance method, what is the company’s annual depreciation expense for the upcoming year?

Answer 54

$505

Question 55

Buckeye Industries purchased a truck and trailer for $81,000. The appraised values of the truck and trailer are $57,000 and $28,500, respectively. What is the amount of the cost that should be assigned to the trailer?

Answer 55

$27,000

Question 56

Avalon Industries buys equipment for $24,000, expects to use it for ten years, and then sell it for $3,000. Using the straight-line method, the company should report annual depreciation for the equipment of:

Answer 56

$2,100

Question 57

If a company records a cost as an expense that should have been capitalized, how is its income statement for the current period impacted?

Answer 57

Expenses are overstated.

Question 58

Holly, Incorporated has a building that originally cost $562,500. Holly expects to be able to sell the facility for $160,500 at the end of its useful life. The balance of the related Accumulated Depreciation account is $387,000. The residual value of the facility is:

Answer 58

$160,500.

Question 59

A piece of equipment was acquired on January 1, 2021, at a cost of $22,000, with an estimated residual value of $2,000 and an estimated useful life of four years. The company uses the double-declining-balance method. What is its book value at December 31, 2022?

Answer 59

$5,500

Question 60

Hacienda Realty, a real estate management company, buys land that contains an abandoned apartment building for $9,000,000. It pays a construction company $1,000,000 to demolish the apartment building. Which of the following is correct?

Answer 60

The company would record $10,000,000 million as the cost of the land.

Question 61

The MegaHit Film Studio owns a production lot and related equipment. How would MegaHit Company categorize these assets?

Answer 61

Tangible assets

Question 62

Pebble Beach Company buys a piece of equipment for $24,000. The equipment has a useful life of ten years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company’s depreciation expense in the first year of the equipment’s useful life?

Answer 62

$4,800

Question 63

At the end of the first year of an asset’s life, the declining-balance depreciation method:

Answer 63

causes an asset to be carried at a lower book value than that computed using the straight-line method.

Question 64

Transport Incorporated has a fleet of 10 large trucks that cost a total of $1,410,000. The fleet is expected to be driven a total of 1,000,000 miles during its estimated 10-year life and be sold for $141,000 at the end of its useful life. If the fleet was driven 125,000 miles during the current year, what is the amount of depreciation that would be calculated using the straight-line and units-of-production methods, respectively?

Answer 64

$126,900 and $158,625

Question 65

Tonto Company purchased property for $280,000. The property included a building, equipment and land. The building was appraised at $173,600, the land at $126,000, and the equipment at $50,400. What is the amount of cost to be allocated to the building in the accounting records?

Answer 65

$138,880

Question 66

Company increases liabilities when: Addition obligations arise by ___ goods and services, ___ customer deposits, or incurring ___ charges over time

Answer 66

purchasing; receiving; interest

Question 67

Company decreases liabilities when: Makes a ___ or provides ___ to the creditor

Answer 67

payment; services

Question 68

Payroll costs =

Answer 68

Net pay to employees + Income taxes withheld from employees + FICA taxes withheld from employees + FICA taxes (matching contributions)

Question 69

Payroll taxes paid by employees include which of the following?

Answer 69

Federal income tax withheld, state income tax withheld, and Medicare

Question 70

Zorn Incorporated makes a sale for $300. The company is required to collect sales tax of 9%. What is the amount that will be credited to the Sales Tax Payable account?

Answer 70

$27

Question 71

Sales tax collected (payable) =

Answer 71

Sales revenue × Sales tax rate

Question 72

Your company sells $50,000 of one-year, 10% bonds for an issue price of $52,000. The journal entry to record the issuance of the bond will include a credit to Bonds Payable in the amount of:

Answer 72

$50,000

Question 73

___ sales tax to the government does not create a liability

Answer 73

remitting

Question 74

In October, the CEO of Saguaro, Incorporated signs a note for $90,000 in order to buy new equipment. The note is due in five years, at 8% annual interest. Semiannual interest payments are due each April and October. Assuming no other long-term debt, what is the initial balance in the related long-term debt account?

Answer 74

$90,000

Question 75

The total amount of interest that will be paid on a four-month, $6,500, 9% note payable equals:

Answer 75

$195

Question 76

A company typically records the amount owed to suppliers for goods or services when:

Answer 76

The goods or services are received.

Question 77

On October 1, Pinnacle Company signs a note for $360,000 to provide the funds needed to build a new facility. The note is due in 10 years, includes an annual interest rate at 7%, and requires semiannual interest payments each April and October. The journal entry to record the issuance of the promissory note should debit:

Answer 77

Cash and credit Notes Payable for $360,000.

Question 78

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1. Brickyard signs a $200,000, 4%, 9-month note. Interest is due at maturity on September 30. The company’s fiscal year ends June 30 and adjusting entries are recorded at that time only.
What adjusting entry should Brickyard make on June 30 before preparing its annual financial statements?

Answer 78

Debit Interest Expense and credit Interest Payable for $4,000.

Question 79

ABC Corporation issued $100,000 of bonds at a premium; as a result, the company:

Answer 79

received more than $100,000.

Question 80

Current liabilities are due:

Answer 80

and payable within the current operating cycle or one year, whichever is longer.

Question 81

Redmont Company’s gross salaries and wages are $30,000, and it withholds $4,500 for income taxes and $2,000 for FICA taxes, the journal entry to record the employees’ pay should include a:

Answer 81

credit to Salaries and Wages Payable for $23,500.

Question 82

During one pay period, Star Valley Company distributes $234,900 to employees as net pay. The income tax withholdings were $34,200 and the FICA withholdings were $9,000. Total payroll costs to the company for this pay period, excluding any unemployment taxes, was:

Answer 82

Payroll costs = Net pay to employees + Income taxes withheld from employees + FICA taxes withheld from employees + FICA taxes (matching contributions)= $234,900 + $34,200 + $9,000 + $9,000 = $287,100

Question 83

Accrued payroll includes liabilities ___ by law or voluntarily requested by employees that have not yet been ___, or ___.

Answer 83

required; paid; remitted

Question 84

Employer payroll taxes:

Answer 84

are an added payroll expense beyond the wages and salaries earned by employees.

Question 85

Owners of common stock usually have a few benefits:

Answer 85

voting rights, dividends, residual claim, and preemptive rights

Question 86

Corporate ownership: shares of stock can be purchased in ___ amounts, ownership interests are ___, and stockholders are not ___ for the corporation’s debts

Answer 86

small; transferable; liable

Question 87

___ stock
“non-voting” stock, don’t have a say in management decisions
They get dividends first, and have a secure percentage compared to common stock

Answer 87

Preferred

Question 88

If there is no par value, ___ is debited and ___ ___/ ___ ___ is credited

Answer 88

Cash; Common Stock/Preferred Stock

Question 89

Par value
There will be 2 separate entries credited, one is __ ___, the other is ___ __ ___. ___ is debited.

Answer 89

@ par; Paid in Capital; Cash

Question 90

Total Contributed Capital =

Answer 90

Preferred Stock par $ + Additional Paid in Capital (PS) + Common Stock par $ + Additional Paid in Capital (CS)

Question 91

Total Contributed Capital + Retained Earnings =

Answer 91

Total Stockholders’ Equity

Question 92

Par value of a stock refers to the:

Answer 92

value assigned to a share of stock in the corporate charter.

Question 93

Ms. Jessica Duffy purchased 1 share of $10 par value common stock from Ohio Corporation for $50 per share. Ms. Duffy sold that share to Mike Truesdale for $60 per share. As a result of the sale by Duffy to Truesdale sale, Ohio Corporation would:

Answer 93

not record this transaction.

Question 94

Sylvan Heights Company issues 200,000 shares of preferred stock for $40 per share. The stock has a fixed dividend rate of 5% and a par value of $3 per share. The company records the issuance with a debit to Cash for:

Answer 94

$8,000,000, a credit to Preferred Stock for $600,000, and a credit to Additional Paid-in Capital for $7,400,000.

Question 95

A corporation’s owners have ___ liability.

Answer 95

unlimited

Question 96

Which of the following statements would not explain why a company may want to repurchase its stock?

Answer 96

To increase the number of shares of outstanding stock.

Question 97

Galaxy Industries buys back 600,000 shares of its stock from investors at $45 a share. Two years later it reissues this stock for $65 a share. The stock reissue would be recorded with a debit to Cash for:

Answer 97

$39 million, a credit to Treasury Stock for $27 million, and a credit to Additional Paid-in Capital for $12 million.

Question 98

Which one of the following events would not require a journal entry on a corporation’s books?

Answer 98

2-for-1 stock split

Question 99

Sullivan Gulch Corporation declared a stock dividend on November 1 and issued 18,000 shares of stock to its stockholders. Prior to the dividend, the balance in Retained Earnings was $1,700,000, the number of shares of $5 par value stock issued and outstanding was 120,000, and the market value of the stock was $12. This stock dividend will cause total stockholders’ equity to:

Answer 99

remain unchanged.

Question 100

King Corporation has one million shares outstanding with a par value of $5. On August 24 of this year, it issued a 10% stock dividend when its stock price was $25. As a result of this stock dividend, retained earnings:

Answer 100

decreased by $2,500,000.

Question 101

A company issues 1 million shares of common stock with a par value of $0.02 for $15 a share. The entry to record this transaction includes a debit to Cash for:

Answer 101

$15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

Question 102

Mountain View Company buys back 3,000 shares of its $10 par value common stock from investors at $126 per share. This stock repurchase would be recorded with a debit to:

Answer 102

Treasury Stock and a credit to Cash for $378,000.

Question 103

Seville Company issued 1,680 shares of $50 par value stock for $126,000. What is the total amount of contributed capital?

Answer 103

$126,000

Question 104

When a company issues stock to the public for the first time, the issuance is called a(n):

Answer 104

initial public offering (IPO).

Question 105

Galleria Company has 280,000 shares authorized, 196,000 shares issued and 14,000 shares of treasury stock. How many shares does Galleria Company have outstanding?

Answer 105

182,000

Question 106

Treasury stock is a ___-___ account

Answer 106

contra-equity

Question 107

Features of common stock usually include all of the following except:

Answer 107

primary claim to the company’s assets in case of liquidation.

Question 108

The stockholders’ equity section of the balance sheet includes all of the following except:

Answer 108

Dividends.

Question 109

On the payment date for a cash dividend, the company:

Answer 109

debits Dividends Payable and credits Cash for the dividend amount.

Question 110

A corporate charter specifies that the company may issue up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The current number of shares of treasury stock after these transactions have been accounted for is:

Answer 110

3 million shares.

Question 111

The effect of a stock dividend is to:

Answer 111

change the composition of stockholders’ equity.

Question 112

Current Ratio=

Answer 112

current assets/ current liabilities

Question 113

Earnings Per Share=

Answer 113

(net income - preferred dividends)/ avg. # shares outstanding

Question 114

Gross Profit Margin=

Answer 114

gross profit/net sales

Question 115

Net Profit Margin=

Answer 115

net income/net sales

Question 116

Days to Collect=

Answer 116

365/receivables turnover ratio

Question 117

Receivables Turnover Ratio=

Answer 117

net Credit Sales /average Accounts Receivable

Question 118

Inventory Turnover Ratio=

Answer 118

cost of goods sold/average inventory

Question 119

Fixed Assets Turnover Ratio=

Answer 119

sales/net Fixed Assets

Question 120

Total Assets Turnover Ratio:

Answer 120

sales/total Assets

Question 121

ROE-Return on Equity=

Answer 121

net Income/total Equity

Question 122

P/E- Price to Earnings Ratio=

Answer 122

share price/earnings per share

Question 123

Impairment Loss=

Answer 123

Book Value − Fair Value