Test 4

Question 1

T OR F Management may choose any inventory cost method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.

Answer 1

False

Question 2

T OR F The three primary accounting problems with accounts receivable are: 1) recognizing,2) depreciating, and 3) disposing.

Answer 2

False

Question 3

Three accounting issues associated with accounts receivable are

Answer 3

Recognizing, valuing, and disposing

Question 4

T OR F Other receivables include nontrade receivables such as loans to company officers.

Answer 4

True

Question 5

T OR F Accounts Receivable are the result of cash and credit sales.

Answer 5

False

Question 6

T OR F Allowance for doubtful accounts is a contra asset account.

Answer 6

True

Question 7

T OR F Under the allowance method, bad debt expense is debited when an account is deemed uncollectible and must be written off.

Answer 7

False

Question 8

T OR F Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method has been used.

Answer 8

False

Question 9

T OR F Under the double-declining-balance method, the depreciation rate used each year remains constant.

Answer 9

True

Question 10

Wesley hospital installs a new parking lot. The paving cost $30000 and the lights to illuminate the new parking area cos 15000. Which of the following statements is true with respect to these additions?

Answer 10

$45000 should be debited to land improvements

Question 11

Land improvements should be depreciated over the useful life of the

Answer 11

Land improvements

Question 12

a company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?

Answer 12

The wiring is part of the computer costs, not the building costs.

Question 13

all of the following factors in computing depreciation are estimates except

Answer 13

Cost

Question 14

Interest may be included in the acquisition cost of a plant asset

Answer 14

During the construction period of a self-constructed asset

Question 15

T OR F capital expenditures are expenditures that increase the company’s investment in productive facilities.

Answer 15

TRUE

Question 16

T OR F Ordinary repairs should be recognized when incurred as revenue expenditures.

Answer 16

TRUE

Question 17

T OR F Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

Answer 17

True

Question 18

T OR F The fair market value of a plant asset is always the same as its book value

Answer 18

FALSE

Question 19

Which of the following assets does not decline in service potential over the course of its useful life

Answer 19

Land

Question 20

The cost of land does not include

Answer 20

Annual property taxes.

Question 21

The balance in the accumulated depreciation account represents the

Answer 21

Amount charged to expense since the acquisition of the plant asset

Question 22

Depreciation is the process of allocating the cost of a plant asset over its service life in

Answer 22

A systematic and rational manner

Question 23

the book value of an asset is equal to

Answer 23

Assets cost less accumulated depreciation

Question 24

Depreciation is a process of

Answer 24

cost allocation

Question 25

In computing depreciation the salvage value is

Answer 25

An estimate of a plant asset's value at the end of its useful life

Question 26

The unit of activity method is generally not suitable for

Answer 26

Buildings

Question 27

Expenses are understated

Answer 27

If a company fails to record estimated bad debt expense

Question 28

The net amount expected to be received in cash from receivables is termed the...

Answer 28

Net realizable value

Question 29

under the allowance method writing off an uncollectible account

Answer 29

Affects only balance sheet accounts

Question 30

The collection of an account that had been previously written off under the allowance method of accounting for uncollectables

Answer 30

Does not affect income in the period it is collected

Question 31

The percentage of sales basis of estimating expected collectibles

Answer 31

Emphasizes the matching of expenses with revenues

Question 32

An aging of a company's accounts receivable indicated that $9000 are estimated to be uncollectible. If allowance for doubtful accounts has a $1100 credit balance, the adjustment to record bad debts for the period will require a

Answer 32

Debit to bad debts expense for 7900

Question 33

A debit balance in the allowance for doubtful accounts

Answer 33

Indicates that the actual bad debt write offs have exceeded previou provisions for bad debts

Question 34

Bad debts expense is considered

Answer 34

A necessary risk of doing business on credit.

Question 35

A 60 day note receivable is dated July 13. When is the maturity date?

Answer 35

September 11th

Question 36

Painting and lettering of a used truck among acquisition of the truck...

Answer 36

Revenue

Question 37

Oil change on a company truck...

Answer 37

Revenue

Question 38

Overhaul of a truck motor. One year extension in useful life is suspected...

Answer 38

Capital

Question 39

Purchased a wastebasket at a cost $10.00

Answer 39

Revenue

Question 40

Painting the exterior of a building

Answer 40

Revenue

Question 41

Construction of a new wing on an office building

Answer 41

Capital

Question 42

Replacement of worn out gears on factory machinery

Answer 42

Capital

Question 43

Compute the maturity value for each of the following notes receivabe 1. A $5000, 6%, 3 month note dated July 20th.

Answer 43

5075

Question 44

Compute the maturity value for each of the following notes receivabe 2. . A $12000, 9%, 150 day note dated August 5. Divide by 360 instead of 365

Answer 44

Maturity value 12450

Question 45

What is the journal entry for both the percentage of sales method and the aging of receivables method?

Answer 45

Debit bad debt expense, credit allowance for doubtful accounts.

Question 46

What number is used in the journal entries for the percentage of sales method?

Answer 46

Sales x percent=answer

Question 47

What given number DONT you use in the percentage of sales method question? (banana peel)

Answer 47

Allowance for doubtful accounts

Question 48

IF there is a credit in the allowance for doubtful accounts, to get the final answer for the journal entry you should __________ it from the amount calculated in the box. (add/subtract)

Answer 48

Subtract

Question 49

IF there is a debit in the allowance for doubtful accounts, to get the final answer for the journal entry you should __________ it to the amount calculated in the box. (add/subtract)

Answer 49

add

Question 50

How do you find the maturity value?

Answer 50

Original value+interest

Question 51

What are the steps in the straight line method?

Answer 51

Determine depreciable cost, calculate the rate, calculate the book value

Question 52

How do you determine depreciable cost under the straight line method?

Answer 52

Total cost-salvage value

Question 53

How do you calculate the rate under the straight line method?

Answer 53

100%/useful life

Question 54

Under the straight line method how do you figure out the book value?

Answer 54

Original cost-accumulated depreciation for that year

Question 55

What number is used in the journal entry for the straight line method?

Answer 55

Annual depreciation expense

Question 56

What are the steps for the units of activity method?

Answer 56

Determine depreciable cost, calculate depreciable cost per unit, calculate book value

Question 57

How do you determine depreciable | Cost under the units of activity method?

Answer 57

Original cost-salvage value

Question 58

How do you determine the cost per unit in the units of activity method?

Answer 58

Depreciable cost/total activities

Question 59

How do you calculate book value under the units of activity method?

Answer 59

Original cost-accumulated depreciation for that year

Question 60

For a 2015 journal entry under the units of activity method, what number is used?

Answer 60

The annual depreciation expense for that year (2015)

Question 61

In the declining balance method what are the steps?

Answer 61

CROSS OUT THE LAST RATE -YOU DONT USE IT!!!!!! Begin with original cost, find the rate and multiply by 2, determine the book value and bring it down

Question 62

In the declining balance method the final book value must equal the

Answer 62

Salvage value (start at the book value and work backwards for the last row!!!!!)

Question 63

How do you find the rate to be used in the declining balance method?

Answer 63

100%/useful life x2

Question 64

How do you find the book value for the declining balance method?

Answer 64

Original cost-accumulated depreciation for that year

Question 65

In the declining balance method, what happens to the book value at the end of the year?

Answer 65

It transfers to the beginning value of the following year

Question 66

What is different about the declining balance method?

Answer 66

Rate is multiplied by two, book value is brought down to beginning value and the last rate gets crossed out final book value must equal salvage value (work backwards for last row)