Accounting 1 Part 3

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.

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Land acquired as a speculation is reported under Investments on the balance sheet.

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Other receivables include nontrade receivables such as loans to company officers. Question options: 1) True 2) False

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Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The party promising to pay a note

6

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The amount due that must be paid at the due date of a note receivable

4

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill Location of a company

4

A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is Question options: 1) $9,100 2) $10,150 3) $10,900 4) $10,000

$10,150

On June 1, Scotter Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. ​ Using straight-line depreciation, calculate depreciation expense for the first year. Question options: 1) $17,500 2) $30,000 3) $40,000 4) $12,500

$17,500

On June 1, Michael Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. ​ Using straight-line depreciation, calculate depreciation expense for the second year. Question options: 1) $12,500 2) $40,000 3) $17,500 4) $30,000

$30,000

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill Reputation of a company

4

Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the second-year depreciation using the straight-line method. Question options: 1) $9,000 2) $19,200 3) $9,600 4) $13,200

$9,600

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The dollar amount stated on a promissory note

1

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Adding refrigerant to an air conditioning system

1

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Exterior and interior painting

1

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Fixing damage due to a car accident

1

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill A new kitchen gadget that can be produced by only one company

1

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The time between the date a note is issued and the due date of the note

2

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Installing a new air conditioning system in an old building

2

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair New landscaping

2

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Overhauling an engine in a large truck

2

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Paving a new parking lot

2

Match: 1. Ordinary maintenance and repairs 2. Asset improvements/Extraordinary Repair Resurfacing a pool in an apartment building

2

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill I-Tunes music

2

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill Rights to sell a book and make a profit

2

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The amount charged for using the money of another party

3

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill McDonald's golden arches

3

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill Mickey Mouse

3

Match: 1. Patent 2. Copyright 3. Trademark 4. Goodwill Nike swoosh

3

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate A formal, written instrument of credit that represents amounts due from customers

7

Match: 1. Face amount 2. Term 3. Interest 4. Maturity value 5. Dishonored note 6. Maker 7. Notes receivable 8. Interest rate The stated rate charged for using the money of another party

8

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? Question options: 1) Allowance for Doubtful Accounts 2) Interest Expense 3) Uncollectible Accounts Expense 4) Accounts Receivable

Accounts Receivable

Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write off this account, Dalton should debit Question options: 1) Accounts Receivable and credit Allowance for Doubtful Accounts 2) Allowance for Doubtful Accounts and credit Accounts Receivable 3) Bad Debt Expense and credit Allowance for Doubtful Accounts 4) Bad Debt Expense and credit Accounts Receivable

Allowance for Doubtful Accounts and credit Accounts Receivable

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? ​ Question options: 1) Allowance for Doubtful Accounts 2) Bad Debt Expense 3) Uncollectible Accounts Receivable 4) Accounts Receivable

Bad Debt Expense

Patents are exclusive rights to produce and sell goods with one or more unique features.

t

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

t

The formula for depreciable cost is Question options: 1) Initial cost - Accumulated depreciation 2) Initial cost + Residual value 3) Initial cost - Residual value 4) Depreciable cost = Initial cost

Initial cost - Residual value

The proper journal entry to purchase a computer costing $975 on account to be utilized within the business would be Question options: 1) Office Equipment 975 Accounts Payable 975 2) Office Supplies 975 Accounts Receivable 975 3) Office Equipment 975 Accounts Receivable 975 4) Office Supplies 975 Accounts Payable 975

Office Supplies 975 Accounts Payable 975

Which of the following should be included in the acquisition cost of a piece of equipment? Question options: 1) transportation costs 2) installation costs 3) testing costs prior to placing the equipment into production 4) all of these

all of these

​The process of transferring the cost of an asset to an expense account is called all of the following except Question options: 1) ​depletion 2) ​depreciation 3) ​amortization 4) ​allocation

allocation

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is Question options: 1) depreciation 2) depletion 3) allocation 4) amortization

amortization

A capital expenditure results in a debit to Question options: 1) a liability account 2) a capital account 3) an expense account 4) an asset account

an asset account

Fixed assets are ordinarily presented on the balance sheet Question options: 1) at replacement costs 2) in a separate section along with intangible assets 3) at current market values 4) at cost less accumulated depreciation

at cost less accumulated depreciation

Which of the following is included in the cost of land? Question options: 1) fences on the land 2) cost of paving a parking lot 3) brokerage commission 4) outdoor parking lot lighting attached to the land

brokerage commission

Expenditures that add to the utility of fixed assets for more than one accounting period are Question options: 1) committed expenditures 2) revenue expenditures 3) utility expenditures 4) capital expenditures

capital expenditures

Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance. Question options: 1) owners' equity, credit 2) contra asset, credit 3) contra asset, debit 4) owners' equity, debit

contra asset, credit

When a company receives an interest-bearing note receivable, it will Question options: 1) credit Notes Receivable for the maturity value of the note 2) debit Notes Receivable for the face value of the note 3) debit Notes Receivable for the maturity value of the note 4) credit Notes Receivable for the face value of the note

debit Notes Receivable for the face value of the note

The journal entry to record a note received from a customer to replace an account is Question options: 1) debit Notes Receivable; credit Accounts Receivable 2) debit Notes Receivable; credit Notes Payable 3) debit Accounts Receivable; credit Notes Receivable 4) debit Cash; credit Notes Receivable

debit Notes Receivable; credit Accounts Receivable

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called Question options: 1) amortization 2) depletion 3) deferral 4) depreciation

depletion

The two methods of accounting for uncollectible receivables are the allowance method and the Question options: 1) direct write-off method 2) cost method 3) equity method 4) interest method

direct write-off method

Two methods of accounting for uncollectible accounts are the Question options: 1) direct write-off method and the accrual method 2) direct write-off method and the allowance method 3) allowance method and the net realizable method 4) allowance method and the accrual method

direct write-off method and the allowance method

A disadvantage of factoring is that the company selling its receivables immediately receives cash.

f

Allowance for Doubtful Accounts is a liability account.

f

Minerals removed from the earth are classified as intangible assets.

f

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined, the amounts can not be changed.

f

The cost of computer equipment does not include the consultant's fee to supervise installation of the equipment.

f

The interest on a 6%, 60-day note for $5,000 is $300.

f

The method used to calculate the depletion of a natural resource is the straight-line method.

f

The normal balance of the accumulated depreciation account is a debit.

f

When a note is written to settle an open account, no entry is necessary.

f

Which of the following is included in the cost of constructing a building? Question options: 1) cost of paving the parking lot 2) insurance costs during construction 3) cost of repairing vandalism damage during construction 4) cost of removing the demolished building existing on the land when it was purchased

insurance costs during construction

A note receivable due in 18 months is listed on the balance sheet under the caption Question options: 1) long-term liabilities 2) fixed assets 3) current assets 4) investments

investments

The term "receivables" includes all Question options: 1) cash to be paid to creditors 2) merchandise to be collected from individuals or companies 3) cash to be paid to debtors 4) money claims against other entities

money claims against other entities

The receivable that is usually evidenced by a formal, written instrument of credit is a(n) Question options: 1) trade receivable 2) income tax receivable 3) accounts receivable 4) note receivable

note receivable

Other receivables includes all of the following except​ Question options: 1) notes receivable 2) ​receivables from employees 3) ​interest receivable 4) taxes receivable

notes receivable

A fixed asset's estimated value at the time it is to be retired from service is called Question options: 1) market value 2) residual value 3) book value 4) carrying value

residual value

A capitalized asset will appear on the balance sheet as a long-term asset.

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Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period.

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An estimate of the amount for which an asset can be sold at the end of its useful life is called residual value.

t

Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.

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Capital expenditures are costs of acquiring, constructing, adding, or replacing property, plant and equipment.

t

Generally accepted accounting principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts.

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Intangible assets differ from property, plant, and equipment assets in that they lack physical substance.

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The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful Accounts is called the net realizable value of the receivables.

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The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

t

The direct write-off method records bad debt expense in the year the specific account receivable is determined to be uncollectible.

t

The direct write-off method records bad debt expense when an account is determined to be uncollectible.​

t

The double-declining-balance depreciation method calculates depreciation each year by taking twice the straight-line rate times the book value of the asset at the beginning of each year.

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The double-declining-balance method is an accelerated depreciation method.

t

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.

t

When a note is received from a customer on account, it is recorded by debiting Notes Receivable and crediting Accounts Receivable.

t

When companies sell their receivables to other companies, the transaction is called factoring.

t

​GAAP requires companies with a large amount of receivables to use the allowance method.

t

Indications that an account may be uncollectible include all of the following except Question options: 1) ​the customer files for bankruptcy 2) the customer is making small but regular payments 3) ​the customer cannot be located 4) ​​the customer closes its business

the customer is making small but regular payments

A characteristic of a fixed asset is that it is Question options: 1) intangible 2) held for sale in the ordinary course of the business 3) a short-term investment 4) used in the operations of a business

used in the operations of a business

One of the weaknesses of the direct write-off method is that it Question options: 1) violates the matching principle 2) is based on estimates 3) is too difficult to use for many companies 4) understates accounts receivable on the balance sheet

violates the matching principle

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited Question options: 1) when a credit sale is past due 2) whenever a predetermined amount of credit sales have been made 3) when an account is determined to be worthless 4) at the end of each accounting period

when an account is determined to be worthless

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000.​ Which of the following is correct regarding the entry to record estimated uncollectible receivables? Question options: 1) ​Cash will be debited 2) ​Allowance for Doubtful Accounts will be credited 3) ​Bad Debt Expense will be credited 4) ​Accounts Receivable will be debited

​Allowance for Doubtful Accounts will be credited

Sands Company purchased mining rights for $500,000. They expect to harvest 1 million tons of ore over the next five years. During the current year, Sands mined 350,000 tons of ore. The entry to record the depletion would include Question options: 1) ​a debit to Accumulated Depletion for $175,000 2) ​a debit to Depletion Expense for $175,000 3) ​a credit to Accumulated Depletion for $350,000 4) ​a credit to Depletion Expense for $350,000

​a debit to Depletion Expense for $175,000

The natural resources of some companies include​ Question options: 1) ​timber, metal ores, and minerals 2) ​timber, equipment, and patents 3) ​metal ores, copyrights, and supplies 4) ​minerals, trademarks, and land

​timber, metal ores, and minerals