Accounting Chapters 4-7

Accumulated depreciation is

A contra-asset.

The entry to record the estimate for uncollectible accounts includes:

A debit to Bad Debt Expense.

The amount of cash owed to the company by its customers from the sale of products or services on account is known as:

Accounts Receivable.

When a company provides services on account, which account is debited?

Accounts Receivable.

Net income is defined as:

All revenues minus all expenses.

Over the entire service life of an asset, which depreciation method records the highest total depreciation?

All the methods result in the same total depreciation (straight-line, double declining, activity-based).

What expenditure should be recorded as an asset?

An addition.

Operating cash flows includes...

Cash paid for supplies.

Financing cash flows includes...

Cash received from the issuance of common stock.

Investing cash flows includes...

Cash received from the sale of a used company truck.

What is considered cash for financial reporting purposes?

Coins and currency. Debit card sales. Checks received from customers.

A sales discount is recorded by the seller as a(n):

Contra revenue.

A long-term asset is recorded at the:

Cost of the asset plus all costs necessary to the asset ready for use.

Which of the following intangible assets are not amortized?

Goodwill.

Operating income is defined as:

Gross Profit minus Operating Expenses.

What adjusts the company's balance of cash in a bank reconciliation?

Interest on bank deposit.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

Inventory.

What cost flow assumption must be used for financial reporting if it is also used for tax reporting?

LIFO.

What expenditure should be recorded as an expense?

Ordinary repairs and maintenance.

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress:

Passed the Sarbanes-Oxley Act.

Who is ultimately responsible for the establishment and success of a company's internal control system?

The company's top executives.

What represents the balance of Cost of Goods Sold at the end of the year?

The cost of inventory sold during the year.

The receivables turnover ratio is a measure of:

The number of times during a year that the average accounts receivable balance is collected.

A company's inventory turnover ratio measures:

The number of times the company sells its average inventory balance during the year.

The primary reason the balance of cash in the company's records will differ from the balance of cash in the bank's records includes:

Timing differences of recording cash transactions by the company and by the bank.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of:

$6,000.

The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?

$60,000.

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net realizable value of accounts receivable is:

$96,000.

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. What would be recorded when the customer remits payment on January 25?

Debit Sales Discount for $10.

Fan Company sells inventory on account. The entry to record this sale using a perpetual inventory system would include a:

Debit to Accounts Receivable. Credit to Sales Revenue Debit to Cost of Goods Sold.

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

Debit to Cost of Goods Sold.

What adjusts the bank's balance of cash in a bank reconciliation?

Deposits outstanding.

What correctly describes the nature of depreciation?

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

What cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

FIFO.

What is not recorded as an intangible asset on the balance sheet?

Research and development.

Gross profit is defined as:

Sales Revenue minus Cost of Goods Sold.

A company's gross profit ratio measures:

The amount by which the sale of inventory exceeds its cost per dollar of sales.