accounting 9 CH

The Three Little Pigs purchased three houses for a total cost of $160,000. Appraisal values for the three completed houses were: straw house, $40,000; wood house $60,000; and brick house $100,000. Using the basket purchase allocation, the recorded value of the brick house should be ______. $53,333 $66,667 $100,000 $80,000

80,000

Thermal, Inc. bought a new office computer for $5,000 cash. The journal entry to record this transaction will include a $5,000 ______. (Check all that apply.) Multiple select question. credit to Equipment credit to Cash debit to Equipment Expense debit to Cash debit to Equipment

credit to Cash debit to Equipment

For long-lived assets that have been in use for more than one accounting period, Depreciation Expense on the ______ Accumulated Depreciation on the ______. Multiple choice question. balance sheet will be greater than; income statement income statement will be equal to; balance sheet balance sheet will be less than; income statement balance sheet will be equal to; income statement income statement will be greater than; balance sheet income statement will be less than; balance sheet

income statement will be less than; balance sheet

An asset's useful life ______. is expressed in terms of time, not units of capacity may be expressed in terms of time or units of capacity is the actual time the asset ends up being used

may be expressed in terms of time or units of capacity

The book (or carrying) value of equipment equals Equipment ______. plus Depreciation Expense minus Depreciation Expense plus Accumulated Depreciation minus Accumulated Depreciation

minus Accumulated Depreciation

The formula for the fixed asset turnover ratio equals ______. Multiple choice question. average net fixed assets/total assets net revenue/total assets net income/average total assets net revenue/average net fixed assets

net revenue/average net fixed assets

Thermal, Inc. bought a new computer system for $50,000 cash. What is the effect of this purchase on the company's total assets? Total assets ______. increase remain the same decrease

remain the same

The straight-line depreciation method ______. Multiple choice question. reports a higher amount of depreciation expense in the early years of an asset's use reports more depreciation expense in a year when an asset is heavily used and less in a year when the asset is hardly used at all can be used only by small companies reports an equal amount of depreciation expense each year

reports an equal amount of depreciation expense each year

The formula for the fixed asset turnover ratio equals net divided by average net fixed assets. (Enter only one word per blank.)

sales

The list price of a computer was $100,000. The sales tax on the computer was 5%. The delivery cost was $1,000. The cost to assemble the computer was $500. The Equipment account should be debited for a total of ______. $100,000; the rest should be expensed $100,500; the rest should be expensed $105,000; the rest should be expensed $106,500 All of the costs should be expensed

$106,500

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

On January 1, X-it Company bought a new delivery truck for $30,000. X-it plans to use the truck for 4 years, after which it will be sold for $6,000. Depreciation Expense for the 1st year using double-declining-balance equals ______. Multiple choice question. $12,000 $15,000 $7,500 $6,000

$15,000

Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. The cash register's depreciable cost equals ______. Multiple choice question. $575 $2,300 $2,500 $200

$2,300

On January 1, X-it Company bought a new delivery truck for $30,000. X-it plans to use the truck for 4 years, after which it will be sold for $6,000. Depreciation Expense for the 2nd year using double-declining-balance equals ______. Multiple choice question. $4,500 $3,000 $6,000 $7,500 $15,000

$7,500

On January 1, Busy Beaver bought a new industrial lathe for $210,000. It expects to use the lathe for 10,000 hours over the next 5 years and then sell it for $10,000. Busy Beaver used the lathe for 2,000 hours in its 1st year and 2,500 hours in its 2nd year. Accumulated Depreciation at December 31 of the 2nd year, using units-of-production, equals ______. Multiple choice question. $50,000 $90,000 $80,000 $40,000 $120,000

$90,000

Assuming straight-line is used, which of the following is the formula for calculating revised annual depreciation? Multiple choice question. (Book value-new residual value) x (1/life) (Book value-new residual value) x (1/remaining Useful life) (Cost-residual value) x (1/remaining life) (Cost-residual value) x (1/life)

(Book value-new residual value) x (1/remaining Useful life)

The formula for calculating straight-line depreciation is ______. Multiple choice question. cost x useful life (cost - residual value) x (1/useful life) cost/useful life (cost + residual value) x (1/useful life)

(cost - residual value) x (1/useful life)

Which of the following may lead to a revision of an estimate of a company's depreciation expense? (Check all that apply.) Multiple select question. A change in the estimated amount of property taxes A change in the estimated residual value A change in the estimated useful life Extraordinary repairs that significantly extend the asset's usefulness

A change in the estimated residual value A change in the estimated useful life Extraordinary repairs that significantly extend the asset's usefulness

Which account is credited in an adjusting entry to record depreciation on machinery?

Accumulated Depreciation

Vicious Cycle built a new building. Which of the following costs should be expensed? Party to celebrate grand opening Sales tax on the lumber Architect fees Cost of lumber

Party to celebrate grand opening

Given each of the following start-up companies are identical except for the depreciation methods and estimates used, which company would report the higher net income in the first year? Company C used double-declining balance and estimated useful lives of 5 years and $1,000 residual values. Company A used straight-line and estimated useful lives of 5 years and $0 residual value. Company B used straight-line and estimated useful lives of 5 years and $1,000 residual values.

Company B used straight-line and estimated useful lives of 5 years and $1,000 residual values.

Multiple Choice Question Which method will report a lower net income in the first year of an asset's life? Multiple choice question. They will be the same Declining-balance Straight-line

Declining-balance

Which method will report a lower net income in the first year of an asset's life? Straight-line Declining-balance They will be the same

Declining-balance

Which of these is an accelerated depreciation method? Multiple choice question. Straight-line Units-of-production Declining-balance

Declining-balance

Which of these depreciation methods are allowed by GAAP? (Select all that apply.) Multiple select question. Economic-benefits Reclining-balance Declining-balance Units-of-production Salvage value Straight-line

Declining-balance Units-of-production Straight-line

Which of these are long-lived productive assets? (Check all that apply.) Delivery equipment Machinery Inventory Retained earnings Cash

Delivery equipment Machinery

What effect will the units-of-production depreciation method have when the actual production is higher than in other periods? Multiple choice question. Accumulated Depreciation will be lower. The book value will be higher. Depreciation Expense will be higher. Depreciation Expense will be lower.

Depreciation Expense will be higher.

Straight-line matches Choice usage and depreciation expense are the same Units-of-production matches Choice usage and depreciation expense varies depending on actual usage Declining balance matches Choice usage and depreciation expense decrease as efficiency decreases

Match the depreciation method with how the assets' economic benefits are assumed to be used and expensed over the asset's useful life.

The entry to record annual straight-line depreciation will decrease a company's ______. Multiple select question. Total Expenses Net Income asset book value Cash Accumulated Depreciation Total Assets

Net Income asset book value Total Assets

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed. What was the effect of this fraud on WorldCom's income statement? (Check all that apply.) Multiple select question. Net income was too low. Expenses were too high. Net income was too high. Expenses were too low. Retained earnings were too high.

Net income was too high. Expenses were too low.

Both Spam Am Airlines and TWB Airlines used straight-line depreciation for a $20 million jet. Spam Am used an estimated 35 year useful life and TWB Airlines used an estimated 25 year life for its planes but estimated similar residual values. As result of the differences in useful lives, which company will appear more profitable? Multiple choice question. Spam Am TWB Neither, the estimated useful lives will not affect their profitability.

Spam Am

Acme Enterprises just bought a new manufacturing machine. Which of these costs should be capitalized? (Check all that apply.) Multiple select question. The $15,000 freight bill to deliver the machine to Acme's factory The $500,000 invoice price of the machine The $100 increase in monthly utility bills to operate the machine The $8,000 cost of tearing down Acme's factory wall to get the machine inside The $500 annual increase in insurance premiums, based on the cost of the machine The $200 annual increase in personal property taxes, based on the cost of the machine

The $15,000 freight bill to deliver the machine to Acme's factory The $500,000 invoice price of the machine The $8,000 cost of tearing down Acme's factory wall to get the machine inside

Which of the following entries result in a decrease in total assets and stockholders' equity? ecording a purchase as a capital expenditure The adjusting entry to record the depreciation of long-live assets The adjusting entry to record the interest owed on a note issued when purchasing a long-lived asset Payment of extraordinary repairs that significantly improves the effectiveness of a long-lived asset

The adjusting entry to record the depreciation of long-live assets

How does management estimate useful lives and residual values? Multiple choice question. They use professional judgment. They guess. They use a dartboard. They do not make these estimates.

They use professional judgment.

Which of the following financial statement totals are reduced by the adjusting entry to record amortization? (Check all that apply.) Multiple select question. Total assets on the balance sheet Cash from operating activities on the statement of cash flows Net income on the income statement Total stockholders' equity on the balance sheet Total liabilities on the balance sheet

Total assets on the balance sheet Net income on the income statement Total stockholders' equity on the balance sheet

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed. What was the effect of this fraud on WorldCom's balance sheet? (Check all that apply.) Total assets were too high. Retained earnings were too low. Total assets were too low. Retained earnings were too high.

Total assets were too high. Retained earnings were too high.

Tangible assets are first recorded at ______. the amount of cash paid for them cost minus residual (or salvage) value current market value or resale value all costs to acquire them and prepare them for use

all costs to acquire them and prepare them for use

Revenue expenditures are recorded with a debit to ______. an asset when they related to ordinary repairs an expense when they relate to extraordinary repairs an expense when they relate to ordinary repairs and maintenance a revenue account when they relate to extraordinary repairs a revenue account when they relate to ordinary repairs

an expense when they relate to ordinary repairs and maintenance

Long-lived assets are ______. (Check all that apply.) assets acquired for use over 1 or more years intended for immediate resale always tangible assets that will be used or converted to cash within 1 year used by the business

assets acquired for use over 1 or more years used by the business

The effect of capitalizing a cost that should have been expensed causes ______. liabilities to be understated on the balance sheet and expenses to be understated on the income statement assets to be understated on the balance sheet and expenses to be overstated on the income statement liabilities to be overstated on the balance sheet and expenses to be understated on the income statement assets to be overstated on the balance sheet and expenses to be understated on the income statement

assets to be overstated on the balance sheet and expenses to be understated on the income statement

Amortizing intangible assets affects the accounting equation by causing ______. (Check all that apply.) Multiple select question. liabilities to increase assets to increase stockholders' equity to increase assets to decrease liabilities to decrease stockholders' equity to decrease

assets to decrease stockholders' equity to decrease

Which of these assets are not depreciated? (Select all that apply.) Multiple select question. machinery cash buildings inventory equipment land

cash inventory land

Depreciation Expense of a long-lived asset calculated using the straight-line depreciation method will be a ______ amount each year. larger constant smaller

constant

Recording depreciation is an application of the ______. Multiple choice question. unit-of-measure assumption cost principle expense recognition (matching) principle separate entity assumption

expense recognition (matching) principle

Ordinary repairs and maintenance costs should be ______. Multiple choice question. added to the cost of the asset capitalized expensed as incurred depreciated over the life of the related asset

expensed as incurred

Ordinary repairs and maintenance costs should be ______. Multiple choice question. depreciated over the life of the related asset added to the cost of the asset expensed as incurred capitalized

expensed as incurred

On January 1, Busy Beaver bought a new industrial lathe for $210,000. It expects to use the lathe for 10,000 hours over the next 5 years and then sell it for $10,000. Busy Beaver used the lathe for 2,000 hours in its 1st year and 2,500 hours in its 2nd year. Using units-of-production, Depreciation Expense will be ______. Multiple choice question. greater in the 2nd year since the lathe was used more the same for both years greater in the 1st year since the lathe was used more

greater in the 2nd year since the lathe was used more

The entry to record the purchase of $10,000 of equipment by signing an $8,000 note and paying the rest with cash causes total assets to ______. increase by $8,000 decrease by $2,000 increase by $2,000 decrease by $8,000 increase by $10,000 decrease by $10,000

increase by $8,000

Capitalized costs differ from expenses in that only capitalized costs result in a(n) ______. Multiple choice question. increase to liabilities increase to long-lived assets decrease to stockholders' equity

increase to long-lived assets

Capitalized costs differ from expenses in that only capitalized costs result in a(n) ______. increase to liabilities increase to long-lived assets decrease to stockholders' equity

increase to long-lived assets

Select all that apply Which of these assets are not depreciated? (Select all that apply.) Multiple select question. land machinery inventory buildings cash equipment

land inventory cash

Ace Electronics bought a new cash register for $2,500. Ace originally planned to use the cash register for 4 years and then sell it for $200. After 4 years, Ace had recorded $2,300 of depreciation. If Ace continues to use the cash register, still planning to sell it eventually for $200, then Ace should record ______. Multiple choice question. the removal of the cash register from its books because it is fully depreciated no additional depreciation $575 of additional depreciation $200 of additional depreciation

no additional depreciation

Another term for residual value is value. (Enter only one word per blank.)

salvage

In the case of a basket purchase, the cost of the land and building is ______. split equally among the assets purchased recorded to the Building account, and not the Land, because land does not depreciate split among the assets purchased based on management's judgment split among the assets purchased in proportion to the market value of the assets as a whole

split among the assets purchased in proportion to the market value of the assets as a whole

Miss Hap, the bookkeeper, forgot to record the depreciation for the year. This error will cause ______. (Check all that apply.) Multiple select question. stockholders' equity to be overstated stockholders' equity to be understated assets to be understated assets to be overstated liabilities to be understated liabilities to be overstated

stockholders' equity to be overstated assets to be overstated

Cost - residual value) x (1/useful life) is the formula for calculating the - method of depreciation. (Enter only one word per blank.)

straight, line

An asset's residual value is ______. (Check all that apply.) Multiple select question. equal to its accumulated depreciation its cost plus any costs to install it and place it in service the estimated amount it can be sold for at the end of its useful life the same as its salvage value its cost minus its accumulated depreciation

the estimated amount it can be sold for at the end of its useful life the same as its salvage value

(Cost-residual value) x (actual production this period/estimated total production) is the formula for calculating ______ depreciation. Multiple choice question. straight-line units-of-production double-declining EBITDA

units-of-production