accounting test 3
employer has taxes for payroll
-FICA (6.2%) social security 1.459 medicare federal instate unemployment tax (fula/suda)
SL method
1. Cost of asset 2. Residual or salvage value 3. Estimated life in years
3 ways to calculate depreciation
1. Straight line method 2. unites production (output) 3. Double declining balence
3 things to know to calculate depreciation
1. cost of asset 2.
2 different ways to handle uncollectible accounts
1. direct write off method 2. allowance method
current and long term assets in 3 different aspects
1. fixed assets 2. natural resources 3. Intangible assets
what happens if John Doe says I know I don't have the 200 but I have 150 now to give you.... because he's not on the books anymore
1. you have to reinstate the account 2.show the collection (debit accounts receivable, credit that bad expense) -increase asset and increase equity
Thomas Co. sold $1,000 worth of merchandise on a bank credit card with a 3% fee. The entry to record the sales transaction would include a debit to Cash in the amount of
970
discard
A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet.
allowance method
A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period. - if I have a history of having to write off some of my account preferred because it is more conservative
trademark
A symbol, name, phrase or jingle identified with a company, product or service is called a
balence sheet
Accumulated depreciation is recorded on which of the following financial statements?
Receivable
Amount due from another party
accounts recievable
Amounts due from customers for credit sales
Notes receivable
An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates
depletion
An oil company recognizes the cost of discovering and operating oil wells by recording ______ expense for each unit of oil used.
land improvements
Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:
accumulated depreciation
Book value can be calculated by taking an asset's acquisition costs less its
Which of the following items related to depreciating equipment would be found on a company's income statement?
Depreciation Expense - Equipment
related to depreciating equipment would be found on a company's income statement?
Depreciation Expense - Equipment
Income Statement
Depreciation expense is reported as a decrease in which of the following financial statements?
Social Security and medicare together are called
FICA
sales tax (October 26) sold $100 of products, cost of the goods is 60, and the sales tax rate is 7%
Journal entry cash 107 sales revenue 100 sales tax payable 7 (October 26) cogs 60 Inventory. 60 (November 15) sales tax payable 7 cash 7
fixed assets
Long-term assets that are relatively permanent such as land, buildings, or equipment. (property and plant)
goodwill
The amount by which a company's value exceeds the value of its individual assets and liabilities is called
book value
The asset's acquisition costs less its accumulated depreciation is called:
Cost to prepare it for use Purchase price
The cost of a plant asset includes the following:
declining balence
The depreciation method that determines the depreciation for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is known as the __________ method.
copyright
The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a
units of production method
The method of depreciation that charges a varying amount to depreciation expense for each period depending on its usage is called the _________ method.
units-of-production
The method of depreciation that charges a varying amount to depreciation expense for each period depending on its usage is called the _________ method.
useful
__ life of a plant asset is the length of time it is productively used in a company's operations
salvage
_____ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.
natural resources
______ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.
Depreciation
______ is the process of allocating the cost of a plant asset to expense while it is in use.
intangible assets
_______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages.
dealetion
_______ is the process of allocating the cost of a natural resource to the period when it is consumed
current liability
`less than a year
sales tax
a current or liability all products are taxed
which of the following situations will result in recognizing a gain on sale of a plant asset
a fully depreciated asset is sold for 1,000
double declining balance method
accelerated method usually done for tax purposes
In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the _______ account.
accounts recievable
To record a sale on account, the company should debit:
accounts recievable
if a check correctly written and paid by the bank for 501 incorrectly in the company book for 510 how should this euro be treated
add 9 to book balance
cost of asset
all cost necessary and reasonable set asset ready to use.
Bad Debt Expense
an expense account to record losses from extending credit
Bad debts are:
an expense of selling on credit. also called uncollectible accounts. accounts of customers who do not pay.
land improvements
are assets that are additions to land and have limited useful lives, such as walkways and fences.
plant
are assets used in a company's operations that have a useful life of more than one accounting period.
natural resources (natural gas supplies)
are long term assets.... but they are not fixed assets
accounts recievable
asset not a liability
If an account receivable balance previously written off using the direct write-off method is later collected in full, the entry to record the payment must include a credit to:
bad debit expense
On August 1, Harris Co. determines that it cannot collect $200 from its customer, L. Dash. Harris Co. uses the direct write-off method, so they will record the write-off of this account by debiting:
bad debt expense
Accumulated depreciation is reported on which of the following financial statements?
balence sheet
The factors necessary to compute depreciation include all of the following, except:
book value
materiality
constraint is permitted under GAAP when the results approximate those using the allowance method.
Straight-line depreciation can be calculated by taking:
cost-salvage value/useful life of asset
A company sells merchandise to a customer on credit. The journal entry that the company makes to record this sale would include a (debit/credit) sales account
credit
2 types of liabilities
current liabilities and long-term liabilities
journal entry to record depreciation
debit depreciation expense, credit accumulated depreciation
liabilities
debts of a company, past event that creates an obligation for the business.
effect on the company
decreases the equity (negative effect on our profit)
when you use up recourses throughout life.... it is called
depletion expense
cost- residual
depreciation cost
The ____________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.
direct write off
when you are a employer, you have to take out this from your employees paycheck
employer holds this from the pay check to create a liability social security (6.2%) medicare (1.45%) income tax
the direct write-off method violates the __________ principle.
expense recognition
assigning an amount to inventory on the balance sheet that approximates its current cost
fifo
long-term liabilities
greater than a year
pay roll liabilities
gross pay # of hours x hourly rate
employers maybe withholding
health insurance (hold from paycheck so it is a temporary liability)
Depreciation Expense is reported on which of the following financial statements?
income statements
good will and mcdonalds
intangible asset, created for the buyer
short term notes payable
interest involved (biggest difference between interest payable vs notes payable)
long term assets
last longer than a year
short term
lend the money that person holds onto the money and money is eventually paid back
short term
lender (payer) , borrower ( maker), interest
When a company has a current obligation to make a future payment to their supplier due to a shipment of supplies that were received last week, the company would record this transaction with an increase to an asset account and a(n) ________ account.
liability
useful
life (also called service life) is the length of time the asset is productively used in a company's operations.
taxes are usually paid
monthly
social security- medicare -income tax =
net pay
unearned revenue
owes services (liabilities)
most liabilities will have the word
payable
direct write off method
pretending John is going to pay off what he owes us... until he doesn't so than were gonna deal with it
interest
principal x rate x time
An accounts receivable ledger: (Check all that apply.)
records journal entries that affect accounts receivable. is a supplementary record to maintain an account for each customer.
writing off account if they comeback and pay after theft
reverse write-off - put them back on the books
estimated life in years
saying in 5 years I'm going to buy a new truck... spreading out the depreciation expense (spread out price)
Depreciation expense
spread cost over its useful life
ambertization
spread out (spread out loan shows you how much you are paying over the next 15 years.
income tax
the amount of income tax that is withheld depends on lots of things. the employer owes that money to the federal government
The method of depreciation that charges a varying amount to depreciation expense for each period depending on its usage is called the _________ method.
unit of production
current asset
used up within a year
salvage
value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.
journal entry to write off the account
we credit accounts receivable (accounts receivable- John Doe)
cost-residual/life in years
yearly depreciation expense
when a customer does not pay
you do a write-off and you need to record the expense
