Acct 284 chpt. 9

The entry to record the purchase of $10,000 of equipment by signing an $8,000 note and paying the rest with cash is recorded with a ______.

$10,000 debit to Equipment and $8,000 credit to Notes Payable and $2,000 credit to Cash

Vango, Inc. bought a new delivery van during the year. Which of these costs should be expensed as ordinary repairs and maintenance? (Check all that apply.) $2,000 paid to install shelves inside the van $40,000 cost of the van $100 oil change on van $900 for cleaning the van during the year

$100 oil change on van $900 for cleaning the van during the year

The list price of a computer was $100,000. The sales tax on the computer was 5%. The delivery cost was $1,000. The cost to assemble the computer was $500. The Equipment account should be debited for a total of ______.

$106,500

Acme, Inc., bought land and a building for $150,000. Acme plans to use the building for 20 years and then sell it. What is the useful life of the land?

Unlimited

Depreciation Expense

income statement

Acme, Inc. bought land and a factory building for $80,000. The land was appraised at $25,000 and the building at $75,000. Using the basket purchase allocation, Acme would record the ______.

land at $20,000 and the building at $60,000

When a company capitalizes a cost, its ______ increase.

long-lived assets

Assuming straight-line depreciation is used, a higher estimated useful life will result in a(n) ______ depreciation expense per year and a(n) ______ net income

lower, higher

An asset's useful life ______.

may be expressed in terms of time or units of capacity

The formula for the fixed asset turnover ratio equals ______.

net revenue/average net fixed assets

The straight-line depreciation method ______.

reports an equal amount of depreciation expense each year

The estimated amount a long-lived asset is expected to be sold for at the end of its useful life is the ______ value

residual or salvage

The formula for the fixed asset turnover ratio equals net ______ divided by average net fixed assets. (Enter only one word per blank.)

sales

Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. The cash register's depreciable cost equals ______.

$2,300

On January 1, Busy Beaver, Inc., signed a $315,000, 5-year note payable to buy a new industrial veneer cutter. Busy Beaver plans to use the machine for 10 years and then sell it for its scrap value of $5,000. Using straight-line depreciation, Depreciation Expense for the 1st year ended December 31 equals ______.

$31,000

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 ______. (Check all that apply.) $2,000 debit to Freight-in $500,000 credit to Note Payable $3,000 credit to Cash $1,000 debit to Installation Expense $503,000 debit to Machinery $500,000 debit to Machinery

$500,000 credit to Note Payable $3,000 credit to Cash $503,000 debit to Machinery

The Three Little Pigs purchased three houses for a total cost of $160,000. Appraisal values for the three completed houses were: straw house, $40,000; wood house $60,000; and brick house $100,000. Using the basket purchase allocation, the recorded value of the brick house should be ______.

$80,000

Vango, Inc. bought a new delivery van during the year. Which of these costs should be expensed as ordinary repairs and maintenance? (Check all that apply.) Multiple select question. $900 for cleaning the van during the year $100 oil change on van $2,000 paid to install shelves inside the van $40,000 cost of the van

$900 for cleaning the van during the year $100 oil change on van

The formula for calculating straight-line depreciation is ______.

(cost - residual value) x (1/useful life)

Dew Drop Inn had net revenue of $117,000 in 2020 and $100,000 in 2021. Its fixed assets were $400,000 at the end of 2019, $380,000 at the end of 2020, and $360,000 at the end of 2021. In which year was the fixed asset turnover ratio better?

2020, because the ratio was higher.

X-it Company bought a new delivery truck. The manufacturer says that the truck should last for ten years and 120,000 miles. X-it plans to use the truck for 4 years, during which it will be driven 50,000 miles. What is the useful life of the truck for depreciation purposes? (Check all that apply.) Multiple select question. 120,000 miles 50,000 miles 4 years 10 years

50,000 miles 4 years

Select all of the items below in determining the cost of purchased equipment. Add the installation costs Subtract the sales tax Add the list price Add the sales tax Add the purchase discount Subtract the purchase discount Add the delivery costs

Add the installation costs Add the list price Add the sales tax Subtract the purchase discount Add the delivery costs

Computit bought a new copier machine. Which of these costs should be expensed? (Check all that apply.) Annual maintenance cost Replacement of the toner for the copy machine Freight bill to deliver the machine Invoice price of the machine

Annual maintenance cost Replacement of the toner for the copy machine

True or false: Land is not depreciated.

True

True or false: Long-lived assets (except land) are expensed over their useful lives.

True

Cedar Fair purchased land; which of the following should be debited to the Land account? (Check all that apply.) Commissions paid to brokers when purchasing the land Construction costs for the building on the land Fees for surveying of the land Legal fees for the land's title search

Commissions paid to brokers when purchasing the land Fees for surveying of the land Legal fees for the land's title search

Straight-line, units-of-production, and declining-balance are commonly used ______ methods

depreciation

Which of the following costs associated with long-lived assets are expensed, not capitalized? (Check all that apply.) Installation costs Delivery costs Immaterial repairs and maintenance Ordinary repairs and maintenance

Immaterial repairs and maintenance Ordinary repairs and maintenance

The journal entry to record depreciation include which of the following? Debit Depreciation Expense Credit Depreciation Expense Debit Accumulated Depreciation Credit Accumulated Depreciation

Debit Depreciation Expense Credit Accumulated Depreciation

Which of the following statements are true? (Check all that apply.) Depreciation Expense on the income statement reports only the current period's usefulness used. Accumulated Depreciation on the balance sheet reports the amount of usefulness used since the long-lived asset was first put into use Accumulated Depreciation is netted against the related long-lived asset on the balance sheet Depreciation Expense is an operating expense on the income statement Depreciation Expense reports the amount of usefulness used since the long-lived asset was purchased

Depreciation Expense on the income statement reports only the current period's usefulness used. Accumulated Depreciation on the balance sheet reports the amount of usefulness used since the long-lived asset was first put into use Accumulated Depreciation is netted against the related long-lived asset on the balance sheet Depreciation Expense is an operating expense on the income statement

Depreciation allocates the cost of a long-lived asset to _____.

Depreciation Expense over the periods the asset is used to generate revenue

The adjusting entry to record depreciation debits ______ ______ and credits ______ ______

Depreciation, Expense, Accumulated, Depreciation

Which of the following may cause net income to differ among companies? (Check all that apply.) Multiple select question. Estimated residual values Cost principle Estimated useful lives Depreciation methods

Estimated residual values Estimated useful lives Depreciation methods

Cedar Fair purchased land; which of the following should be debited to the Land account? (Check all that apply.) Construction costs for the building on the land Fees for surveying of the land Legal fees for the land's title search Commissions paid to brokers when purchasing the land

Fees for surveying of the land Legal fees for the land's title search Commissions paid to brokers when purchasing the land

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed. What was the effect of this fraud on WorldCom's income statement? (Check all that apply.) Expenses were too high. Net income was too high. Expenses were too low. Retained earnings were too high. Net income was too low.

Net income was too high. Expenses were too low.

Sunny Sky paid $30,000 cash for piece of land to be used for a new corporate headquarters building. What is the effect of this transaction on the accounting equation?

One asset increases, while another asset decreases.

Both Spam Am Airlines and TWB Airlines used straight-line depreciation for a $20 million jet. Spam Am used an estimated 35 year useful life and TWB Airlines used an estimated 25 year life for its planes but estimated similar residual values. As result of the differences in useful lives, which company will appear more profitable?

Spam Am

If management was to unethically capitalize costs that should not have been, which of the following would be misstated? (Select all that apply.) Assets would be understated. Stockholders' equity would be overstated. Stockholders' equity would be understated. Assets would be overstated. Liabilities would be understated. Liabilities would be overstated.

Stockholders' equity would be overstated. Assets would be overstated.

Which of these depreciation methods are allowed by GAAP? (Select all that apply.) Multiple select question. Economic-benefits Salvage value Straight-line Reclining-balance Declining-balance Units-of-production

Straight-line Declining-balance Units-of-production

Acme Enterprises just bought a new manufacturing machine. Which of these costs should be capitalized? (Check all that apply.) The $500 annual increase in insurance premiums, based on the cost of the machine The $8,000 cost of tearing down Acme's factory wall to get the machine inside The $15,000 freight bill to deliver the machine to Acme's factory The $500,000 invoice price of the machine The $200 annual increase in personal property taxes, based on the cost of the machine The $100 increase in monthly utility bills to operate the machine

The $8,000 cost of tearing down Acme's factory wall to get the machine inside The $15,000 freight bill to deliver the machine to Acme's factory The $500,000 invoice price of the machine

What effect does the residual value have on a long-lived asset's depreciable cost?

The greater the residual value the smaller the depreciable cost.

The entry to record annual straight-line depreciation will increase a company's ______ and ______. Cash Total Assets Total Expenses Net Income asset book value Accumulated Depreciation revenue

Total Expenses Accumulated Depreciation

What is the effect of recording depreciation expense on the accounting equation? (Check all that apply.) Total assets increase. Total stockholders' equity increases. Total assets decrease. Total liabilities decrease. Total stockholders' equity decreases. Total liabilities increase.

Total assets decrease. Total stockholders' equity decreases.

Tangible assets are first recorded at ______.

all costs to acquire them and prepare them for use

Revenue expenditures are recorded with a debit to ______.

an expense when they relate to ordinary repairs and maintenance

Long-lived assets are ______. (Check all that apply.) assets acquired for use over 1 or more years used by the business always tangible assets that will be used or converted to cash within 1 year intended for immediate resale

assets acquired for use over 1 or more years used by the business

Amortizing intangible assets affects the accounting equation by causing ______. (Check all that apply.) Multiple select question. stockholders' equity to increase assets to increase assets to decrease liabilities to decrease liabilities to increase stockholders' equity to decrease

assets to decrease stockholders' equity to decrease

Accumulated Depreciation

balance sheet

Accumulated Depreciation is reported on the ______.

balance sheet netted against the related long-lived asset

An asset's cost minus accumulated depreciation is its ______ value.

book

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

capitalized

Depreciation Expense of a long-lived asset calculated using the straight-line depreciation method will be a ______ amount each year.

constant

An asset's book value or carrying value is its ______.

cost minus accumulated depreciation

On-a-Roll, Inc. amortizes its patent of $20,000 over 20 years. The adjusting entry to record amortization results in a(n) ______. (Check all that apply.) increase to assets on the balance sheet increase to net income on the income statement decrease to assets on the balance sheet decrease to net income on the income statement increase to liabilities on the balance sheet

decrease to assets on the balance sheet decrease to net income on the income statement

Matching part of the cost of a long-lived asset with the revenues generated by the asset is ______.

depreciation

Ordinary repairs and maintenance costs should be ______.

expensed as incurred

A productive asset ______.

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

Ace Electronics bought a new cash register for $2,500. Ace originally planned to use the cash register for 4 years and then sell it for $200. After 4 years, Ace had recorded $2,300 of depreciation. If Ace continues to use the cash register, still planning to sell it eventually for $200, then Ace should record ______.

no additional depreciation

Thermal, Inc. bought a new computer system for $50,000 cash. What is the effect of this purchase on the company's total assets? Total assets ______.

remain the same

In the case of a basket purchase, the cost of the land and building is ______.

split among the assets purchased in proportion to the market value of the assets as a whole

An asset's residual value is ______. (Check all that apply.) Multiple select question. the estimated amount it can be sold for at the end of its useful life its cost minus its accumulated depreciation its cost plus any costs to install it and place it in service equal to its accumulated depreciation the same as its salvage value

the estimated amount it can be sold for at the end of its useful life the same as its salvage value