acct

Which of the following describes the correct accounting for wages paid to employees?

? Debit Wages Expense, credit Taxes Payable, credit Cash

Utility bills would be coded to

Accounts Payable

Operational ratios include all of the following except

Accrual-adjusted net farm income

The terms tangible and intangible refer to subcategories of

Assets

Typically, the first category of items listed in the chart of accounts is

Assets

The original cost of an asset minus its accumulated depreciation is known as

Book value

Which of the following debit accounts is correct to record building a new warehouse?

Buildings

Transfer of ownership occurs at the end of the lease infers that it is a

Capital Lease

Statement of cash flows

Cash flows from operating activities

The gain or loss on the sale of a farm capital asset is computed as

Cash received minus book value of the asset

Purchased fuel reported as inventory should be valued at

Cost

Which of the following is classified as an expense account?

Crop harvest

Liquidity ratios include which of the following ratios?

Current ratio

The payment for unemployment taxes includes which of the following

Debit Payroll Tax Expense

If a bill was received on December 27, financial statements are prepared on December 31, and the bill is paid on January 3, when will the expense be recorded under the accrual-basis system?

December 27

If an almond crop was sold on December 29, financial statements are prepared on December 31, and the check from the sale was received on January 5, when will the adjustment be recorded under the accrual-basis system

December 29

Accounting is an information system only for farmers.

False

Expense accounts relate only to operating activities

False

If a perennial crop has not been harvested yet when financial statements are prepared, the costs of growing the crop should be reported only in expense accounts.

False

One way to compare the current year's financial performance with past years is to prepare combined financial statements.

False

The higher the return on equity ratio, the less is the ability to generate profit on the farm owners' investment in the farm business.

False

The historical cost principle refers to reporting assets at market value.

False

To classify a lease arrangement as a capital lease, the lease agreement has to meet four ownership tests

False

When a farm capital asset is sold, a gain always occurs.

False

When the farm business earns a profit, the owner's equity decreases

False

Without an adjustment for bad debts, the Accounts Receivable account might be understated

False

In a capital lease, the balance sheet reports all of the following except

Interest Expense

Debt owed for cost of borrowing money would be coded to

Interest Payable

A cash-basis balance sheet does not list which of the following items?

Inventory purchased for use

If a bill was received on December 27, financial statements are prepared on December 31, and the bill is paid on January 3, when will the expense be recorded under the cash-basis system?

January 3

An item on the balance sheet is

Land

Which of the following non-current assets is not depreciated?

Land

Ability to meet short-term financial obligations when due shows

Liquidity

Which of the following occurrences should be classified as an extraordinary item?

Loss of an orange crop in Arizona due to unusually cold weather

Purchased feed intended to be fed to poultry on the farm should be valued at

Lower of cost or market only

A corn crop raised on the farm and intended to be sold should be valued at

Net realizable value

A five-year loan would be coded to

Notes Payable

A six-month loan would be coded to

Notes Payable

Subtotals on the income statement include

Operating Income

If depreciation is not recorded it is most likely an

Operating Lease

Payments recorded as rent expense would be

Operating Lease

Measures of profitability include all of the following except

Operating expense ratio

The statement of owner equity reports which of the following items

Other Capital Contributions/Gifts/Inheritances

Measures of solvency include all of the following except

Rate of return on assets

Ability to generate profit from assets shows

Rate of return on farm assets

Ability to pay back loans from farm and non-farm income shows

Repayment Capacity

Ability to pay all financial obligations if all assets were sold shows

Solvency

The simplest method for depreciation, in which depreciation expense is the same amount every year, is

Straight line method

The estimated tax rate is used to calculate all of the following except

Taxable Income

The amount of income taxes owed at the end of the year is reported as.

Taxes Payable

Which of the following ratios evaluates repayment capacity?

Term debt and lease coverage

Subtotals on the balance sheet include

Total Non-current Assets

A financial ratio is a mathematical relationship of one financial item to another.

True

For accounting purposes, the cost of demolishing an old building is part of the cost of the land

True

In a capital lease, the leased asset is reported on the balance sheet at market value

True

In a capital lease, the payments include an interest component

True

Installment loans can require one payment per year or several payments per year

True

Market values for some assets may be difficult to verify.

True

One reason for the difference between the cash-basis system and the accrual-basis system is that sometimes revenue is earned before the money is received.

True

Posting should occur immediately following the recording of a journal entry.

True

Selling an asset involves a journal entry with a credit to an asset account

True

The balance sheet reports the financial position of the farm business on a specified date

True

The farm business owes income taxes at the end of the year because income taxes are not paid until after the end of the year.

True

The higher the debt to equity ratio, the greater is the credit risk.

True

The higher the working capital, the less likely that money will have to be borrowed to pay bills.

True

The journal entry to record the borrowing of money includes a debit to the Cash account.

True

The primary purpose of the income statement is to report whether or not a profit was made

True

The specific accounts listed in the chart of accounts of a farm operation depend on the operation's products and activities.

True

The useful life of an asset is the length of time that an asset can be used, not the length of time that current owners will be using it

True

When purchasing more than one asset together, the farm accountant has to keep a record of each asset separately.

True

When the debits do not equal the credits in a trial balance, the farm accountant knows that an error has occurred

True

Which of the following terms is not an appropriate classification for inventory

Used up

Current liabilities subtracted from current assets yields

Working capital

An example of a source document for a loan is

a promissory note

Identify which of the following activities is a financing (F) activity

a. Borrowing money to buy land b. Investing personal savings to start a farm business c. inheriting land from parents d. Using a personal vehicle for hauling livestock e. Paying off a personal credit card debt with money from farm cash account

Identify which of the following activities is an operating (O) activity.

a. Buying feeder cattle. b. Selling wheat crop. c. Buying parts for the tractor.

balance sheet

a. Liabilities b. Assets c. Equity

Income Statement

a. Losses b. Revenues c. Gains d. Expenses

Identify which of the following activities is an investing (I) activity.

a. Trading in a pickup truck and buying a new one. b. Buying land from a neighbor. c. Buying breeding cattle from a purebred cattle producer.

Total amount of the allocated cost of a non-current asset

accumulated depreciation

The method of depreciation in which depreciation expense varies each year with the amount of the use of the asset is

activity method

During the year the farm accountant records the costs of the perennial crop in the productive phase in

an asset account

Amount of the cost of an asset allocated during the life of the asset

base

The development costs of perennial plants are reported as a non-current asset on the balance sheet at

book value

The first step in making an adjustment for bad debts is

calculate the average percentage of bad debts in past years

The first step in performing a bank reconciliation

checking off the items listed on the bank statement and in the cash ledger account

Insurance paid for in advance should be valued at

cost

Process of allocating the cost of non-current assets

depreciation

Amount of depreciation reported for a single year

depreciation expense

Price that a buyer and a seller can agree upon

market value

Purchase price of a non-current asset.

original cost

Providing complete and up-to-date information helps financial statements to be

relevant

Value of a non-current asset at the end of its useful life

salvage value

The financial statement that provides useful information about how cash was used during the year is the

statement of cash flows

One characteristic of financial statements is that they are prepared according to a format that everyone recognizes so that financial statements are

understandable

Length of time that an asset can be used by a farm operation

useful life