ACCT. Decisions Making

Which one of the following is an investing activity on the statement of cash flows?

Purchase of long-term investments

What is the impact on the cash flow statement from an increase in short-term notes receivable, assuming the indirect method is used?

A decrease in the cash flow from operating activities.

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

Accumulated Depreciation

Barnhill, Inc. uses straight-line depreciation for its equipment with an estimated useful life of 10 years and zero residual value. The CEO points out that the equipment will last much longer than 10 years, perhaps up to 20 years. What is the impact on earnings per share, and net income of depreciating equipment over 20 years rather than 10 years?

Both earnings per share and net income will increase.

What is the impact on the cash flow statement from a decrease in accounts receivable, assuming the indirect method is used?

An increase in the cash flow from operating activities.

If a company uses the allowance method to account for bad debts, when will the company's owners' equity decrease?

At the end of the accounting period when an adjusting entry for bad debts is recorded

Which of the following accounts would NOT be reported in the Property, Plant, and Equipment section of a balance sheet?

Depreciation Expense- Buildings

Which of the following statements is true regarding dividend income?

Dividend income is reported on the income statement.

Delmont Fire Co. purchased identical equipment having an estimated useful life of ten years. Wind Chime uses the straight-line depreciation method and Fire Hut uses the double declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?

Fire Hut's book value will be less than Wind Chime's book value at the end of year two

What should a company do to improve its accounts receivable turnover rate?

Give customers credit terms of 2/10, n/30 rather than 1/10, n/30

Which one of the following is not an accurate description of Allowance for Doubtful Accounts?

Income statement account

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt?

No effect on overall assets or equity

Which one of the following is not an accurate statement regarding the direct write-off method of accounting for bad debts?

The allowance method for bad debts violates the matching principle, but the direct write-off method does not.

allowance for doubtful accounts represents:

The difference between the gross amount of accounts receivable and the net realizable value of accounts receivable

Which of the following statements is true regarding the two allowance methods used to account for bad debts

The percentage of accounts receivable approach takes into account the existing balance in the Allowance for Doubtful Accounts account

Blanket Airline acquires a new aircraft. It has an estimated life of 15 years and should be used for 15,000 hours of flight. What is the most appropriate method of deprecation to properly match revenues and expenses?

Units of Production

A compnay should choose a depreciation method that.

best allocates the original cost of the asset to the periods benefited by the use of the asset

Depreciation is a process by which

he cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asse

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

not be amortized.

Land is not depreciated because it

will provide future benefits for a company for an unlimited period of time.