Accounting General Journal, 11E-Chapter 15

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Annual straight-line depreciation expense calculated as the original cost of the plant asset divided by the years of estimated useful life.

False

Cash and other assets expected to be exchanged for cash or consumed within a year are called liquid assets.

False

Depreciation expense is recorded on all plant assets.

False

Estimated federal income tax must be paid in monthly installments

False

For a business using the periodic inventory method, purchases are recorded in the Merchandise Inventory account.

False

For a business using the periodic inventory method, the balance of Merchandise Inventory in the unadjusted trial balance represents the beginning balance plus all purchases of merchandise made in the fiscal period

False

The Internal Revenue Service sets the amounts and rates of the tax brackets used to calculate federal income tax expense.

False

The annual straight-line depreciation of equipment costing $7,000 with a salvage value of $1,000 and a useful life of 5 years would be $1,400.00

False

The tax rate associated with an income tax bracket is called the tax rate.

False

The total amount of depreciation expense that has been recorded since the purchase of a plant asset is called

accumulated depreciation

The amount of the adjustment to Allowance for Uncollectible Accounts when the account balance is a $800 debit and $8,800 of accounts receivable is estimated to be uncollectible would be

$8,800

Revenue earned in one fiscal period but not received until a later fiscal period is called accrued revenue.

True

The Income Summary account is one of the accounts used to adjust the Merchandise Inventory account at the end of the fiscal period.

True

The Prepaid Insurance account must be adjusted at the end of a fiscal period because the account balance does not reflect the value of the insurance premiums that expired during the period.

True

The book value of a plant asset is its original cost minus accumulated depreciation.

True

The difference between an asset's account balance and its related contra account is called book value.

True

The marginal tax rate increases as the net income before federal income tax increases.

True

The total amount of depreciation expense that has been recorded since the purchase of a plant asset is called accumulated depreciation.

True

The value of the insurance coverage used is recorded as a debit to Insurance Expense.

True

Recording depreciation expenses is an application of the accounting concept

Matching Expenses with Revenue

The adjustment unique to merchandising businesses adjusts

Merchandise Inventory

A business can use any 12-month period for reporting its financial performance.

True

All accounts are listed on the unadjusted trial balance regardless of whether there is a balance or now.

True

Functional depreciation should be considered in estimating the useful life of computer equipment.

True

The journal entry to adjust Merchandise Inventory when the beginning merchandise inventory is $125,000 and ending merchandise inventory is $115,000 would be

debit Income Summary, $10,000 and credit Merchandise Inventory $10,000

The adjustment for unpaid federal income tax includes

expense and a liability account

Depreciation expense is calculated using all of the following amounts except

fair market value

A physical inventory is always conducted at the end of each

fiscal year

Accrued interest income on notes receivable is calculated using all of the following information except the

term of the note


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