Week 7 Quiz

Question 1

The land cost initially reported on the balance sheet may include legal fees and title insurance.

True
False

Answer 1

True

Question 2

On January 1, 2019, equipment was purchased for $100,000. The equipment’s estimated residual value is $20,000, and its estimated useful life is 8 years. On December 31, 2019, the book value using the straight-line method of depreciation is $90,000.

True
False

Answer 2

True

Question 3

Which of the following is the best description of investments in available-for-sale securities?

A. Investments in bonds that management intends to hold to maturity.

B. Investments in bonds that are held primarily for the purpose of selling them in the near future.

C. Investments in more than fifty percent of the voting stock of another company.

D. Investments in debt securities that are passive investments other than trading securities and held-to-maturity investments and are accounted for under the fair value method.

Answer 3

D. Investments in debt securities that are passive investments other than trading securities and held-to-maturity investments and are accounted for under the fair value method.

Question 4

Wages expense is an example of an accrued liability account.

True
False

Answer 4

False

Question 5

Young Company is involved in a lawsuit. When would the lawsuit be recorded as a liability on the balance sheet?

A. When the loss probability is remote and the amount can be reasonably estimated.

B. When the loss is probable and the amount can be reasonably estimated.

C. When the loss probability is reasonably possible and the amount can be reasonably estimated.

D. When the loss is probable regardless of whether the loss can be reasonably estimated.

Answer 5

B. When the loss is probable and the amount can be reasonably estimated.