AC test 3

which of the following are long-term liabilities?

20 year mortgage payable note payable due in 3 years

lox, stock and bagel, inc. issued 50,000 shares of the 100,000 authorized. it has since repurchased 5,000 of its shares. the number of shares outstanding equals ___________ shares

45,000

price/ earnings (P/E)

= current stock price (per share) / earnings per share (annual)

ROE

= net income - preferred dividends/ average common stockholders' equity

EPS

= net income - preferred dividends/ average number of common shares outstanding

which of these payroll taxes are paid only by the employer?

SUTA FUTA

stock splits

cause the par value per share to change

stock splits and stock dividends

cause total stockholders' equity to remain the same

xyz borrowed $50,000 this year. half of the loan will be repaid next year and the remainder will be paid the following year, which is longer than xyz's operating cycle. on its balance sheet at the end of this year, xyz will show ____________

current portion of long term debt of $25,000 long term debt of $25,000

straight-line, units-of-production, and declining-balance are commonly used ___________ methods

depreciation

which of the following accounts are closed into retained earnings at year end?

dividends expense accounts revenue accounts

when diva, inc., declared a $10,000 cash dividend, it recorded a debit to ___________ and a credit to dividends ____________

dividends payable

squid roe, inc.'s ROE increased two percentage points to 12%. this increase may have happened because squid roe ___________

generated more profits than the interest incurred on its borrowed funds replaced its 12% debt with 10% debt

EPS appears on the ___________

income statement

amortization

intangible

how is the change in cash classified on the statement of cash flows?

it is the sum of the operating, investing, and financing activities sections

what effect will issuing more bonds have on the times interest earned ratio over time?

it will decrease

assets are financed with _____________ and stockholders' equity

liabilities

deferred income tax is a __________ account if the difference is due to an accelerated tax depreciation used for its tax returns and straight line for financial reporting

liability

what kind of account is unearned revenue?

liability account

permission to use something in accordance with specific terms and conditions are called _____________

licensing rights

a major advantage of the corporate form of ownership is __________ legal liability

limited

earnings per share (EPS) equals

net income- preferred dividends / average number of common shares outstanding dividing the stock price by the P/E ration

intangible assets with unlimited or indefinite lives are _________________

not amortized, but instead are reviewed for impairment

a contingent liability should _____________

not be reported if the loss is remote and unable to be estimated be in the notes to the financial statements if the loss may possibly occur and can be reasonably estimated be reported on the balance sheet if the loss will probably occur and can be reasonably estimated

under US GAAP, a contingent liability should ________________

not be reported if the loss is remote and unable to be estimated be reported on the balance sheet if the loss will probably occur and can be reasonably estimated be in the notes to the financial statements if the loss may possibly occur and can be reasonably estimated

research and development costs are _____________

not capitalized because of uncertainty incurred to construct or internally develop intangible resources expensed when incurred

nova, inc. is considering declaring a $100,000 cash dividend. nova has a cash balance of $20,000 and retained earnings balance of $100,000. nova should __________

not declare a cash dividend because it does not have enough cash

cash dividends

on the declaration date, liabilities are increased on the payment date, current assets are decreased

an asset's useful life is based on the ________

professional judgement

stock dividends

require a journal entry

corporations can raise large amounts of money because ___________

shares of stock can be purchased in small amounts, so even small investors can participate

land improvements reported on a company's balance sheet might include ______________

sidewalks outside the corporate headquarters the fence around a factory parking lot trees planted to provide shade for the customer parking lot

technology assets include ____________

software web development work

morris lest, inc. sold its delivery truck for $4000 cash. the truck's book value was $3000. which financial statements will be affected by this sale?

statement of cash flows balance sheet statement of retained earnings income statement

morris lest, inc. sold its delivery truck for $4000 cash. the truck's book vale was $3000. which financial statements will be affected by this sale?

statement of retained earnings statement of cash flows balance sheet income statement

which of the following line items would be found on a statement of stockholders' equity?

stock issuances dividends net income treasury stock additional paid in capital

date of record

stock records are finalized to determine which stockholders are to receive payment

contributed capital of $1,000,000 is found in the ___________ section of the ____________

stockholders' equity balance sheet

treasury stock is reported in the ______________

stockholders' equity section of the balance sheet

miss hap, the bookkeeper, forgot to record the depreciation for the year. this error will cause ________________.

stockholders' equity to be overstated assets to be overstated

the journal entry to record the payment of salaries and wages for work performed in the current accounting period causes ____________

stockholders' equity to decrease liabilities to increase assets to decrease

depreciation

tangible

why should a company divide up the cost of a "basket purchase" among the different assets purchased?

the different assets might be depreciated over different useful lives

callable bonds

the issuing company can pay off the bonds at any time

which of the following transactions would be classified as investing activities?

the purchase of investments for cash the sale of a building used in the business the purchase of equipment

how does management estimate useful lives and residual values?

they use professional judgement

most companies use one method of depreciation for financial reporting and a different method for income taxes, which requires ______________ sets of accounting records

two

six years ago, on january 1, ace electronics purchased a $310000 machine with an estimated useful life of 10 years and a residual value of $10000. ace used the machine for 6 years and recorded straight line depreciation each year. at the end of the 6th year after depreciation expense had been recorded for the year, ace found that the machine no longer had any future economic value because the product it makes is obsolete. ace still owns the machine, but should make a journal entry that includes a __________

$130000 credit to machinery $130000 debit to loss on impairment

x-co issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $100 cash per share. the journal entry to record this event includes a ______________

$100,000 debit to cash $100,000 credit to preferred stock

gross earnings for the pay period are $100,000. required payroll deductions are: social security $6,700; medicare $1,450; federal income tax $18,000 and state income tax $3,850. the journal entry to record wages paid includes a _____________.

$100,000 debit to salaries and wages expense

on the maturity date, the bondholders of $100,000 of bonds that were issued at a $90,000 will receive ________________

$100,000 in cash plus the interest owed

which of the following result in an increase to intangible assets?

$10000 was spent to purchase a patent a company purchased another company for $10000 more than its net assets a company purchased a franchise for $100000

x circle company purchased a computer system black box, inc. with a list price of $100,000 plus 5% sales tax. the cost to deliver and install the computer was $10,000. the debit to equipment equals _____________.

$115,000

the issue price of 1,000, 5%, $1,000 bonds issued at 92.10 equals ___________

$921,000 the bonds are selling at 92.10 which means the issuance price is 92.1% of the face value or $1,000,000 (=1,000 x $1,000 x 92.1%)

what is the formula for calculating double declining balance depreciation?

( cost - accumulated depreciation ) x ( 2/ useful life )

what is the formula for calculating units of production depreciation?

( cost - residual value ) x ( actual production this period / estimated total production )

if a company wants exclusive rights to artistic material, it should purchase ___________

a copyright

a corporation may be restricted from paying a dividend if _______________

a creditor's loan agreement is violated the dividend is greater than the amount of retained earnings

if company a is providing services using company b's name and conforming to company b's standards and stipulations, then company a purchased ______________

a franchise

potions, inc. sold its patent for $10,000. the book value of these patents was $9,000. as a result of this sale, potions will record ____________

a gain of $1,000

the debt to asset ratio indicates ______________

a higher ratio means greater financing risk the percentage of assets financed by debt

under IFRS, if the company issuing preferred stock is contractually obligated to pay dividends or to redeem the shares at a future date, then the preferred stock is classifies as ____________

a liability

what are the benefits of common stock?

a preemptive right to buy newly issued stock before it is offered to others voting rights the right to receive dividends if they are declared a residual claim on assets after creditors and preferred stockholders have been satisfied

if a company's EPS falls from $5 to $3, then investors may expect ____________

a reduction in the stock price

if a cost is capitalized, it is recorded as an ____________, not an expense

asset

the debt to asset ratio is calculated by dividing total liabilities by total _____________

assets

net assets is the term used to describe _______________

assets minus liabilities

if management was to unethically capitalize costs that should not have been, which of the following would be misstated?

assets would be overstated stockholders' equity would be overstated

GAAP require assets be reviewed for impairment ______________

at least once a year

a corporation's board of directors could prefer a stock split to a stock dividend because a stock split ____________

does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future

straight line depreciation

does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life

straight-line depreciation

does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life

the early retirement of a bond includes ___________

elimination of the liability payment of cash recording of a gain or loss

advantages of equity financing over debt financing include that ______________

equity financing does not require repayment dividends are optional

recording depreciation is an application of the ______________.

expense recognition (matching) principle

ordinary repairs and maintenance costs should be ______________

expensed as incurred

whether a bond is issued at par, premium or discount, when the bond matures the amount paid equals the __________ value

face

the date of record is the date on which the corporation _________

finalizes its list of stockholders who will receive dividends

issuing stock to owners is classified as a _____________ activity

financing

repayment of loan principal to lenders

financing

the payment of dividends and changes in the dividends payable account are classified as _____________ activities

financing

issuance of additional stock to stockholders

financing activity

another term for long-lived assets is _____________ assets and is found on the financial statement called the _________________.

fixed balance sheet

what does the IRS call a corporate income tax return?

form 1120

when a company purchases another company at a premium because of the purchased company's favorable reputation, then the company would record an asset called _______________

goodwill

preferred stock generally _________________ preference as to dividends

has

a stock dividend ________

has no effect on total stockholders' equity increases common stock decreases retained earnings

trademarks ______________

have an unlimited life and hence are not amortized

a company might record an involuntary disposal of an asset __________

if the asset was seriously damaged in a fire

a company might record an involuntary disposal of an asset ___________.

if the asset was seriously damaged in a fire

a company may make an exception to the accounting rules and not capitalize a long lived asset if its cost is

immaterial

which type of investment would retirees wanting a stable income prefer?

income investment

the write down of goodwill for impairment will affect which of the following financial statements?

income statement balance sheet

the changes in the noncash balance sheet accounts explain the differences between the ___________

income statement and the statement of cash flows

an ___________ in accrued liabilities, such as interest payable will be added to net income when determining net cash flow from operating activities

increase

during the past year, arnold inc.'s comparative balance sheet reported an increase in overall stockholders' equity of $43,500, a decrease in total liabilities of $17,200, and an increase in assets other than cash of $12,000. consequently, Arnold, inc. reported an __________ in cash of ____________

increase $14300

the entry to record the initial borrowing of cash by issuing a promissory note causes an ______________

increase in liabilities increase in assets

morris lest, inc. sold its delivery truck for $500 more than its book value. the sale will result in an _____________

increase in net income on the income statement

anudu, inc. sold equipment and received more cash than the equipment's book value. the effect of this sale on the accounting equation includes an _________________

increase to assets increase to stockholders' equity

lox, stock and bagel, inc buys $1,000,000 cash. cream cheesery's net assets are valued at $800,000 at the time of the sale. lox, stock and bagel, inc. should record an ________________

increase to goodwill of $200,000 decrease to cash of $1,000,000

accuring a liability always involves ___________ expenses and ______________ liabilities

increasing increasing

issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by ____________

increasing total assets increasing total stockholders' equity

issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by ______________

increasing total stockholders' equity increasing total assets

which of the following describes the acceptable methods that may be used to prepare the statement of cash flows

indirect direct

credits to the common stock account recorded during the period will be reported as cash ___________ activities on the statement of cash flows

inflows under financing

bonds are financial _______________ that outline the future payments a company promises to make in exchange for receiving a sum of money now

instruments

amortization is an adjusting entry that records the amount of ___________

intangible assets' usefulness used during the accounting period

the times interest earned ratio equals net income plus interest expense and income tax expense, divided by _____________

interest expense

which of the following costs associated with long lived assets are expensed, not capitalized?

interest on loans to purchase the assets immaterial repairs and maintenance ordinary repairs and maintenance

which of these assets are not depreciated?

inventory land cash

sale of equipment no longer needed in the business

investing

companies are required to report material noncash transactions from _________ and __________ activities in either a supplementary schedule to the statement of cash flows or as a disclosure in the notes to the financial statements

investing financing

purchase of stock in another company

investing activity

when a shareholder of limited, inc. sells its shares to another investor on the stock exchange, limited, inc.'s accounting equation ______________

is not affected because the corporation is separate from its owners

accumulated deficit __________

is shown in parentheses on the balance sheet means that retained earnings has a debit balance indicated accumulated net losses

an asset's useful life _____________

is the asset's expected economic life to its owner can be expressed in either years or units

an asset's useful life _______________.

is the asset's expected economic life to its owner can be expressed in either years or units

declining balance depreciation

is the best method to use when an asset is productive in its earliest years but quickly loses its usefulness

declining-balance depreciation

is the best method to use when an asset is productive in its earliest years but quickly losses its usefulness

units of production depreciation

is the best method to use when the amount of an asset's use varies significantly from one accounting period to another

units-of-production depreciation

is the best method to use when the amount of an asset's use varies significantly from one accounting period to another

a productive asset ____________.

is used to produce goods or services that will be sold to customers

shares outstanding equals shares __________ minus ______________ shares

issued treasury

sources of financing for corporations include __________

issuing stock borrowing

purpose of the statement of cash flow

it is intended to provide a cash based view of a company

acme in bought land and a factory building for $80000. the land was appraised at $25000 and the building at $75000. using the basket purchase allocation, acme would record the ___________

land at $20000 and the building at $60000 the land is reported at ($25000/($25000+$75000)) x $80000 or $20000. the building is reported at ($75000/($25000+5000)) x $80000 or $60000. the cost principal requires assets to be reported at the cost, not the individual appraised values

dividends payable is a __________ account with a normal _____________ balance and is initially recorded on the _____________ date

liability credit declaration

when a company capitalizes a cost, its __________________ increases

long lived assets

vango, inc. sold its van for $6000 cash. the van's original cost was $40000 and its accumulated depreciation was $32000. When recording the sale, Vango should record a ______________.

loss on disposal of $2000

gains on the disposal of fixed assets are recorded with a credit and occur when the book value is _________ than the sales price

lower

the number of shares authorized represents the _________________

maximum number of shares a company is allowed to issue

a company ________________

may use depreciation methods for different classes of assets if used consistently

bond carrying value equals bonds payable _____________

minus discount on bonds payable plus premium on bonds payable

the declining balance depreciation method assigns __________ depreciation expense to the early years of asset ownership

more

a corporation that has a loan covenant _____________

must disclose the covenant in the notes to the financial statements may be required to repay the loan immediately if it violates the covenant

which of these are natural resources that are depleted over time?

natural gas wells timber

repayments of loans will be reported as a ___________

negative cash flow under financing activities

when using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is __________________

net income

which of the following line item amounts would be under the retained earnings column of a statement of stockholders' equity

net income dividends: preferred dividends: common

on-a-roll, inc. amortizes its copyright of $20,000 over 20 years. miss hap, the bookkeeper, forgot to record the amortization in the current year. the effect of this mistake causes ______________.

net income to be overstated assets to be overstated

xyz warehouse operates in a state with a 6% sales tax. for convenience, xyz warehouse credits sales revenue for the total amount (selling price plus sales tax) collected from each customer. what will be the effect if xyz warehouse fails to make an adjustment for sales tax?

net income will be overstated liabilities will be understated

depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a ___________ reduction to net income

noncash

US GAAP classifies the payment of interest as an ___________ activity on the statement of cash flows

operating

a change in accounts receivable will be reported in the ___________ activities section of the statement of cash flows prepared using the indirect method

operating

cash collected from customers

operating

it is important that a company's statement of cash flows reports a positive cash flows from ___________ activities

operating

revenues and expenses relate to the cash inflows and outflows found in the __________ activities section of the statement of cash flows

operating

payments to creditors resulting in a decrease to accounts payable

operating activity

loss on impairment is an _________________

operating expense that appears on the income statement

if a company wants to receive exclusive rights to a manufacturing process, it should purchase a __________

patent

US corporations pay federal taxes on ____________

payroll income

lenders will sometimes impose dividend restriction to ____________

prevent the corporation from paying out too much to stockholders

which type of contingent liability would most likely be found on a balance sheet prepared under US GAAP

probable contingent liability that can be estimated

the primary objective of financial reporting is to ___________

provide information about a business that is useful in projecting its future cash flows

an intangible asset may be recorded only if _______________

purchased

an intangible asset may be recorded when a company __________

purchases a trademark pays more than the net assets of the company purchased

the primary objective of income taxes is to _______________

raise enough revenue to pay for expenditures and to encourage certain social and economic behaviors

the primary objective of income taxes is to _________________

raise enough revenue to pay for expenditures and to encourage certain social and economic behaviors

investors earn a return on stock investments by ___________

receiving dividends selling the stock for more than its cost

treasury stock ___________

reduces total stockholders' equity is shares of stock no longer outstanding is a contra-equity account

the stated rate _____________

remains the same throughout the life of the bonds

at the end of a depreciable asset's useful life, its book value equals its _____________

residual value

a company's past profits that are kept instead of being paid to stockholders are ________________

retained earnings

an end of period adjusting entry that debits unearned revenue most likely will credit a ___________ account

revenue

sales taxes are recorded by the retailer as ___________

sales tax payable

(cost - residual value) x (1/useful life) is the formula for calculating the _____________ - _____________ method of depreciation.

straight - line

when a company has both common and preferred stock, its POE must be adjusted by ___________

subtracting preferred stock dividends from net income subtracting the preferred stock balance from total stockholders' equity

the "least and latest rule" is ____________

that a taxpayer should pay the least tax legally permitted at the latest date allowed

subtracting a decrease in unearned revenue from net income eliminates the effect of recording revenue ___________

that increased net income, but did not impact cash this period

acme enterprises just bought a new manufacturing machine. which of these costs should be capitalized?

the $15000 freight bill to deliver the machine to acme's factory the $500000 invoice price of the machine the $8000 cost of tearing down acme's factory wall to get the machine inside

why might a company dispose of a long lived tangible asset?

the asset has reaches the end of its useful life the asset is replaced with a newer, more efficient model the asset was seriously damaged the company doesn't need the asset anymore

declaration date

the board of directors officially approves a dividend

why can depreciation expense be a different amount each year using the units of production method?

the method calculates expense based on the relationship between each year's output and total estimated output

braden and sons, inc., paid cash to purchase equipment costing $342,000 this year. also this year, the company sold for $70,000 cash equipment that originally cost $230,000 5 years ago. how should these transactions be listed in the statement of cash flows?

the purchases and sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale)

net cash flows provided by operating activities will be _________ when using the direct method compared to the indirect method

the same

seasoned new issues are _____________

the selling of additional new shares

exclusive rights to a special name, image or slogan is a _________

trademark

which accounts are credited when payroll tax expense is debited?

unemployment tax payable FICA payable

partial year modifications are not necessary for ____________ depreciation

units of production

debentures

unsecured bonds

to record the disposal of a noncurrent asset, a company must first ___________

update depreciation expense to the date of sale

stock options are expensed ___________

when granted and are recorded at the estimated cost of the options

when does impairment occur?

when the future cash flow expected from using an asset is less than the asset's book value

long term liabilities are accounted for in the same way as short term liabilities, except that long term liabilities are on the books for more than one ___________

year

which of the following is the best measure of a company's profitability?

accrual based net income

which account is credited in an adjusting entry to record depreciation on machinery?

accumulated depreciation

a bond premium _________

arises when interest payments are higher than the cost of borrowing

cumulative preferred stock is entitled to receive current dividends plus "dividends in _________" before any future common dividends can be paid

arrears

the cost of a new building that is currently under construction, not for sale but for a company's own use, is reported on the balance sheet _______________

as an asset, construction in progress

shenandoah skies built a new lodge for its ski resort. which of the following costs should be capitalized?

$4200 paid in sales tax on the lumber to build the lodge $7000 in architect fees $70000 cost of lumber to build the lodge

common stock's par value is _____________

an insignificant amount specified in the corporate charter

payroll deductions _______________

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

why are changes in current liabilities classified as operating activities

are directly related to cash inflows and outflows arising from revenues and expenses involved in daily operations of the business

during the year, a $1,000,000 lawsuit was filed against a US company for unsafe working conditions. management and the attorneys feel that it is not likely that the company will lose the case. the plaintiff who filed the lawsuit has offered to settle for $600,000. management estimates that lawsuits for unsafe working conditions are generally settled for $300,000. what amount of contingent liability would be recorded for this lawsuit on the current balance sheet?

$0 no liability should be recorded because the loss is "not likely" to occur

a bond with a face value of $1,000 has a current price quote of 102.880. what is the bond's current price in dollars?

$1,028.80

as of december 31, 2018, $110 of interest had been accrued on a 12%, 1 year, $1,000 note payable. on january 31, 2019, the entry to record the payment of the note's principal and interest requires a _____________

$10 debit to interest expense $1,120 credit to cash $1,000 debit to notes payable $110 debit to interest payable

refurbish, inc. bought 1,000 shares of its own stock for $8,000. later it reissued the shares for $10,000. the journal entry to record the sale of treasury stock includes a _________________

$2,000 credit to additional paid in capital $8,000 credit to treasury stock

on january 1, 2015, ace electronics bought a new cash register for $2,500 and estimates a useful of 4 years and $0 residual value. for tax purposes, the total depreciation expense that ace can record over the cash register's useful life is _________

$2,500

daffy duct, inc. issues 10,000 shares of $1 par value common stock at $5 per share. the effect of this transaction on the accounting equation includes a ________________

$50,000 increase in total assets $50,000 increase in total stockholders' equity

x-it company signed a $500,000 5 year note payable to buy a new industrial machine. the company paid $2,000 cash for transportation of the machine and $1,000 cash for installation costs. the journal entry to record this transaction will include a _______________.

$500,000 credit to note payable $503,000 debit to machinery $3,000 credit to cash

atomic, inc. had 10,000 shares of $1 par value common stock outstanding prior to a 2 for 1 stock split. as a result of the stock split ___________

20,000 shares are outstanding with a $0.50 par value

which of the following are current liabilities?

accounts payable salaries and wages payable note payable due in 3 months

items such as unrealized gains and losses from pensions, foreign currencies or financial investments are reported as _____________

accumulated other comprehensive income

when calculating net cash flow provided by operating activities, an increase in accounts payable is _________________ net income because payments to suppliers are ____________ than new purchases

added to less

if the accounts receivable balance is $10 million less than the balance at the beginning of the year, then on the statement of cash flows (indirect method) $10 million should be ______________

added to net income

___________ an increase in unearned revenue to net income allows the inclusion of transactions that increase cash, but do not impact net imcome

adding

common stock's par value ______________

affects how common stock is recorded was introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies

subtracting decreases in current liabilities such as salaries payable

allows the inclusion of transactions that decreased cash but not net income

adding increases in current liability such as income tax payable

allows the inclusion of transactions that decreased net income but not cash

subtracting increases in current assets such as accounts receivable

allows the inclusions of transactions that increased net income but not cash

transactions between a company and its stockholders affect the company's ___________ accounts only

balance sheet

the issue price of a bond is __________

based on a present value calculation based on what the market is willing to pay

the issue price of a bond is ___________

based on what the market is willing to pay based on a present value calculation

sony inc. spent $1,000,000 of development cost for commercially feasible prototypes. if sony follows IFRS, then the $1,000,000 would ____________

be recorded as an asset

term

bond issue that matures on a single date

bondholders are willing to pay a premium to acquire a bond because the ________________

bond's stated interest rate is higher than the market interest rate

convertible bonds

bonds that can be exchanged for shares of stock in the issuing company

serial bond

bonds that mature in installments

an asset's cost minus accumulated depreciation is its _____________ value

book

the law requires ___________ to pay FICA taxes

both employee and employer

which of these are intangible assets?

brand names patents trademarks

free cash flow is the amount of cash available to use to ___________

build up the company's cash balance expand the business through additional investing activities repay existing financing

the notes in the annual report, which follow the financial statements, should be reviewed to determine whether a company that follows IFRS chose to record its tangible and intangible assets at historical _________ or ___________ value

cost fair

all costs to get an asset in place and ready for its intended use should be ____________.

capitalized

extraordinary repairs to long lived assets are _____________ because they are large expenditures and increase the useful life of the asset

capitalized

short term, highly liquid investments that are purchased within 3 months of maturity can be considered __________ equivalents

cash

the entry to record the initial borrowing of cash by issuing a promissory note includes a debit to ___________ and a credit to ___________

cash notes payable

after its first year of business, best measures, inc.'s sales revenue were $100,000 of which $90,000 was collected and total expenses of $60,000 of which $20,000 was paid. which of the following statements is correct?

cash basis net income equals $70,000 accrual basis net income equals $40,000

the dividend payment date is when ___________

cash is decreased dividends payable is decreased

which of the following will result in the recording of goodwill?

company a purchases company b and pays more than the fair value of company b's assets and liabilities

discounts on bonds payable are recorded with a debit and are _______________

contra-liability

john smith works 40 hours for abc corp. for $15 per hour. required payroll deductions are: social security $37.20; medicare $8.70; federal income tax $58; and state income tax $10. assuming the payroll deductions are paid in the following month, abc would record john's pay with a journal entry that includes a ________

credit to FICA (social security and medicare) payable of $45.90 credit to state and federal income tay payable of $68 credit to cash of $486.10 debit to salaries and wages expense of $600

the journal entry to record the payment of a previously declared dividend includes a ___________

credit to cash debit to dividends payable

abc company issues a bond with a face value of $100,000 at par on january 1. abc prepares financial statements only at december 31, so no adjusting entries are made during the year to accrue interest. if the bond carries a stated interest rate of 6% payable in cash on december 31 of each year, the journal entry to record the first bond interest payment includes a _______________ of $6,000

credit to cash debit to interest expense

sunny sky paid $30,000 cash for a piece of land to be used for a new corporate headquarters building. the journal entry to record this transaction will include a $30,000 ____________.

credit to cash debit to land

in 2008, abc company issued $100,000 of 20 year bonds at face value. ten years later, in 2018, the company retired the bonds early by purchasing them in the open market at $101,000. the entry to record this transaction includes a ____________________

credit to cash of $101,000 debit to loss on bond retirement of $1,000 debit to bonds payable of $100,000

abc corporation issued bonds that pay interest each march 1 and september 1. the corporation's december 31 adjusting entry may include a _____________

credit to interest payable

under US GAAP, if a company violates loan covenants on long term debt but renegotiates the loan before releasing its financial statements, the debt remains classified as long term. under IFRS, the company must reclassify that long term debt as a _____________ liability

current

under US GAAP, if a company violates loan covenants on long term debt but renegotiates the loan before releasing its financial statements, the debt remains classifies as long term. under IFRS, the company must reclassify that long term debt as a ___________________ liability

current

accounts (or trade) payable is a __________ and increases when _______________ and decreases when _____________

current liability purchases are made on credit bills are paid

dilution solutions, inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. the journal entry to record this transaction includes a $5,000 _________ to treasury stock

debit

when recording losses on the sale of fixed assets, the account, loss on disposal, is increased with a ____________

debit

on november 1, 2018, ABC corp borrowed $100,000 cash on an 1 year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. the last adjusting journal entry was made on december 31, 2018, ABC's year end. the entry to record the payment on october 31,2019 would include a _______________

debit to interest expense of $5,000 debit to interest payable of $1,000 credit to cash of $106,000 debit to note payable of $100,000

a decrease in accounts payable will result in a _____________ to net cash flow from operating activities

decrease

amortizing a bond discount will ____________ the discount balance and ______________ the carrying value of the bond so that when the bond matures the carrying value will __________ the face value

decrease increase equal

if the direction of change in accounts receivable is a ____________ from the prior period, the amount of that change is added to net income in the ___________ activities section of the statement of cash flows

decrease operating

mega corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. the effect of this transaction on the accounting equation includes a ____________

decrease in stockholders' equity decrease in assets

morris lest, inc. sold its truck and received less cash than the truck's book value. the net effect of this sale on the accounting equation is __________

decrease to stockholders' equity decrease to assets

a purchase of an intangible asset results in a __________ to net cash flow provided by __________ activities

decrease- since an asset is being purchased, cash is being spent investing- purchasing intangible assets is not part of the company's normal daily operating activities. since the asset will benefit the company for more than one year, it is classified as an investing activity

in arriving at cash from operating activities using the indirect method, subtracting a decrease in accounts payable from net income adjusts net income for transactions that ___________ net income

decreased cash, but did not affect

when using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that ____________

decreased net income, but did not impact cash

when using the indirect method, adding an increase in an account such as wages and salaries payable to net income eliminates the effect of recording wages and salary expense the ___________ this period

decreased net income, but had not been paid in cash

a cash dividend differs from a 2 for 1 stock split in that a cash dividend ___________

decreases current assets decreases retained earnings

which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

depreciation expense originally reduced net income, but the expense does not involve paying cash

which of the following statements are true?

depreciation of a truck equals the decline in the estimated usefulness of the truck impairment loss on an asset arises from a precipitous decline in the current value of the asset

why don't all companies use the same depreciation method?

different depreciation methods might better reflect the pattern in which assets' economic benefits are used

a distribution of a company's accumulated prior earnings is a ___________

dividend

a stock __________ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders

dividend

payment date

dividends payable is decreased

IFRS ___________________

divides the cost of an asset among its significant component parts and depreciates the components separately over their useful lives

a corporation _______________ have a legal obligation to pay dividends

does not