acctg

Which of the following is an advantage of using LIFO in a period of rising costs?

Results in lower taxes

15) When inventory costs are rising, LIFO results in lower tax expense when compared to FIFO.

TRUE

16)Companies that report inventory using the LIFO method must report the difference between the LIFO cost and FIFO cost of its inventory. This difference is commonly called the LIFO reserve.

TRUE

Social Security and Medicare taxes withheld from employees' paychecks are collectively referred to as ________.

FICA taxes

When inventory costs are rising, the _____ results in a higher reported inventory.

FIFO method

An appropriate use of the specific identification method is in accounting for low-cost, similar inventory items that are difficult to separately identify.

False

Which of the following is true of a period of falling inventory costs?

LIFO will report higher gross profit than FIFO.

The LIFO conformity rule requires that _____.

a company that uses LIFO for tax reporting to also use LIFO for financial reporting

Infinity Corporation purchased equipment with a 10-year useful life and zero residual value for $10,000. At the end of the fifth year, the equipment is sold for $6,000. The entry to record this sale will include _______. Assume the straight-line depreciation method is used. (Select all that apply.)

a credit to Equipment for $10,000 a debit to Cash for $6,000 a debit to Accumulated Depreciation for $5,000 a credit to Gain for $1,000

Infinity Corporation purchased equipment with a 10-year useful life and zero residual value for $10,000. At the end of the fifth year, the equipment was destroyed in a fire. If the equipment is not insured, the entry to record the retirement of this asset will include _______. Assume the straight-line depreciation method is used. (Select all that apply.)

a debit to Accumulated Depreciation for $5,000 a debit to Loss for $5,000 a credit to Equipment for $10,000

Terra Corporation purchased equipment with a 10-year useful life and zero residual value for $100,000. At the end of the seventh year, the equipment is sold for $20,000. The entry to record this sale will include _______. Assume the straight-line depreciation method is used. (Select all that apply.)

a debit to Cash for $20,000 a credit to Equipment for $100,000 a debit to Loss for $10,000 a debit to Accumulated Depreciation for $70,000

When a firm develops a trademark internally through advertising, it records the advertising costs as part of the cost of the intangible asset.

income statement is expense

An attorney adds an air purification system to his office building. The addition:

increases future benefits and should be capitalized.

We do not amortize intangible assets _____.

indefinite life ( goodwill) trademarks with indefinite life

The owner of an established McDonald's franchise pays fees on a continuing basis to the franchisor. These periodic payments should be capitalized as an intangible asset.

initial franchise fee is recorded as an intangible asset on balance sheet while other payments are recorded as expenses on income statement

The amount a company expects to receive from selling a long-term asset at the end of its service life is known as:

residual value

incorrect capitalization and expense results in current period

total assets and net income being overstated in current period

Anderson Company acquires Thompson Company by paying $30 million in cash. The fair value of the identifiable assets acquired is $38 million. The fair value of the identifiable liabilities acquired is $6 million. What will be the amount of goodwill that Anderson Company would record as part of this acquisition?

0 mill

trademark reused every blank years

10 years

On January 1, Year 1, a company purchases a machine for $18,000. The estimated residual value is $6,000, and the estimated service life is 8 years or 30,000 units. After three years of use, the company estimates the remaining service life of the machine to be nine years rather than the original eight. Using the straight-line method, calculate the amount of depreciation for Year 4.

1250

On January 1, Year 1, a company purchases a machine for $18,000. The estimated residual value is $6,000, and the estimated service life is 8 years or 30,000 units. Using the straight-line method, calculate the amount of depreciation for Year 2.

1500 Year one is gone so no cost ?

The legal life of a patent is _____ years.

20

Date Transaction Number of Units Unit Cost Jan. 1 Beginning inventory 500 $ 5 May 15 Purchase 1,000 6 Jun. 10 Purchase 500 7 Oct. 25 Purchase 2,000 8 Units sold during the year: 3,000 What is the amount of cost of goods sold that Green Products will report in its income statement for the current year, if it uses the first-in, first-out cost method?

20000

Light Company acquires Photon Company by paying $25 million in cash. The fair value of the identifiable assets acquired is $30 million. The fair value of the identifiable liabilities acquired is $8 million. What will be the amount of goodwill that Light Company would record as part of this acquisition? @

3 mill

A company pays $5,000 for equipment. Annual depreciation on the equipment is $500. What is the book value of the equipment at the end of Year 2?

4000

Windsor Hospital purchases $90,000 in surgical equipment on October 1, Year 1. The useful life is estimated to be 5 years, and the residual value is estimated to be $10,000. What will be the depreciation expense reported for this equipment in Year 1 if the hospital uses the straight-line method?

4000- yearly depreciation 16000 times months left /12 so 16000*3/12= 4000

Attorneys' fees to organize the corporation $ 9,000 Purchase of a patent 40,000 Legal and other fees for transfer of the patent 2,500 Advertising 80,000 Total $ 131,500

42500 to debit patent 9000 to debit legal fees 80000 to debit advertising fees

Prime, Inc., purchases $100,000 in construction machinery on January 1, Year 1. The useful life is estimated to be 8 years, and the residual value is estimated to be $20,000. If the company uses the double-declining-balance method, the asset will reach its residual value in the ____ year.

6 (25%) depreciation rate

A company purchases a machine for $10,000. The estimated residual value is $4,000, and the estimated service life is 4 years or 10,000 units. The company uses the straight-line method of depreciation. The depreciable cost of the asset is:

6000

Date Transaction Number of Units Unit Cost Jan. 1 Beginning inventory 500 $ 5 May 15 Purchase 1,000 6 Jun. 10 Purchase 500 7 Oct. 25 Purchase 2,000 8 Units sold during the year: 3,000 What is the amount of ending inventory that Green Products will report in its balance sheet at the end of the year, if it uses the first-in, first-out cost method?

8000

Which of the following accounts are affected when recording the expense related to the portion of a patent that expired during the year? (Select all that apply.)

Amortization Expense patents

Which of the following are withheld from an employee's salary? (Select all that apply.)

Employee portion of health insurance Federal and state income taxes FICA taxes

The research and development (R&D) team at a pharmaceutical company is developing a drug for colon cancer. Which of the following is true of the R&D costs incurred in developing this drug during the current year?

They are expensed directly in the income statement.

Sonic Corporation purchases a delivery truck for $24,000. The company expects the truck to be in service for 100,000 miles, and the residual value is estimated to be $4,000. What is the depreciation rate using activity-based depreciation?

activity based deprecation 24000-4000/100000= .$2

multiple choice Costs that produce future benefits are ______, but costs that produce benefits only in the current period are ______.

capitalized; expensed

The journal entry to record annual depreciation for equipment includes a:

debit to depreciation expense

Depreciation is the process of allocating the cost of an asset to a(n) _________ over its service life.

expense

Kelly Cakes Bakery purchases a new building to use for its baking operations. In addition to the purchase price, the acquisition requires the company owner to pay a commission to a realtor and fees to an attorney. The realtor commissions and legal fees will be expensed in the current period.

false

When a change in depreciation estimate is required, the company adjusts depreciation in prior periods.

false

The exclusive right of protection given to the creator of a published work is known as a patent.

false - copy right

The cost of ordinary repairs to equipment during the first year of service is added to the Equipment account.

false- it goes to assets or expenses

Accumulated Depreciation is and has

is a contra asset and has a normal credit balance

We record goodwill as an intangible asset in the balance sheet only when _____.

it is part of an acquisition of another business

The method that allocates an equal amount of depreciation to each year of an asset's service life is:

strait line

Accountants often call FIFO the balance-sheet approach because _____.

the amount it reports for ending inventory better approximates the current cost of inventory

The weighted-average method assumes that:

the cost of goods sold consists of a random mixture of all goods available for sale.

The FIFO method assumes that:

the first units purchased are the first ones sold.

The LIFO method assumes that:

the last units purchased are the first ones sold.

The cost of an oil change for a company's delivery truck is expensed in the current period.

true

When an expenditure is not large enough to influence a decision, it is typically recorded as an expense regardless of its expected period of benefit.

true regarddless of whether futer benifits increase

Repairs and maintenance expenditures that benefit future periods are capitalized as an asset.

true- long term repairs not likely to occur in the next period and recorded as an asset unlike routine maintenance and repairs recorded as an expense

litigation cost for legal defense are expenses when and capitalized when?

when they lose the legal case for a right to patent and capitalized when they win