FINAL EXAM STUDY Quizzes 9-11

. Accumulated depreciation account is an example of: a. contra asset account b. contra liability account c. contra equity account d. expense account

A

1. Straight line depreciation is used when: a. Usage is expected to be the same each period b. Usage is expected to vary each period c. the asset's efficiency declines over time d. The useful life of the asset is less than 15 years

A

1. Which of the following accounts is an income statement account used to record the capitalization of a fixed asset? a. Depreciation expense b. Accumulated Depreciation c. Residual value expense d. Maintenance expense

A

. Which will give you the highest end balance on principal? a. Simple Interest b. Interest compounded daily c. Interest compounded monthly d. Interest compounded yearly

B

1. A liability that is probable and can not be reasonably estimated would receive which accounting treatment? a. Record the liability and estimated loss b. Describe in financial statement notes c. Don't mention it d. Record it at maturity

B

A bond is considered issued at a premium when: a. The interest rate is below the market interest rate b. The interest rate is above the market interest rate c. The maturity date is less than 12 months away d. The maturity date is more than 12 months away

B

An annuity is: a. Equal interest amounts earned per year b. Equal cash payments over equal time intervals c. One-time investment and interest payment at end of period d. Total compounded interest over the time interval

B

If the interest rate in a present value problem increases, what happens to the present value? a. Increases b. Decreases c. Does not change d. Not enough information to know

B

Method of earning interest on the initial investment and previous interest is called: a. Annuity Interest Method b. Compound Interest Method c. Simple Interest Method d. Monthly Interest Method

B

The book value of an asset is defined as a. Cost Minus Salvage Value b. Cost Minus Accumulated Depreciation c. Cost Minus Salvage Value Minus Accumulated Depreciation d. Estimated Fair Market Value

B

Under the Time Value of Money principle, a dollar today is worth _________ a dollar next year. a. Equal to b. More than c. Less than d. Half of

B

What is the fixed asset turnover ratio? a. Average net fixed assets / net revenue b. Net revenue / average net fixed assets c. Total assets / average net fixed assets d. Average assets / Inventory

B

What term is used to explain when costs are recorded as assets rather than as expenses? a. Expensed b. Capitalized c. Recognized d. Realized

B

What type of interest is earned only on the initial investment? a. Compound b. Simple c. Annual d. Definite

B

What type of interest is used to calculate the time value of money? a. Simple interest b. Compound interest c. Calculated interest d. Premium interest

B

2. The existence of a Bond Premium account implies that the company sold bonds publicly that offered an interest rate: a.higher than the prevailing market rate of interest b. lower than the prevailing market rate of interest c. equal to the prevailing market rate of interest d. none of the above

A

2. Which of the following is the liability recorded for accrued payroll?a. Payroll deductions b. Gross earnings c. Net cash paid d. Both A & B

A

For contingent liabilities, if they are ________ and ________, then an expense and liability are accrued. a. Probable , Estimable b. Material , Likely c. Current , Unlikely d. Realized , Incurred

A

On January 1, 2011, Hoffman Company, a calendar year company, issued $75,000 of notes payable of which $15,000 is due on January 1 for each of the next 5 years. The proper Balance Sheet presentation on December 31, 2011, is a.Current Liabilities $15,000 \ Long-Term Liabilities $60,000 b. Current Liabilities $60,000 \ Long-Term Liabilities $15,000 c. Current Liabilities $75,000 d. Long term Liabilities $75,000

A

The depreciation method in which the depreciation expense is always constant over the useful life of the asset is: a. Straight-Line b. Units-of-production c. Declining Balance d. Accelerated Depreciation

A

The idea that money received today is worth more than the same amount received in the future is known as: a. Time value of money b. Future value of money c. Present value of an annuity d. None of the above

A

The purchaser of a bond issued at a premium will take what actions over the life of the bond? a. Amortize the bond premium b. Increase the carrying value c. Both A & B d. Neither A nor B

A

What is the formula for a Gain on the disposal of tangible assets? a. Gain= Cash Received - Book Value b. Gain= Book Value - Cash Received c. Gain= Accumulated depreciation - Cash Received d. Gain= Cash Received - Accumulated depreciation

A

Which of the following regarding the Debt-to-Assets ratio is false: a. A lower ratio means greater financing risk b. It tells you the percentage of assets financed by creditors c. A higher ratio means greater financing risk d. The equation is Total Liabilities divided by Total Assets

A

. When do managers choose to use the straight-line depreciation method? a. When the amount of asset production varies significantly from period to period. b. To report more depreciation expense in the early years of an asset's life when the asset is more efficient c. When the asset is expected to be used up in equal amounts each period of the asset's estimated useful life. d. Manager typically try to avoid the Straight-line depreciation method.

C

3. A company uses Kickstarter to make pre-sales of a product still in development. The cash it receives from these transactions is most specifically classified as: a. An accrued liability b. An amount payable c. A deferred revenue d. An installment payable

C

Acquisition costs of tangible assets include: a. Purchase price b. Purchase price, all expenditures needed to prepare the asset for its intended use, and all maintenance costs in the future c. Purchase price, all expenditures needed to prepare the asset for its intended use d. All costs during the life of the asset

C

All of the following are types of bonds except: a. Treasuries b. Municipal c. Contingent d. Corporation

C

If an entity does not expect to recover the carrying amount of an asset, the entity has incurred: a. a depreciation expense b. an amortization cost c. an impairment loss d. loss on disposal

C

Liabilities for expenses that have been incurred but not paid at the end of the accounting period are called: a. Current Liabilities b. Long-term Liabilities c. Accrued Liabilities d. Total Liabilities

C

Long-term liabilities are obligations that will be paid in full after: a. 18 months b. 2 years c. 1 year d. The following period

C

To solve a future value of money problem, you need to know all the following except: a. Amount to be invested b. Number of periods in which the amount earns interest c. Expected cash flows d. Interest rate per period

C

Which of the following is most likely to be an annuity? a. Monthly payments on a credit card bill b. Monthly interest earned on a checking account c. Monthly payments on a car loan d. Monthly utility bill payments

C

Which of the following is not a tangible asset? a. Land b. A Parking Garage c. Copyright d. A Tractor

C

Which of the following statement about Goodwill is false? a. Is impairment tested and may be written down b. Occurs when one company buys another company c. Is amortized using the straight-line method d. Exists if Purchase Price>Fair market value of Net Assets Acquired

C

Which of these is not a factor in determining the liability amount reported? a. Additional amounts owed to credit b. The initial amount of the liability c. Amount of cash the company has on-hand d. Payments or services provided to the creditor

C

Which of these is not a factor when performing depreciation calculations? a. Asset Cost b. Residual Value c. Market Value d. Useful Life

C

Which of these would not be classified as an intangible asset? a. Patents b. Goodwill c. Trademarks d. Natural Resources

C,D

1. Which of the following costs would not be included in recording the cost of land? a. Purchase cost b. Legal fees c. Title search fees d. Cost of gasoline used while driving to the property

D

3. What is the formula for a bond premium?a. Premium= Face value- cash proceeds b. Premium= Interest expense- Interest paid c. Premium= Face value- Interest expense d. Premium= Cash proceeds- Face value

D

A worker deposits money each month in a retirement account. Knowing how much the worker will have at age 65 requires which type of calculation: a. Present value of an annuity b. Future value of an amount c. Present value of an amount d. Future value of an annuity

D

Annuity Payments can be made: a. Monthly b. Quarterly c. Semiannually d. All of the Above

D

For solving a future value problem, which does not need to be known? a. Amount invested b. Interest Rate c. Number of periods d. Market risk premium

D

If you need to determine how much a one-time $1,000 payment you will receive in 5 years is worth today, which calculation will you need to make? a. Present value of an annuity b. Future value of an annuity c. Future value of a single payment d. Present value of a single payment

D

In order to solve a future value problem, you must know all of the following items except: a. Amount to be invested b. Interest (i) rate the amount will earn c. Number of periods (n) in which the amount will earn interest d. You must know all of the above

D

Interest is comprised of three components, which is not a component of calculating interest? a. Principal b. Rate c. Time d. Exchange Rate

D

Which does not result in a liability for a company?a. Issuing long-term debt b. Obtaining a short-term loan c. Purchasing equipment with credit d. Purchasing inventory with cash

D

Which is not true for a series of annuity payments? a. Equal time intervals between payments b. Same interest rates for each payment c. Same sum of money to be paid d. Made on the same day of the week

D

Which is not true of bonds sold at a discount? a. the bond carrying amount gets larger each year b. the Discount on Bonds Payable account gets smaller each year c. at maturity, the face value and carrying amount will be equal d.the balance of Bonds Payable account will get larger each year

D

Which of the following is a characteristic of an annuity? a. An equal dollar amount each interest period b. Interest periods of equal length c. An equal interest rate each interest period d. All of the above are characteristics of an annuity

D

Which of the following is not a cause of impairment losses? a. Casualty b. Obsolescence c. Lack of Demand for the asset's services d. Gain in demand for the asset's services

D

Which of the following is not an example of a company creating a liability? a. Purchasing goods on credit b. Obtaining a short-term loan c. Signing a long term note to purchase new equipment d. Sending an invoice to a customer for goods sold

D

Which of the following is not an intangible asset? a. Trademarks b. Licensing rights c. Franchises d. All are intangible assets

D

Which of these is not a key element of a bond? a. Discount Value b. Maturity Date c. Stated Interest Rate d. Face Value

S