1
How is the market value of a bond issuance determined?
By adding the present value of the principal amount to the present value of the interest payments
The cost of assets consumed or services used is also known as
an expense
What organization issues U.S. accounting standards?
... Financial Accounting Standards Board
The agency of the United States Government that oversees the U.S. financial markets is the
...Security Exchange Commission
Declaring a cash dividend will
...decrease retained earnings.
Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally a. expensed when incurred. b. capitalized as a part of the cost of the asset. c. debited to the Accumulated Depreciation account. d. not recorded until they become material in amount.
A. expensed when incurred
The four subdivisions for plant assets are a. land, land improvements, buildings, and equipment. b. intangibles, land, buildings, and equipment. c. furnishings and fixtures, land, buildings, and equipment. d. property, plant, equipment, and land.
A. land, land improvements, buildings, equipment
All leases are classified as either a. capital leases or long-term leases. b. capital leases or operating leases. c. operating leases or current leases, d. long-term leases or current leases.
B capital leases or operating leases
The cost of a long-term asset is expensed a. when it is paid for. b. as the asset benefits the company. c. in the period in which it is acquired. d. in the period in which it is disposed of.
B. as the asset benefits the company
The Land account would include all of the following costs except a. drainage costs. b. the cost of building a fence. c. commissions paid to real estate agents. d. the cost of tearing down a building.
B. the cost of building a fence
A company purchases a remote building site 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 cost of the building will not include the repainting and recarpeting costs. b. The cost of the building will include the cost of replacing the roof. c. The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements. d. The wiring is part of the computer costs, not the building cost.
B. the cost of the building will include the cost of replacing the roof
Management should select the depreciation method that a. is easiest to apply. b. best measures the plant asset's market value over its useful life. c. best measures the plant asset's contribution to revenue over its useful life. d. has been used most often in the past by the company.
C. best measures the plants assets contribution to revenue over its useful life
Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation.
C. cost allocation
Recording depreciation each period is necessary in accordance with the a. going concern principle. b. historical cost principle. c. expense recognition principle. d. asset valuation principle.
C. expense recognition principle
National Molding is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true? a. Excavation fees are capitalized but building permit fees are not. b. Architect fees are capitalized but building permit fees are not. c. Interest is capitalized during the construction as part of the cost of the building. d. The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.
C. interest is capitalized during the construction as part of the cost of the building
Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n) a. equal and equitable manner. b. accelerated and accurate manner. c. systematic and rational manner. d. conservative market-based manner.
C. systematic and rational manner
A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a
Credit to Sales Taxes Payable for $16
A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a
Credit to Sales for 174 Debit to sales tax expense for $14
The book value of an asset is equal to the a. asset's fair value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset's cost less accumulated depreciation.
D. assets cost less accumulated depreciation
Expenditures that add to the utility of plant assets for more than one accounting period are a. committed expenditures. b. revenue expenditures. c. current expenditures. d. capital expenditures.
D. capital expenditures
Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits. b. Time valuation. c. Straight-line. d. Declining-balance
D. declining balance depreciaiton---high depreciation value first year and then lowers
What is the effect of amortizing a bond discount?
It increases the carrying value of bonds
Most companies pay current liabilities
Out of current assets
The number of shares issued stock equals
Outstanding shares plus treasury shares
If everything else is held constant, what will cause earnings per share to increase?
The purchase of treasury stock
True or False: Land improvements are depreciable assets
True
When expenses exceed revenues, which of the following is true?
a net loss results
The cumulative effect of the declaration and payment of a cash dividend on a company's financial statement is to
decrease total assets and stockholders' equity
depreciation expense vs depreciation cost
expense is just in one year. cost is over whole useful life
An advantage of the corporate form of business is that
its ownership is easily transferable via the sale of shares of stock.