1

How is the market value of a bond issuance determined?

By adding the present value of the principal amount to the present value of the interest payments

The cost of assets consumed or services used is also known as

an expense

What organization issues U.S. accounting standards?

... Financial Accounting Standards Board

The agency of the United States Government that oversees the U.S. financial markets is the

...Security Exchange Commission

Declaring a cash dividend will

...decrease retained earnings.

Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally a. expensed when incurred. b. capitalized as a part of the cost of the asset. c. debited to the Accumulated Depreciation account. d. not recorded until they become material in amount.

A. expensed when incurred

The four subdivisions for plant assets are a. land, land improvements, buildings, and equipment. b. intangibles, land, buildings, and equipment. c. furnishings and fixtures, land, buildings, and equipment. d. property, plant, equipment, and land.

A. land, land improvements, buildings, equipment

All leases are classified as either a. capital leases or long-term leases. b. capital leases or operating leases. c. operating leases or current leases, d. long-term leases or current leases.

B capital leases or operating leases

The cost of a long-term asset is expensed a. when it is paid for. b. as the asset benefits the company. c. in the period in which it is acquired. d. in the period in which it is disposed of.

B. as the asset benefits the company

The Land account would include all of the following costs except a. drainage costs. b. the cost of building a fence. c. commissions paid to real estate agents. d. the cost of tearing down a building.

B. the cost of building a fence

A company purchases a remote building site for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true? a. The cost of the building will not include the repainting and recarpeting costs. b. The cost of the building will include the cost of replacing the roof. c. The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements. d. The wiring is part of the computer costs, not the building cost.

B. the cost of the building will include the cost of replacing the roof

Management should select the depreciation method that a. is easiest to apply. b. best measures the plant asset's market value over its useful life. c. best measures the plant asset's contribution to revenue over its useful life. d. has been used most often in the past by the company.

C. best measures the plants assets contribution to revenue over its useful life

Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation.

C. cost allocation

Recording depreciation each period is necessary in accordance with the a. going concern principle. b. historical cost principle. c. expense recognition principle. d. asset valuation principle.

C. expense recognition principle

National Molding is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true? a. Excavation fees are capitalized but building permit fees are not. b. Architect fees are capitalized but building permit fees are not. c. Interest is capitalized during the construction as part of the cost of the building. d. The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

C. interest is capitalized during the construction as part of the cost of the building

Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n) a. equal and equitable manner. b. accelerated and accurate manner. c. systematic and rational manner. d. conservative market-based manner.

C. systematic and rational manner

A company receives $176, of which $16 is for sales tax. The journal entry to record the sale would include a

Credit to Sales Taxes Payable for $16

A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a

Credit to Sales for 174 Debit to sales tax expense for $14

The book value of an asset is equal to the a. asset's fair value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset's cost less accumulated depreciation.

D. assets cost less accumulated depreciation

Expenditures that add to the utility of plant assets for more than one accounting period are a. committed expenditures. b. revenue expenditures. c. current expenditures. d. capital expenditures.

D. capital expenditures

Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits. b. Time valuation. c. Straight-line. d. Declining-balance

D. declining balance depreciaiton---high depreciation value first year and then lowers

What is the effect of amortizing a bond discount?

It increases the carrying value of bonds

Most companies pay current liabilities

Out of current assets

The number of shares issued stock equals

Outstanding shares plus treasury shares

If everything else is held constant, what will cause earnings per share to increase?

The purchase of treasury stock

True or False: Land improvements are depreciable assets

True

When expenses exceed revenues, which of the following is true?

a net loss results

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statement is to

decrease total assets and stockholders' equity

depreciation expense vs depreciation cost

expense is just in one year. cost is over whole useful life

An advantage of the corporate form of business is that

its ownership is easily transferable via the sale of shares of stock.