Acct Test 2

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assume BLC uses straight-line depreciation. At the beginning of Year 3, the limo is sold for $30,000 cash. As a result of the asset disposal BLC will recognize a ______.

$30,000 cash inflow from investing activities.

equation for calculating depreciation

(asset cost - salvage value) / useful life = depreciation expense

The net realizable value of accounts receivable is ______.

- an estimate that represents the amount of cash a company expects to collect from its accounts receivable - the ending balance of accounts receivable less an allowance representing the amount of accounts a company expects to be uncollectible

The net realizable value of receivables decreases when a company ______.

- recognizes uncollectible accounts expense - collects an account receivable

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. Benson's cost of goods available for sale is ______. $212,000 $77,000 $182,000 $30,000

212000

When goods are sold under the perpetual inventory system, the cost of the good sold is transferred from the ______ account to the ______ account. inventory; cost of goods sold cost of goods available for sale; inventory cost of goods sold; inventory inventory; cost of goods available for sale

inventory; cost of goods sold

A line of credit ______. is generally classified as a long-term liability is repaid only on the maturity date is normally renewable on a one year term normally has fluctuating interest rates.

is normally renewable on a one year term normally has fluctuating interest rates.

When a company recognizes uncollectible accounts expense, cash flows from operating activities ______.

is not affected

The seller of a bond is called the ____________, while the buyer of a bond is called the_____________

issuer, bondholder

A company experienced an event that caused assets, liabilities and cash flow from financing activities to increase, but had no affect on net income. This could be due to ______. paying the principal balance of a bond at maturity issuing a bond with a 20 year term collecting the principal balance of a bond at maturity buying a bond with a 20 year term

issuing a bond with a 20 year term

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $20 gross margin?

last in first out

Benson Company purchased two identical inventory items. The item purchased first cost $40. The second item cost $42. If one of the items were sold, which cost flow method would produce the highest amount of cost of goods sold?

last-in-first-out

The longer an account receivable remains outstanding, the _____ likely it is to be collected.

less

Loans that provide flexible borrowing and repayment options are called ______. installment loans accounts payable balloon notes lines of credit

lines of credit

How quickly assets are expected to be converted to cash during normal operations is referred to as ________.

liquidity

A company experienced an event that had no affect on the amount of total assets or net income, but did cause a cash outflow from investing activities. The event that caused this could have been ______. collecting an account receivable reinstating an account receivable borrowing money with a two year term to maturity loaning money with a three year term to maturity

loaning money with a three year term to maturity

Natural resources are normally classified as ______.

long term assets

Bond obligations normally have ______ terms when compared to notes issued to bank. similar longer shorter

longer

Knowledgeable investors will be more attracted to companies that choose the inventory value method that ______. maximizes net income minimizes tax expense balances reported net income and tax expense

minimizes tax expense

The depreciable cost of an asset is the cost of the asset ______. plus the salvage value minus the salvage value plus accumulated depreciation minus accumulated depreciation

minus the salvage value

When a company recognizes a cash revenue event that is subject to state sales tax, the balance in the Cash account increases by ______ the amount of revenue. more than less than the same amount as

more than

When a company recognizes uncollectible accounts expense, total ______.: net income decreases liabilities increase assets decrease equity decreases

net income decreases assets decrease equity decreases

To avoid overstating assets, companies report recievables on their balance sheets at the __________.

net realizable value

Land is ______ subject to depreciation.

never

If the likelihood of a future obligation arising is remote, ______. no liability is shown in the financial statements or related notes a liability must be reported on the balance sheet the estimated amount is shown as an expense on the Income statement the estimated amount must be disclosed in the notes to the financial statements

no liability is shown in the financial statements or related notes

Interest is normally shown as a(n) ______ item on the income statement and ______ item on the statement of cash flows.

non-operating operating

Interest is normally shown as a(n) _________ item on the income statement and a(n) __________activity on the statement of cash flows.

non-operating, operating

The cost of intangible assets with indefinite use lives are ______.

not expensed unless the value is impaired

A payment on an installment loan will be shown in the ______ activities sections of the statement of cash flows. investing operating financing

operating financing

When a company uses the allowance method uncollectible accounts expense will likely be ______.: exactly equal to the accounts written off overstated or understated

overstated or understated

The cost of a building includes ______. purchase price maintenance realtor commissions fire Insurance renovation costs

purchase price realtor commissions renovation costs

A company experienced an event that caused total assets and net income to increase, but had no affect on cash flow. This could be the result of ______. lending money collecting the principal balance of a loan collecting interest receivable recognizing accrued interest

recognizing accured interest

A company experienced an event that caused total assets and net income to increase, but had no affect on cash flow. This could be the result of ______. recognizing accrued interest collecting interest receivable lending money collecting the principal balance of a loan

recognizing accured interest

Cash flows are not affected by ______.: cash receipts for revenue recognizing uncollectible accounts expense collecting an accounts receivable

recognizing uncollectible accounts expense

Stair Company accepted a credit card with a fee for services rendered. As a result of this transaction ______ recorded revenue exceeds accounts receivable total assets increased stockholders' equity increased total liabilities increased operating cash flows increased

recorded revenue exceeds accounts receivable total assets increased stockholders' equity increased

Buck Company purchased a computer and a desk for $9,000 cash. An appraiser determined the fair market values to be $3,000 for the computer and $7,000 for the desk. Based on this information, the assets should be recorded as $ ______ for the computer and $ ______for the desk.

2700 and 6300 3000+7000=10000 the computer is 30% of total the desk is 70% of total 9000x.3 = 2700 9000x.7 = 6300

Which of the following statements is correct?: The allowance for doubtful accounts is an estimated amount and the NRV of accounts receivable is an actual amount. The allowance for doubtful accounts is an actual amount and the NRV of accounts receivable is an estimated amount. Both the allowance for doubtful accounts and the NRV of accounts receivable are actual amounts. Both the allowance for doubtful accounts and the NRV of accounts receivable are estimated amounts.

Both the allowance for doubtful accounts and the NRV of accounts receivable are estimated amounts.

Which of the following statements about aging accounts receivable is true? An existing balance in the Allowance for Doubtful Accounts account is ignored when when determining uncollectible accounts expense. Higher percentages are applied to older accounts. Newer accounts are less likely to be collected. The total of the aging schedule represents the amount of uncollectible accounts expense.

Higher percentages are applied to older accounts.

What distinguishes contingent liabilities from general uncertainties? Whether the event stems from a past event. The likelihood of occurrence. The amount of the potential liability. The period in which the liability is known.

Whether the event stems from a past event.

The allowance for doubtful accounts is:

an estimate that represents the amount of accounts receivable a company expects to be uncollectible

Bad Debt Expense

an expense account to record losses from extending credit

When a company incurs costs for minor repairs to keep an asset in good working order, the costs ______. are capitalized as assets may either be expensed or capitalized are expensed in the period incurred

are expensed in the period incurred

Costs related to long-term assets are expensed in the period incurred when they ______ are for minor repairs are for routine maintenance improve the quality of the asset extend the asset's useful life

are for minor repairs are for routine maintenance

Warranty obligations ______. only require footnote disclosure are reported in financial statements have uncertain timing and amounts are not considered liabilities

are reported in financial statements have uncertain timing and amounts

accounts recievable is a ___________

asset

Borrowing funds through a line of credit is a(n) ______ transaction. asset use claims exchange asset exchange asset source

asset source

Issuing a bond to borrow money is a(n) ______ transaction.

asset source

Making an interest payment for a bond issued at face value is a(n) ______ transaction. asset exchange claims exchange asset source asset use

asset use

Repaying funds through a line of credit is a(n) ______ transaction. asset exchange asset source claims exchange asset use

asset use

Repaying the face value of a bond liability that was issued at face value is a(n) ______ transaction. asset use asset source claims exchange asset exchange

asset use

The Allowance for Doubtful Accounts appears on the ______.

balance sheet

The Allowance for Doubtful Accounts appears on the ______.: balance sheet statement of cash flows income statement statement of changes in stockholders' equity

balance sheet

When a company reinstates an account receivable that had previously been written-off only the ______ is affected.

balance sheet

Paying off a sales tax liability affects the ______. income statement balance sheet statement of cash flows

balance sheet statement of cash flows

Paying off the principal balance of a note payable affects the ______. balance sheet statement of cash flows income statement

balance sheet statement of cash flows

The recognition of cash paid for a capital expenditure that increases the useful life of an existing asset will result in changes to the company's ______. balance sheet income statement statement of cash flows

balance sheet statement of cash flows

Western Company loaned Eastern Company money. This event affects Western Company's ______. income statement balance sheet statement of changes in stockholders equity statement of cash flows

balance sheet statement of cash flows

Western Company loaned Eastern Company money. This event affects Western Company's ______. statement of cash flows income statement statement of changes in stockholders equity balance sheet

balance sheet statement of cash flows

Paying a warranty claim affects the ______.

balance sheet and statement of cash flows

Recognizing a warranty expense affects the ______. balance sheet. income statement. statement of cash flows.

balance sheet. income statement.

Recognizing a warranty expense affects the: balance sheet. statement of cash flows. income statement.

balance sheet. income statement.

Companies typically report inventory ______ accounts receivable on the balance sheet.

below

Borrowing money by issuing a bond increases ______. bonds payable net income cash flow from operating activities cash

bonds payable cash

The salvage value of an asset is the ______. same as book value of an asset expected market value of a fully depreciated asset current market value of an asset cost of the asset minus accumulated depreciation

expected market value of a fully depreciated asset

Most companies expect to collect the full balance of all of their accounts receivable. This statement is

false

True or false: A company sold merchandise under warranty in Year 1. The merchandise was returned for a warranty repair in Year 2. The company recognized warranty expense for this item in both years.

false

True or false: A company sold merchandise under warranty in Year 1. The merchandise was returned for a warranty repair in Year 2. The company recognized warranty expense for this item in both years. True False

false

True or false: Because it is highly liquid, inventory is generally presented above accounts receivable on the balance sheet.

false

True or false: Classified balance sheets report current assets only.

false

When a company sells merchandise with a warranty, ______. financial statement users must be informed of the obligation the estimated warranty amount is a cash outflow on the statement of cash flows there is no income statement impact for the estimated warranty amount an estimated warranty expense must be recorded in the actual year of repair

financial statement users must be informed of the obligation

A payment on an installment loan will be shown in the ______ activities sections of the statement of cash flows. financing investing operating

financing operating

The allowance method of accounting for uncollectible accounts ______.

reports accounts receivable at net realizable value

The allowance method of accounting for uncollectible accounts ______.: does not report uncollectible accounts until they are actually written off generally estimates uncollectible accounts as a percentage of total assets reports accounts receivable at net realizable value

reports accounts receivable at net realizable value

Warranties normally ______. have indefinite lives. represent liabilities. cover a specific time period. guarantee repair or replacement.

represent liabilities. cover a specific time period. guarantee repair or replacement.

percent of revenue method equation

revenue x 0.02

The specific identification cost flow method is most likely to be used when ______. both sales volume and cost per unit are high sales volume is low and cost per unit of inventory is high both sales volume and cost per unit are low sales volume is high and cost per unit is low

sales volume is low and cost per unit of inventory is high

In practice, bonds normally pay interest ______. annually quarterly only on the maturity date semiannually

semiannually

statement of changes in stockholders' equity

statement that summarizes the transactions that affected owner's equity during the accounting period

The book value of a long-term tangible asset is determined by:

subtracting the balance in the accumulated depreciation account from the balance in the associated asset account.

Assets that have a physical presence that enables them to be seen and touched are called _____assets.

tangible

A company experienced an event that had no affect on the amount of total assets, net income, or cash flow. This could have been caused by ______. recognizing uncollectible accounts expense collecting a reinstated account receivable writing off an uncollectible account reinstating an account receivable

writing off an uncollectible account reinstating an account receivable

Alpha Company loaned $5,000 to Beta Company on October 1, Year 1 for a one year term. Interest was set at 6% per year payable at maturity. The amount of interest reported on Alpha Company's December 31, Year 1 statement of cash flows was ______. $75. $300. $0 $225.

$0 cash is not be collected until the maturity date in Year 2.

The allowance for doubtful accounts and the net realizable value are _________ values.

estimated

On January 1, Year 1, Zoe Company issued a $200,000, 9%, 5 year term installment loan. The loan required a $51,419 annual cash payment on December 31 of each year. The amount of interest expense incurred in Year 1 was ______. $4,628 $18,000 $46,791 $33,419

18,000

contra asset account

an account that is offset against an asset account on the balance sheet

On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Year 2 uncollectible accounts expense shown on the income statement will be: $1,000. $20,000. $700. $19,000.

$700 Reason: Ending balance in the allowance account = $20,000 x 5% = $1,000. Since the allowance account currently has a $300 balance, $700 of expense must be added to the account.

On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Allowance for Doubtful Accounts shown on the Year 2 balance sheet is: $300 $700. $1,300 $1,000.

1,000

On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Allowance for Doubtful Accounts shown on the Year 2 balance sheet is: 700 300 1300 1000

1000

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses straight-line depreciation, depreciation expense for Year 1 is $ __________ .

10000

Inventory item 101 cost $100. Inventory item 102 cost $110. If the business uses the specific identification cost flow method and Item 102 is sold to a customer, the amount assigned to cost of goods sold is ______. $110 $105 $100 $0

110

Ted's Sports Center purchased two basketballs for resale. One was purchased in June at a cost of $30 and the other was purchased in July at a cost of $34. The two inventory items are identical in all respects except the price paid to acquire them. Assume Ted's uses the FIFO cost flow method. If Ted's sells one of the balls in August, the amount charged to cost of goods sold ______ will be $34 will be $30 may be $30 or $34 will be $32

30

Ellen Company loaned $10,000 cash to Ann Company on December 1, Year 1. The loan had a one year term and a 6% annual interest rate. Ellen prepares financial statements on December 31 of each year. In regards to this loan, the financial statements will report Year 1 net income of $ _______; Year 2 net income of $ ___________; Year 1 cash flow from operations of $ ___________; and Year 2 cash flow from operations of $ ________ .

50 550 0 600

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. BLC uses the straight-line depreciation method. At the beginning of Year 3, BLC spent $6,000 to remodel the interior of the limo, thereby improving the quality of the asset. Based on this information, the cost of the asset shown on the Year 3 balance sheet will be ______.

54000

Jack Company loaned $12,000 to Jill Company on September 1, Year 1 for a one year term. Interest was set at 5% per year with interest payable at maturity. Assuming Jack prepares financial statements on December 31 of each year, the amount of cash inflow for interest reported on the Year 2 statement of cash flows equals ______. $600. $200. zero. $400.

600

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses FIFO, the reported ending inventory equals:

66,000

On December 31, Year 2 before adjustments, Silver Co.'s Accounts Receivable account balance was $20,000 and the Allowance for Doubtful Accounts account balance was $300. Silver estimates uncollectible accounts to be 5% of accounts receivable. The Year 2 uncollectible accounts expense shown on the income statement will be: $19,000. $700. $20,000. $1,000.

700 Reason: Ending balance in the allowance account = $20,000 x 5% = $1,000. Since the allowance account currently has a $300 balance, $700 of expense must be added to the account.

Alpha Company loaned $5,000 to Beta Company on October 1, Year 1 at 6% interest. On December 31, Year 1 Alpha Company's financial statements will report accrued interest of ______. $300. $0 $75. $225.

75

Which of the following statements regarding contingent liabilities is true? (Select all that apply.) A contingent liability is a potential obligation arising from a past event. Contingent liabilities represent losses; the contingency is about the amount. The amount or existence of a contingent liability depends on some future event. For reporting purposes, contingent liabilities are sorted into three categories depending on the likelihood of their becoming actual liabilities.

A contingent liability is a potential obligation arising from a past event. The amount or existence of a contingent liability depends on some future event. For reporting purposes, contingent liabilities are sorted into three categories depending on the likelihood of their becoming actual liabilities.

Statement of Cash Flows

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

percent of revenue method

A method of estimating the amount of uncollectible accounts by taking a percent of revenue that was earned on account during the accounting period. The percentage is frequently based on a combination of factors such as historical experience, condition of the economy, and the company's credit policies.

Assume a company with total accounts recievable of 50,000 estimates that 2,000 of its recievables will not be collected. The net realizable value of recievables is as follows: Accounts Recievable _________ Less: allownce for doubtful accounts ________ Net realizable value of recievables ________

Accounts Recievable 50,000 Less: allownce for doubtful accounts 2,000 Net realizable value of recievables 48,000

When a company recognizes depreciation expense, ______. Accumulated Depreciation increases net income increases total assets decrease cash outflow increases

Accumulated Depreciation increases total assets decrease

specific identification method

An actual physical-flow costing method in which particular items sold and items still in inventory are specifically costed to arrive at cost of goods sold and ending inventory.

Allen's tutoring services recognized $14,000 service revenue earned on account during 2012. Expain the balance sheet and Income statement.

Balance Sheet: Assets (act. recievable) +14,000 Retained earnings +14,000 Liabilities +0 Income Statement: revenue +14,000 Exoense -0 net income +14,000

ATS collected 8,430 cash from accounts receivable. Explain the balance sheet, income statement, and statement of cash flows.

Balance Sheet: This is a asset exchange transaction Assets (act. recievable) -8,430 Assets (cash) +8,430 Liabilities +0 Equity +0 Income Statement: revenue +0 Exoense -0 net income +0 Statement of cash flows +8,430

Which method do companies most often use to physically flow inventory items through a store?

FIFO

True Stories Company sold the rights to a documentary film. They are expecting significant revenue in Year 1. The revenue stream is expected to decrease steadily until it reaches zero in Year 5. Based on this Which depreciation method should be used to most closely match the expense to the revenue stream the asset produces? Double-declining-balance Specific-identification Units-of-production Straight-line

Double-declining-balance

uncollectible accounts expense

Expense associated with uncollectible accounts receivable; amount recognized may be estimated using the allowance method, or actual losses may be recorded using the direct write-off method.

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $24 gross margin?

FIFO

Which inventory cost flow method will produce tax advantages in a deflationary environment?

FIFO

Which inventory cost flow method will produce the highest income and asset values in an inflationary environment?

FIFO

FIFO cost flow method

Inventory cost flow method in which cost of goods sold is computed as if the earliest items purchased are the first items sold.

Weighted average cost flow method

Inventory cost flow method in which the cost allocated between inventory and cost of goods sold is based on the weighted average cost per unit

LIFO cost flow method

Inventory cost flow method that treats the last items purchased as the first items sold for the purpose of computing cost of goods sold.

Which of the following statements is true? Companies that use FIFO for physical flow must use FIFO for cost flow, regardless of tax consequences. GAAP requires consistency between the cost flow method used for financial reporting and that used for tax reporting. LIFO may be the preferred cost flow method even when it results in lower reported income and asset values.

LIFO may be the preferred cost flow method even when it results in lower reported income and asset values.

relative fair market value method

Method of assigning value to individual assets acquired in a basket purchase in which each asset is assigned a percentage of the total price paid for all assets. The percentage assigned equals the market value of a particular asset divided by the total of the market values of all assets acquired in the basket purchase.

Income statement equation:

Net Income = Revenue - Expenses

The cost of equipment includes ______. Purchase price fine for work safety violations during installation damage caused while unloading ordinary installation cost cash discount from the list price

Purchase price ordinary installation cost cash discount from the list price

reinstate

Recording an account receivable previously written off back into the accounting records, generally when cash is collected long after the original due date.

Which of the following statements are true? the amount due at bond maturity is called the face value of the bond. A bond certificate describes the company's obligation to pay interest and repay the principal. The bondholder is the seller or issuer of a bond. Cash interest payments are based on the stated interest rate.

The amount due at bond maturity is called the face value of the bond. A bond certificate describes the company's obligation to pay interest and repay the principal. Cash interest payments are based on the stated interest rate.

Which of the following statements are true? the more quickly an asset is converted to cash or consumed, the more liquid it is considered. A current asset is expected to be converted to cash or consumed within one year or an operating cycle, whichever is shorter. Long-term assets are usually presented before short-term assets on a classified balance sheet. Most businesses provide information about their bill-paying ability by classifying their assets and liabilities according to liquidity.

The more quickly an asset is converted to cash or consumed, the more liquid it is considered. Most businesses provide information about their bill-paying ability by classifying their assets and liabilities according to liquidity.

Ellen Company loaned $10,000 cash to Ann Company on August 1, Year 1. The loan had a one year term and a 6% annual interest rate. Principal and interest are payable at maturity. Assume that the company's balance sheet date is 31st December each year. year 1 revenue year 1 cash flow from operations year 2 revenue year 2 cash flow from operations

Year 1 Revenue - $250 Year 1 Cash flow from operations - Zero Year 2 Revenue - $350 Year 2 Cash flow from operations - $600

Because double-declining balance depreciation recognizes depreciation expense faster than straight-line, it is called a(n) _________________method.

accelerated depreciation

A company recorded an event that increased total assets and net income, but had no affect on cash flow. This event could have been a result of ______, accepting a credit card for services provided lending money collecting the principal balance of a loan collecting interest receivable

accepting a credit card

Typically, on a balance sheet, ______. accounts receivable is shown before notes receivable notes receivable is shown before accounts receivable cash is shown after accounts receivable cash is shown before accounts receivable

accounts receivable is shown before notes receivable cash is shown before accounts receivable

The contra asset account used to reduce the asset value when depreciation expense is recorded is called ______.

accumulated depreciation

A payment on an installment loan ______. affects the income statement. does not affect the statement of cash flows affects the balance sheet.

affects the income statement. affects the balance sheet.

Reporting accounts recievable in the financial statements at net realizable value is commonly called the _________________.

allowance method of accounting for uncollectable accounts

Reporting accounts receivable in the financial statements at net realizable value is commonly called the _________method of accounting for ____________ accounts.

allowance, uncollectible

The term used when recognizing expense for intangible assets with identifiable useful lives is _________.

amortization

The gain or loss on the disposal of an asset is equal to the sales price minus ______. original asset cost book value accumulated depreciation

book value

Lopez Company purchased land and a building for $460,000 cash. A real estate appraiser determined the fair market value of land to be $100,000 and that of the building to be $400,000. Based on this information, the cost of the ______.

building should be established at $368,000 land should be recorded as $92,000

Property, plant, and equipment includes: buildings. land. timber. computers.

buildings. land. computers

Substantial amounts spent to improve the quality or extend the life of an asset are called _______ expenditures.

capital

When a company repays the face value of a bond liability that was issued at face value, ______ decreases. cash cash flow from operating activities bonds payable cash flow from financing activities retained earnings

cash bonds payable cash flow from financing activities

Simms Accountants charged a client $2,000 cash plus tax for services provided in a state where the service sales tax rate is 6%. As a result of this event, the ______. cash account increases by $2,120 sales tax liability account increases by $120 revenue account increases by $2,120 cash flow from operating activities is not affected

cash account increases by $2,120 sales tax liability account increases by $120

When a company makes a cash payment for interest on a bond that was issued at face value, ______ decreases. cash flow from operating activities cash cash flow from investing activities retained earnings bonds payable

cash flow from operating activities cash retained earnings

Assets belonging to the maker of a promissory note that are assigned as security to ensure the principal and interest will be paid when due are called ______________.

collateral

The GAAP principle of ______ generally requires that companies use the same inventory cost flow method from one accounting period to the next.

consistency

Accumulated Depreciation is a(n) ____________account that has a balance that is opposite from the balance in the associated asset account.

contra asset

The Allowance for Doubtful Accounts is a(n) ______ account.

contra asset

The Allowance for Doubtful Accounts is a(n) ______ account.: liability stockholders' equity contra asset asset

contra asset

Intangible assets with an identifiable useful life include ______. copyrights patents goodwill trademarks

copyrights patents

When inventory is sold, inventory cost methods (FIFO, LIFO, weighted average) are used to determine how much cost to assign to ______. cost of goods sold selling expenses cash flow from operations ending inventory

costs of goods sold

When a bond is issued at face value, the cash interest payment ______ interest expense. is less than equals is greater than

equals

General uncertainties include potential ______. loss due to legal liability decline in earnings due to competition warranty claims storm damage

decline in earnings due to competition storm damage

A capital expenditure that extends the useful life of a building will ______. be shown on the Statement of Cash Flows as an outflow for operating activities increase the balance in the Building account decrease the balance in the Accumulated Depreciation account increase the book value of the building be shown as an expense on the Income Statement

decrease the balance in the Accumulated Depreciation account increase the book value of the building

Remitting sales tax (paying cash to the tax authorities), ______. does not affect the balance sheet is an assets exchange transaction does not affect the income statement affects the statement of cash flows

does not affect the income statement affects the statement of cash flows

When a company expects heavy asset use and high revenues in the early years of an asset's life and lower revenues and use in the later years, the best depreciation method to smooth out the amount of net income reported each year is ______. straight-line double-declining balance accelerated straight-line

double-declining balance

Which depreciation methods always recognizes more depreciation in the early years of an asset's useful life and less depreciation in the later years of its useful life?

double-declining balance

Knowledgeable investors tend to make investment decisions based on ______. economic substance how information is reported in financial statements reported taxable income

economic substance

Cost of goods available for sale is allocated between ______. ending inventory and cost of goods sold beginning inventory and purchases ending inventory and beginning inventory beginning inventory and cost of goods sold

ending inventory and cost of goods sold

retained earnings are _______________

equity

Property, plant and equipment is sometimes called plant assets or ________ assets

fixed

What type of interest rate remains constant during the term of the loan? hybrid fixed variable

fixed

Companies are required to indicate the inventory cost flow methods used to prepare the financial statements under the GAAP principle of ________.

full disclosure

Natural resources include ______ a stone quarry furniture timber cars a gold mine

gold mine timber stone quarry

Intangible assets with an indefinite useful life include ______. copyrights goodwill franchises trademarks

goodwill franchises trademarks

The purchase price plus any costs necessary to get an asset in the location and condition for its intended use is called the __________cost of the asset.

historical

An asset must be recorded at the amount paid for it under the ______ concept.

historical cost

Costs related to long-term assets are capitalized when they ______ extend the asset's useful life are for minor repairs improve the quality of the asset are for routine maintenance

improve the quality of the asset extend the asset's useful life

Payments on installment loans ______. normally have fluctuating interest rates include a repayment of a portion of the principal balance include a payment for interest are made only on the maturity date

include a repayment of a portion of the principal balance include a payment for interest

The Uncollectible Accounts Expense account appears on the ______: balance sheet statement of cash flows income statement statement of changes in stockholders' equity

income statement

Recognizing accrued interest expense affects the ______. income statement statement of cash flows balance sheet

income statement balance sheet

Recognizing depreciation expense affects the ______. income statement balance sheet statement of cash flows

income statement balance sheet

Stable Company recognized accrued interest revenue. This event affects Stable Company's ______. income statement balance sheet statement of changes in stockholders equity statement of cash flows

income statement balance sheet statement of changes in stockholders equity

Writing-off an uncollectible account receivable does not affect the: balance sheet. income statement. statement of cash flows.

income statement statement of cash flows

Tom Company loaned $24,000 to Paul Company on November 1, Year 1 with a one year term and a 4% rate of interest. Tom's accounting period ends on December 31. Based on this information, Tom's Year 1 ______. statement of cash flows would show a $160 of cash inflow, and the Year 2 statement of cash flows would show an $800 cash inflow income statement would show $160 of interest revenue, and the Year 2 income statement would show $800 of interest revenue balance sheet would show $160 of interest receivable, and the Year 2 balance sheet would show zero interest receivable income statement would show $160 of interest revenue, and the Year 2 statement of cash flows would show a $800 cash inflow from operations

income statement would show $160 of interest revenue, and the Year 2 income statement would show $800 of interest revenue balance sheet would show $160 of interest receivable, and the Year 2 balance sheet would show zero interest receivable

Writing-off an uncollectible account receivable does not affect the: income statement. balance sheet. statement of cash flows.

income statement. statement of cash flows.

Fran Company recognized accrued interest revenue. On Fran's financial statements, net income ______. is not affected but cash flow from operating activities increases increases and so does cash flow from operating activities increases but cash flow from operating activities is not affected is not affected and neither is cash flow from operating activities

increases but cash flow from operating activities is not affected

Fran Company recognized accrued interest revenue. On Fran's financial statements, net income ______. is not affected but cash flow from operating activities increases is not affected and neither is cash flow from operating activities increases and so does cash flow from operating activities increases but cash flow from operating activities is not affected

increases but cash flow from operating activities is not affected

Loans that require payments of principal and interest at regular intervals are called ______. lines of credit balloon notes accounts payable installment notes

installment notes

Although they may be represented by physical documents, _________ assets are, rights or privileges that cannot be seen or touched.

intangible

If the likelihood of a future obligation arising is reasonably possible, but not likely; or if it is probable, but cannot be reasonably estimated, ______. the estimated amount is shown as an expense on the income statement the estimated amount is determined for managerial purposes and is not shown in the financial statements or related notes a liability must be estimated and reported on the balance sheet the estimated amount must be disclosed in the notes to the financial statements

the estimated amount must be disclosed in the notes to the financial statements

When uncollectible accounts are estimated: cash flows from operating activities will be equal to reported net income. there is a better matching of revenues with expenses. the balance sheet reports the amount of cash the company expects to collect.

there is a better matching of revenues with expenses. the balance sheet reports the amount of cash the company expects to collect.

At the end of the useful life of an asset, ______. double declining balance accumulated depreciation will be higher because it ignores salvage value the total amount of accumulated depreciation may be different if units-of-production was used total accumulated depreciation will be the same regardless of the depreciation method used

total accumulated depreciation will be the same regardless of the depreciation method used

Write out the bones of a balance sheet:

total assets = liabilities + equity

When a company recognizes depreciation expense, ______. total assets decrease Accumulated Depreciation increases cash outflow increases net income increases

total assets decrease Accumulated Depreciation increases

The person responsible for making payment on the due date is the maker of the promissory note.

true

True or false: A company may use LIFO or weighted average for financial reporting even if its goods flow physically on a FIFO basis.

true

True or false: Companies that use LIFO for income tax reporting must use the same inventory cost flow method for their financial statements.

true

True or false: Land has an infinite life.

true

True or false: One benefit of estimating uncollectible accounts is that it better matches expenses with revenues.

true

True or false: The book value of an asset may also be called the carrying value.

true

true or false: regardless of the depreciation method used, an asset cannot be depriciated below its salvage value

true

What type of interest rate fluctuates up or down during the loan period?

variable

A company has been using the allowance method for uncollectible accounts expense for several years. On the year end financial statements, the amount of uncollectible accounts expense ______ the balance of the Allowance account. should always to be equal to will likely be different than

will likely be diffrent

A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by ______.

writing off an uncollectible account

A company recorded an event that had no affect on total assets, net income, or cash flow. This could have been caused by ______.: writing off an uncollectible account recognizing uncollectible accounts expense recognizing revenue on account collecting an account receivable

writing off an uncollectible account