AC test 3
which of the following are long-term liabilities?
20 year mortgage payable note payable due in 3 years
lox, stock and bagel, inc. issued 50,000 shares of the 100,000 authorized. it has since repurchased 5,000 of its shares. the number of shares outstanding equals ___________ shares
45,000
price/ earnings (P/E)
= current stock price (per share) / earnings per share (annual)
ROE
= net income - preferred dividends/ average common stockholders' equity
EPS
= net income - preferred dividends/ average number of common shares outstanding
which of these payroll taxes are paid only by the employer?
SUTA FUTA
stock splits
cause the par value per share to change
stock splits and stock dividends
cause total stockholders' equity to remain the same
xyz borrowed $50,000 this year. half of the loan will be repaid next year and the remainder will be paid the following year, which is longer than xyz's operating cycle. on its balance sheet at the end of this year, xyz will show ____________
current portion of long term debt of $25,000 long term debt of $25,000
straight-line, units-of-production, and declining-balance are commonly used ___________ methods
depreciation
which of the following accounts are closed into retained earnings at year end?
dividends expense accounts revenue accounts
when diva, inc., declared a $10,000 cash dividend, it recorded a debit to ___________ and a credit to dividends ____________
dividends payable
squid roe, inc.'s ROE increased two percentage points to 12%. this increase may have happened because squid roe ___________
generated more profits than the interest incurred on its borrowed funds replaced its 12% debt with 10% debt
EPS appears on the ___________
income statement
amortization
intangible
how is the change in cash classified on the statement of cash flows?
it is the sum of the operating, investing, and financing activities sections
what effect will issuing more bonds have on the times interest earned ratio over time?
it will decrease
assets are financed with _____________ and stockholders' equity
liabilities
deferred income tax is a __________ account if the difference is due to an accelerated tax depreciation used for its tax returns and straight line for financial reporting
liability
what kind of account is unearned revenue?
liability account
permission to use something in accordance with specific terms and conditions are called _____________
licensing rights
a major advantage of the corporate form of ownership is __________ legal liability
limited
earnings per share (EPS) equals
net income- preferred dividends / average number of common shares outstanding dividing the stock price by the P/E ration
intangible assets with unlimited or indefinite lives are _________________
not amortized, but instead are reviewed for impairment
a contingent liability should _____________
not be reported if the loss is remote and unable to be estimated be in the notes to the financial statements if the loss may possibly occur and can be reasonably estimated be reported on the balance sheet if the loss will probably occur and can be reasonably estimated
under US GAAP, a contingent liability should ________________
not be reported if the loss is remote and unable to be estimated be reported on the balance sheet if the loss will probably occur and can be reasonably estimated be in the notes to the financial statements if the loss may possibly occur and can be reasonably estimated
research and development costs are _____________
not capitalized because of uncertainty incurred to construct or internally develop intangible resources expensed when incurred
nova, inc. is considering declaring a $100,000 cash dividend. nova has a cash balance of $20,000 and retained earnings balance of $100,000. nova should __________
not declare a cash dividend because it does not have enough cash
cash dividends
on the declaration date, liabilities are increased on the payment date, current assets are decreased
an asset's useful life is based on the ________
professional judgement
stock dividends
require a journal entry
corporations can raise large amounts of money because ___________
shares of stock can be purchased in small amounts, so even small investors can participate
land improvements reported on a company's balance sheet might include ______________
sidewalks outside the corporate headquarters the fence around a factory parking lot trees planted to provide shade for the customer parking lot
technology assets include ____________
software web development work
morris lest, inc. sold its delivery truck for $4000 cash. the truck's book value was $3000. which financial statements will be affected by this sale?
statement of cash flows balance sheet statement of retained earnings income statement
morris lest, inc. sold its delivery truck for $4000 cash. the truck's book vale was $3000. which financial statements will be affected by this sale?
statement of retained earnings statement of cash flows balance sheet income statement
which of the following line items would be found on a statement of stockholders' equity?
stock issuances dividends net income treasury stock additional paid in capital
date of record
stock records are finalized to determine which stockholders are to receive payment
contributed capital of $1,000,000 is found in the ___________ section of the ____________
stockholders' equity balance sheet
treasury stock is reported in the ______________
stockholders' equity section of the balance sheet
miss hap, the bookkeeper, forgot to record the depreciation for the year. this error will cause ________________.
stockholders' equity to be overstated assets to be overstated
the journal entry to record the payment of salaries and wages for work performed in the current accounting period causes ____________
stockholders' equity to decrease liabilities to increase assets to decrease
depreciation
tangible
why should a company divide up the cost of a "basket purchase" among the different assets purchased?
the different assets might be depreciated over different useful lives
callable bonds
the issuing company can pay off the bonds at any time
which of the following transactions would be classified as investing activities?
the purchase of investments for cash the sale of a building used in the business the purchase of equipment
how does management estimate useful lives and residual values?
they use professional judgement
most companies use one method of depreciation for financial reporting and a different method for income taxes, which requires ______________ sets of accounting records
two
six years ago, on january 1, ace electronics purchased a $310000 machine with an estimated useful life of 10 years and a residual value of $10000. ace used the machine for 6 years and recorded straight line depreciation each year. at the end of the 6th year after depreciation expense had been recorded for the year, ace found that the machine no longer had any future economic value because the product it makes is obsolete. ace still owns the machine, but should make a journal entry that includes a __________
$130000 credit to machinery $130000 debit to loss on impairment
x-co issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $100 cash per share. the journal entry to record this event includes a ______________
$100,000 debit to cash $100,000 credit to preferred stock
gross earnings for the pay period are $100,000. required payroll deductions are: social security $6,700; medicare $1,450; federal income tax $18,000 and state income tax $3,850. the journal entry to record wages paid includes a _____________.
$100,000 debit to salaries and wages expense
on the maturity date, the bondholders of $100,000 of bonds that were issued at a $90,000 will receive ________________
$100,000 in cash plus the interest owed
which of the following result in an increase to intangible assets?
$10000 was spent to purchase a patent a company purchased another company for $10000 more than its net assets a company purchased a franchise for $100000
x circle company purchased a computer system black box, inc. with a list price of $100,000 plus 5% sales tax. the cost to deliver and install the computer was $10,000. the debit to equipment equals _____________.
$115,000
the issue price of 1,000, 5%, $1,000 bonds issued at 92.10 equals ___________
$921,000 the bonds are selling at 92.10 which means the issuance price is 92.1% of the face value or $1,000,000 (=1,000 x $1,000 x 92.1%)
what is the formula for calculating double declining balance depreciation?
( cost - accumulated depreciation ) x ( 2/ useful life )
what is the formula for calculating units of production depreciation?
( cost - residual value ) x ( actual production this period / estimated total production )
if a company wants exclusive rights to artistic material, it should purchase ___________
a copyright
a corporation may be restricted from paying a dividend if _______________
a creditor's loan agreement is violated the dividend is greater than the amount of retained earnings
if company a is providing services using company b's name and conforming to company b's standards and stipulations, then company a purchased ______________
a franchise
potions, inc. sold its patent for $10,000. the book value of these patents was $9,000. as a result of this sale, potions will record ____________
a gain of $1,000
the debt to asset ratio indicates ______________
a higher ratio means greater financing risk the percentage of assets financed by debt
under IFRS, if the company issuing preferred stock is contractually obligated to pay dividends or to redeem the shares at a future date, then the preferred stock is classifies as ____________
a liability
what are the benefits of common stock?
a preemptive right to buy newly issued stock before it is offered to others voting rights the right to receive dividends if they are declared a residual claim on assets after creditors and preferred stockholders have been satisfied
if a company's EPS falls from $5 to $3, then investors may expect ____________
a reduction in the stock price
if a cost is capitalized, it is recorded as an ____________, not an expense
asset
the debt to asset ratio is calculated by dividing total liabilities by total _____________
assets
net assets is the term used to describe _______________
assets minus liabilities
if management was to unethically capitalize costs that should not have been, which of the following would be misstated?
assets would be overstated stockholders' equity would be overstated
GAAP require assets be reviewed for impairment ______________
at least once a year
a corporation's board of directors could prefer a stock split to a stock dividend because a stock split ____________
does not reduce retained earnings, so it does not reduce the ability to declare a cash dividend in the future
straight line depreciation
does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life
straight-line depreciation
does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life
the early retirement of a bond includes ___________
elimination of the liability payment of cash recording of a gain or loss
advantages of equity financing over debt financing include that ______________
equity financing does not require repayment dividends are optional
recording depreciation is an application of the ______________.
expense recognition (matching) principle
ordinary repairs and maintenance costs should be ______________
expensed as incurred
whether a bond is issued at par, premium or discount, when the bond matures the amount paid equals the __________ value
face
the date of record is the date on which the corporation _________
finalizes its list of stockholders who will receive dividends
issuing stock to owners is classified as a _____________ activity
financing
repayment of loan principal to lenders
financing
the payment of dividends and changes in the dividends payable account are classified as _____________ activities
financing
issuance of additional stock to stockholders
financing activity
another term for long-lived assets is _____________ assets and is found on the financial statement called the _________________.
fixed balance sheet
what does the IRS call a corporate income tax return?
form 1120
when a company purchases another company at a premium because of the purchased company's favorable reputation, then the company would record an asset called _______________
goodwill
preferred stock generally _________________ preference as to dividends
has
a stock dividend ________
has no effect on total stockholders' equity increases common stock decreases retained earnings
trademarks ______________
have an unlimited life and hence are not amortized
a company might record an involuntary disposal of an asset __________
if the asset was seriously damaged in a fire
a company might record an involuntary disposal of an asset ___________.
if the asset was seriously damaged in a fire
a company may make an exception to the accounting rules and not capitalize a long lived asset if its cost is
immaterial
which type of investment would retirees wanting a stable income prefer?
income investment
the write down of goodwill for impairment will affect which of the following financial statements?
income statement balance sheet
the changes in the noncash balance sheet accounts explain the differences between the ___________
income statement and the statement of cash flows
an ___________ in accrued liabilities, such as interest payable will be added to net income when determining net cash flow from operating activities
increase
during the past year, arnold inc.'s comparative balance sheet reported an increase in overall stockholders' equity of $43,500, a decrease in total liabilities of $17,200, and an increase in assets other than cash of $12,000. consequently, Arnold, inc. reported an __________ in cash of ____________
increase $14300
the entry to record the initial borrowing of cash by issuing a promissory note causes an ______________
increase in liabilities increase in assets
morris lest, inc. sold its delivery truck for $500 more than its book value. the sale will result in an _____________
increase in net income on the income statement
anudu, inc. sold equipment and received more cash than the equipment's book value. the effect of this sale on the accounting equation includes an _________________
increase to assets increase to stockholders' equity
lox, stock and bagel, inc buys $1,000,000 cash. cream cheesery's net assets are valued at $800,000 at the time of the sale. lox, stock and bagel, inc. should record an ________________
increase to goodwill of $200,000 decrease to cash of $1,000,000
accuring a liability always involves ___________ expenses and ______________ liabilities
increasing increasing
issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by ____________
increasing total assets increasing total stockholders' equity
issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $100 cash per share affects the accounting equation by ______________
increasing total stockholders' equity increasing total assets
which of the following describes the acceptable methods that may be used to prepare the statement of cash flows
indirect direct
credits to the common stock account recorded during the period will be reported as cash ___________ activities on the statement of cash flows
inflows under financing
bonds are financial _______________ that outline the future payments a company promises to make in exchange for receiving a sum of money now
instruments
amortization is an adjusting entry that records the amount of ___________
intangible assets' usefulness used during the accounting period
the times interest earned ratio equals net income plus interest expense and income tax expense, divided by _____________
interest expense
which of the following costs associated with long lived assets are expensed, not capitalized?
interest on loans to purchase the assets immaterial repairs and maintenance ordinary repairs and maintenance
which of these assets are not depreciated?
inventory land cash
sale of equipment no longer needed in the business
investing
companies are required to report material noncash transactions from _________ and __________ activities in either a supplementary schedule to the statement of cash flows or as a disclosure in the notes to the financial statements
investing financing
purchase of stock in another company
investing activity
when a shareholder of limited, inc. sells its shares to another investor on the stock exchange, limited, inc.'s accounting equation ______________
is not affected because the corporation is separate from its owners
accumulated deficit __________
is shown in parentheses on the balance sheet means that retained earnings has a debit balance indicated accumulated net losses
an asset's useful life _____________
is the asset's expected economic life to its owner can be expressed in either years or units
an asset's useful life _______________.
is the asset's expected economic life to its owner can be expressed in either years or units
declining balance depreciation
is the best method to use when an asset is productive in its earliest years but quickly loses its usefulness
declining-balance depreciation
is the best method to use when an asset is productive in its earliest years but quickly losses its usefulness
units of production depreciation
is the best method to use when the amount of an asset's use varies significantly from one accounting period to another
units-of-production depreciation
is the best method to use when the amount of an asset's use varies significantly from one accounting period to another
a productive asset ____________.
is used to produce goods or services that will be sold to customers
shares outstanding equals shares __________ minus ______________ shares
issued treasury
sources of financing for corporations include __________
issuing stock borrowing
purpose of the statement of cash flow
it is intended to provide a cash based view of a company
acme in bought land and a factory building for $80000. the land was appraised at $25000 and the building at $75000. using the basket purchase allocation, acme would record the ___________
land at $20000 and the building at $60000 the land is reported at ($25000/($25000+$75000)) x $80000 or $20000. the building is reported at ($75000/($25000+5000)) x $80000 or $60000. the cost principal requires assets to be reported at the cost, not the individual appraised values
dividends payable is a __________ account with a normal _____________ balance and is initially recorded on the _____________ date
liability credit declaration
when a company capitalizes a cost, its __________________ increases
long lived assets
vango, inc. sold its van for $6000 cash. the van's original cost was $40000 and its accumulated depreciation was $32000. When recording the sale, Vango should record a ______________.
loss on disposal of $2000
gains on the disposal of fixed assets are recorded with a credit and occur when the book value is _________ than the sales price
lower
the number of shares authorized represents the _________________
maximum number of shares a company is allowed to issue
a company ________________
may use depreciation methods for different classes of assets if used consistently
bond carrying value equals bonds payable _____________
minus discount on bonds payable plus premium on bonds payable
the declining balance depreciation method assigns __________ depreciation expense to the early years of asset ownership
more
a corporation that has a loan covenant _____________
must disclose the covenant in the notes to the financial statements may be required to repay the loan immediately if it violates the covenant
which of these are natural resources that are depleted over time?
natural gas wells timber
repayments of loans will be reported as a ___________
negative cash flow under financing activities
when using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is __________________
net income
which of the following line item amounts would be under the retained earnings column of a statement of stockholders' equity
net income dividends: preferred dividends: common
on-a-roll, inc. amortizes its copyright of $20,000 over 20 years. miss hap, the bookkeeper, forgot to record the amortization in the current year. the effect of this mistake causes ______________.
net income to be overstated assets to be overstated
xyz warehouse operates in a state with a 6% sales tax. for convenience, xyz warehouse credits sales revenue for the total amount (selling price plus sales tax) collected from each customer. what will be the effect if xyz warehouse fails to make an adjustment for sales tax?
net income will be overstated liabilities will be understated
depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a ___________ reduction to net income
noncash
US GAAP classifies the payment of interest as an ___________ activity on the statement of cash flows
operating
a change in accounts receivable will be reported in the ___________ activities section of the statement of cash flows prepared using the indirect method
operating
cash collected from customers
operating
it is important that a company's statement of cash flows reports a positive cash flows from ___________ activities
operating
revenues and expenses relate to the cash inflows and outflows found in the __________ activities section of the statement of cash flows
operating
payments to creditors resulting in a decrease to accounts payable
operating activity
loss on impairment is an _________________
operating expense that appears on the income statement
if a company wants to receive exclusive rights to a manufacturing process, it should purchase a __________
patent
US corporations pay federal taxes on ____________
payroll income
lenders will sometimes impose dividend restriction to ____________
prevent the corporation from paying out too much to stockholders
which type of contingent liability would most likely be found on a balance sheet prepared under US GAAP
probable contingent liability that can be estimated
the primary objective of financial reporting is to ___________
provide information about a business that is useful in projecting its future cash flows
an intangible asset may be recorded only if _______________
purchased
an intangible asset may be recorded when a company __________
purchases a trademark pays more than the net assets of the company purchased
the primary objective of income taxes is to _______________
raise enough revenue to pay for expenditures and to encourage certain social and economic behaviors
the primary objective of income taxes is to _________________
raise enough revenue to pay for expenditures and to encourage certain social and economic behaviors
investors earn a return on stock investments by ___________
receiving dividends selling the stock for more than its cost
treasury stock ___________
reduces total stockholders' equity is shares of stock no longer outstanding is a contra-equity account
the stated rate _____________
remains the same throughout the life of the bonds
at the end of a depreciable asset's useful life, its book value equals its _____________
residual value
a company's past profits that are kept instead of being paid to stockholders are ________________
retained earnings
an end of period adjusting entry that debits unearned revenue most likely will credit a ___________ account
revenue
sales taxes are recorded by the retailer as ___________
sales tax payable
(cost - residual value) x (1/useful life) is the formula for calculating the _____________ - _____________ method of depreciation.
straight - line
when a company has both common and preferred stock, its POE must be adjusted by ___________
subtracting preferred stock dividends from net income subtracting the preferred stock balance from total stockholders' equity
the "least and latest rule" is ____________
that a taxpayer should pay the least tax legally permitted at the latest date allowed
subtracting a decrease in unearned revenue from net income eliminates the effect of recording revenue ___________
that increased net income, but did not impact cash this period
acme enterprises just bought a new manufacturing machine. which of these costs should be capitalized?
the $15000 freight bill to deliver the machine to acme's factory the $500000 invoice price of the machine the $8000 cost of tearing down acme's factory wall to get the machine inside
why might a company dispose of a long lived tangible asset?
the asset has reaches the end of its useful life the asset is replaced with a newer, more efficient model the asset was seriously damaged the company doesn't need the asset anymore
declaration date
the board of directors officially approves a dividend
why can depreciation expense be a different amount each year using the units of production method?
the method calculates expense based on the relationship between each year's output and total estimated output
braden and sons, inc., paid cash to purchase equipment costing $342,000 this year. also this year, the company sold for $70,000 cash equipment that originally cost $230,000 5 years ago. how should these transactions be listed in the statement of cash flows?
the purchases and sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale)
net cash flows provided by operating activities will be _________ when using the direct method compared to the indirect method
the same
seasoned new issues are _____________
the selling of additional new shares
exclusive rights to a special name, image or slogan is a _________
trademark
which accounts are credited when payroll tax expense is debited?
unemployment tax payable FICA payable
partial year modifications are not necessary for ____________ depreciation
units of production
debentures
unsecured bonds
to record the disposal of a noncurrent asset, a company must first ___________
update depreciation expense to the date of sale
stock options are expensed ___________
when granted and are recorded at the estimated cost of the options
when does impairment occur?
when the future cash flow expected from using an asset is less than the asset's book value
long term liabilities are accounted for in the same way as short term liabilities, except that long term liabilities are on the books for more than one ___________
year
which of the following is the best measure of a company's profitability?
accrual based net income
which account is credited in an adjusting entry to record depreciation on machinery?
accumulated depreciation
a bond premium _________
arises when interest payments are higher than the cost of borrowing
cumulative preferred stock is entitled to receive current dividends plus "dividends in _________" before any future common dividends can be paid
arrears
the cost of a new building that is currently under construction, not for sale but for a company's own use, is reported on the balance sheet _______________
as an asset, construction in progress
shenandoah skies built a new lodge for its ski resort. which of the following costs should be capitalized?
$4200 paid in sales tax on the lumber to build the lodge $7000 in architect fees $70000 cost of lumber to build the lodge
common stock's par value is _____________
an insignificant amount specified in the corporate charter
payroll deductions _______________
are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives
why are changes in current liabilities classified as operating activities
are directly related to cash inflows and outflows arising from revenues and expenses involved in daily operations of the business
during the year, a $1,000,000 lawsuit was filed against a US company for unsafe working conditions. management and the attorneys feel that it is not likely that the company will lose the case. the plaintiff who filed the lawsuit has offered to settle for $600,000. management estimates that lawsuits for unsafe working conditions are generally settled for $300,000. what amount of contingent liability would be recorded for this lawsuit on the current balance sheet?
$0 no liability should be recorded because the loss is "not likely" to occur
a bond with a face value of $1,000 has a current price quote of 102.880. what is the bond's current price in dollars?
$1,028.80
as of december 31, 2018, $110 of interest had been accrued on a 12%, 1 year, $1,000 note payable. on january 31, 2019, the entry to record the payment of the note's principal and interest requires a _____________
$10 debit to interest expense $1,120 credit to cash $1,000 debit to notes payable $110 debit to interest payable
refurbish, inc. bought 1,000 shares of its own stock for $8,000. later it reissued the shares for $10,000. the journal entry to record the sale of treasury stock includes a _________________
$2,000 credit to additional paid in capital $8,000 credit to treasury stock
on january 1, 2015, ace electronics bought a new cash register for $2,500 and estimates a useful of 4 years and $0 residual value. for tax purposes, the total depreciation expense that ace can record over the cash register's useful life is _________
$2,500
daffy duct, inc. issues 10,000 shares of $1 par value common stock at $5 per share. the effect of this transaction on the accounting equation includes a ________________
$50,000 increase in total assets $50,000 increase in total stockholders' equity
x-it company signed a $500,000 5 year note payable to buy a new industrial machine. the company paid $2,000 cash for transportation of the machine and $1,000 cash for installation costs. the journal entry to record this transaction will include a _______________.
$500,000 credit to note payable $503,000 debit to machinery $3,000 credit to cash
atomic, inc. had 10,000 shares of $1 par value common stock outstanding prior to a 2 for 1 stock split. as a result of the stock split ___________
20,000 shares are outstanding with a $0.50 par value
which of the following are current liabilities?
accounts payable salaries and wages payable note payable due in 3 months
items such as unrealized gains and losses from pensions, foreign currencies or financial investments are reported as _____________
accumulated other comprehensive income
when calculating net cash flow provided by operating activities, an increase in accounts payable is _________________ net income because payments to suppliers are ____________ than new purchases
added to less
if the accounts receivable balance is $10 million less than the balance at the beginning of the year, then on the statement of cash flows (indirect method) $10 million should be ______________
added to net income
___________ an increase in unearned revenue to net income allows the inclusion of transactions that increase cash, but do not impact net imcome
adding
common stock's par value ______________
affects how common stock is recorded was introduced to prevent bankrupt companies from unfairly distributing company resources has become less meaningful because states use other means to prevent stockholders from removing capital from financially distressed companies
subtracting decreases in current liabilities such as salaries payable
allows the inclusion of transactions that decreased cash but not net income
adding increases in current liability such as income tax payable
allows the inclusion of transactions that decreased net income but not cash
subtracting increases in current assets such as accounts receivable
allows the inclusions of transactions that increased net income but not cash
transactions between a company and its stockholders affect the company's ___________ accounts only
balance sheet
the issue price of a bond is __________
based on a present value calculation based on what the market is willing to pay
the issue price of a bond is ___________
based on what the market is willing to pay based on a present value calculation
sony inc. spent $1,000,000 of development cost for commercially feasible prototypes. if sony follows IFRS, then the $1,000,000 would ____________
be recorded as an asset
term
bond issue that matures on a single date
bondholders are willing to pay a premium to acquire a bond because the ________________
bond's stated interest rate is higher than the market interest rate
convertible bonds
bonds that can be exchanged for shares of stock in the issuing company
serial bond
bonds that mature in installments
an asset's cost minus accumulated depreciation is its _____________ value
book
the law requires ___________ to pay FICA taxes
both employee and employer
which of these are intangible assets?
brand names patents trademarks
free cash flow is the amount of cash available to use to ___________
build up the company's cash balance expand the business through additional investing activities repay existing financing
the notes in the annual report, which follow the financial statements, should be reviewed to determine whether a company that follows IFRS chose to record its tangible and intangible assets at historical _________ or ___________ value
cost fair
all costs to get an asset in place and ready for its intended use should be ____________.
capitalized
extraordinary repairs to long lived assets are _____________ because they are large expenditures and increase the useful life of the asset
capitalized
short term, highly liquid investments that are purchased within 3 months of maturity can be considered __________ equivalents
cash
the entry to record the initial borrowing of cash by issuing a promissory note includes a debit to ___________ and a credit to ___________
cash notes payable
after its first year of business, best measures, inc.'s sales revenue were $100,000 of which $90,000 was collected and total expenses of $60,000 of which $20,000 was paid. which of the following statements is correct?
cash basis net income equals $70,000 accrual basis net income equals $40,000
the dividend payment date is when ___________
cash is decreased dividends payable is decreased
which of the following will result in the recording of goodwill?
company a purchases company b and pays more than the fair value of company b's assets and liabilities
discounts on bonds payable are recorded with a debit and are _______________
contra-liability
john smith works 40 hours for abc corp. for $15 per hour. required payroll deductions are: social security $37.20; medicare $8.70; federal income tax $58; and state income tax $10. assuming the payroll deductions are paid in the following month, abc would record john's pay with a journal entry that includes a ________
credit to FICA (social security and medicare) payable of $45.90 credit to state and federal income tay payable of $68 credit to cash of $486.10 debit to salaries and wages expense of $600
the journal entry to record the payment of a previously declared dividend includes a ___________
credit to cash debit to dividends payable
abc company issues a bond with a face value of $100,000 at par on january 1. abc prepares financial statements only at december 31, so no adjusting entries are made during the year to accrue interest. if the bond carries a stated interest rate of 6% payable in cash on december 31 of each year, the journal entry to record the first bond interest payment includes a _______________ of $6,000
credit to cash debit to interest expense
sunny sky paid $30,000 cash for a piece of land to be used for a new corporate headquarters building. the journal entry to record this transaction will include a $30,000 ____________.
credit to cash debit to land
in 2008, abc company issued $100,000 of 20 year bonds at face value. ten years later, in 2018, the company retired the bonds early by purchasing them in the open market at $101,000. the entry to record this transaction includes a ____________________
credit to cash of $101,000 debit to loss on bond retirement of $1,000 debit to bonds payable of $100,000
abc corporation issued bonds that pay interest each march 1 and september 1. the corporation's december 31 adjusting entry may include a _____________
credit to interest payable
under US GAAP, if a company violates loan covenants on long term debt but renegotiates the loan before releasing its financial statements, the debt remains classified as long term. under IFRS, the company must reclassify that long term debt as a _____________ liability
current
under US GAAP, if a company violates loan covenants on long term debt but renegotiates the loan before releasing its financial statements, the debt remains classifies as long term. under IFRS, the company must reclassify that long term debt as a ___________________ liability
current
accounts (or trade) payable is a __________ and increases when _______________ and decreases when _____________
current liability purchases are made on credit bills are paid
dilution solutions, inc. repurchased 1,000 shares of its $1 par value common stock for $5,000. the journal entry to record this transaction includes a $5,000 _________ to treasury stock
debit
when recording losses on the sale of fixed assets, the account, loss on disposal, is increased with a ____________
debit
on november 1, 2018, ABC corp borrowed $100,000 cash on an 1 year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. the last adjusting journal entry was made on december 31, 2018, ABC's year end. the entry to record the payment on october 31,2019 would include a _______________
debit to interest expense of $5,000 debit to interest payable of $1,000 credit to cash of $106,000 debit to note payable of $100,000
a decrease in accounts payable will result in a _____________ to net cash flow from operating activities
decrease
amortizing a bond discount will ____________ the discount balance and ______________ the carrying value of the bond so that when the bond matures the carrying value will __________ the face value
decrease increase equal
if the direction of change in accounts receivable is a ____________ from the prior period, the amount of that change is added to net income in the ___________ activities section of the statement of cash flows
decrease operating
mega corporation repurchased 1,000 shares of its $1 par value common stock for $8,000. the effect of this transaction on the accounting equation includes a ____________
decrease in stockholders' equity decrease in assets
morris lest, inc. sold its truck and received less cash than the truck's book value. the net effect of this sale on the accounting equation is __________
decrease to stockholders' equity decrease to assets
a purchase of an intangible asset results in a __________ to net cash flow provided by __________ activities
decrease- since an asset is being purchased, cash is being spent investing- purchasing intangible assets is not part of the company's normal daily operating activities. since the asset will benefit the company for more than one year, it is classified as an investing activity
in arriving at cash from operating activities using the indirect method, subtracting a decrease in accounts payable from net income adjusts net income for transactions that ___________ net income
decreased cash, but did not affect
when using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that ____________
decreased net income, but did not impact cash
when using the indirect method, adding an increase in an account such as wages and salaries payable to net income eliminates the effect of recording wages and salary expense the ___________ this period
decreased net income, but had not been paid in cash
a cash dividend differs from a 2 for 1 stock split in that a cash dividend ___________
decreases current assets decreases retained earnings
which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?
depreciation expense originally reduced net income, but the expense does not involve paying cash
which of the following statements are true?
depreciation of a truck equals the decline in the estimated usefulness of the truck impairment loss on an asset arises from a precipitous decline in the current value of the asset
why don't all companies use the same depreciation method?
different depreciation methods might better reflect the pattern in which assets' economic benefits are used
a distribution of a company's accumulated prior earnings is a ___________
dividend
a stock __________ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders
dividend
payment date
dividends payable is decreased
IFRS ___________________
divides the cost of an asset among its significant component parts and depreciates the components separately over their useful lives
a corporation _______________ have a legal obligation to pay dividends
does not