Accounting 210 Test 2

False

(T/F) A good system of internal control is important to make a company's accounting records completely foolproof.

False

(T/F) A six-month bank certificate of deposit would be classified as a cash equivalent.

True

(T/F) Credit terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of the date of the invoice.

True

(T/F) Specific identification relies on matching unit costs with the actual units sold.

False

(T/F) The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.

False

(T/F) The gross profit ratio is computed by dividing net sales by gross profit.

False

(T/F) The only reason a company needs to create an internal control system is to deter intentional fraudulent acts.

False

(T/F) Treasury notes with a maturity of six months or less, that are issued by the federal government are cash equivalents.

True

(T/F) Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

False

(T/F) When a bank pays interest or collects an amount owed to a company by one of the bank's customers, the bank issues a debit memorandum.

False

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change. True False

True

A subsidiary is a separate legal entity that is owned or controlled by another entity. True False

d. not affect total assets or total equity.

Assuming a company uses the allowance method, the entry to recognize the write-off of the specific uncollectible accounts will a. increase total assets and total equity. b. decrease total assets and total equity. c. increase total assets and decrease total equity. d. not affect total assets or total equity.

False

Both stock and bond investments have maturity dates. True False

c. affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

Capitalizing an expenditure rather than recording it as a revenue expenditure a. has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement. b. affects the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet. c. affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. d. affects the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period.

c. decrease to Notes Receivable.

Comfort Shoes received a promissory note from a customer on April 1, 2017. The face amount of the note is $2,000; the terms are 12 months and 8% annual interest. At the maturity date, the customer pays for the note and interest. Comfort Shoes made the proper adjustment at the end of December for interest. The effect of recognizing the transaction on the maturity date is a(n) a. increase to Discount on Notes Receivable. b. decrease to Cash. c. decrease to Notes Receivable. d. increase to Notes Receivable.

a. $342,867

Darrin Brown bought a pub. The purchase price was $695,000. An appraiser provided the following appraisal values: land, $320,000; building, $370,000; and equipment, $60,000. What cost should be allocated to the building? a. $342,867 b. $695,000 c. $370,000 d. $399,281

a. deposits in transit.

Deposits made by a company, but not yet reflected on a bank statement are called a. deposits in transit. b. debit memoranda. c. credit memoranda. d. None of these choices are correct.

b. an effort to achieve proper matching of the cost of operating assets.

Depreciation is a. the difference between the original cost and salvage value of an asset. b. an effort to achieve proper matching of the cost of operating assets. c. an accumulation of funds to replace the related plant asset. d. the cash allocated each period to maintain a plant asset.

d. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

Depreciation is a process by which a. the difference between current market value and historical cost of plant and equipment is determined. b. the decline in market value of plant and equipment is determined and recorded. c. replacement funds are accumulated for plant and equipment. d. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

b. 28.1%

Dimension Lighting Corp. has the following data at its fiscal year-end: Net Sales $27,250 Cost of Goods Sold 19,600 Gross Profit $7,650 Determine Dimension Lighting's gross profit ration. a. 71.9% b. 28.1% c. 39.0% d. None of these choices are correct.

c. $0

Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2017, on account. Tile Magic Corp. paid the invoice on August 31, 2017. How much sales discount will Floors recognize? a. $40 b. $200 c. $0 d. $236

d. Custom-designed diamond rings

For which type of inventory would a company most likely use the specific identification method? a. Gasoline in storage tanks at a gasoline station b. Cartons of milk c. Barbie dolls d. Custom-designed diamond rings

a. $14,000.

Gentech Corp. prepared a bank reconciliation as of June 30, 2017. The following items were identified: Gentech's bank balance $14,300 Deposits in transit 1,000 Outstanding checks 1,300 Bank service charge 50 Customer's NSF check returned by the bank 150 Gentech's adjusted cash balance at June 30, 2017 is a. $14,000. b. $13,800. c. $14,100. d. $14,300.

b. $84,000

George's Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $200,000 Purchases 90,000 Inventory (beginning) 23,000 Inventory (ending) 17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 Refer to the account information for George's Department Store. Calculate cost of goods purchased. a. $117,000 b. $84,000 c. $90,000 d. $103,000

a. $282,200

Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence, and a legal fee of $8,500. What is the cost of the land? a. $282,200 b. $284,600 c. $256,000 d. $281,000

c. Net of the costs already amortized

How should intangible assets be disclosed on the balance sheet? a. At cost in the Current Assets section b. As a reduction of stockholders' equity c. Net of the costs already amortized d. At the estimated market value at the balance sheet date

c. The promissory note will be recorded as an asset.

How will the payee of the promissory note record the note on its books? a. The promissory note will be recorded as an expense. b. The promissory note will be recorded as revenue. c. The promissory note will be recorded as an asset. d. The promissory note will be recorded as a liability.

d. $25,000.

If Rope Inc. receives $23,825 from credit card collections and has an average rate of 4.7% charged by the credit card company, its credit card sales during the period were a. $22,705. b. $50,691. c. $111,978. d. $25,000.

False

If a company accepts a major credit card such as VISA from a customer, then the company is responsible for the amount of the sale in case of nonpayment from a cardholder. True False

c. Overstated by $5,000 Overstated by $5,000

If a company overstates its ending inventory balance for 2018 by $10,000 and overstates its ending inventory balance for 2017 by $5,000, what are the effects on its net income for 2018 and 2017 if neither error is corrected? Effect on 2018 Net Income Effect on 2017 Net Income a. Overstated by $15,000 Overstated by $10,000 b. Overstated by $10,000 Overstated by $5,000 c. Overstated by $5,000 Overstated by $5,000 d. Understated by $5,000 Overstated by $10,000

c. both the periodic and perpetual inventory systems.

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for a. the perpetual inventory system. b. the periodic inventory system. c. both the periodic and perpetual inventory systems. d. neither the periodic nor perpetual inventory systems.

False

Interest is never a part of the cost of property, plant, and equipment or intangible assets. True False

False

Lewisburg Corp. had sales during the year of $15,000,000 and an average accounts receivable of $5,000,000. Its accounts receivable turnover ratio is 0.33 times. True False

c. $41,000

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale? a. $128,000 b. $36,000 c. $41,000 d. $30,000

d. $15,000

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2018? a. $20,000 b. $14,063 c. $18,750 d. $15,000

d. $400,000

On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. What was the depreciation expense for Grove City Corp. for the year ended December 31, 2017? a. $0 b. $195,000 c. $390,000 d. $400,000

d. $6,300.

On January 15, 2017, the accounts receivable balance was $7,000 and the balance in Allowance for Doubtful Accounts was $700. On January 16, 2017, a $200 uncollectible account was written off. The net realizable value of accounts receivable on January 16 immediately after the write-off is a. $7,900. b. $6,500. c. $6,800. d. $6,300.

False

One of the problems with the use of the allowance method to account for bad debts is that it often violates the matching principle. True False

b. Park, Inc.

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2017. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2017. Park paid the amount due on June 13, 2017. Who is responsible for payment of the transportation costs on the merchandise sold by Jay Zee Music to Park? a. Jay Zee Music Company b. Park, Inc. c. Split equally between the two companies d. Cannot be determined from the information provided.

d. $70,000.

Pocono Co. purchased a patent at the beginning of 2017 for $490,000. Economic benefits were expected for seven years, but the patent's legal life was 20 years. Also, during 2017, the company incurred research and development costs of $150,000. Patent amortization expense for 2017 is a. $150,000. b. $24,500. c. $72,143. d. $70,000.

b. $230

Quan uses a periodic inventory system. The company had the following data for the month of April: April 1 On hand, 10 units @ $2 each $ 20 19 Purchased 90 units @ $3 each 270 Cost of goods available for sale $290 30 On hand, 20 units If Quan, Inc. uses the FIFO method, how much is cost of goods sold for April? a. $232 b. $230 c. $250 d. $240

False

Research and development costs should be presented as intangible assets. True False

a. $56,000

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000. The truck had an estimated life of six years and an estimated residual value of $24,000. On January 1, 2016, the company made major repairs of $20,000 to the truck that extended the life one year. Thus, starting with 2017, the truck has a remaining life of five years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What is the book value of the truck to be reported on the balance sheet at December 31, 2017? a. $56,000 b. $44,000 c. $62,000 d. $50,000

a & d

Select the financial statement on which the user would most likely find the answer to the question given. (Select all that apply.) How much depreciation expense did the company report during the year? a. Income statement b. Statement of retained earnings c. Balance sheet d. Statement of cash flows

d. New World Corp. sells its inventory faster than Sorenta, Inc.

Selected data for Sorenta, Inc. and New World Corp., two companies in the same industry, are presented below: Sorenta, Inc. New World Corp. Sales $50,000 $80,000 Cost of goods sold 30,000 50,000 Average inventory balance 5,000 5,000 Based on this data, which of the following statements is true? a. Sorenta, Inc. has lower storage costs and a lower investment in inventory than New World Corp. b. Sorenta, Inc. has a lower gross profit ratio than New World Corp. c. New World Corp. has a higher net income than Sorenta, Inc. d. New World Corp. sells its inventory faster than Sorenta, Inc.

b. $2,369,400

Sweetson Enterprises' comparative balance sheets included accounts receivable of $220,300 at December 31, 2017, and $200,900 at December 31, 2018. Sales reported on Sweetson's 2018 income statement amounted to $2,350,000. What is the amount of cash collections that Sweetson will report in the Operating Activities category of its 2018 statement of cash flows assuming that the direct method is used? a. $2,330,600 b. $2,369,400 c. $2,350,000 d. $2,771,200

d. $14,885

The accountant for Busch Corp. was preparing a bank reconciliation as of February 28, 2017. The following items were identified: Busch's book balance $15,000 Outstanding checks 2,500 Service charge 15 Customer's NSF check returned by the bank 100 What amount will Busch report as its adjusted cash balance at February 28, 2017? a. $17,385 b. $12,500 c. $12,385 d. $14,885

d. their legal lives or useful lives, whichever is shorter.

The accounting life of intangible assets is determined by a. their useful lives. b. their legal lives. c. the tax life mandated by the IRS. d. their legal lives or useful lives, whichever is shorter.

False

The accounts receivable turnover ratio is computed by dividing net income by average accounts receivable. True False

b. It will be reported as a deduction from net income in the Operating Activities section.

The comparative balance sheets of Midnite Corp. for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018. How will this change be reported on Midnite's statement of cash flows, if Midnite uses the indirect method? a. It will be added to net income in the Operating Activities section. b. It will be reported as a deduction from net income in the Operating Activities section. c. It will be reported as a cash outflow in the Investing Activities section. d. It will be included in the amount of cash and cash equivalents at the end of 2018.

b. $13,200

The data below are for Benton Corporation for 2017: Accounts Receivable—January 1, 2017 $334,000 Credit sales during 2017 850,000 Collections from credit customers during 2017 725,000 Customer accounts written off as uncollectible during 2017 12,000 Allowance for doubtful accounts (credit balance) (after write-off of uncollectible accounts) 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 Refer to the data for Benton Corporation. If the aging approach is used to estimate bad debts, what should the balance in Allowance for Doubtful Accounts be after the bad debts adjustment? a. $11,500 b. $13,200 c. $14,900 d. $26,900

d. $12,700

The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts receivable (December 31, 2017) 170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 See the data for Lynx Corp. If Lynx Corp. uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debts expense for 2017? a. $13,700 b. $15,300 c. $14,000 d. $12,700

b. more than 20% of the equity securities of a second company.

The equity method of accounting for an investment is used when a company purchases a. more than 20% of the debt securities of a second company. b. more than 20% of the equity securities of a second company. c. 100% of the debt securities of a second company. d. 15% of the equity securities of a second company.

b. $600 decrease

The following data was identified by Raines Corp. in preparation of a bank reconciliation on October 31, 2017: Bank statement balance $30,700 Raines' book balance (before adjustments) ? Outstanding checks 4,200 NSF checks 400 Service charge 300 Deposits in transit 3,100 Interest earned on checking account 100 What is the net amount of the increase or decrease in Raines' cash balance which must be recorded as a result of the adjustments identified by the bank reconciliation? a. $300 decrease b. $600 decrease c. $400 decrease d. $100 decrease

a. 1.60 years

The following information is for Chambersburg Corp. for 2018 and 2017. Chambersburg uses the straight-line depreciation method. 2018 2017 Property, plant, and equipment $ 250,000 $190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Average total assets 625,000 475,000 Refer to the information for Chambersburg Corp. Using the 2018 data, what is the average age of Chambersburg's property, plant, and equipment (rounded to two decimal places)? a. 1.60 years b. 4.00 years c. 10.00 years d. 2.50 years

c. $174,600

The following is from Goldman Inc.'s 2017 income statement. Purchases $172,000 Transportation-in 11,000 Inventory, January 1, 2017 26,500 Inventory, December 31, 2017 28,800 Purchase returns and allowances 8,400 How much will Goldman report as cost of goods purchased in its 2017 income statement? a. $183,000 b. $180,400 c. $174,600 d. None of these choices are correct

a. Adheres to sound internal control procedures

The following set of items describes activities completed by a company in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. Cash register tapes are picked up on a regular basis each day by an employee from the accounting department. a. Adheres to sound internal control procedures b. Violates sound internal control procedures c. Neither strengthens nor violates internal control

b. Violates sound internal control procedures

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. The receiving department compares the quantity received with the quantity printed on the receiving report when the purchase order was prepared. a. Adheres to sound internal control procedures b. Violates sound internal control procedures c. Neither strengthens nor violates internal control

False

The reason the allowance method of recognizing bad debts is used is primarily because it recognizes the maximum amount of write-off in each period. True False

d. $18,190.

The set of items below was identified in preparing a bank reconciliation for Mars Corp. as of August 31, 2017. Bank statement balance $19,500 Mars's book balance (before adjustments) ? Outstanding checks 2,700 Customer's NSF check 350 Service charges 100 Deposit in transit 1,000 Interest earned on checking account 60 Mars Corp.'s balance per books before the reconciliation is a. $17,900. b. $17,410. c. $18,310. d. $18,190.

b. the direct result of the differing goals of financial and tax accounting.

Using different depreciation methods for book purposes versus tax purposes for the same asset is a. contrary to GAAP. b. the direct result of the differing goals of financial and tax accounting. c. against the Internal Revenue Code, and as such, against the law. d. not allowed since the amount can only be calculated one way or the other, not both.

b. $120

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2017, for $9,000 and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on the maturity date of the note? a. $60 b. $120 c. $0 d. $180

b. Double-declining-balance

Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. Refer to the information about Wexford Co. Wexford Co. wants to use the depreciation method that will result in the highest depreciation expense for 2017. Which method should be used? a. Units-of-production b. Double-declining-balance c. Straight-line d. All methods create the same income in 2017.

d. If one company owns more than 50% of another company

When are consolidated financial statements prepared? a. At the option of an investor company b. Only if one company owns 100% of another company c. At the option of an investee company d. If one company owns more than 50% of another company

True

When land and building are acquired for a lump sum, the purchase amount should be allocated on the basis of the market values of the two assets. True False

c. There is no effect on overall assets or equity.

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt? a. Assets increase and stockholders' equity decreases. b. Assets and stockholders' equity increase. c. There is no effect on overall assets or equity. d. Assets and stockholders' equity decrease.

d. Both the income statement and balance sheet

Where can the amounts needed to compute the accounts receivable turnover ratio be found? a. The income statement b. The statement of cash flows c. The balance sheet d. Both the income statement and balance sheet

b. Independent verification

Which internal control procedure is followed when a physical count of inventory is performed in a perpetual inventory system? a. Segregation of duties b. Independent verification c. Proper authorizations d. Safeguarding assets and records

c. Segregation of duties

Which internal control procedure is violated when the cashier at the checkout stand also records the daily receipts in the journal? a. Proper authorizations b. Independent verification c. Segregation of duties d. Independent review and appraisal

b. LIFO

Which inventory costing method might allow a company to make significant inventory purchases at year-end for the purpose of manipulating income? a. Specific identification b. LIFO c. FIFO d. Weighted average cost

d. Cash

Which of the following assets is considered the most liquid? a. Prepaid expenses b. Merchandise inventory c. Accounts receivable d. Cash

b. Comparing purchase requisitions, purchase orders, receiving reports, and invoices.

Which of the following is a sound internal control procedure for cash disbursements? a. Requiring the signature of the purchasing department supervisor on checks. b. Comparing purchase requisitions, purchase orders, receiving reports, and invoices. c. Using presigned checks to facilitate payment within the cash discount period. d. Making copies of purchase orders for the receiving department so they know how many items to be expected upon delivery.

d. A voucher

Which of the following is another term for the invoice approval form? a. A remittance advice b. An invoice c. A receiving report d. A voucher

c. Reducing the cost of hiring seasonal employees

Which of the following is not a generally recognized internal control procedure? a. Limiting access to computerized accounting records b. Establishing of clear lines of authority to carry out specific tasks c. Reducing the cost of hiring seasonal employees d. Physically counting inventory in a perpetual inventory system

b. They must design and implement an effective information system design.

Which of the following is not a requirement of a company's external auditors under the Sarbanes-Oxley Act? a. They cannot perform any brokerage services for the company. b. They must design and implement an effective information system design. c. They must give an opinion that the company maintained an effective internal control system over financial reporting. d. All of these choices are requirements of a company's external auditors under the Sarbanes-Oxley Act.

d. U.S. Treasury bills with an original maturity of six months

Which of the following is not considered to be a cash equivalent? a. Corporate commercial paper due in 90 days after purchase b. A certificate of deposit with a term of 75 days when acquired c. A money market account with a stock brokerage firm d. U.S. Treasury bills with an original maturity of six months

c. Outstanding checks

Which of the following items is a reconciling item on the bank side of a bank reconciliation? a. Service charge b. NSF checks c. Outstanding checks d. Canceled checks

a. Interest collected by the bank on a customer note

Which of the following items would be added to the balance per books on a bank reconciliation? a. Interest collected by the bank on a customer note b. Service charge assessed by the bank c. Outstanding checks d. Deposit in transit

d. When the petty cash fund is replenished, a journal entry is recorded to recognize an increase in the petty cash account.

Which of the following procedures is incorrect for setting up and maintaining a petty cash fund? a. A check is prepared for a fixed amount; when the check is cashed, the money is entrusted to a petty cash custodian. b. When appropriate documentation is presented, cash payments are made from the fund; the petty cash custodian retains the documentation. c. A journal entry is recorded to establish the fund and obtain the cash. d. When the petty cash fund is replenished, a journal entry is recorded to recognize an increase in the petty cash account.

a. Both the balance sheet and the income statement are affected.

Which of the following statements is true if the amount assigned to ending inventory is incorrect? a. Both the balance sheet and the income statement are affected. b. The balance sheet is affected, but the income statement is not. c. The income statement is affected, but the balance sheet is not. d. Neither the balance sheet nor the income statement are affected.

b. Inventory increases are subtracted from net income.

Which of the following statements is true when using the indirect method of preparing the Operating Activities category of the statement of cash flows? a. Inventory increases are added to net income. b. Inventory increases are subtracted from net income. c. Inventory decreases are subtracted from net income. d. None of these statements are true.

a. Changing inventory methods affects consistency.

Which of the following statements regarding changing inventory methods is true? a. Changing inventory methods affects consistency. b. One place that the reader of an annual report would be able to identify that a company changed inventory methods is the statement of stockholders' equity. c. Tax advantages are valid justification for changing inventory methods. d. A change in inventory methods can be justified if the change is made to better match profits with revenue.

a. Cost of goods available for sale is a "pool" of costs to be distributed between what was sold and what was not sold during a period.

Which of the following statements regarding cost of goods available for sale is true? a. Cost of goods available for sale is a "pool" of costs to be distributed between what was sold and what was not sold during a period. b. Cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period. c. Cost of goods available for sale is subtracted from net sales to arrive at the gross margin. d. Cost of goods available for sale is an expense account.

a. Shelving to hold the inventory.

Which of the following would not be included in inventory costs? a. Shelving to hold the inventory. b. The cost of sales tax paid when purchasing the inventory. c. Freight costs incurred by the buyer in shipping inventory to its place of business. d. The cost of insurance taken out during the time that inventory is in transit.

b. The company may need to borrow to acquire operating cash.

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long? a. Cash flows from operations may be higher than expected for the company's sales. b. The company may need to borrow to acquire operating cash. c. The company may offer trade discounts to lengthen the collection period. d. The company should expand operations with its excess cash.

d. Merchandise Inventory

Which one of the following types of inventory accounts would be used by a wholesaler or retailer? a. Work-in-Process Inventory b. Finished Goods Inventory c. Raw Materials Inventory d. Merchandise Inventory

c. Cost of goods sold

Which one of the following would appear on the income statement of a merchandising company, but not on the income statement of a service company? a. Income tax expense b. Net sales c. Cost of goods sold d. Selling and administrative expenses

a. Operating assets are used over two or more periods to generate revenues.

Which statement is true concerning operating assets? a. Operating assets are used over two or more periods to generate revenues. b. A company's operating assets are important to its short-term liquidity. c. Operating assets have no physical properties. d. All operating assets are reported on the balance sheet.

b. Loss on Disposal account for $3,000.

Yellow Dog Transit sold an old truck on December 31, 2017, for $18,400 cash. The following data were available when the truck sold: Acquisition cost $75,000 Estimated residual value at time of acquisition 8,000 Accumulated depreciation on December 31, 2017, after adjustment 53,600 When this transaction is recorded, it should include a(n) a. Gain on Disposal account for $3,000. b. Loss on Disposal account for $3,000. c. Gain on Disposal account for $5,000. d. decrease of $21,400 to the Truck account.