accounting sb 5

A $300,000 building was purchased on December 1. It is estimated that it will have a life of 20 years and zero salvage value. Calculate depreciation expense for the month of December using straight-line depreciation.

$1,250

$21,000 of equipment is purchased on December 1. It is estimated that it will have a life of 5 years and zero salvage value. Calculate depreciation expense for one month, as of December 31, of the first year using the straight-line method.

$350

Explain what a contra account is by choosing the statement(s) below that correctly describe(s) a contra account. (Check all that apply.)

A contra account is subtracted from another account. A contra account is linked with another account. Accumulated Depreciation is an example of a contra account. A contra account has an opposite normal balance than its linked account.

What is a plant asset?

A plant asset refers to a long-term tangible asset used to produce and sell products or services.

Which of the following statements about the Accumulated depreciation account is (are) correct? (Check all that apply.)

Accumulated depreciation is subtracted from its plant asset on the balance sheet. Accumulated depreciation is a contra account. Accumulated depreciation accumulates the total depreciation taken on an asset since its purchase. The Accumulated depreciation account allows the original cost of the asset to remain in the plant asset account.

Which of the following lists of assets would be classified as plant assets?

Buildings, Equipment

Which of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.)

Businesses report financial information at regular intervals to ensure timeliness of data. The value of information is often linked to its timeliness. Useful information must reach decision makers frequently.

Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building.

Debit Depreciation expense; credit Accumulated depreciation.

Place the steps in the adjusting process in the correct order in which they would be performed.

Determine what the current account balance is Determine what the correct account balance should be Record an adjusting entry

Which of the accounts below would be classified as long-term or fixed assets? (Check all that apply.)

Equipment Land Vehicles Building

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

Expenses should be matched in the same accounting period as the revenues that are earned as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process.

Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? (Check all that apply.)

One-month period Six-month period One-year period

A plant asset can be defined by which of the following statements? (Check all that apply.)

Provide benefits for greater than one period. It is reported on the balance sheet. It is a tangible long-term asset. Its original cost (minus any salvage value) is gradually expensed over its useful life.

Which of the following accounts is considered a prepaid expense?

Supplies

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

Supplies Prepaid insurance Prepaid rent

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300. Supplies would be credited for $300.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

Supplies expense would be debited for $600.

What is the purpose of the Accumulated Depreciation account?

The account allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously.

Describe the final step in the adjusting process.

The final step is to create an adjusting journal entry to get from step 1 to step 2.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)

They refer to cash received in advance of performing a service or product. They are also called deferred revenues. They are a liability. They are reported on a balance sheet.

Explain what unearned revenues are by choosing the correct statement below.

Unearned revenues refer to cash received in advance of providing a service or product.

Accrual basis accounting is defined as: (Check all that apply.)

an accounting system that uses the matching principle to determine when to recognize revenues and expenses. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.