Objective Unit 1: The Balance Sheet - Assets Due date: 5/23/2018

A-1 Roofing Service incurred the following costs for its service truck during the current year: Oil changes and lubrication $ 300 Transmission overhaul $1,800 Modification to allow hauling additional equipment for other types of jobs 2,500 Repair to cracked windshield 200 Replacement of tires 900 How much of the aforementioned costs will be expensed in the current year? $1,400 $900 $1,800 $500

$1,400

Speedy Pizza purchased a used delivery van, and the purchase price was $10,000. In addition, it paid $75 for title and registration fees, $400 for a new set of tires, $200 to have the van repainted and lettered, and $100 for a speeding ticket that was received while returning the van to the pizza shop. What cost will be entered in the vehicle account for this van? $675 $10,675 $10,000 $20,000

$10,675 Well done! $10,000 + 75 + 400 + 200 = $10,675

On January 2, 2012, Capital Company added a new jet to its fleet. It costs $12,000,000 and is estimated to have a useful life of 10 years and a residual value of $2,000,000. It is estimated to have 10,000 hours of flying time. During its first year, it flew 900 hours. What is the first year's depreciation using the double declining balance depreciation method?

$12,000,000 × 20% = $2,400,000 depreciation expense

Martins Hardware has cash of $42,100 in the bank and on hand, net accounts receivable from customers of $29,200, and prepaid expenses of $12,000. It also has $89,000 in current liabilities and $80,000 in long-term liabilities. What is the current ratio for Martins Hardware?

0.94

Office Renovation Inc. has cash of $22,850, net accounts receivable of $18,250, short-term investments of $5,000, and supplies of $10,800. It also has $15,199 in current liabilities and $28,000 in long-term liabilities. What is the current ratio for Office Renovation Inc.?

3.74

Janice Janitorial Supplies has cash of $28,000, net accounts receivable of $33,500, short-term investments of $6,000, and inventory of $20,000. It also has $22,500 in current liabilities and $37,500 in long-term liabilities. What is the current ratio for Janice Janitorial Supplies? 2.73 3.62 3.00 3.89

3.89

On January 2, 2012, Capital Company added a new jet to its fleet. It costs $12,000,000 and is estimated to have a useful life of 10 years and a residual value of $2,000,000. It is estimated to have 10,000 hours of flying time. During its first year, it flew 900 hours. What is the first year's depreciation using the straight-line depreciation method?

900 hours 2012 flight time × $1,000 depreciation per hour = $900,000

Which of the following is an example of a lump-sum purchase? Inventory only A factory including equipment and inventory Equipment only Land only

A factory including equipment and inventory

Which of the following items is not considered a current asset?

Buildings

Which of the following is one of the categories of plant asset expenditures? Tangible assets Capital expenditures Petty cash Supplier information

Capital expenditures expenses

Which of the following statements is true about capital expenses? Capital expenses are capitalized by debiting the asset's account for the amount of the repair. Capital expenses normally include cash and prepaid expenses. Capital expenses include inventory that a company has purchased to sell soon. They are presented in the balance sheet in the order of their liquidity.

Capital expenses are capitalized by debiting the asset's account for the amount of the repair.

Which of the following is a tangible item that is included in plant assets? Computers Investments Supplier information Cash

Computers, land

Which of the following is an entry that occurs during purchase of land? Debit cash Debit equity Credit the asset account Credit cash

Credit cash Debit the asset account

Which of the following represents working capital?

Current assets minus current liabilities

Which of the following could be a monthly entry to depreciate a building? Are not necessary under Generally Accepted Accounting Principles (GAAP) A reconciliation of petty cash Debit depreciation expense Based on the historical cost principle

Debit depreciation expense

Red Onion Restaurant classifies a 6-month prepaid insurance policy as a current asset. Which of the following factors is the restaurant's rationale based on? Materiality Operating cycle Definition Liquidity

Definition

On January 2, 2012, Capital Company added a new jet to its fleet. It costs $12,000,000 and is estimated to have a useful life of 10 years and a residual value of $2,000,000. It is estimated to have 10,000 hours of flying time. During its first year, it flew 900 hours. What is the first year's depreciation using the straight-line depreciation method?

Depreciation = $10,000,000 / 10 years = $1,000,000 per year

On January 2, 2012, Capital Company added a new jet to its fleet. It costs $12,000,000 and is estimated to have a useful life of 10 years and a residual value of $2,000,000. It is estimated to have 10,000 hours of flying time. During its first year, it flew 900 hours. What is the first year's depreciation using the straight-line depreciation method? Depreciation = $10,000,000 / 10 years = $1,000,000 per year Depreciation = $10,000,000 / 5 years = $2,000,000 per year Depreciation = $10,000,000 / 4 years = $2,500,000 per year The answer cannot be calculated from the given information.

Depreciation = $10,000,000 / 10 years = $1,000,000 per year

How is a business' current ratio that is used to find liquidity calculated?

Dividing the total current assets by the current liabilities

Which of the following statements is true regarding the calculation of double declining balance? It does not accurately reflect the depreciation of an item. During the last year of the asset life, the depreciation is taken down to and no further than the residual life. Residual value is included in the calculation. Double declining balance is a two-step process.

During the last year of the asset life, the depreciation is taken down to and no further than the residual life., Residual value is not included in the calculation. During the last year of the asset's life, the depreciation is taken down to and no further than the residual life.

Which of the following assets is not expected to be converted to cash or consumed within 1 year or the operating cycle? Goodwill Accounts receivable Supplies Inventory

Goodwill

Which of the following characteristics is included in plant assets? Assets to be consumed within one year High cost Ability to be sold or traded High levels of liquidity

High cost Ability to be sold or traded

Which of the following are examples of current assets? I. Building II. Accounts receivable III. Merchandise inventory for a catering business IV. Supplies

II. Accounts receivable III. Merchandise inventory for a catering business IV. Supplies

Which of the following statements is true regarding double declining balance? It does not accurately reflect the depreciation of an item. It does not depreciate an asset faster than other methods. It depreciates an asset faster than other methods. It does not save a company money on taxes.

It depreciates an asset faster than other methods.

Which of the following would result if a business has a current ratio less than 1? It may not have enough liquidity to cover short-term expenses. It may be in position to generate high revenues. It may be a company that external investors would be interested in. It may be able to easily pay their short-term expenses.

It may not have enough liquidity to cover short-term expenses.

Which of the following items is included in current assets?

Items that can be converted into cash within a year

Which of the following defines a measurement of a company's available cash? Current liabilities Liquidity Current assets Accounts receivable

Liquidity

Which of the following is included during the transaction for land? Coffee for the surveyors The cost of the building The purchase price of the land Credit equity for the amount of the purchase

The purchase price of the land

Which of the following is included during the transaction for land? The cost of the building Coffee for the surveyors The purchase price of the land Credit equity for the amount of the purchase

The purchase price of the land The cost to prepare the land for use

Suppose that a company has $50,000 of current assets and $25,000 of current liabilities. The current ratio would be calculated by dividing $50,000 by $25,000 to arrive at a 2:1 ratio. Which of the following is true about this company? This company has strong liquidity. This company has weak liquidity. This company should not be able to pay their short-term expenses. This company may be considered to be a relatively safe company to invest in.

This company has strong liquidity. This company may be considered to be a relatively safe company to invest in.

Suppose that a company has $25,000 of current assets and $50,000 of current liabilities. The current ratio would be calculated by dividing $25,000 by $50,000 to arrive at a 0.5:1 ratio. Which of the following is true about this company?

This company may be a risky investment. This company should not be able to pay their short-term expenses. This company has weak liquidity.

What are the examples of intangible assets? (Choose 2)

Trademarks Brand names

How do intangible assets differ from tangible assets? (Choose 2) Intangible assets depreciate faster than tangible assets Typically, they cannot be touched They are not physical in nature Intangible assets can be touched

Typically, they cannot be touched They are not physical in nature

Which of the following is a depreciation method? Increasing balance Debiting expenses Units of production Right angle

Units of production

How are plant assets depreciated? By including residual value in the calculation Using one of various methods available By using double declining balance, a two-step process By photosynthesis

Using one of various methods available, Using the matching principle

The straight-line method __________. allocates equal amounts to each year is one of the most complicated methods of depreciation is the least accurate method of depreciation is preferable over the units of production method

allocates equal amounts to each year is a very simple method to calculate

Intangible assets that have a specific useful life are not depreciated, but _________ through the use of the straight-line method.

amortized

Impairment tests________. (Choose 2) are conducted on goodwill are never conducted on goodwill show adjusted value of goodwill are not effective

are conducted on goodwill are conducted on goodwill show adjusted value of goodwill are conducted on goodwill

Cash equivalents would not include ___________. debt instruments with maturity dates of less than three months from the date of the purchase highly liquid equity securities a sinking fund for bonds that mature in three years accounts receivable from a financial institution

cash not available for current operations highly liquid equity securities

The cost of an asset includes the purchase price plus __________. labor rate of depreciation land commissions

commissions

A note receivable due in 90 days is listed on the balance sheet under the caption ___________. long-term assets current assets long-term liabilities fixed assets

current assets

The accounts on a balance sheet that can be easily converted into cash or consumed quickly, within a year or within the normal operating cycle of the business are ___________.

current assets

The units of production method __________. depreciates by years does not accurately reflect the depreciation of an item is the most accurate method of depreciation depreciates by units

depreciates by units allocates depreciation based on usage

Franchises are________. (Choose 2)

governed by specified conditions granted to sell goods

Intangible assets may __________. (Choose 2) not have a specific life be physical assets have an indefinite life have a specific life

have an indefinite life have a specific life

The double declining balance method __________. allocates equal amounts to each year is a very simple method to calculate is equal to 2 × (1 / Useful life) is preferable over the straight-line method

is equal to 2 × (1 / Useful life)

A patent________. (Choose 2) cannot be purchased is shown on the income statement is the right to produce an invention is the right to sell an invention

is the right to produce an invention is the right to sell an invention

Plant assets are depreciated over time due to the __________ principle. appreciated-/ matching revenue difficult

matching

To reduce the value of intangible assets, amortize them ________. bi-weekly daily monthly never

monthly

Goodwill is ________. (Choose 2)

paying more for something than it is worth for reasons other than financial often acquired with a purchase

Intangible assets are________. (Choose 2) shown at their net book value always exhausted never shown at their net book value can include natural resources

shown at their net book value can include natural resources

Current assets include cash and all other assets expected to become cash or be consumed ___________.

within 1 year or one operating cycle, whichever is longer

Assets are depreciated down to __________. zero the market value last year's price the sentimental value

zero