ACC 210 ERAU Prescott - Chapter 8-11 adaptive study guide

A $1,000 bond quoted at 100 could be purchased or sold at ______________.

$1,000.

A $1,000 bond quoted at _____ would be purchased or sold at a discount. 110 100 98 105

98

A contingent liability can be classified as all of the following except for a.Remote b.Certain c.Reasonably possible d.Probable

Certain

Horizon Company had interest expense of $767,000 and income before income tax expense of $6,210,000 in the past fiscal year. What is Horizon's times interest earned? 0.1 7.1 8.1 9.1

9.1 (Income Before Income Tax + Interest Expense) ÷ Interest Expense.

Equipment was purchased at a cost of $78,000. The equipment had an estimated useful life of five years and a residual value of $3,000. Assuming the equipment was sold at the end of Year 4 for $8,000, determine the gain or loss on the sale of equipment. (Assume the straight-line depreciation method.) a.A loss of $8,000 b.A loss of $10,000 c.A gain of $10,000 d.A gain of $8,000

A loss of $10,000 ($78,000 − $3,000)/5 = $15,000; $15,000 × 4 = $60,000; $78,000 − $60,000 = $18,000; $8,000 − $18,000 = $(10,000) loss

Which of the depreciation methods is called an accelerated depreciation method?

Double-declining-balance method

An asset with a book value of $4,725 was discarded, having no market value. How much will be recorded as a loss or gain on disposal? a.Gain of $4,725 b.No loss or gain c.Loss of $4,725 d.Cannot be determined.

Loss of $4,725

Estimating and recording product warranty expense in the period of the sale best follows which of the following? a.Cost principle b.Materiality concept c.Matching principle d.Business entity assumption

Matching principle

All of the following are other deductions that employees may choose to have deducted from their gross pay except a.life insurance. b.retirement savings. c.dental insurance. d.Medicare insurance.

Medicare insurance.

All except which of the following will be included in the cost of a fixed asset? a.Mistakes in installation b.Cost of installing equipment c.Freight costs d.Direct costs of new construction

Mistakes in installation

Which is usually the first course of action a business takes to collect a bill? Turns the bill over to a collection agency. Reports the non-payment to the tax agency. Contacts the person to ask about why they haven't paid and adjust terms to maximize the potential for collection. Writes off the bill as a part of doing business.

Contacts the person to ask about why they haven't paid and adjust

In determining an employee's net pay, which of the following taxes would not be deducted? a.FICA taxes b.Federal income taxes c.Medicare taxes d.SUTA taxes

SUTA taxes

The fixed asset turnover ratio is calculated as

Sales/Average Book Value of Fixed Assets.

Fixed assets considered a long-term commitment because of their ____________.

Cost

The depletion rate is calculated as

Cost of Resource/Estimated Total Units of Resource.

The numerator in the current ratio calculation is______________.

Current Assets.

When bonds are issued at their face amount, the journal entry will include a __________ to __________.

credit; Bonds Payable

The journal entry to record the issuance of a note to a creditor to satisfy an account payable created earlier would include a __________ to __________. credit; Accounts Payable credit; Notes Payable debit; Notes Payable debit; Inventory

credit; Notes Payable

A copy machine was purchased for $35,000. It is estimated that the machine will have a useful life of four years and a residual value of $3,000. It is estimated that the machine will make 2,000,000 copies. Using the units-of-activity method to depreciate the copy machine, how much will be depreciated if during the first year 550,000 copies were made? a.$8,750 b.$8,000 c.$32,000 d.$8,800

$8,800 ($35,000 − $3,000)/2,000,000 = $0.016 per copy; $0.016 × 550,000 = $8,800. (PP-RV)/useful life (# of Copies) = per copy depreciation (PCD) PCD*#of Copies made= depreciated value per batch of copies

Postretirement benefits may include all of the following except a.tuition assistance. b.life insurance. c.dental care. d.vacation pay.

vacation pay.

On July 8, Action Co. issued an $80,000, 6%, 90-day note payable to Scanlon Co. Assuming a 360-day year, what is the maturity value of the note? a.$81,200 b.$78,800 c.$84,800 d.$80,000

$81,200 $80,000 × 0.06 × 90/360 = $1,200; $1,200 + $80,000 = $81,200.

A 90-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is a.$9,900. b.$8,100. c.$9,000. d.$9,225.

$9,000.

The payroll register of Sara Company indicates $5,800 of social security tax withheld and $1,450 of Medicare tax withheld on total salaries of $90,000 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $31,500 at the federal rate of 0.8% and the state rate of 5.4%. What is the total amount of payroll tax expense? a.$9,203 b.$8,951 c.$7,250 d.$7,502

$9,203

Assume that John Smith is a salesperson employed by McCrackin Company. Smith's regular rate of pay is $36 per hour, and any hours worked in excess of 40 hours per week are paid at 1½ times the regular rate. Smith worked 42 hours for the week ended October 27. What are his total earnings for the week? $2,268 $1,548 $1,512 $2,548

$1,548

A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. Assuming a 360-day year, the maturity value of the note is a.$10,300. b.$10,000. c.$9,700. d.$11,200.

$10,300. 10,000 * 12% = $1,200 90 day / 360 day = 4 $1,200 / 4 = 300 10,000+300= 10,300

On December 1, Bright Company receives a 6% interest-bearing note from Galvalume Company to settle a $20,000 account receivable. The note is due in three months. At December 31, Bright should record interest revenue of a.$100. b.$600. c.$0. d.$200.

$100 ($20,000 × 6% × 1/12) = $100

The semiannual interest payment on a $10,000, 5% bond would be $25. $250. $500. $2,500.

$250.

Blazer Company sells merchandise with a one-year warranty. In Year 1, sales consisted of 2,800 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2. In the income statement for Year 1, Blazer Company should show warranty expense of a.$28,000. b.$19,600. c.$0. d.$8,400.

$28,000.

Employees' weekly gross earnings were $5,500, and their federal income tax withholding was $1,116.50. Assuming the social security rate is 6.0% and Medicare tax rate is 1.5%, what is the net amount to be paid to employees? a.$4,053.50 b.$4,301.00 c.$4,383.50 d.$3,971.00

$3,971.00

On January 1, 2018, Quinton Corporation issued 8% bonds with a face value of $100,000. The bonds are sold for $98,000. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, 2022. Quinton Corporation records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2018, is a.$7,600. b.$8,000. c.$8,200. d.$8,400.

$8,400. Interest is calculated as principal × rate × time plus amortization of discount. $100,000 × 8% × 12/12 (as it is for the first full year) = $8,000, plus [($100,000 − $98,000) ÷ 5 (life of bond)] = $2,000 ÷ 5 = $400. The total is $8,400.

An employee receives an hourly rate of $25, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 45; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to the employee? a.$762.00 b.$837.50 c.$748.44 d.$775.00

$748.44

Shale Miner Co. acquired mineral rights for $60,000,000. It is estimated that there are 80,000 total tons of the resource; during the current year, 10,750 tons were mined and sold. What is the rate of depletion? a.$750 per ton b.$600 per ton c.$1,000 per ton d.$500 per ton

$750 per ton

Hsu Company issued $100,000 of 8% bonds on January 1, 20Y8, at face value. The bonds pay interest semiannually on June 30 and December 31, 20Y8. The total interest expense related to these bonds for the year ended December 31, 20Y8, is a.$8,000. b.$4,000. c.$12,000. d.$2,000.

$8,000. Interest is calculated as: principal × rate × time, or $100,000 × 8% × 12/12 = $8,000.

Financial statement data for the year ending December 31 for Flagg Co. are as follows: Sales $4,250,000 Accounts receivable: Beginning of year - 600,000 End of year - 630,000 Determine the number of days' sales in receivables for the year. a.52.8 days b.54.1 days c.50.0 days d.51.5 days

52.8 days ($600,000 + $630,000)/2 = $615,000; $4,250,000/365 = $11,644; $615,000/$11,644 = 52.8 days

Goss Company reported the following on the company's income statement for the current year: Interest expense $ 400,000 Income before income tax expense 2,000,000 What is the times interest earned ratio? a.4.0 b.6.0 c.3.0 d.5.0

6.0 Times Interest Earned = (Income Before Income Tax + Interest Expense)/Interest Expense = ($2,000,000 + $400,000)/$400,000 = 6.0

Using the following end-of-year information, calculate accounts receivable turnover for Year 2. Year 2: Sales are $82,500; average accounts receivable is $11,000. Year 1: Sales are $78,000; average accounts receivable is $10,000. a.48.7 b.7.8 c.46.8 d.7.5

7.8 Sales / AAR = ART (accounts receivable turnover)

A certificate that authorizes an employer to withhold federal income taxes from each employee is called a Form W-2. 1040. W-4. 1040EZ.

W-4.

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and Bad Debt Expense is estimated at 2% of sales. If sales are $500,000, the adjusting entry for uncollectible accounts would include a.a credit to Allowance for Doubtful Accounts of $9,500. b.a debit to Allowance for Doubtful Accounts of $10,500. c.a debit to Allowance for Doubtful Accounts of $10,000. d.a credit to Allowance for Doubtful Accounts of $10,000.

a credit to Allowance for Doubtful Accounts of $10,000.

All of the following assets will be included as intangible assets on the balance sheet except a.buildings. b.goodwill. c.copyrights. d.patents.

buildings.

A gain or loss on the exchange of similar assets will be recorded if the transaction has

commercial substance.

A gain or loss on the exchange of similar assets will be recorded if the transaction has______________.

commercial substance.

The interest rate to be paid on the face amount of the bond is called the

contract rate.

Bonds that may be exchanged for other securities, such as common stock, are called______________.

convertible.

The exclusive right to publish and sell a literary, artistic, or musical composition is granted by a

copyright.

All of the following are considered fixed assets except a.copyrights. b.land. c.land improvements. d.building.

copyrights.

Intangible assets are reported on the balance sheet

immediately after the property, plant, and equipment.

If a purchased item is long-lived but not used in normal operations, the asset is classified and recorded as a(n)

investment.

The number of days' sales in receivables what?

is an estimate of the length of time the receivables have been outstanding.

All of the following fixed assets are depreciated EXCEPT building. truck. land. equipment.

land.

In a lease contract, the party to whom the rights to use the asset are granted is called the

lessee.

The party making the promise to pay the promissory note is the ______.

maker.

The estimate of uncollectible accounts is based on all of the following except a.monthly cash expenses. b.past experience. c.forecasts of the future. d.industry averages.

monthly cash expenses.

An installment note that is secured by the purchased asset is called a(n)

mortgage note.

The accounts receivable turnover is computed as __________ divided by __________.

sales; average accounts receivable

The fixed asset turnover ratio is computed as __________ divided by __________.

sales; average book value of fixed assets

The most common transaction for creating receivables is a.selling fixed assets on credit. b.buying fixed assets on credit. c.buying merchandise on credit. d.selling merchandise or services on credit.

selling merchandise or services on credit.

A contingent liability that is reasonably possible

should be disclosed only.

The balance in Unamortized Discount on Bonds Payable a.would be added to the face amount of the related bonds payable on the balance sheet. b.should be reported separately in the Current Liabilities section of the balance sheet. c.should be reported in the Paid-In Capital section of the balance sheet. d.should be reported on the balance sheet as a deduction from the face amount of the related bonds payable.

should be reported on the balance sheet as a deduction from the face amount of the related bonds payable.

All of the following would be considered examples of employer postretirement benefits EXCEPT social security. dental care. tax services. medical care.

social security.

Employees are not subject to ______________ tax?

state unemployment tax.

In the current assets section of the balance sheet, receivables are usually listed in order a.alphabetically. b.that they can be turned into cash. c.of due date. d.of size.

that they can be turned into cash.

Generally accepted accounting principles (GAAP) require companies with a large amount of receivables to use

the allowance method.

If the market rate of interest is greater than the contract rate of interest, the bonds will sell ______________.

the bonds will sell for less than their face amount.

If the market rate of interest is equal to the contract rate of interest, a.the bonds will sell for their face amount. b.the bonds will sell for less than their face amount. c.the bonds will sell for more than their face amount. d.the selling price of the bond cannot be determined.

the bonds will sell for their face amount.

The best definition of a copyright is

the exclusive right to publish and sell literary, artistic, or musical compositions.

The maturity value of a promissory note is______________.

the face value of the note plus the interest due at the maturity date.

The more efficiently a company is using its assets a.the lower the fixed asset turnover. b.efficiency does not affect the fixed asset turnover. c.the higher the fixed asset turnover. d.the higher the book value of fixed assets.

the higher the fixed asset turnover.

When a seller allows a buyer an amount for old equipment traded in for new equipment having a similar use, this amount is called

the trade-in allowance.

Under the allowance method, when a specific account is written off, a.total assets will be unchanged. b.total assets will decrease. c.net income will decrease. d.total assets will increase.

total assets will be unchanged.

A fixed asset should be removed from the accounts except a.when it is discarded. b.when it is given away. c.when it is fully depreciated. d.when it is sold.

when it is fully depreciated.

If an asset is long-lived and is used in a productive manner in a business, it will be classified as a(n)

fixed asset.

A $1,000 bond quoted at 98 could be purchased or sold for ______________.

$980.

A distinguishing feature of the installment note is

equal periodic payments.

An employee earned $1,000 in the first pay period of the current year. How much is the total employer and employee social security taxes on these earnings? $120 $60 $0; the earnings are not subject to social security tax $76

$120

On December 1, a company accepted a $5,000, 4%, 90-day note. How much accrued interest will be recorded as an adjusting entry on December 31, the end of the accounting period? $166.67 $16.67 $1.67 $0.00; interest is not accrued at year-end

$16.67

If Accounts Receivable for Crawford Company is equal to $172,000 and Allowance for Doubtful Accounts is $4,500 at December 31, what is the amount of net receivables shown on Crawford's balance sheet of the same date? a.$172,000 b.$176,500 c.$166,600 d.$167,500

$167,500 AR = $172,000 ADA = $4,500 Net receivables = AR-ADA

Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the first year using the units-of-activity method of depreciation assuming the generator was used for 1,040 hours. a.$2,288 b.$2,000 c.$208 d.$2,080

$2,080

The interest on a $5,400, 3%, 45-day note is

$20.25

The assets of a company are subject to the following except ______________.

rights of customers.

A copy machine was purchased for $35,000 and had accumulated depreciation of $24,000. The machine was traded in for a new one that had a sticker price of $50,000. The vendor agreed to give a trade-in allowance for the old equipment in the amount of $9,000. How much will the company need to pay in cash, and what is the amount of the gain or loss? a.$41,000, gain of $2,000 b.$50,000, no loss or gain c.$41,000, loss of $2,000 d.$50,000, loss of $2,000

$41,000, loss of $2,000

A company has the following liabilities as of December 31: Accounts payable $150,000 Notes payable (current portion) 217,000 Salaries and wages payable 55,000 Installment notes payable 1,140,000 Interest payable 32,000 Payroll taxes payable 15,500 What is the amount of total current liabilities reported on the balance sheet? $319,500 $469,500 $1,609,500 $437,500

$469,500

On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of boot in this transaction? a.$488,000 b.$500,000 c.$470,000 d.$18,000

$488,000

Peachtree Company borrows $30,000 from the local bank at 7% interest. The term of the note is five years, and the annual payments remain constant at $7,317. Determine the decrease in notes payable that Peachtree Company should record in the first year. a.$1,735 b.$2,100 c.$5,217 d.$7,317

$5,217 $30,000 × 7% = $2,100; $7,317 − $2,100 = $5,217.

A copier was purchased on October 1 for $10,000 and had an estimated useful life of five years. There was no salvage value. What is the first year's depreciation using the straight-line method? a.$2,500 b.$2,000 c.$3,330 d.$500

$500 $10,000 ÷ 5 years = $2,000. First year depreciation = $2,000 × (3 ÷ 12) = 500.

Puzzles Company sells merchandise with a one-year warranty. In Year 1, sales consisted of 3,600 units. It is estimated that warranty repairs will average $15 per unit sold, and 40% of the repairs will be made in Year 1 and 60% in Year 2. In the income statement for Year 1, Puzzles Company should show warranty expense of a.$21,600. b.$54,000. c.$32,400. d.$0.

$54,000.

On January 8, Lawrence Co. issued a $60,000, 120-day discounted note to Raines Bank. The discount rate is 8%. Assuming a 360-day year, what is the amount of proceeds received? a.$61,600 b.$60,000 c.$55,200 d.$58,400

$58,400 $60,000 - ($60,000 × 0.08 × 120/360) = $58,400.

Times interest earned is calculated as

(Income Before Income Tax + Interest Expense) ÷ Interest Expense.

The times interest earned ratio is computed as______________.

(Income Before Income Tax + Interest Expense)/Interest Expense.

Financial data for Greene Company follows: Sales $825,000 Accounts receivable: Beginning of year 75,000 End of year 87,000 Net income 1,500,000 What is Greene Company's accounts receivable turnover?

10.2 (Sales/ Avg. A/R) A/R = (Beginning A/R + Ending A/R) / 2

Financial statement data for the year ending December 31 for River Company are as follows: Sales$2,445,000 Fixed assets: Beginning of year 800,000 End of year 830,000 Determine the fixed asset turnover ratio for the year. a.3.0 b.2.9 c.1.5 d.3.1

3.0

Which is a true statement? Federal law requires all businesses to offer credit to customers. A customer may claim dissatisfaction with a product as a means of refusing to make payments. A business has the legal right to harass a customer until a debt is paid. If a company is run correctly, it will not have to deal with uncollectibles.

A customer may claim dissatisfaction with a product as a means of refusing to make payments.

Which of the following would not be reported as current liabilities on the balance sheet? Accruals Accounts payable Notes payable Accounts Receivable

Accounts Receivable

Assume that equipment acquired at a cost of $10,000 is fully depreciated. On June 30, the equipment is discarded. The entry to record the discard would be to debit __________ and credit __________. Equipment; Accumulated Depreciation—Equipment Accumulated Depreciation—Equipment; Equipment Equipment; Depreciation Expense—Equipment Accumulated Depreciation—Equipment; Depreciation Expense—Equipment

Accumulated Depreciation—Equipment; Equipment

Under the allowance method for uncollectible accounts, the journal entry to record the estimate of uncollectible accounts would include a credit to

Allowance for Doubtful Accounts.

The entry to record the amortization of a patent would include a debit to __________ and a credit to __________. Amortization Expense; Patents Amortization Expense; Accumulated Amortization Patents; Accumulated Amortization Patents Expense; Accumulated Amortization

Amortization Expense; Patents

The estimated value of an asset at the end of its useful life is called all of the following except a.salvage value. b.scrap value. c.residual value. d.book value.

book value.

A debtor is referred to as a

borrower.

Equation for........ number of days' sales in receivables

Average Accounts Receivable / Average Daily Sales (sales/365)

The numerator in the number of days' sales in receivables calculation is________.

Average Accounts Receivable.

The denominator in the fixed asset turnover ratio is the

Average Book Value of Fixed Assets.

Accumulated depreciation would be shown on which financial statement?

Balance sheet

The market interest rate related to a bond is also called the ______________.

effective interest rate.

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts? a.Debit Bad Debt Expense, $500; credit Allowance for Doubtful Accounts, $500 b.Debit Allowance for Doubtful Accounts, $500; credit Bad Debt Expense, $500 c.Debit Allowance for Doubtful Accounts, $15,500; credit Bad Debt Expense, $15,500 d.Debit Bad Debt Expense, $14,500; credit Allowance for Doubtful Accounts, $14,500

Debit Bad Debt Expense, $14,500; credit Allowance for Doubtful Accounts, $14,500

Equipment was purchased at a cost of $52,000. It had an estimated useful life of seven years and a residual value of $3,000. Assuming the equipment was sold at the end of Year 6 for $14,000, which of the following will be included in the journal entry? (Assume the straight-line depreciation method.) a.Credit to Loss on Sale of Asset for $4,000 b.Debit to Accumulated Depreciation for $42,000 c.Credit to Cash for $14,000 d.Debit to Gain on Sale of Asset for $4,000

Debit to Accumulated Depreciation for $42,000

Which of the following is NOT a characteristic of natural resources? Removed for sale Exist physically Naturally occurring Removed and sold over more than one year

Exist physically

Which of the following taxes is paid by the employee and the employer? a.FUTA b.FICA c.SUTA d.Federal withholding taxes

FICA

Which of the following taxes are not included in the employer's payroll taxes? a.FICA taxes b.Federal income taxes c.FUTA taxes d.SUTA taxes

Federal income taxes

In regard to discarding fixed assets, which of the following is not true? a.Recorded depreciation should be brought up to date before removing the asset from the accounting records. b.If a fixed asset is no longer used and has no residual value, it should be written off. c.If a fixed asset is no longer used and has no residual value, it is discarded. d.Full depreciation should be recorded and no loss recognized with an asset that is discarded rather than sold.

Full depreciation should be recorded and no loss recognized with an asset that is discarded rather than sold.

The allowance method is required by

GAAP.

The numerator in the quick ratio includes all of the following except

Inventory.

The numerator in the quick ratio includes all of the following except a.Temporary Investments. b.Inventory. c.Cash. d.Accounts Receivable.

Inventory.

Other receivables whose collection is expected beyond one year are reported on the balance sheet under

Investments.

Which of the following fixed assets is not depreciated? a.Land b.Building c.Equipment d.Machinery

Land

An asset with a net book value of $1,225 was discarded, having no market value. How much will be recorded as a loss or gain on disposal? a.Gain of $1,225 b.No loss or gain c.Loss of $1,225 d.Cannot be determined with the information given.

Loss of $1,225

On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to give a trade-in allowance of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction? a.Gain of $12,000 b.Gain of $25,417 c.Loss of $12,000 d.Loss of $18,000

Loss of $18,000 The book value of the equipment is equal to $30,000 ($225,000 original cost less the accumulated depreciation of $195,000). The trade-in allowance of $12,000 is subtracted from the $30,000 book value resulting in an $18,000 loss.

A corporation issues for cash $1,000,000 of 8%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 10%. The straight-line method is adopted for the amortization of a bond discount or premium. Which of the following is true? a.The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. b.The amount of the annual interest expense gradually decreases over the life of the bonds. c.The amount of unamortized premium decreases from its balance at issuance date to a zero balance at maturity. d.The amount of the annual interest expense is computed at 8% of the bond carrying amount at the beginning of the year.

The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity.

All of the following are factors used in determining depreciation expense with the straight-line method except a.the asset's initial cost. b.the asset's expected useful life. c.the asset's estimated residual value. d.The asset's net book value.

The asset's net book value.

Why might a customer frequently ask for changes in the payment schedule? They are traveling a lot. Their pay day changes depending on their schedule. They are sick a lot. The customer may be having trouble making payments.

The customer may be having trouble making payments.

Which is an early sign that points to an uncollectible debt?

The customer refuses to acknowledge you when you make contact.

The rule is that an account becomes uncollectible a.at the end of the fiscal year. b.upon receipt of a certified letter from the debtor. c.when the debtor fails to pay a note on the due date. d.There is no general rule as to when an account becomes uncollectible.

There is no general rule as to when an account becomes uncollectible.

Which is usually the last course of action a business takes to collect a bill? Turns the bill over to a collection agency. Reports the non-payment to the tax agency. Contacts the person to ask about why they haven't paid and adjust terms to maximize the potential for collection. Writes off the bill as a part of doing business.

Turns the bill over to a collection agency.

Which of the following statements is true when comparing the percent of sales method and the analysis of receivables method? The analysis of receivables method emphasizes matching revenues and expenses. The percent of sales method emphasizes the balance sheet. Under the percent of sales method, Bad Debt Expense is the focus of the estimation process. The analysis of receivables method emphasizes maximizing sales.

Under the percent of sales method, Bad Debt Expense is the focus of the estimation process.

Depletion can be compared to which of the following depreciation methods? a.Double-declining-balance b.Units-of-activity c.Straight-line d.Sum-of-the-years-digits

Units-of-activity

An increase in the fixed asset turnover ratio from 2.0 to 2.7 indicates a.a favorable change in the efficiency of using fixed assets to generate sales. b.an unfavorable change in the efficiency of using fixed assets to generate sales. c.an unfavorable change in the efficiency of using cash to generate sales. d.an unfavorable change in the efficiency of using fixed assets to pay down debt.

a favorable change in the efficiency of using fixed assets to generate sales.

A bond is______________.

a form of an interest-bearing note.

The best definition of a trademark is

a name, term, or symbol used to identify a business or its product.

Examples of current liabilities are all of the following except a.current portion of long-term debt. b.short-term notes payable. c.accounts payable. d.accounts receivable.

accounts receivable.

The estimate for uncollectible accounts is normally based on which of the following? past experience industry averages forecasts of the future all of the above

all of the above

The term boot refers to the

amount of cash paid or liability incurred when buying a new asset and trading in an old asset.

The term boot refers to the a.amount of cash paid or liability incurred when buying a new asset and trading in an old asset. b.total cost of a new asset. c.amount of down payment on an asset. d.amount of the gain or loss on exchange of assets.

amount of cash paid or liability incurred when buying a new asset and trading in an old asset.

Allowance for Doubtful Accounts will have a.an unadjusted debit balance at the end of the period if the write-offs during the period were less than the beginning balance. b.an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance. c.an unadjusted credit balance at the end of the period if the write-offs during the period were more than the beginning balance. d.an unadjusted debit balance at the end of the period if the write-offs during the period were equal to the beginning balance.

an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance.

A decrease in the fixed asset turnover ratio from 3.0 to 2.2 indicates a.an unfavorable change in the efficiency of using cash to generate sales. b.an unfavorable change in the efficiency of using fixed assets to generate sales. c.an unfavorable change in the efficiency of using fixed assets to pay down debt. d.a favorable change in the efficiency of using fixed assets to generate sales.

an unfavorable change in the efficiency of using fixed assets to generate sales.

Any unamortized premium is reported on the balance sheet as______________.

as an addition to the face amount of the bonds.

The number of days' sales in receivables is calculated as __________ divided by __________.

average accounts receivable; average daily sales

Cost less accumulated depreciation equals __________.

book value.

The pension plan for GL Inc. requires a contribution to the plan administrator equal to 11% of employee salaries. Salaries were $575,600 for the period. The journal entry to record the pension benefit would include a a.credit to Salary Expense for $63,316. b.debit to Pension Expense for $6,332. c.debit to Cash for $6,332. d.credit to Cash for $63,316.

credit to Cash for $63,316.

Under the allowance method for uncollectible accounts, the journal entry to record the write-off of an account receivable would include a __________ to __________. credit; Bad Debt Expense debit; Bad Debt Expense credit; Cash credit; Accounts Receivable

credit; Accounts Receivable

The journal entry to record the amortization of a bond discount would include a __________ to __________.

credit; Discount on Bonds Payable

The entry to record a gain on an exchange of similar assets would include a __________ to __________. debit; Cash debit; Gain on Exchange of Equipment credit; Gain on Exchange of Equipment credit; Accumulated Depreciation—Equipment

credit; Gain on Exchange of Equipment

The adjusting entry for accrued interest on a note receivable would include a __________ to __________. debit; Cash debit; Interest Expense credit; Interest Revenue debit; Notes Receivable

credit; Interest Revenue

Accounts receivable is classified on the balance sheet as a

current asset.

All receivables that are expected to be realized in cash within a year are reported in the __________ section of the balance sheet.

current assets

A note receivable due in 11 months is listed on the balance sheet under the caption a.long-term liabilities. b.current assets. c.investments. d.fixed assets.

current assets.

Receivables are _________ on the __________, which are listed in order of ____________.

current assets; balance sheet; liquidity.

A five-year note payable would appear on the balance sheet as a(n)

current liability for any portion due within one year.

The portion of bonds or notes payable that is due within one year is reported as a(n)______________.

current liability on the balance sheet.

An unfunded pension liability is reported on the balance sheet as a(n)

current liability or a long-term liability, depending upon when the pension liability is to be paid.

Accounts payable would appear on the balance sheet as a

current liability.

Flora Co. uses the allowance method of accounting for uncollectible accounts receivable. The entry to write off an account that has been determined to be uncollectible would be to a.debit Allowance for Doubtful Accounts and credit Accounts Receivable. b.debit Bad Debt Expense and credit Allowance for Doubtful Accounts. c.debit Accounts Receivable and credit Bad Debt Expense. d.debit Sales Returns and Allowances and credit Accounts Receivable.

debit Allowance for Doubtful Accounts and credit Accounts Receivable.

On January 1 of Year 1, Pierce Company borrowed $200,000 on a 10-year, 7% installment note payable. The terms of the note require Pierce to pay 10 equal payments of $25,000 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31 of Year 1 is debit Interest Expense, $14,000; debit Notes Payable, $11,000; credit Cash, $25,000. debit Notes Payable, $14,000; debit Interest Expense, $11,000; credit Cash, $25,000. debit Notes Payable, $25,000; credit Cash, $25,000. debit Notes Payable, 14,000; credit Interest Expense $14,000.

debit Interest Expense, $14,000; debit Notes Payable, $11,000; credit Cash, $25,000.

The journal entry to record a note received from a customer to apply on account is a a.debit to Cash and a credit to Notes Receivable. b.debit to Accounts Receivable and a credit to Notes Receivable. c.debit to Notes Receivable and a credit to Accounts Receivable. d.debit to Notes Receivable and a credit to Cash.

debit to Notes Receivable and a credit to Accounts Receivable.

Scout Company sold $15,000 of merchandise in September with a three-month warranty. The cost to repair defects under warranty is estimated at 5% of the sales price. The journal entry to record the estimated warranty expense for the month of September will include a a.debit to Product Warranty Expense for $750. b.credit to Product Warranty Payable for $7,500. c.credit to Product Warranty Expense for $750. d.debit to Product Warranty Payable for $7,500.

debit to Product Warranty Expense for $750.

If a product is repaired under warranty, the seller would record a journal entry that includes a______________ to ______________.

debit to Product Warranty Payable.

Little Company provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation cost to be paid in the following year is $172,800. The journal entry to record the adjusting entry required on December 31, the end of the current year, to record the accrued vacation pay includes a a.debit to Vacation Pay Payable for $86,400. b.debit to Vacation Pay Expense for $172,800. c.credit to Vacation Pay Payable for $14,400. d.credit to Cash for $172,800.

debit to Vacation Pay Expense for $172,800.

The entry to record the sale of equipment at book value would include a __________ to __________. debit; Loss on Sale of Equipment credit; Cash debit; Accumulated Depreciation credit; Accumulated Depreciation

debit; Accumulated Depreciation

The journal entry to record costs related to extraordinary repairs would include a __________ to __________. credit; Accumulated Depreciation debit; Accumulated Depreciation debit; Cash credit; the respective asset account

debit; Accumulated Depreciation

When an installment note is issued, the journal entry will include a __________ to __________.

debit; Cash

The journal entry to record depletion would include a __________ to __________. debit; Depletion Expense credit; Depletion Expense debit; Accumulated Depreciation credit; Natural Resource Expense

debit; Depletion Expense

Assume that Hartmann Company contributes 15% of employee monthly salaries to an employee 401k plan. Assuming $600,000 of monthly salaries, the journal entry to record the monthly contribution would include a __________ to __________ for $90,000. debit; Pension Expense debit; Cash debit; Unfunded Pension Liability credit; Unfunded Pension Liability

debit; Pension Expense

The entry to amortize a bond premium would include a __________ to __________.

debit; Premium on Bonds Payable

Assume that during May, a company sold a product for $160,000 that includes a 36-month warranty. Historically, the average cost of repairs over the warranty period is 7% of the sales price. The entry to record the estimated product warranty expense would include a __________ to __________ for $11,200. debit; Product Warranty Expense credit; Cash debit; Product Warranty Payable credit; Product Warranty Expense

debit; Product Warranty Expense

The adjusting entry to record accrued vacation at year-end would include a __________ to __________. debit; Vacation Pay Expense credit; Cash debit; Vacation Pay Payable credit; Vacation Pay Expense

debit; Vacation Pay Expense

The allowance for doubtful accounts is reported as a(n) __________ on the balance sheet.

deduction from accounts receivable

The difference between a fixed asset's initial cost and residual value is known as its

depreciable cost.

The __________ method records bad debt expense only when an account is determined to be worthless.

direct write-off

Interest expense is reported as ______________ on the ______________.

other expense on the income statement.

The party to whom the promissory note is payable is the ______________.

payee.

The cost of a product warranty should be included as an expense in the a.future period when the cost of repairing the product is paid. b.future period when the product is repaired or replaced. c.period the cash is collected for a product sold on account. d.period of the sale of the product.

period of the sale of the product.

The quick ratio is computed as __________ divided by __________.

quick assets; current liabilities (Current Assets - Inventory) / Current liabilities

Analysis that helps creditors evaluate a company's ability to pay its current liabilities includes all of the following except a.ratio of cash to monthly cash expenses. b.working capital. c.current ratio. d.quick ratio.

ratio of cash to monthly cash expenses.

A contingent liability that is probable and for which the dollar amount can be estimated should be______________.

recorded and disclosed.

If a contingent liability is probable and the amount of the liability can be reasonably estimated, it is

recorded and disclosed.

Any portion of the bonds payable that is due within one year is

reported as a current liability on the balance sheet.