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Accounting > Test 4 > Flashcards

Test 4 Flashcards

1
Q

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.

A

False

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2
Q

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

A

False

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3
Q

Three accounting issues associated with accounts receivable are

A

Recognizing, valuing, and disposing

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4
Q

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

A

True

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5
Q

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

A

False

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6
Q

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

A

True

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7
Q

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

A

False

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8
Q

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.

A

False

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9
Q

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

A

True

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10
Q

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?

A

$45000 should be debited to land improvements

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11
Q

Land improvements should be depreciated over the useful life of the

A

Land improvements

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12
Q

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?

A

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

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13
Q

all of the following factors in computing depreciation are estimates except

A

Cost

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14
Q

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

A

During the construction period of a self-constructed asset

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15
Q

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

A

TRUE

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16
Q

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

A

TRUE

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17
Q

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.

A

True

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18
Q

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

A

FALSE

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19
Q

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

A

Land

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20
Q

The cost of land does not include

A

Annual property taxes.

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21
Q

The balance in the accumulated depreciation account represents the

A

Amount charged to expense since the acquisition of the plant asset

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22
Q

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

A

A systematic and rational manner

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23
Q

the book value of an asset is equal to

A

Assets cost less accumulated depreciation

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24
Q

Depreciation is a process of

A

cost allocation

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25
Q

In computing depreciation the salvage value is

A

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

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26
Q

The unit of activity method is generally not suitable for

A

Buildings

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27
Q

Expenses are understated

A

If a company fails to record estimated bad debt expense

28
Q

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

A

Net realizable value

29
Q

under the allowance method writing off an uncollectible account

A

Affects only balance sheet accounts

30
Q

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

A

Does not affect income in the period it is collected

31
Q

The percentage of sales basis of estimating expected collectibles

A

Emphasizes the matching of expenses with revenues

32
Q

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

A

Debit to bad debts expense for 7900

33
Q

A debit balance in the allowance for doubtful accounts

A

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

34
Q

Bad debts expense is considered

A

A necessary risk of doing business on credit.

35
Q

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

A

September 11th

36
Q

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

A

Revenue

37
Q

Oil change on a company truck…

A

Revenue

38
Q

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

A

Capital

39
Q

Purchased a wastebasket at a cost $10.00

A

Revenue

40
Q

Painting the exterior of a building

A

Revenue

41
Q

Construction of a new wing on an office building

A

Capital

42
Q

Replacement of worn out gears on factory machinery

A

Capital

43
Q

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

A

5075

44
Q

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

A

Maturity value 12450

45
Q

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

A

Debit bad debt expense, credit allowance for doubtful accounts.

46
Q

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

A

Sales x percent=answer

47
Q

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

A

Allowance for doubtful accounts

48
Q

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)

A

Subtract

49
Q

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)

A

add

50
Q

How do you find the maturity value?

A

Original value+interest

51
Q

What are the steps in the straight line method?

A

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

52
Q

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

A

Total cost-salvage value

53
Q

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

A

100%/useful life

54
Q

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

A

Original cost-accumulated depreciation for that year

55
Q

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

A

Annual depreciation expense

56
Q

What are the steps for the units of activity method?

A

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

57
Q

How do you determine depreciable

Cost under the units of activity method?

A

Original cost-salvage value

58
Q

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

A

Depreciable cost/total activities

59
Q

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

A

Original cost-accumulated depreciation for that year

60
Q

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

A

The annual depreciation expense for that year (2015)

61
Q

In the declining balance method what are the steps?

A

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

62
Q

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

A

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

63
Q

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

A

100%/useful life x2

64
Q

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

A

Original cost-accumulated depreciation for that year

65
Q

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

A

It transfers to the beginning value of the following year

66
Q

What is different about the declining balance method?

A

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)

Accounting (10 decks)

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