7/8
When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the__value of the asset sold
book
In accounting, expenditures recorded as assets are said to be
capitalized
What is the formula for the profit margin ratio
net income divided by net sales
When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset
provides benefits to the company.
the portion of long-term debt is the amount that will be paid within the next year.
current
The types of expenditures that can occur subsequent to an asset's acquisition are
repairs and maintenance. improvements. additions.
The original cost of the asset less the accumulated depreciation is the____of the asset
Book value
Withholding taxes for federal and state income tax are based upon which items?
Amounts earned by employees Number of exemptions claimed
Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?
Costs to remove an old building Grading the land Legal fees to secure title Title insurance
By law, an employer is required to pay which of the following amounts as payroll taxes?
Federal unemployment tax Social Security contributions Medicare contributions
Which of the following items should be capitalized in the cost of equipment?
Insurance on equipment during shipping Purchase price Installation and testing of equipment Freight to deliver the equipment to its location
Identify a primary reason why financial statement users assess a company's liquidity.
Lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful.
value is the amount the company expects to receive for the asset at the end of its service life.
Residual
The amortization of an intangible asset occurs over the period of time that is the__ of the legal, regulatory, contractual, or service life
Shorter
Long-lived assets are typically classified in two categories
Tangible Intangible
Which of the following items are intangible assets?
Trademarks Goodwill
A transaction or event in which the outcome is uncertain is referred to as a
contingency
The accumulated depreciation account is classified as a(n)
contra asset.
Long-term assets are classified as
intangible, tangible
True or false: Current liabilities are always payable within one year.
false
The key factor in classifying items as repairs and maintenance is that
future benefits are not provided beyond those originally anticipated from the asset.
Obtaining a note payable for cash results in a
increase in assets and an increase in liabilities
Intangible assets that are acquired from other entities are referred to as purchased intangibles, whereas intangibles that are created by a company are referred to as
internally developed intangibles
Which of the following measure liquidity?
- Current ratio - Working capital - Acid-test ratio
Linx Corporation internally develops an intangible asset with research and development costs of $10,000. How should Linx report this $10,000?
As an expense on the income statement.
Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides
Benefits or revenue
The cost of a major improvement that extends the service life of an asset would be and hereas the cost of maintenance that does not increase the future benefits would be
Capitalized Expense
Which of the following are not required to be deducted from an employee's paycheck?
Charitable contributions State unemployment tax (SUTA) Federal unemployment tax (FUTA)
The service life of an intangible asset may be limited by what types of provisions?
Contractual Regulatory Legal
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
Which of the following may be classified as contingent liabilities?
Frequent flyer program awards Product warranties Future litigation losses
Three methods used for depreciation method
Straight line Double decline Activity base
The gain or loss on sale of an asset is calculated as:
amount received less the book value of asset sold
For accounting purposes, depreciation is
an allocation of a cost of an asset.
Working Capital
current assets - current liabilities
A subsequent expenditure for an asset increases the future benefits of the asset if it
increases the operating efficiency of the asset. extends the asset's service life. increases the quality of the goods or services produced by the asset.
Interest expense is recorded in the period when it is
incured
The two categories for intangible assets are
intangibles with finite lives. intangibles with indefinite lives.
Which of the following costs should be capitalized in the costs of acquiring a building?
legal fees to obtain title realtor commissions purchase price
An asset___occurs when an asset is no longer useful, but cannot be sold.
retirement
The service life or useful life of an asset is
the estimated use that the company expects to obtain from the asset before disposing of it.
The residual value of an intangible asset is usually
zero
Which of the following payroll-related taxes must the employer pay by law?
Unemployment taxes Federal Insurance Contributions Act amounts