Accounting 3 test

Goodwill is recognized only when one company blank another company.

acquirer

Depreciation is a process of cost Blank and not a process of valuation.

allocation

Intrest Receivable

amount of interest that has been earned but not yet been received in cash

In accounting, the term impairment refers to

an asset's significant decline in value

Activity Base example Hawaiian Speciality foods purchased equipment for $30,000. Residual Value at the end of an estimated year is service life is expected to be $3,000. The machine operated for 3,100 hours in the first year, and the company expects the machine to operate for a total of 20,000 hours. Calculate the Deprecation expense for the first year.

$30,000-3,000/ 20,000 hrs= $1.35 per hour x 3,100hrs= $4,185

On January 1, year 1, Ziegler issued 5-year bonds with a stated rate of 8% and a face amount of $100,000. The bonds pay interest semiannually. The market rate of interest was 10%. Calculate the issue price of the bonds. Round your answer to the nearest dollar.

$92,278 Rationale:(7.72173 x $8,000 x 0.5) + (0.61391 x $100,000) = $92,278

Double-decline balance (DDB) Example Hawaiian Speciality foods purchased equipment for $30,000. Residual Value at the end of an estimated year is service life is expected to be $3,000. The machine operated for 3,100 hours in the first year, and the company expects the machine to operate for a total of 20,000 hours. Calculate the Deprecation expense for the first year. estimated service life 4 years

30,000 x 2/4= $15,000 Note : Since the life estimated is 4 years, the double decline balance is half of whatever the straight-line method is. So since its 1/4 is 25% for straight line you would take 2/4 for double decline balance. Another example is 1/5 of straight line method would be would be 20% so double decline would be 40% for 2 years

Example Straight Line method Example New Truck= 40,000 Residual value 5,000 Estimated service life 5 years

7,000 per year

perpetual inventory system

A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand.

What will be the effect of paying off an accounts payable balance on the current and the acid-test ratios? Assume that both ratios are greater than 1. Acid-test ratio will remain unchanged Acid-test ratio will increase Current ratio will remain unchanged Current ratio will increase Acid-test ratio will decrease Current ratio will decrease

Acid-test ratio will increase Current ratio will increase

Which of the following items are initially recorded as an expense on the income statement? Multiple select question. Advertising costs Research and development costs Purchased intangibles

Advertising cost research and development costs

Depreciation

Allocation of the cost of a tangible fixed asset

Amortization

Allocation of the cost of an intangible asset

Depletion

Allocation of the cost of natural resources

Where is the account accumulated depreciation on equipment found on the financial statements?

As a contra account to equipment on the balance sheet

Double-decline balance (DDB)

Book Value x Deprecation Rate= Deprecation Expense

The term means BLANK to record an expenditure as an asset.

Capitalize

In accounting, expenditures recorded as assets are said to be

Capitalized

The purchase price and all costs to bring an asset to its desired condition and location for use should be

Capitalized

A(n) is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years.

Copy right

Notes payable is classified as a liability that has which of the following effects? Creates revenue on the income statement Creates interest expense on the income statement Creates deferred revenue on the income statement Creates an asset on the balance sheet

Creates interest expense on the income statement

Which of these are parts of the journal entry to record depreciation? Multiple select question. Debit Depreciation Expense Credit Accumulated Depreciation Debit Accumulated Depreciation Credit Depreciation Expense

Debit Depreciation Expense Credit Accumulated Depreciation

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $70,000 Credit equipment $90,000 Debit equipment $50,000 Credit gain on exchange of asset $30,000

Identify two ratios commonly used to assess a company's financial risk.

Debt to equity ratio Times interest earned ratio

The allocation of the cost of a tangible fixed asset is referred to as ,blank whereas the allocation of the cost of an intangible asset is referred to as blank

Depreciation, amortization

Deferred income

Income received but not yet earned is

Intrest Revenue

Money earned through loaning money

Straight Line Method

Most Common Method Purchased - residual value/Estimated service life

How to calculate Profit Margin

Net Income/net sales

How to calculate Asset turnover

Net sales/ average total assets

The exclusive legal right to manufacture a product or to use a process is called a(n)

Patent

A(n) BLANK is the exclusive right to manufacture a product or use a process granted for a period of BLANK years

Patent and 20 years

Activity Base

Purchase amount - Residual Value/total hours=per hour x hours used= Activity Base

On January 1, 2018, Lennox Corporation purchased equipment for $100,000. Lennox depreciated the equipment straight--line over 10 years with no residual value. What is the book value of the equipment on January 1, 2021?

Reason: $100,000/10 years = $10,000 depreciation per year. Historical cost of $100,000 less $30,000 depreciation (for 2018, 2019, and 2020) = $70,000.

blank value is the amount the company expects to receive for the asset at the end of its service life.

Residual

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use. True false question. True False

T

Long-term assets are classified as Multiple select question. acquired. tangible. intangible. current.

Tangible and Intangible

During the current year, Katie Corp. pays $5,120 on an installment note. The outstanding loan balance at the beginning of the year was $50,000; the effective interest rate is 8%. Which of the statements regarding the installment note balance at the end of the current year is correct?

The balance is $48,880. Rationale:$50,000 - (5,120 - 4,000 interest)

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a

Trademark

Notes Receivable

Written promise (as evidenced by a formal instrument) for amounts to be received. Also a asset

A retirement or abandonment of an asset is different from a sale of an asset because

a loss must be recognized for the remaining book value. no cash is received.

Periodic payments on installment notes typically include an increase in stockholders' equity a portion that reduces the outstanding loan balance. installment fees. a portion that reflects interest.

a portion that reduces the outstanding loan balance. a portion that reflects interest.

A(n) Blank notes , payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash

account

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as a

accounts payable.

Convertible bonds allow the lender to convert each bond into:

common stock

A(n) Blank liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event

contingent

Which account is credited in a journal entry to record depreciation on machinery?

contra asset

is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph,

copyright

Deferred revenues and sales tax payable typically are reported as Blank liabilities.

current

Liabilities that are payable within one year commonly are classified as BLANK liabilities, while those payable more than one year from now commonly are classified as BLANK liabilities.

current, longterm

The formula to calculate the depreciation for the units-of-production method or activity-based depreciation, is ((cost - residual value)/total estimated production) x

current-year activity or production

A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is

lease

A(n) BLANK is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events

liability

How to calculate Return on Assets

net income/average total assets Note: to get the average total take beginning of year and end of year and divide it by 2

Which of the following are expenditures for assets subsequent to acquisition? Multiple select question. Additions Repairs and maintenance Freight charges Improvements

repairs and maintenance improvements additions

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides

revenues

Notes Payable

signed by a firm to repay amount borrowed plus interest also a liability

The depreciable cost is

the cost of the asset minus the residual value.

The price of a bond includes the present value of the periodic interest payments the present value of the face amount the present value of the face amount minus the present value of the periodic interest payments the present value of the face amount plus the present value of the periodic interest payments

the present value of the face amount plus the present value of the periodic interest payments

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land? Multiple select question. Title insurance Grading the land Costs to remove an old building Current year's property taxes Legal fees to secure title

title insurance grading the land cost to remove building legal fees to secure title

Semiannual

twice a year every 6 months

Other terms used for an activity-based depreciation method are:

units of production method and units of output method

The original cost of the asset less the accumulated depreciation is the blank

book value

Identify the characteristics of an annuity. A series of amounts that vary from period to period A series of amounts that are equal Varying time periods between payment dates Equal time periods between payment dates

A series of amounts that are equal Equal time periods between payment dates

Common current liabilities include: Multiple select question. Sales tax payable Notes payable due in two years a long-term liability Prepaid insurance Deferred revenues The current portion of long-term debt

Sales tax payable Deferred revenues The current portion of long-term debt

Payroll withholdings ______. are voluntary are amounts subtracted from employees' gross earnings to determine their net pay increase the amount of cash an employee receives are amounts added to employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

The original cost of an asset minus accumulated depreciation is

book value

The journal entry to retire old equipment that is not fully depreciated includes a:

debit to accumulated depreciation debit to loss credit to equipment

Financing with BLANK requires borrowing, whereas financing with BLANK requires issuing shares of stock.

debt, equity

How to calculate interest

face value x annual interest x fraction of the year

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a

franchise

When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as

goodwill

When an asset has a significant decline in value and is written down, this is called

impairment

Obtaining a note payable for cash results in a(n)

increase in assets and an increase in liabilities

An asset that has no physical substance is referred to as a

intangible asset

Long-lived assets are typically classified in two categories:

tangible and intangible