exam 2 accounting smartbook

used primarily by companies with unique expensive products with low sales volume:

specific identification

the primary benefit of LIFO is _____ savings?

tax

We record interest expense in the period in which we pay it, rather than in the period we incur it A. True B. False

true

true or false: companies are allowed to report inventory costs by assuming which specific units of inventory are sold and not sold, even if this does not match the actual flow?

true

The current portion of long-term debt should be: Paid immediately. Reported as a current liability in the balance sheet. Combined with the rest of the long-term debt in the balance sheet. Reported as a long-term liability in the balance sheet.

Reported as a current liability in the balance sheet.

Liabilities are defined as: Multiple Choice Resources owed by an entity as a result of past transactions. Resources owned by an entity as a result of past transactions. Selling products and services to customers in the current period. Costs of running the business in the current period.

Resources owed by an entity as a result of past transactions.

equals gross profit minus operating expenses:

operating income

On December 2, 2023, Quebecor Printing received cash from customers for online subscriptions to begin in 2024. What effect will receiving cash on December 2, 2023, have on the financial statements? Multiple Choice There is no financial statement effect Increase assets and increase revenues Decrease assets and decrease stockholders' equity Increase assets and increase liabilities

Increase assets and increase liabilities

Which one of the following statements regarding the book value of an asset is correct? Multiple Choice It is the original cost of the asset minus the depreciation expense for that asset during the year. It is the original cost at which the asset was purchased. It is the fair value of the asset if the asset is sold. It reflects the original cost of the asset less accumulated depreciation.

It reflects the original cost of the asset less accumulated depreciation.

______ results in lower reported inventory and net income, reducing the company's tax obligation?

LIFO

companies that use _______ for reporting purposes calculate cost of goods sold an ending inventory only once per year?

LIFO

Sales taxes collected by a company on behalf of the state and local governments are recorded as a(n): Multiple Choice Expense. Revenue. Equity. Liability.

Liability.

In accounting, goodwill: Multiple Choice Is amortized over its useful life. May be reported whenever a company achieves a level of net income that exceeds the industry average. May be reported only when one company acquires another company. Must be expensed in the period it is reported because benefits from goodwill are difficult to identify.

May be reported only when one company acquires another company.

Companies that purchase inventories that are primarily in finished form for resale to customers are known as: Multiple Choice Service companies. Delivering companies. Merchandising companies. Manufacturing companies.

Merchandising companies.

Cost of Goods Sold is a ________ account?

expense

cost of goods sold is an _____ reported in the ______:

expense, income statement

Recorded only when one company acquires another company?

goodwill

equals net revenue minus cost of goods sold:

gross profit

when companies purchase inventory using a perpetual system, they _______ the inventory account and _______ cash or _______ A/P?

increase, decrease, increase

we capitalize an expenditure as an asset if

it increases future benefits

equals all revenues minus all expenses:

net income

A company purchased new equipment for $60,000. The company paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid, $3,000; and installation cost, $2,500. The total capitalized cost reported for the equipment was: Multiple Choice $61,000. $60,000. $66,500. $64,000.

$66,500

when inventory costs are rising, FIFO results in?

1. higher reported amount for inventory in the balance sheet and higher reported gross profit in the income statement

When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method? Multiple Choice A debit to Bad Debt Expense and a credit to Allowance for Uncollectible Accounts A debit to Bad Debt Expense and a credit to Accounts Receivable A debit to Allowance for Uncollectible Accounts and a credit to Accounts Receivable A debit to Allowance for Uncollectible Accounts and a credit to Bad Debt Expense

A debit to Allowance for Uncollectible Accounts and a credit to Accounts Receivable

A perpetual inventory system measures cost of goods sold by: Multiple Choice Recording Cost of Goods Sold for all purchases of inventory. Adjusting the Inventory account for each purchase and sale. Estimating the amount of inventory sold. Counting inventory at the end of the period.

Adjusting the Inventory account for each purchase and sale.

Using a balance sheet approach to estimate bad debts involves calculating the desired ending balance in which account? Multiple Choice Accounts receivable Credit sales Bad debt expense Allowance for uncollectible accounts

Allowance for uncollectible accounts

A note receivable is reported in the balance sheet: Multiple Choice Always as a long-term asset. As a contra asset. Always as a current asset. As either a current asset or long-term asset depending on the expected collection date.

As either a current asset or long-term asset depending on the expected collection date.

On November 1, 2024, a company signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2025. What effect does receiving cash and signing a note have on the financial statements? Multiple Choice Assets increase and liabilities increase. increase and stockholders' equity decreases. Assets increase and stockholders' equity increases. Assets increase and expenses increase.

Assets increase and liabilities increase.

FIFO is considered a balance-sheet approach for reporting inventory because it: Multiple Choice Always results in a lower amount of inventory being reported. Better approximates the value of ending inventory. Always results in a higher amount of inventory being reported. Better approximates inventory cost necessary to generate revenue.

Better approximates the value of ending inventory.

Inventory is reported as a(n) ______ on the:

Current Asset, Balance Sheet

Credit sales are recorded as: Multiple Choice Debit Cash, credit Service Revenue. Debit Accounts Receivable, credit Service Revenue. Debit Cash, credit Deferred Revenue. Debit Service Revenue, credit Accounts Receivable.

Debit Accounts Receivable, credit Service Revenue.

Nearly all research and development costs should be: Multiple Choice Expensed in the period incurred. Expensed in the period they are determined to be unsuccessful. Expensed if unsuccessful, capitalized if successful. Deferred pending determination of success.

Expensed in the period incurred.

Does FIFO or LIFO result in higher ending inventory, lower cogs, and higher reported profit?

FIFO

Which of the following is not an employer payroll cost? Multiple Choice Federal and state income taxes FICA taxes Employer contributions to a retirement plan Federal and state unemployment taxes

Federal and state income taxes

When a company reports a gain on the sale of a depreciable asset, which of the following is always true? Multiple Choice The company sold the asset for more than its book value. The company sold the asset before its service life was over. The company sold the asset for more than it was worth. The company sold the asset for more than its fair value.

The company sold the asset for more than its book value.

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when: Multiple Choice Cash collection from the customer fails to occur. The inventory is sold. The value of inventory declines below cost. The inventory is purchased.

The value of inventory declines below cost.

a __________ _____________ is recorded only if a loss is probable and the amount is reasonably estimable?

contingent liability

We expense items that benefit only the _______ period

current