ACCT 121 chapter 8 test
What is a method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due?
Aging of accounts receivable method.
What are cash equivalents?
Are short-term, highly liquid investment assets.
Land improvements are:
Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.
Adjusting entries made at the end of an accounting period accomplish all of the following except:
Assuring that external transaction amounts remain unchanged.
What does a properly designed internal control system do?
Lowers the company's risk of loss.
What is the special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings?
income summary account
What is the normal account balance of wages payable?
liability/ credit
Which of the following is not classified as plant assets?
patent
The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an):
Accelerated depreciation method.
Salvage value is:
An estimate of the asset's value at the end of its benefit period.
When applying the lower of cost or market method to inventory valuation, how is market defined?
Current replacement cost
Depreciation:
Is the process of allocating the cost of a plant asset to expense.
Plant assets are defined as:
Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business.
When is revenue properly recognized?
Upon the completion of the sale or when services have been performed and the business obtains the right to collect sale price
Why is separate accounts receivable information for each customer important?
When the customer intends to pay outstanding balances
What is the normal account balance of retained earnings?
credit
What is the normal account balance of sales salary expense?
debit
What is the name of the record that contains all accounts and their balances?
general ledger
What is the approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues?
Accrual basis of accounting
The total cost of an asset less its accumulated depreciation is called:
Book value
What is the accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange?
Cost Principle
The cost of land would not include:
Cost of parking lot lighting.
Which inventory valuation method yields the highest reported net income during a period of steadily rising costs?
FIFO
The relevant factors in computing depreciation do not include:
Market value
The useful life of a plant asset is:
The length of time it is productively used in a company's operations.
What is the normal account balance of cash?
asset/debit
What is the normal account balance of office equipment?
asset/debit