Acct I Final

depreciation is a process by which

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

using different depreciation methods for book purposes versus tax purposes for the same asset is

the direct result of differing goals of financial and tax accounting

If a company issues $5 par value common stock,

$5 per share is presented in the common stock account on the balance sheet.

if a company purchases $3,000 worth of inventory with terms of 1/15, n30 and pays within 15 days, then the amount paid to the seller would be

$2,970

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?

U.S. treasury bill purchased when there were 90 days until maturity

the current portion of long-term debt is a balance sheet item for flavorful products company. how would it most likely be classified on the balance sheet?

current liability

which of the following is NOT classified as a long-term liability

current portion of long-term debt

The effect of recording depreciation for the year is a(n)

decrease in assets and a decrease in net income

tropical co. declared a cash dividend of $30,000. this transaction includes a(n)

decrease to retained earnings of $30,000

A company would repurchase its own stock for all of the following reasons except:

it wishes to make an investment on its own stock

Which balance sheet accounts are most affected by investing activities?

long-term assets

which of the following statements is true with respect to long-term liabilities

long-term liabilities include bonds, other long-term liabilities and deferred income taxes

which of the following accounts is classified as a long-term liability

note payable, due in three (3) years

Trend analysis is analysis

of dollar changes and percentage changes over several years

which of the following would appear on the balance sheet as a current liability?

premium offers in cereal boxes

Which of the following should be classified as an investing activity on the statement of cash flows?

sale of a warehouse

Which of the following is NOT an investing activity?

sale of merchandise for cash

Which of the following is NOT a financing activity?

selling an investment in IBM stock for cash

the three forms of business entities are:

sole proprietorships, partnerships, corporations

which of the following statements is correct?

the actual issue price of a bond represents the present value of all future cash flows related to the bond

The primary purpose of the statement of cash flows is to provide information about

the cash inflows and outflows of the company

borden company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land, cost to clear land, cost of paving, lighting for the parking lot, and landscaping. how should the company determine which costs should be recorded as land improvements and which costs should be recorded as land?

the costs with an unlimited life will increase land, and the costs with a limited useful life will increase land improvements

which of the following below is an example of a capital expenditure?

replacing an engine in a company car

On January 2, 2018, roof master construction inc. issues 500,000, 10-year bonds for $574,540. the bonds pay interest on June 30 and December 31. the face rate is 8% and the market rate is 6%. at the maturity date, besides an interest payment, roof master would repay the bondholders

$500,000

boston trombley company is a defendant in a lawsuit alleging damages of $3 billion. it is probable that boston trombley will lose the suit. the litigation is anticipated to continue for several years, but no reasonable estimate can be made at this time regarding ultimate financial responsibility. this situation is an example of:

a loss contingency that should be disclosed in the notes to Boston's financial statements

Vegas Finance Company reported the following: common stock, $10 par, 100,000 shares authorized, 80,000 shares issued and outstanding what is the effect of issuing 1,000 shares of common stock at $15 per share?

additional paid-in capital increases by $5,000

all of the following are characteristics of current liabilities except?

all three are characteristics: they may be replaces with a new short-term liability rather than being paid in cash, they may involve estimated amounts, they are due within one year or within the operating cycle, whichever is longer

Valor company issued 5,000 shares of $1 par common stock for $30 per share, providing the company with $150,000 in cash. What effect, in addition to the increase in cash, does this transaction have on the accounting equation for Valor?

common stock increases $5,000; additional paid-in capital - common stock increases $145,000

which of the following statements is true regarding vertical analysis?

common-size financial statements can be used to compare businesses of different sizes

which of the following statements regarding contingencies is true?

contingencies that are probable and not estimable are disclosed in the notes to financial statements

which balance sheet accounts are most affected by operating activities

current assets and current liabilities

The retained earnings account balance for a corporation is $10,000,000. This amount represents

earnings that have not been distributed to shareholders

The dollar change and percentage change in the accounts receivable account from 2017 to 2018 is calculated for Allison Corporation. this is an example of

horizontal analysis

on January 2, 2013 Hannah company sold a machine for $1,000 that it had used for several years. the machine cost $12,000 and had accumulated depreciation of $9,000 at the time of sale. what gain or lose will be reported on the income statement for the sale of the machine?

loss of $2,000

Which of the following set of the factors is needed to calculated depreciation on plant and equipment

the estimated life of the asset, its acquisition cost, and its estimated residual value

If crab shack company has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is:

$117,000

Stockholders prefer to invest in preferred stock because

the dividends are paid on preferred stock before they are paid on common stock

on May 1, the Chris company borrowed $30,000 form the third street bank on a 1-year, 6% note. if the company keeps its records on a calendar year, an adjustment is needed on December 31 to increase

interest payable, $1,200

Bing's export company Co. purchased a new delivery truck at the beginning of 2015. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2015. The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016. The number of expected miles over five years is 100,000. What is the amount by which double-declining exceeds straight-line depreciation over the 5-year life of the truck?

$0

Waxman company purchased a patent for $170,000 at the beginning of 2018, and estimated that its expected useful life was 10 years. the patent has a legal life of 17 years. what amount should be recorded as amortization expense for the patent in 2018?

$17,000

Royal Company purchased a dump at the beginning of 2012 at a cost of $60,000. The truck had an estimated life of 6 years and estimated residual value of $24,000. On January 1, 2014, the company made major repairs of $20,000 to the truck that extended the life 1 year. Thus, starting with 2014, the truck has a remaining life of 5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2014?

$12,000

bonds in the amount of $100,000 and a life of 10 years were issued by the focus company. if the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

$60,000

If Mussel Company has working capital of $540,000 and a current ratio of 3 to 1, the amount of current assets is:

$810,000

if current assets amount to $150, total assets $350, current liabilities $65, and total liabilities $100, then working capital is

$85

Carrington inc. recorded $97,000 in salary expense for January 2019. its beginning balance in salaries payable was $3,000 and its ending balance was $4,000. how much was paid in cash for salaries during January 2019?

$96,000

Winslow corporation reported the following in the stockholders' equity section of its balance sheet at December 31, 2015: common stock, $1 stated value = $10,000 additional paid-in capital--common = 40,000 retained earnings = 25,000 total contributed capital & retained earnings = $75,000 less: treasury stock (at cost $20 per share) = -2,000 Total stockholders' equity = $73,000 How many shares of stock are issued?

10,000

if current assets amount to $62,000, total assets $350,000, current liabilities $31,000, and total liabilities $125,000, the the current ratio is

2.0 to 1

A liability for dividends is created

at the date of declaration

bonds are a popular source of financing because

bond interest expense is deductible for tax purposes, while dividends paid on stock are not

Which of the following is NOT an operating activity?

cash payments for dividends to stockholders

Horizontal analysis is analysis

in which all items are presented as a percentage of one selected item on a financial statement

Portland sound cafe began business on January 1, 2015. The corporate charter authorized issuance of 1,000 shares of no-par value common stock, of which 200 shares were issued, and 4,000 shares of $8 par value, 6% cumulative preferred stock, of which none were issued. Portland sound sold 400 shares of common stock at $8 per share on May 1. The entry to record the issuance of shares on May 1 will:

increase cash, $3,200; increase common stock $3,200

when bonds are issued by a company, the accounting entry shows an

increase in assets and an increase in liabilities

operating assets with NO physical properties are called

intangible assets

Seashell company is considered "very liquid" for the year ended December 31, 2016. this means that seashell

is able to pay its current debts using its current assets

Land is not depreciated because:

it will provide future benefits for the company for an unlimited period of time