ACCOUNTING PROBLEMS

par value represents

arbitrary amount that establishes a minimum price for the stock when it is first issued

accumulated depreciation

increased with a credit

resources that are in operations more than one year with no physical substance are called:

intangible assets

the days in receivable ratio

is an estimate of the length of time the receivables have been outstanding

a weakness of the direct write off method is that

it violates the matching principle

when a corporation pays a previously declared cash dividend, which of the following is true?

liabilities decrease

if a corporation declares a 2 for 1 stock split, which of the following is true?

the number of outstanding shares is twice the number that was outstanding before the split

treasury shares represent

the number of previously issued shares that have been repurchased by the corporation

depreciation is...

the process of systematically and rationally allocating the cost of a fixed asset over its useful life

what factors are needed to calculate depreciation on plant and equipment?

the useful life of the asset, its historical cost, and its estimated salvage value

he accounting life of intangible assets is determined by

their legal lives or useful lives

the accounting life of intangible assets is determined by:

their legal lives or useful lives, whichever is shorter

2/10 n/30

.02 * gross price discount if payed within 30 days

to find allowance ratio you have to..

add net accounts receivable to bad debts and then calculate

issued 15,000 shares of common stock for $20,000 cash

Cash 20,000 Common stock 20,000

which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold?

LIFO

which inventory will yield the lowest cost of goods sold

LIFO

using the straight line depreciation method will cause a company to incur ____ tax expense in the early years of an assets life than they would experience wising an accelerated method of depreciation

MORE

Purchase cleaning supplies for $5,000 cash

Supplies 5,000 cash 5,000

an example of a deferred revenue

payments are received prior to providing the services to customers

on the balance sheet, the cumulative amount of depreciation expense recognized to date on a fixed asset is called:

accumulated depreciation

billed customers $5,200 for cleaning services

accounts receivable service revenue

billed customers $4,800 for cleaning services

accounts receivable 4,800 service revenue 4,800

what effect does "recognizing accrued interest revenue at the end of the accounting period" have on the accounting equation

assets increase and stockholders equity increases

when is a liability for cash dividends created?

at the date of declaration

expenditure that increase the expected useful life or productivity of the asset are

capital expenditures

expenditures that increase the expected useful life or productivity of the asset are?

capital expenditures

collected $4,000 cash from customers billed on march 12

cash accounts receivable

adjusting journal entries are made at the end of the period when

cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting

the return on assets ratio..

considers the investments made by all creditors and stockholders of the company

an accurate description of the allowance for bad debts

contra account

an organization that has the owner's legal responsibility for the debt of the business limited to the amount they invested in the business

corporation

the business that is most likely to obtain large amounts of resources by issuing stock

corporation

the amount of inventory expensed during the year is reported on the income statement as

cost of goods sold

the amount of inventory expensed during the year is reported on the income statement as...

cost of goods sold

the effect of recording depreciation for the year is a

decrease in assets and a decrease in net income

one main disadvantage of a corporation is

double taxation of dividends

declare and paid $200 cash dividend

dividends cash

the depreciation method that does NOT use salvage value in calculating the first year's depreciation expense is:

double declining balance method

assets classified as property, plant, and equipment are reported at

each assets original cost less depreciation since acquisition

assets classified as property, plant, and equipment are reported at:

each assets original cost less depreciation since acquisition

the percentage of receivables approach..

emphasizes the net realizable value of accounts receivable on the balance sheet

Purchase equipment for $7,200 cash

equipment 7,200 cash 7,200

for the month, paid for and used $600 of fuel

fuel expense cash

example of an intangible asset

goodwill

the party to a promissory note who will pay the interest and principal is called the

maker of the note

authorized shares represent the

maximum number of shares of stock that a company can legally issue

the days in inventory ratio

measures the length of time it takes to acquire, sell, and replace the inventory

what is an example of a capital expenditure?

measures the relationship between the volume of goods sold and amount of inventory carried

in a common size income statement the 100% amount is

net sales

when the allowance method is used to account for bad debts it has

no effect on net income and no effect on total assets

after a corporation declares a cash dividend, what takes place on the date of the record

no entry is necessary

outstanding shares represent the

number of shares that are currently held by stockholders

issued shares represent the

number of shares that the corporation has distributed to owners to date

transportation in is

part of the cost of net purchases

paid $2,400 cash on a one-year insurance policy effective March 1

prepaid insurance 2,400 cash 2,400

accrued expenses originate from

previously unrecorded expenses that have been incurred but not yet paid in cash

example of a revenue expenditure

repair and maintenance costs during the equipments first year of service

what is the appropriate general journal entry to record the declaration of a cash dividend

retained earnings dividends payable

an example of a profitability ratio

return on equity

brooks company sells merchandise to customers. Under the accrual basis of accounting, brooks should normally recognize

revenue and the related expenses in the same accounting period as earned, whether payment is received or not

paid $2,300 cash for employee salaries

salaries expense cash

authorized shares represent

the maximum number of shares of stock that a company can legally issue

earnings per share is an indication of how much

the company earned for each share of outstanding common stock

if a company's fixed asset turnover ratio decreased from 2010 to 2011, which of the following conclusions can be made?

the company was more efficient during 2011 in using its fixed assets to produce profits

the cost of goods sold is equal to

the cost of goods available for sale less ending inventory

the days in inventory ratio measures

the length of time it takes to acquire, sell, and replace the inventory

when the allowance method is used to account for uncollectible accounts bad debt is debited when:

the management estimates the amount of uncollectibles

if a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders

they have the right to receive current year dividends and all unpaid dividends from prior years

in a common size balance sheet the 100% amount is

total assets

what should be included in the acquisition cost of a piece of equipment?

transportation costs, installation costs, and testing costs prior to placing the equipment into production

true or false vertical analysis is used to compare companies of different sizes

true

under which accounting method are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

under the cash basis of accounting

the percent of fixed assets to total assets is an example of

vertical analysis

what method is the most appropriate in complying with GAAP?

weighted average