unit 3 fin acc txst

Assuming straight-line is used, which of the following is the formula for calculating revised annual depreciation?

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

_____ is an insignificant value per share of capital stock specified in the corporate charter.

Par value

The entry to record the employer's obligation for FICA and state unemployment taxes includes a ______.

credit to FICA Payable debit Payroll Tax Expense credit Unemployment Tax Payable

Any difference between the cost of the treasury stock and the price when it is re-issued is recorded as a ______.

debit to Additional PIC when the re-issue price is below the cost

The P/E ratio is calculated by ______.

dividing the stock price by EPS

When a stockholder sells its shares to another person for more than its original cost, the corporation ______.

does not make a journal entry

Treasures, Inc. repurchased 1,000 shares of its $1 par value common stock for $100,000. The journal entry to record this transaction includes a ______.

$100,000 debit to Treasury Stock $100,000 credit to Cash

The entry to record the issuance of 100, $1,000 bonds for 98.000 includes a ______.

credit to Bonds Payable for $100,000 debit to Cash for $98,000 debit to Discount on Bonds Payable for $2,000

The journal entry to record the amortization of an intangible asset includes a ______.

debit to Amortization Expense

For investors, credit rating agencies provide independent, easy-to-use measurements of relative credit risk. The most well-known credit rating agencies are ______.

Moody's Standard & Poor's

The date of record is the date on which the corporation ______.

finalizes its list of stockholders who will receive dividends

A major advantage of the corporate form of ownership is ______ legal liability.

1,000,000

________ is a popular way for small business ventures to raise funds from large numbers of individuals of the Internet.

Crowdfunding

________ _________ on a classified balance sheet report the obligations that will be paid or met within the company's operating cycle or within 1 year, whichever is longer.

Current liabilities

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

$106,500

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 ______.

$2,300

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 ______.

$80,000

What is the formula for calculating units-of-production depreciation?

(Cost - residual value) x (actual production this period/estimated total production)

On January 1, 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. If Ace uses straight-line depreciation, depreciation expense for the 1st year ended December 31 equals ______.

$575

Stockable, Inc. began business on January 1 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of 6%, $100 par value preferred stock. Stockable declared and paid a $0.50 dividend to its common stockholders. The preferred stockholders must have received ______ per share dividend.

$6

An intangible asset may be recorded only if ______.

Purchased

For investors, the ______ provide independent, easy-to-use measurements of relative credit risk.

credit rating agencies

The journal entry to record the payment of a previously declared dividend includes a ______

credit to Cash debit to Dividends Payable

Anudu, Inc. sold equipment and received more cash than the equipment's book value. The effect of this sale on the accounting equation includes a(n ______. (

increase to stockholders' equity increase to assets

Bond carrying value equals Bonds Payable ______.

minus Discount on Bonds Payable plus Premium on Bonds Payable

As of December 31, $110 of interest had been accrued on a 12%, 1-year, $1,000 note payable. On January 31, the entry to record the payment of the note's principal and interest requires a ______.

$1,120 credit to Cash $10 debit to Interest Expense $110 debit to Interest Payable $1,000 debit to Notes Payable

An asset's cost is $60,000 with an estimated residual value of $10,000 and useful life of 10 years. At the end of the asset's useful life, its book (or carrying) value equals ______.

$10,000

From the issuing company's perspective, a bond is a liability. From a bondholder's perspective, the bond is a(n)

Investment / asset

A bond's issue price is determined by the ______.

Investors

GenZ, Inc. debited Cash and credited Bonds Payable for $100,000. Which of the following is an appropriated description for this transaction?

Issued 100, $1,000 bonds at face value

Similar to depreciation, _____ is the expensing of intangible asset's usefulness used during the accounting period.

amortization or amortizing

The formula for calculating straight-line depreciation is ______.

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

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 / increase

The journal entry to record depreciation include which of the following?

Debit Depreciation Expense Credit Accumulated Depreciation

Which of these are long-lived productive assets?

Delivery equipment Machinery

Which of the following statements is correct?

Depreciation is not intended to report an asset at its current value.

A share of stock that has a dividend rate specified on it must be ______.

preferred stock

If the proceeds from selling an asset is less than the asset's book value, then a ______

Loss on Disposal will be debited

________ _________is a liability that represents the amount the company owes to others as a result of issuing a promissory note.

Notes Payable

If an adjusting entry for interest owed is recorded then the company must have issued

Notes payable

An end-of-period adjusting entry that debits Deferred Revenue most likely will credit a(n) ______ account.

Revenue

Ice Queen bought a new refrigerated delivery truck. The engine has a useful life of 3 years, the refrigeration unit has a useful life of 2 years, and the body of the truck has a useful life of 10 years. Under IFRS, how many assets should Ice Queen record?

Three

Refurbish, Inc. bought 1,000 shares of its own stock at $8 a share. Later, it reissued the shares for $10,000. The effect of the entry to record the sale of treasury stock on the accounting equation includes a(n) ______.

$10,000 increase in stockholders' equity

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

$115000

Sunny Skys, Inc. bought a derelict hunting lodge, which it tore down at a cost of $45,000 and replaced with a new lodge. The demolition cost should be ______.

Capitalized

Which of the following is true?

Capitalized costs increase long-lived assets.

After a company has issued its bonds, the daily fluctuations of market rates of interest ______.

are not considered transactions and thus not recorded in the company's accounting records

Dividends on preferred stock _____

are paid before dividends on common stock are more attractive than common stock dividends to investors who want a stable income may be paid at a fixed rate, such as 7%

Transactions between a company and its stockholders affect the company's _____ accounts only

balance sheet

Accumulated Depreciation is reported on the ______.

balance sheet netted against the related long-lived asset

If an adjusting entry is required for interest owed, then the ______ will report ______.

balance sheet; Interest Payable balance sheet; Notes Payable income statement; Interest Expense

The issue price of a bond is ______.

based on a present value calculation based on what the market is willing to pay

An asset's useful life ______.

can be expressed in either years or units is the asset's expected economic life to its owner

The old Metropolitan Theater, which had been unused for years, was purchased for $1, renovated at a cost of $3.5 million, and then reopened for business. The renovation cost should be ______.

capitalized as part of the cost of the theater

Before dividends can be paid to common stockholders, the ______ preferred stockholders must be paid ______.

cumulative; dividends in arrears

Accrued Liabilities are ______.

current liabilities resulting from adjusting entries that record amounts incurred but not yet paid

Dividends Payable is recorded as a credit on the ______.

declaration date

On-a-Roll, Inc. amortizes its patent of $20,000 over 20 years. The adjusting entry to record amortization results in a(n) ______.

decrease to assets on the balance sheet decrease to net income on the income statement

Ordinary repairs and maintenance costs should be

expensed as incurred

If a company receives $100,000 cash in exchange for issuing 100 bonds at $1,000, the bonds were issued at ______.

face value

Whether a bond is issued at par, premium or discount, when the bond matures the amount paid equals the ______ value.

face, par, or principal

True or false: In accordance with US Generally Accepted Accounting Principles, a company will always capitalize the cost of a long-lived asset.

false

True or false: It doesn't matter which depreciation method you use, since all 3 methods calculate the same depreciation expense each year.

false

Employees' gross earnings differ from their net pay because of ______.

federal and state income taxes payroll deductions FICA taxes

Market rates of interest ______.

fluctuate due to changes in economic events

A company may make an exception to the accounting rules and not capitalize a long-lived asset if its cost is _____.

immaterial, insignificant, small, low, minimal, or negligible

Morris Lest, Inc. sold its delivery truck for $500 more than its book value. The sale will result in a(n)

increase in Net Income on the income statement

The entry to record the issuing of a note payable for cash results in a(n) ______.

increase in assets increase in liabilities

Issuing a note payable for cash immediately results in a(n) ______.

increase in assets and an increase in liabilities

Capitalized costs differ from expenses in that only capitalized costs result in a(n) ______.

increase to long-lived assets

Current portion of Long-Term Debt reports the amount of ______ and is reported on the ______.

long-term debt that is reclassified because it is due within the year; balance sheet

The book (or carrying) value of equipment equals Equipment ______.

minus Accumulated Depreciation

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

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

Stock options are given to ______.

provide incentives for employees to work harder

When a company sells its delivery truck, it must ______.

reduce both the truck account by the original cost and the related accumulated deprecation

A stock dividend causes a stockholder's percentage ownership in a company to ______

remain the same

The stated rate______

remains the same throughout the life of the bonds

The estimated amount a long-lived asset is expected to be sold for at the end of its useful life is the _______ value.

residual or salvage

A company's past profits that are kept instead of being paid to stockholders are ______.

retained earnings

The formula for the fixed asset turnover ratio equals net _____ divided by average net fixed assets.

sales or revenue

Investors earn a return on stock investments by ______.

selling the stock for more than its cost receiving dividends

When a company has both common and preferred stock, its ROE must be adjusted by ______

subtracting the preferred stock balance from total stockholders' equity subtracting preferred stock dividends from net income

An asset's residual value is ______.

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

Land improvements reported on a company's balance sheet might include ______.

trees planted to provide shade for the customer parking lot sidewalks outside the corporate headquarters the fence around a factory parking lot

True or false: A classified balance sheet separates liabilities into current and non-current categories.

true

True or false: Some states allow corporations to issue no-par value common stock.

true

What is the effect of an impairment loss on the accounting equation?

It decreases total stockholders' equity. It decreases total assets.

A company may be restricted from paying dividends if it has ______.

a loan covenant

Issuing preferred stock ______

increases stockholders' equity similar to issuing common stock

The journal entry to record employer payroll taxes affects ______.

liabilities and stockholders' equity

Stockit Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock outstanding. In its first two years of business, Stockit did not declare a dividend. Stockit's balance sheets at the end of its first two years of business should include ______.

no Dividends Payable

Advantages of a corporation are _______.

ownership interests are easily transferable it can raise large amounts of money by issuing stock

Large stock dividends are recorded at _______ and small stock dividends are recorded at ______.

par value; market value

An intangible asset may be recorded when a company ______.

pays more than the net assets of the company purchased purchases a trademark

Corporations can raise large amounts of money because ______.

shares of stock can be purchased in small amounts, so even small investors can participate

The entry to record the issuance of preferred stock is ______.

similar to the issuance of common stock increases stockholders' equity

On November 30, Burrows, Inc. issued 2 notes payable at 6% per year for $10,000 each. One is a 3-month, 6%, note and the other is a 6-month, 6% note. The amount of interest owed at December 31 will be ______.

the same amount for both notes

True or false: No gain or loss is reported when treasury stock is reissued because GAAP does not consider transactions between a corporation and its owners to be profit-making activities.

true

Acme, Inc., bought land and a building for $150,000. Acme plans to use the building for 20 years and then sell it. What is the useful life of the land?

unlimited

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 June 1, 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 $100. If Ace uses straight-line depreciation, what is depreciation expense for the year ended December 31 that year?

$350

Which of the following statements are true?

- Depreciation Expense is an operating expense on the income statement - Accumulated Depreciation is netted against the related long-lived asset on the balance sheet - Depreciation Expense on the income statement reports only the current period's usefulness used. - Accumulated Depreciation on the balance sheet reports the amount of usefulness used since the long-lived asset was first put into use

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares.

100,000

A bond with an issue price of $10,100 and a face value of $10,000 was issued at ______.

101 Reason: Bond prices are quoted as a percent of the face value. Thus, these bonds sold at 101% or 101.000 of their face value.

Mia Hero Shop sold its table with a book value of $1,000 for $800. Mia Hero will record ______.

A loss on the sale

Morris Lest, Inc. sold its delivery truck for $4,000 cash. The truck's book value was $3,000. Which financial statements will be affected by this sale?

Balance sheet Statement of retained earnings Income statement Statement of cash flows

Which depreciation method does not use an asset's residual value to calculate depreciation expense?

Declining-balance

Alternative _____ methods are allowed because companies use their long-lived assets differently over their useful lives.

Depreciation

Similar to a stock split, a stock ______ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders.

Dividend

The units-of-production depreciation method will result in ____ Depreciation Expense when the actual production is higher.

Higher

The adjusting entry to record interest accrued on a note payable is debit ______

Interest Expense and credit Interest Payable

Which of these assets are not depreciated?

Land Cash inventory

Paving the parking lot and landscaping are recorded with a debit to ______.

Land Improvements, an asset

Vicious Cycle built a new building. Which of the following costs should be expensed?

Party to celebrate grand opening

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 that John gets paid in cash and payroll deductions will be paid the following month, how would ABC record his gross pay?

Salaries and Wages Expense increases $600.

Sales taxes are recorded by the retailer as ______.

Sales Tax Payable

True or false: Interest Expense is a non-operating item and reported below Income from Operations on the income statement.

True

Which of these depreciation methods are allowed by GAAP?

Units-of-production Declining-balance Straight-line

The effect of capitalizing a cost that should have been expensed causes ______.

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

An asset's cost minus accumulated depreciation is its ______ value.

book

The entry to record the payment of previous purchases made on account includes a

debit to Accounts Payable credit to Cash

Texable, Inc. is required to match $45,900 for its portion of FICA and to pay $4,700 for federal and state unemployment taxes. The entry to record Texable's payroll taxes includes ______.

debit to Payroll Tax Expense for $50,600 credit to FICA Payable for $45,900 credit to Unemployment Tax Payable of $4,700

A bond that was issued at a premium will have a carrying value that ______ with each interest payment.

decrease

When may expenditures for repairs be capitalized? When the expenditure is _____

large and significantly enhances the asset's usefulness

The Accumulated Depreciation balance will be ______.

large relative to the asset's cost in the latter years of the asset's life

A $1,000 bond's carrying value will be greater if the bond is sold ______.

when the stated rate is greater than the market rate of interest at a premium

A company bought land and a building for $128,000. The building has a useful life of 20 years. Why should the company split the $128,000 cost between the land and the building?

Land is not depreciated, while the building will be depreciated over its 20-year useful life

Which of the following reports net income relative to average common stockholders' equity?

ROE

Which of these payroll taxes are paid only by the employer?

SUTA FUTA

A company may issue a(n) ________ _________ to lower the market price per share of its stock or to demonstrate commitment to stockholders while conserving cash when experiencing difficult times.

Stock Dividend

terms again

Stock splits Cause the par value per share to change Stock splits and stock dividends Cause total stockholders' equity to remain the same Stock dividends Require a journal entry

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. What is John's net pay?

$486.10

Treasure This, Inc. had total assets of $100,000, liabilities of $60,000 and stockholders' equity of $40,000 before repurchasing 1,000 shares of its $1 par value common stock for $5 each. After this repurchase, total assets equal _____, liabilities equal ______ and stockholders' equity equals _____

$95,000; $60,000; $35,000

What is the formula for calculating double-declining-balance depreciation?

(Cost - Accumulated Depreciation) x (2/useful life)

Dew Drop Inn had net revenue of $117,000 in 2020 and $100,000 in 2021. Its fixed assets were $400,000 at the end of 2019, $380,000 at the end of 2020, and $360,000 at the end of 2021. In which year was the fixed asset turnover ratio better?

2020, because the ratio was higher

X-it Company bought a new delivery truck. The manufacturer says that the truck should last for ten years and 120,000 miles. X-it plans to use the truck for 4 years, during which it will be driven 50,000 miles. What is the useful life of the truck for depreciation purposes?

50,000 miles 4 years

_______ __________ is a current liability that represents the amount owed for goods or services purchased on credit and is generally interest free

Accounts payable

What are the key events with notes payable?

Accruing interest incurred but not paid Recording principal paid Establishing the note Recording interest paid

Items such as unrealized gains and losses from pensions, foreign currencies or financial investments are reported as ______.

Accumulated Other Comprehensive Income (Loss)

Land improvements include items such as sidewalks, landscaping, fencing and are reported on the ______.

Balance sheet

If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, the transaction will be recorded with a debit to ______.

Cash and a credit to Bonds Payable of $100,000

The entry to record the issuance 100 shares of 3%, $100 par value preferred stock at a price of $105 is recorded with a debit to ______.

Cash of $10,500 and credit to Preferred Stock of $10,000 and Additional Paid-in Capital -Preferred of $500

Stockholders receive a share of the corporation's profits when it distributes

Dividends

___ per share equals Net Income divided by the average shares of common stock ___

Earnings Outstanding

If the proceeds from selling an asset is greater than the asset's book value, then a

Gain on Disposal will be credited

US corporations pay federal taxes on ______.

Income payroll

On November 1, ABC Corp. borrowed $100,000 cash on a 1-year note payable with a 6% annual rate that requires ABC to pay all the interest as well as the principal on October 31 of the following year. Assuming the November 1 transaction was properly recorded, how would the December 31, year-end adjusting entry affect the accounting equation?

Liabilities increase and stockholders' equity decreases.

What kind of account is Deferred Revenue?

Liability account

A major advantage of the corporate form of ownership is ________ legal liability.

Limited

Select those statements below that are true about cash dividends.

On the declaration date, liabilities are increased. On the payment date, current assets are decreased.

Which of the following costs associated with long-lived assets are expensed, not capitalized?

Ordinary repairs and maintenance Immaterial repairs and maintenance

A ______ agreement is where people/companies pledge money to a venture which will collect the funds only if the venture reaches funding goal.

Presale

The Date of _______ is the cut-off date for determining which specific stockholders are to be paid the dividend.

Record

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 ______.

Remain the same

The expenditure incurred for changing the oil in the company's fleet of trucks is debited to ______.

Repairs and Maintenance Expense

Computit bought a new copier machine. Which of these costs should be expensed?

Replacement of the toner for the copy machine Annual maintenance cost

_________ ___________represents the earned capital and ____________ capital represents the paid-in capital.

Retained Earnings Contributed

At year-end, Dividends is closed into ______.

Retained Earnings because Dividends is a temporary account

Which of the following entries result in a decrease in total assets and stockholders' equity?

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

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.

Shares that were previously issued to and owned by stockholders but have been reacquired and now held by the corporation are called _____ Stock.

Treasury

When a corporation buys back its own stock, the stock is reported on the balance sheet as ______.

Treasury Stock

When does impairment occur?

When circumstances interfere with the ability to recover the value of the asset through future operations

When should a corporation record a liability for dividends on its cumulative preferred stock?

When the dividends have been declared

If a cost is capitalized, it is recorded as a(n) ______, not an expense.

asset

Recording an asset impairment requires netting the ______.

asset with its Accumulated Depreciation and then reducing the asset's carrying value to its lower fair market value

The entry to record the issuance of 100 bonds at their $1,000 face value causes ______

assets to increase by $100,000 liabilities to increase by $100,000

On January 1, We-Haul, Inc. purchased a truck for $110,000 and depreciates it using straight-line and an estimated useful life of 5 years and a $10,000 residual value. Three years later on January 1, We-Haul sold its truck for $40,000. The journal entry to record the sale of the truck includes a ______.

credit to Truck for $110,000 debit to Accumulated Depreciation for $60,000 debit to Cash for $40,000 debit to Loss on Disposal for $10,000

The entry to record the early retirement of bonds when the cash paid is less than the bonds' carrying value will include a ______

credit to a Gain on Early Retirement

The declaration and payment of a cash dividend ultimately causes a(n) ______.

decrease in stockholders' equity decrease in Cash decrease in Retained Earnings

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(n) ______

decrease in stockholders' equity decrease in assets

Depreciation ______.

decreases an asset's book value which is not necessarily equal to its current market value

A stock dividend

has no effect on total stockholders' equity decreases Retained Earnings increases Common Stock

Preferred stock is advantageous in that it ______.

has priority over common stock at liquidation has priority over common stock when dividends are declared

Investors who acquire preferred stock ______.

have preference over common stockholders have preference as to dividends

Earnings per share (EPS) appears on the ______.

income statement

Accruing a liability always involves ______ expenses and ______ liabilities.

increasing; increasing

For an investor, bonds are attractive investments because ______

interest is higher than bank savings accounts they can be traded on established bond exchanges

The stated rate is the rate used to determine the ______.

interest payment

Amortization ______

is in accordance with the expense recognition (matching) principle is calculated using the straight-line method spreads the cost of intangible assets to expense over their useful lives

A dividend date of record is the date on which the corporation ______

makes no entry

A company should depreciate a long-lived tangible asset to ______.

match part of the cost of the asset with the revenues generated by the asset

When a company records a debit to Bonds Payable and a credit to Cash, it is the bonds' ______.

maturity date

Diva, Inc. declared and paid $10,000 of dividends. Dividends of $10,000 may be found on the ______.

statement of retained earnings

The statement of ______ _______ reports the changes in retained earnings as well as paid-in capital.

stockholders' equity

Long-lived assets are ______.

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

Crowdfunding is a _____

way for small business ventures to raise funds from large numbers of individuals over the Internet

Which of the following may lead to a revision of an estimate of a company's depreciation expense? (

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

True or false: All payroll deductions are required by law.

False Reason: Some payroll deductions such as retirement savings are voluntary.

True or false: The bond issue price is determined by the company issuing the bonds.

False Reason: The investors in the market determine the price they are willing to pay and is based on a present value calculation using the current market rate of interest.

What does the IRS call a corporate income tax return?

Form 1120

Which accounts are credited when Payroll Tax Expense is debited?

Unemployment Tax Payable FICA Payable

Canton, Inc. issued 10,000 shares of $1 par value common stock at $10 per share. Mr. Smart, the bookkeeper, recorded this transaction with a $100,000 debit to Cash and a $100,000 credit to Common stock. As a result of this entry ______.

Common stock will be overstated Additional paid-In capital will be understated

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 that John gets paid in cash and payroll deductions will be paid the following month, how would ABC record the payroll deductions?

Current liabilities increase $113.90.

When a stockholder sells its shares of ABC Co. to another person at a price higher than what the stockholder purchased it for, ABC records _____

Nothing

Another term for stockholders is

Owners / shareholder

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

An advantage of _____ financing is that dividends are optional

Equity

Why might a company issue a stock dividend?

To demonstrate commitment to stockholders while conserving cash during difficult times To lower the market price per share To signal an expectation of significant future earnings

IFRS ______.

divides the cost of an asset among its significant component parts and depreciates the components separately over their useful lives

Miss Hap, the company bookkeeper, recorded the annual repair costs on the company's machinery as an increase to the machinery account. As a result, which of the following is true?

Stockholders' equity will be overstated. Assets will be overstated.

Deli Llama operates in a state with a sales tax. What will be the effect if it records a cash sale to a customer?

Stockholders' equity will increase. Liabilities will increase. Assets will increase.

terms

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

In its 1st year of business, Decks Cleared, Inc. declared a $8,000 total dividend. How much of the $8,000 would go to the common stockholders given the company has 1,000 shares of 5%, $100 par value preferred stock outstanding?

$3,000

The money a corporation receives from investors by issuing stock is called ______.

Contributed Capital

The accountant recorded the adjusting entry for the depreciation of its long-lived assets with a debit to Depreciation Expense and a credit to Accumulated Depreciation. As a result of this entry, assets and stockholders' equity will be ______.

Decreased

ABC Airlines collected $300 for a round-trip ticket from Chicago to Los Angeles in advance. The entry to record after the flight occurs includes a debit to ______ for $300.

Deferred Revenue and a credit to Service Revenue

Matching part of the cost of a long-lived asset with the revenues generated by the asset is ______.

Depreciation

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

Depreciation Expense

Why is the straight-line method of depreciation called "straight-line"?

Depreciation expense is a constant amount each year, so a graph of depreciation expense over time is a straight line.

Which of the following statements are true? p2

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.

If an entry is recorded that debits Interest Payable and Interest Expense and credits Cash, what must be the case?

Interest incurred rom the current and prior period is being paid

Issuing 1,000 shares of 5%, $100 par value, cumulative preferred stock for $110 in cash per share affects the accounting equation by ______.

increasing total stockholders equity increasing total assets

When a corporate charter does not specify a legal value per share, then the stock issued is referred to as ______.

no-par value stock

Vango, Inc. bought a new delivery van during the year. Which of these costs should be expensed as ordinary repairs and maintenance?

$100 oil change on van $900 for cleaning the van during the year

As of December 31, $110 of interest had been accrued and recorded on a 12%, 1-year, $1,000 note payable. On January 31 of the following year, the entry to record the payment of the note's principal and interest requires a ______.

$110 debit to Interest Payable, $10 debit to Interest Expense, $1,000 debit to Notes Payable and a $1,120 credit to Cash Reason: The entry requires a $1,000 debit to Notes Payable, $110 debit to Interest Payable (interest expensed in December of the prior year) and $10 debit to Interest Expenses (interest expense for January) and a $1,120 credit to Cash.

Six years ago, on January 1, Ace Electronics purchased a $310,000 machine with an estimated useful life of 10 years and a residual value of $10,000. 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 ______.

$130,000 debit to Loss on Impairment $130,000 credit to Machinery

On October 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. What is depreciation expense for the year ended December 31 that year using double-declining-balance?

$3,750

Busy Beaver, Inc. signed a $315,000, 5-year note payable to buy a new industrial veneer cutter. Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs. The journal entry to record this transaction will include a ______. (Check all that apply.)

$320,750 debit to Machinery $5,750 credit to Cash $315,000 credit to Note Payable

In its 1st year of business, Decks Cleared, Inc. declared a $12,000 total dividend. How much of the $12,000 would go to the 1,000 shares of 5%, $100 par value preferred stock?

$5,000

Prior to a $4,000 stock dividend, total stockholders' equity equaled $50,000. After the stock dividend, total stockholders' equity equals ______.

$50,000

Daffy Duct, Inc. issued 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.

Acme Enterprises began the new year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts Payable balance of ______.

$6,000

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 2nd year using double-declining-balance equals ______.

$7,500

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. What is the net pay to employees?

$70,000

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 ______.

$8,000

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(n) ______.

$8,000 credit to Treasury Stock $2,000 credit to Additional Paid-in Capital

On January 1, X-it Company bought a new delivery truck for $30,000. X-it plans to use the truck for 4 years, during which it will be driven 50,000 miles. The truck will be worthless at the end of the 4 years. If the truck was driven 15,000 miles in its 1st year, Depreciation Expense for the year using units-of-production is ______.

$9,000

Just In Thyme, Inc. has the following December 31 equity balances: Common Stock of $20,000; Additional Paid-in Capital of $30,000; and Retained Earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total stockholders' equity balance would equal ______.

$90,000

Acme, Inc.'s balance sheet shows equipment at a cost of $5,000,000. Accumulated Depreciation is $2,000,000. Acme's income statement shows Depreciation Expense of $200,000 for the year. Which of the following statements is true?

4% of the equipment's economic benefit was used up this year.

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

If a bond's stated rate is 4% and the market rate is 6%, this bond will sell at _____

A discount

The premium on a bond is ______ and ______ each period.

Amortized; decrease

Cumulative preferred stock is entitled to receive current dividends plus "dividends in ____" before any future common dividends can be paid.

Arrears

The maximum number of shares a corporation is allowed to sell in accordance with its corporate charter are called _____ shares

Authorized

The difference between the Equipment account and its Accumulated Depreciation is called the ______ value.

Book / carrying

Extraordinary repairs to long-lived assets are ______ because they are large expenditures and increase the useful life of the asset.

Capitalized

Which of the following would cause the balance sheet to appear stronger and income statement to appear more profitable than it should?

Capitalizing costs that should be expensed.

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 B used straight-line and estimated useful lives of 5 years and $1,000 residual values. Reason: Company B would have the higher net income because the depreciation expense is less than Company A because the lack of a residual value makes the numerator higher and thus the expense higher.

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

Constant

Once the construction of a new building is completed it is moved out of the ______ and into the ______ account

Construction in Progress; Building

Identify what is needed to calculate the P/E ratio.

Earnings per share Stock price

A liability is first recorded at the amount of cash a creditor would accept to immediately settle the liability, which ______ interest.

Excludes

______ repairs to long-lived assets are capitalized because they are large expenditures and increase the useful life of the asset.

Extraordinary

True or false: Your employer is allowed to keep the amounts deducted from your gross pay.

False Reason: Your employer is required to send payroll deductions to the appropriate government agency or company.

Gains on the disposal of fixed assets are recorded with a credit and occur when the book value is _____ than the sales price.

Lower

Assuming straight-line depreciation is used, a higher estimated useful life will result in a(n) _____ depreciation expense per year and a(n) _____ net income.

Lower Higher

Which of the following line item amounts would be under the Retained Earnings column of a statement of stockholders' equity?

Net Income Dividends: Common Dividends: Preferred

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 ______.

No additional depreciation

When does a corporation record an increase in Dividends Payable?

On the declaration date

A common stock's ______ value is typically set at a low amount and has little meaning today other than being used to by some states to assess fees.

Par

terms p2

Premium stated rate is greater than the market rate of interest Discount stated rate is less than the market rate of interest Face Value stated rate equals the market rate of interest

ABC Company is in the process of issuing bonds. The bonds have a stated interest rate of 6%, which is 2% above the current market rate. What effect will the two interest rates have on the bond issue price?

The issue price will be above the bond's face value. Reason: The 6% interest rate makes the bond more attractive and investors are willing to pay more.

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.

Tangible assets are first recorded at ______.

all costs to acquire them and prepare them for use

Busy Beaver, Inc. signed a $315,000, 5-year note payable to buy a new $315,000 industrial veneer cutter. Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs. What is the overall effect of this transaction on the accounting equation?

Total assets increase $315,000. Total liabilities increase $315,000. Machinery, an asset, increases $320,750.

Which of the following would be found on a statement of stockholders' equity?

Treasury Stock Stock Issuances Additional Paid-in Capital Dividends Net Income

True or false: Companies issue bonds at a discount when the bond's stated interest rate is lower than the market interest rate.

True

If ABC Company issues 100 of its $1,000 bonds at a price of 110.00, i.e., $1,100 each, the journal entry to record the transaction includes ______.

a credit to Premium on Bonds Payable of $10,000

If ABC Company issues 100 of its $1,000 bonds at a price of 105.00, i.e., 105%, the journal entry to record the transaction includes ______.

a debit to Cash of $105,000 a credit to Bonds Payable of $100,000 a credit to Premium on Bonds Payable of $5,000

A bond discount is ______.

a result of the interest payments being less than the cost of borrowing

The discount on a bonds payable becomes ______.

additional interest expense over the life of the bonds

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

The dividend payment date is when ______.

cash is paid to satisfy the dividend liability

The law requires ______ to pay FICA taxes.

both employee and employer

Ownership structure can vary from one company to another, but the most basic form of corporation offers ______.

common stock

The owners of a(n) _____ are not personally responsible for the debts of the business

corporation, LLC, or limited liability company

The entry to record the payment of 6-months of interest on a note in which 2 months of interest was recorded as an adjusting entry in the prior accounting period includes ______.

credit Cash for 6 month's of interest debit Interest Payable for 2 months of interest debit Interest Expense for 4 months of interest

When a company issues of shares of $0.10 par value common stock for $10 per share, it will record a ______.

credit to Additional Paid-in Capital for the difference between the $10 price and the $0.10 par value

On November 1, 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 in the following year. The last adjusting journal entry was made on December 31, ABC's year end. The entry to record the payment on October 31 would include a ______.

credit to Cash of $106,000 debit to Note Payable of $100,000 debit to Interest Expense of $5,000 debit to Interest Payable of $1,000

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 Cash of $486.10 debit to Salaries and Wages Expense of $600 credit to FICA (Social Security and Medicare) Payable of $45.90 credit to State and Federal Income Tax Payable of $68

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

The journal entry to record amortization expense includes a ______ to Amortization Expense.

debit

A company recorded the issuance of its bonds with a debit to Cash for $98,260 and a credit to Bonds Payable for $100,000, and a ______ on Bonds Payable for the difference.

debit to Discount

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.

debit to Interest Expense credit to Cash

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 ______.

debit to Land credit to Cash

A stock dividend ______.

distributes additional shares of stock to existing stockholders on a pro rata basis. causes retained earnings to decrease.

XYZ borrowed $50,000 on December 31, 2020. Half of the loan will be repaid in in the following year and the remainder will be paid in the year after that, which is longer than XYZ's operating cycle. On its balance sheet at December 31, 2020, XYZ will show ______.

long-term debt of $25,000 current portion of long-term debt of $25,000

In the case of a basket purchase, the cost of the land and building is ______.

split among the assets purchased in proportion to the market value of the assets as a whole Reason: If the building's and the land's fair market values were $800,000 and $200,000 respectively but were bought together for $900,000, the $900,000 cost would be split based on the proportion to the market value of the assets as a whole. Thus, $720,000 (=$900,000 x 80% (=$800,000/$1,000,000)) would be allocated to the Building account and $180,000 (=$900,000 x 20% (=$200,000/$1,000,000)) to the Land account.

Stock options are expensed ______.

when granted and are recorded at the estimated cost of the options

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.

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.

Quiche & Tell, Inc. has discovered that its goodwill has been impaired because the secret recipe it received when it purchased its competitor is no longer a secret. Recording this impairment will ______.

cause a decrease in stockholders' equity

Dilution Solutions, Inc. repurchased 500 shares of its $2 par value common stock for $10,000. The effect of this transaction on the accounting equation, using the cost method, includes a ______.

$10,000 decrease in Cash $10,000 increase in Treasury Stock

On the balance sheet, ______ reports unrealized gains and losses from temporary changes in the value of certain assets and liabilities the company holds.

Accumulated Other Comprehensive Income (Loss)