Acct 3304 Test 4

A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation?

Disclose the amount of the dividends in arrears.

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the corporation for the entity's entire life. These costs should be

Expensed as incurred

Lamar Printing Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should

Include a credit to the accumulated deprecation account

A principal objection to the straight-line method of depreciation is that it

ignores variations in the rate of asset use

Coronado Industries owns machinery with a book value of $757000. It is estimated that the machinery will generate future cash flows of $712000. The machinery has a fair value of $569000. Coronado should recognize a loss on impairment of

757-569=188

Which of the following disclosures is not required in the financial statements regarding depreciation?

Details demonstrating how depreciation was calculated.

On December 31, Year 1, Taylor, Inc. signed a binding agreement with a bank for the refinancing of an existing note payable scheduled to mature in February, Year 2. The terms of the refinancing included extending the maturity date of the note by three years. On January 15, Year 2, the note was refinanced. How should Taylor report the note payable in its December 31, Year 1, balance sheet?

A long-term liabilitity

Which of the following research and development expenditures should be capitalized and depreciated?

Acquisition of machinery that can also be used for future R&D projects

Which of the following would not be considered an R & D activity?

Adaptation of an existing capability to a particular requirement or customer's need.

Which of the following is a condition for accruing a liability for the cost of compensation for future absences?

All of these are conditions for the accrual.

Which of the following is often reported as part of operating expenses?

Amortization expense

Worley Truck Rental uses the group depreciation method for its fleet of trucks. When it retires one of its trucks and receives cash from a salvage company, the carrying value of property, plant, and equipment will be decreased by the

Cash proceeds received

A company has outstanding accounts payable of $30,000 and a short-term construction loan in the amount of $100,000 at year end. The loan was refinanced through issuance of long-term bonds after year end but before issuance of financial statements. How should these liabilities be recorded in the balance sheet?

Current liabilities of $30,000, long-term liabilities of $100,000.

Which of the following is an example of a contingent liability?

Obligations related to product warranties.

Which of the following is not acceptable treatment for the presentation of current liabilities?

Offsetting current liabilities against assets that are to be applied to their liquidation.

Which of the following is considered research and development costs?

Planned search or critical investigation aimed at discovery of new knowledge.

Gain contingencies are usually recognized in the income statement when

Realized

One factor that is not considered in determining the useful life of an intangible asset is

Salvage Value

Which of the following statements is false?

Stock dividends declared but not yet distributed are a reported as a liability until the stock is issued.

Of the following costs related to the development of natural resources, which one is not a part of depletion cost?

Tangible equipment costs associated with machinery used to extract the natural resource.

Operating losses incurred during the start-up years of a new business should be

accounted for and reported like the operating losses of any other business.

The cost of successfully defending a patent suit should be

amortized over the remaining estimated useful life of the patent.

When the purchaser in a business combination pays less then the fair value of the identifiable net assets, such a situation is referred to as a:

bargain purchase

A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should

be accrued during the period when earned.

A loss on impairment of an intangible asset is the difference between the asset's

carrying amount and its fair value.

John Thomas has recently entered into an agreement with Longman Inc. Under this agreement, John will sell its products using the trade name of Longman in a specified geographical location. What type of intangible asset is this agreement between John Thomas and Longman Inc.?

contract-related intangible asset.

A company can exclude a short-term obligation from current liabilities if it:

intends to refinance the obligation on a long-term basis and demonstrates an ability to consummate the refinancing.

Goodwill may be recorded when

one company acquires another in a business combination.

Jeff Brown is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2017, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Brown had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Brown in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Brown appears inclined to accept the Railroad's offer. The Railroad's 2017 financial statements should include the following related to the incident:

recognition of a loss and creation of a liability for the value of the land.

The major difference between the service life of an asset and its physical life is that

service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners.

Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty

should be reported as part current and part long-term.