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When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the__value of the asset sold

book

In accounting, expenditures recorded as assets are said to be

capitalized

What is the formula for the profit margin ratio

net income divided by net sales

When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset

provides benefits to the company.

the portion of long-term debt is the amount that will be paid within the next year.

current

The types of expenditures that can occur subsequent to an asset's acquisition are

repairs and maintenance. improvements. additions.

The original cost of the asset less the accumulated depreciation is the____of the asset

Book value

Withholding taxes for federal and state income tax are based upon which items?

Amounts earned by employees Number of exemptions claimed

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?

Costs to remove an old building Grading the land Legal fees to secure title Title insurance

By law, an employer is required to pay which of the following amounts as payroll taxes?

Federal unemployment tax Social Security contributions Medicare contributions

Which of the following items should be capitalized in the cost of equipment?

Insurance on equipment during shipping Purchase price Installation and testing of equipment Freight to deliver the equipment to its location

Identify a primary reason why financial statement users assess a company's liquidity.

Lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful.

value is the amount the company expects to receive for the asset at the end of its service life.

Residual

The amortization of an intangible asset occurs over the period of time that is the__ of the legal, regulatory, contractual, or service life

Shorter

Long-lived assets are typically classified in two categories

Tangible Intangible

Which of the following items are intangible assets?

Trademarks Goodwill

A transaction or event in which the outcome is uncertain is referred to as a

contingency

The accumulated depreciation account is classified as a(n)

contra asset.

Long-term assets are classified as

intangible, tangible

True or false: Current liabilities are always payable within one year.

false

The key factor in classifying items as repairs and maintenance is that

future benefits are not provided beyond those originally anticipated from the asset.

Obtaining a note payable for cash results in a

increase in assets and an increase in liabilities

Intangible assets that are acquired from other entities are referred to as purchased intangibles, whereas intangibles that are created by a company are referred to as

internally developed intangibles

Which of the following measure liquidity?

- Current ratio - Working capital - Acid-test ratio

Linx Corporation internally develops an intangible asset with research and development costs of $10,000. How should Linx report this $10,000?

As an expense on the income statement.

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides

Benefits or revenue

The cost of a major improvement that extends the service life of an asset would be and hereas the cost of maintenance that does not increase the future benefits would be

Capitalized Expense

Which of the following are not required to be deducted from an employee's paycheck?

Charitable contributions State unemployment tax (SUTA) Federal unemployment tax (FUTA)

The service life of an intangible asset may be limited by what types of provisions?

Contractual Regulatory Legal

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a

Franchise

Which of the following may be classified as contingent liabilities?

Frequent flyer program awards Product warranties Future litigation losses

Three methods used for depreciation method

Straight line Double decline Activity base

The gain or loss on sale of an asset is calculated as:

amount received less the book value of asset sold

For accounting purposes, depreciation is

an allocation of a cost of an asset.

Working Capital

current assets - current liabilities

A subsequent expenditure for an asset increases the future benefits of the asset if it

increases the operating efficiency of the asset. extends the asset's service life. increases the quality of the goods or services produced by the asset.

Interest expense is recorded in the period when it is

incured

The two categories for intangible assets are

intangibles with finite lives. intangibles with indefinite lives.

Which of the following costs should be capitalized in the costs of acquiring a building?

legal fees to obtain title realtor commissions purchase price

An asset___occurs when an asset is no longer useful, but cannot be sold.

retirement

The service life or useful life of an asset is

the estimated use that the company expects to obtain from the asset before disposing of it.

The residual value of an intangible asset is usually

zero

Which of the following payroll-related taxes must the employer pay by law?

Unemployment taxes Federal Insurance Contributions Act amounts


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