accounting 201 exam 3

Identify whether each item is an expense, a capital expenditure (an asset), or neither. Sock Market, Inc. paid ______.

$100,000 for advertisements run during the year B. Expense $30,000 for the training of its employees during the year B. Expense $5,000 sales tax on purchase of equipment C. Capital Expenditure (asset)

Depreciation Journal Entry

Dr.- Depreciation ExpenseCr.- Accumulated Depreciation

During the year, Reid & Wright Learning Center, Inc., spent $500,000 on training and capitalized the entire amount, intending to write it off over 5 years. This accounting treatment is ______.

incorrect. The company should treat the entire amount as an expense during the year

If a bond is sold at a premium, Cash Paid for Interest reported on the Statement of Cash Flows in subsequent years __________.

stays the same each year

outstanding stock

stock in the hands of stockholders

intangible assets

straight line amortized

depreciable cost

the cost of a plant asset minutes its estimated residual value

salvage value

the estimated value of a fixed asset at the end of its useful life

Shares Outstanding =

Shares Issued - Shares in Treasury Stock

bonds and interest are always for

1 year

Microhard, Inc., issued a $88,000, 10-year, 10% bonds dated January 1, at 102.000. By what amount should the Cash account be debited when the bonds are issued?

88000 x 1.02

Income Statement and Balance Sheet

A company's bookkeeper forgot to make the adjusting entry to accrue Interest Expense at the end of September. As a result, there will be an error(s) on September's ________.

Depreciation

Allocating to expense the cost of a plant asset over its useful life in a systematic manner

Central Perk, Inc. issued 10,000 shares of no-par value common stock at $10 per share. The proper entry to record this issuance of shares is to debit _______.

Cash and credit Common Stock for $100,000

The correct journal entry for the issuance of 200 shares of $1 par common stock for $25 is:

Cash. 5,000 Common Stock 200 Paid-in-Capital in Excess of Par 4,800

decreases each year

If a bond is sold at a premium, Interest Expense reported on the Income Statement in subsequent years ________.

Double-Declining Balance Method

More depreciation in early years of asset's lifecost (2 / years useful = percent * HV cost) = 1st year 2nd year = [(cost - 1st year) * percent]

calculate the gain or loss where to place on the Statement of Cash Flows:

Purchase of Plant Assets - Sale of Plant Assets = gain or loss

Which statement best describes the proper accounting treatment for long-term assets classified as Plant and Equipment?

Record them as assets and then depreciate them over an estimated useful life.

Straight-Line Method

Same for each year of asset's useful life(cost - salvage) / years useful

Units-of-Activity Method

Useful life expressed in terms of expected use of asset (cost - salvage) / est. total activity = constant rate (then multiply by amount years or hr)

par stock

The ideal amounts of inventory items that an operation should have at all times. 100% Wok N Roll, Inc., issued $200,000 worth of bonds with a stated interest rate of 9% when the market rate of interest for similar investments was 9%.

Planet of the Grapes, Inc., purchases an $80,000 truck with an estimated useful life of 5 years and no salvage value. Which of the following statements is TRUE regarding this truck?

The purchase of the truck is a capital expenditure.

double declining balance method

a depreciation method that writes off a relatively large amount of the assets costs nearer to the start of its useful life than does straight line

Common stock's par value is ______.

a minimal amount specified in the corporate charter

Bond Payable net T account

find the difference from cash and interest expense equation to find the debit in the T account

Which of the following should be classified on the balance sheet as a long-term intangible asset and amortized over its useful life?

copy right

Historical value

cost of asset originally

Before common dividends can be paid, the ______ preferred stock must be paid ______.

cumulative; dividends in arrears

The date, which follows the date of declaration, and determines which shareholders will receive the dividend is the ______.

date of record

issued bond jornal

debit cash credit bond payable calculate difference to find premium on bond payable credit

The purchase of treasury stock ______.

decreases total assets and decreases shareholders' equity

When a shareholder sells its shares to another person for more than its original cost, the corporation ______.

does not make a journal entry

land

dose not depreciat

goodwill

excess of the cost of an acquired company over the use of the market values of its net assets

residual value

expected cash value of an asset at the end of its useful life

capital expenditure

expenditure that increases the capacity or efficiency of an asset or extends its useful life

ordinary repair

expenditure that merely maintains an asset in its existing condition or restores the asset to good working order

bond cash equation

face value x stated rate x time 100,000 x 9% x 1year

Retained Earnings of $100,000 represents a corporation's cumulative earnings ______ and is reported on the ______.

kept; balance sheet and statement of shareholders' equity in cash; balance sheet

If a bond sells at a premium, when recording interest payments, the debit to Interest Expense is ________ the credit to cash.

less than

On January 1, Year 1, Bottoms Up, Inc., issued $1,000,000 of 6%, 20-year bonds when the market rate of interest was 5%. The bonds pay interest annually on December 31. On its income statement for the year ended December 31, Year 1, Bottoms Up will show Interest Expense of ________.

less than $60,000

plant assets

long lived tangible assets used in the operation of the business

interest expense equation

market value x market rate x time 106,710 x 8% x 1year

depletion

natural resources oils activity method

discount stock

occurs when a corporation sells its stock for less than par (or stated) value less than 100% Doolittle & Dalley issued $200,000 worth of bonds with a stated interest rate of 7% when the market rate of interest for similar investments was 8%.

premium on stock

occurs when a corporation sells its stock for more than par (or stated) value more than 100% Bank, Rupp, & Baroque, Inc., issued $100,000 worth of callable bonds with a stated rate of 9% when the market rate of interest for similar investments was 8%

Est Useful Life

what will co get from asset