Accounting Exam 3

The term used for allocating the cost of an intangible asset to the periods it benefits is:

Amortization

The Collins Company sold $200,000 of 10 year bonds for $190,000. The stated rate on the bonds was 8% and interest is paid annually on Dec. 31. What entry would be made on Dec. 31 when the interest is paid?

Interest Expense Discount on Bonds Payable

A repair to an appliance under warranty occurs within the warranty period. What adjustment is made?

Warranty Liability is debited

Potential liabilities on short-term note payable is recorded by:

contingent liabilities

The book value or carrying value of an asset is defined as:

cost less accumulated depreciation

Computing Magazine receives $90 in advance from a customer for 3 year subscription. Computing Magazine's entry to record the receipt of funds would include a:

credit to unearned subscription revenue for $90

An asset that costs 24,000 and has an accumulated depreciation of 18,000 is sold for 5,200. The entry to record the sale would include a:

debit to loss on sale of asset for $800

Accrued interest on a short-term note payable is recorded by:

debiting interest expense and crediting interest payable

Which of the following terms does not describe the interest rate printed on the bond certificate?

effective rate

Which of the following is irrelevant in computing a machine's depreciation expense using the units-of-production method?

estimated useful life in years

A revenue expenditure usually results in debit to a(n):

expense account

GAAP requires that research and development costs to develop a new product be

expense in the period incurred

A contingent liability is recorded as a journal entry in the accounting records

if it is probable that is will become an actual liability and the amount can be reasonably estimated

If bonds were initially issued at a discount, the carrying value of the bond on the issuer's books will

increase as the bonds approach their maturity date

Stasia, Inc. has a weekly payroll of $8,000 for 5-day work week beginning each Monday and ending each Friday. Stasia's year-end is December 31st. If Dec. 31st falls on a Wednesday, Stasia would make an adjustment entry to

increase wages expense by 4,800

Which of the following assets is not subject to depreciation, depletion, and amortization?

land

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

matching

Long-term debt generally includes:

obligations that extend beyond one year

The depreciable cost of an asset is:

original cost minus accumulated depreciation

Which of the following would be classified as a current liability?

salaries payable

Which of the following is a tax paid by the employee but not the employer?

state income tax

A gain is recorded on the sale of a plant asset when:

the asset is sold for price greater than the asset's book value

A convertible bond is one where

the bondholder can convert the bond into common stock at a future time

If a company's bonds are callable,

the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest if 4%

Which of the following is not an advantage of issuing long-term debt?

the risk of becoming bankrupt is reduced

When will bonds sell at discount?

the started rate of interest is less than yield/market rate of interest at the time of issue