ACC201 Exam #3 URI

a trademark is protected for a renewable period of

10 years

when someone pays for a service in advance, the advance payment received by the company is recorded as

a debit to asset & credit to liability account

proceeds from selling selvages materials should be recognized as

a reduction in cost of the purchased land

if equipment is retired, what would be debited

accumulated depreciation

Attorney fees and other costs necessary to secure a patent should be

added to the patent account.

depreciation represents the ________ of the cost of ______, _________, & _________ over its service life

allocation; property, plant, & equipment

accounting rules of a franchise

amortize the cost of the franchise over life, expense periodic payments as incurred, & capitalize cost of the franchise

ordinary repairs && maintenance should be recorded as

an expense

an interest rate, unless otherwise specified, is usually an

annual rate

what should NOT be a current liability on a balance sheet

bank notes due in 2 years because anything beyond a year is a long term liability

long term tangible assets include

buildings, land, equipment

mixture of debt financing & equity financing a company uses is referred to as the company's _______ ________

capital structure

costs that produce future benefits are

capitalized

the purchase price & all costs to bring an asset to its desired condition & location for use is

capitalized

Accumulated Depreciation is a

contra asset

a _______ is protected by law & gives the creator of a published work the exclusive rights to produce & sell the work for the life of the creator plus 70 years

copyright

how to find book value

cost - accumulated depreciation

examples of costs capitalized in cost of land

cost to remove old buildings, commissions, & legal fees to secure a title, grading the land, & title insurance

what is something that's reported as a current liability

current portion of long term debt

journal entries to recognize an installment notes payable includes

debit to cash & credit to notes payable

borrowing from a bank is utilizing what type of financing

debt

if a company revived payment in advance for work to be done following year, it's classified as

deferred revenue

examples of what costs can be capitalized into the cost of a trademark

design costs, registration fees, & fees from a successful legal defense

what depreciation method results in highest depreciation expense during the first year of an assets life

double depreciation

_____financing refers to obtaining investment from stockholders

equity

Two types of financing

equity financing and debt financing

costs that produce benefits only in the current period are

expensed

recurring costs related to equipment are

expenses during the period they are incurred

a ________ is a contractual agreement in which one entity grants the purchaser the exclusive right to use trade name, formulas, & product rights within s specific geographical area for a specific period of time

franchise

when a company purchases another company & the purchase price exceeds the fair value of the net assets acquired, this is referred to as

goodwill

obtaining a notes payable for cash results in a

increase in assets & increase in liabilities

the life of a trademark is considered

indefinite

loans requiring periodic payments of interest & principle are referred to as

installment notes

interest expense is recorded in the period when

interest is incurred

debt investing is considered a lower cost method of financing than equity because

interest on debt is tax deductible

a ________ is a contractual arrangement in which an owner provides a user the right to use an asset for a specific period of time

lease

____ is the most popular form of long-term asset in the US

leasing

probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

liabilities

bonds & leases are classified as _______ liabilities

long-term

leases, bonds, & notes payable are all examples of

long-term assets

A company's capital structure refers to

mix of total liabilities && stockholders equity

when an expenditure/cost is "capitalized", that means

the cost is recorded as an asset cost on the balance sheet

long-term assets are recorded at

the cost of assets plus all necessary to the asset ready for use

characteristics of a liability

1) obligation results from a past event 2) future sacrifice arises from present obligation 3) future sacrifice of an economic benefit is probable

T/F: we depreciate land

False

interest expense is recorded in the period in which

The interest is incurred

periodic payment on installment notes include

a portion that reduces outstanding loan balance & a portion that reflects interest

assets represent probable future economic

benefits

deferred revenue is classified as a

liability

a _______ is an exclusive right to manufacture s product or use a process granted for a period of _____ years

patent; 20

examples of intangible assets

patents, trademarks, copyrights, franchises, and goodwill

liabilities reprint probably future economics

sacrifices

amount of gain on the sale of equipment equals

selling price minus the book value of the equipment

long-lived assets are typically in two categories which are

tangible && intangible

in each succeeding payment on an installment note,

the amount that goes to interest expense decreases

what is NOT a current liability

unused line of credit

A(n) _ payable results from an agreement with a supplier to pay within 30 to 60 days, whereas a(n) _ payable is a signed contract that promises to pay a specific amount with interest at a specific maturity date.

Account; Note

an exclusive right to display a word, slogan, or emblem that distinctively identifies a company, product, or service is a

trademark

T/F: the accounting treatment for the cost of a copyright is identical to that of the patents

true