acc test
We record interest expense in the period in which we pay it, rather than in the period we incur it.
FALSE
In January 2018, Summit Co. sells a gift card for $50 and receives cash. What would be the appropriate journal entry for this event?
Debit Cash, $50; credit Deferred (Unearned) Revenue, $50.
BOB Inc. borrowed $8,000 from First Bank and signed a promissory note. What entry should BOB Inc. record?
Debit Cash, $8,000; Credit Notes Payable, $8,000.
We record a long-term asset at its cost less all expenditures necessary to get the asset ready for use.
FALSE
On December 1, 2015, Old World Deli signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2016. Old World Deli should record which of the following adjusting entries at December 31, 2015?
Debit Interest Expense and credit Interest Payable, $1,250.
Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement.
FALSE
Inventory is usually reported as a long-term asset in the balance sheet
FALSE
. Young Company is involved in a lawsuit. The liability that could arise as a result of this lawsuit should be recorded on the books if the probability of Young owing money as a result of the lawsuit is:
Probable and the amount is reasonably estimable.
Book value is equal to the original cost of the asset minus the current balance in Accumulated Depreciation.
TRUE
Commonly, current liabilities are payable within one year, and long-term liabilities are payable more than one year from now.
TRUE
Companies are free to choose FIFO, LIFO, or weighted-average cost to report inventory and cost of goods sold.
TRUE
Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.
TRUE
During periods of rising costs, FIFO generally results in a higher ending inventory balance.
TRUE
During periods of rising costs, LIFO generally results in a higher cost of goods sold.
TRUE
Gross profit equals net sales of inventory less cost of goods sold.
TRUE
The property, plant, and equipment category consists of land, land improvements, buildings, equipment, and natural resources.
TRUE
Using the first-in, first-out method (FIFO), the first units purchased are assumed to be the first ones sold.
TRUE