ACCT 242-01 Juwon Midterm 2

A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized.

False

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

False

Intangible assets derive their value from the right (claim) to receive cash in the future.

False

Prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio.

False

Magazine subscriptions and airline ticket sales both result in unearned revenues

True

The cost of an asset less its salvage value is its depreciation base.

True

The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.

True

if a company develops a trademark, it should expense the costs related to attorney fees, registration fees, and design costs.

false

internally generated intangible assets are initially recorded at fair value

false

the cost of a purchased patent should be amortized over the remaining legal life of the patent

false

Which of the following is a contract-related intangible assets A) trademark B) Copyright C) Franchise D) patent

franchise

in a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as A) other assets B) indirect costs C) goodwill D) direct costs

goodwill

Falcon Company purchased a depreciable asset for $175,000. The estimated salvage value is $14,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset? A) 16,100 B) 17,500 C) 161,000 D) 175,000

A) 16,100

Which of the following is an example of a contingent liability A) obligations related to product warranties B) Possible receipt from litigation settlement C) Pending court case with a probable favorable outcome D) tax loss carryforwards

A) Obligations related to product warranties

When a patent is amortized, the credit is usually made to A) the patents account B) An Accumulated Amortization Account C) A Deferred Credit Account D) An Expense Account

A) The Patents Account

Which of he following is true about accounts payable? A) accounts payable are also called trade accounts payable B) when accounts payable are recorded at the net amount, a purchase discounts account will be used C) when accounts payable are recorded at the gross amount, a purchase discounts lost account will be used D) Both b and c are true

A) accounts payable are also called trade accounts payable

The term depreciable base or depreciation base, as it is used in accounting, refers to A) the total amount to be charged (debited) to expense over an asset's useful life. B) the cost of the asset less the related depreciation recorded to date C) the estimated market value of the asset at the end of its useful life D) the acquisition of the asset

A) the total amount to be charged (debited) to expense over an asset's useful life.

Slotkin Products purchased a machine for $65,000 on July 1, 2020. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $5,000. Depreciation for 2020 is? A) 32,500 B) 8,125 C) 14,219 D) 15,000

B) 8,125

which of the following is not an intangible asset? A) trade name' B) research and development costs C) franchise D) copyrights

B) Research and Development Costs

Why is the liability section of the balance sheet of primary importance to bankers? A) To evaluate the entity's credit quality B) To assist in understanding the entity's liquidity C) To better understand sources of repayment D) To evaluate operating efficiency

B) To assist in understanding the entity's liquidity

When is a contingent liability recorded? A) When the amount can be reasonably estimated B) When the future events are probable to occur and the amount can be reasonably estimated. C) When the future events are probable to occur D) When the future events will possibly occur and the amount can be reasonably estimated.

B) When the future events are probable to occur and the amount can be reasonably estimated.

A loss on impairment of an intangible asset is the difference between the asset's A) carrying amount and the expected future net cash flows B) carrying amount and its fair value C) fair value and the expected future net cash flows D) book value and its fair value

B) carrying amount and its fair value

Lamar Printing Company determines that a printing press used in its operation has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should A) recognize an unusual loss for the period B) include a credit to the equipment accumulated depreciation amount C) include a credit to the equipment account D) not be made if the equipment is still being used

B) include a credit to the equipment accumulated depreciation account.

goodwill may be recorded when A) it is identifiable B) on company requires another in a business combination C) the fair value of a company's assets exceeds their costs D) a company has exceptional customer relations

B) on company acquires another in a business combination

Venible newspaper sold 6,000 of annual subscriptions at $150 each on June 1. How much-unearned revenue will exist as of December 31? A) $0 B) $375,000 C) $450,000 D) $900,000

C) $450,000

Which of the following best describes the accounting for assurance-type warranty costs? A) expensed when paid B) Expensed when warranty claims are certain C) Expensed based on estimate in year of sale D) Expensed when incurred

C) Expensed based on estimate in year of sale.

What is a discount as it related to zero-interest-bearing notes payable? A) the discount represents the lender's costs to underwrite the note B) The discount represents the credit quality of the borrower. C) The discount represents the cost of borrowing D) The discount represents the allowance for uncollectible amounts

C) He discount represents the cost of borrowing

companies should test indefinite life intangible assets at least annually for A) recoverability B) amortization C) impairment D) estimated useful life

C) Impairment

What does the current ratio inform you about a company? A) the extent of slow-moving inventories B) The efficient use of asses C) the company's liquidity D) the company's profitability

C) the company's liquidity

Which is of the following is true of depreciation accounting? A) it is not a matter of valuation B) it is part of the matching of revenues and expenses C) it is the process of cost allocation D) all of these answers are correct

D) All of these answers are correct.

Which of the following terms is associated with recording a contingent liability? A) Possible B) Likely C) Remote D) probable

D) Probable

How do you determine the acid-test ratio? A) the sum of cash and short-term investments divided by short-term debt. B) current assets divided by current liabilities C) current assets divided by short-term debt D) the sum of cash, short-term investments and net receivables divided by current liabilities.

D) The sum of cash, short-term investments and net receivables divided by current liabilities.

The recoverability test is used to determine any impairment loss on which of the following types of intangible assets? A) indefinite life intangibles other than goodwill B) indefinite life intangibles C) goodwill D) limited life intangibles

D) limited life intangibles

Liabilities are A) any accounts having credit balances after closing entries are made. B) Deferred credits that are recognized and measured in conformity with generally accepted accounting principles C) obligations to transfer ownership shares to other entities in the future. D) obligations arising from past transactions and payable in assets or services in the future.

D) obligations arising from past transaction and payable in assets or services in the future.

Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to A) patents and amortized over the legal life of the patent B) legal fees and amortized over 5 years or less C) Expenses of the period D) patents and amortized over the remaining useful life of the patent

D) patents and amortized over the remaining useful life of the patent.

If an industrial firm uses the units-of-production method for computing depreciation on its only plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will? A) Be constant B) vary with unit sales C) vary with sales revenue D) vary with production

D) vary with production

purchased goodwill should A) be written off as soon as possible against retained earnings B) be written off as soon as possible as an extraordinary item C) be written off by systematic charges as a regular operating expense over the period benefited D) not be amortized

Not be amortized

Depreciation is a means of cost allocation, not a matter of valuation.

True

Discount on Notes Payable is a contra account to Notes Payable on the balance sheet.

True

all intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

true

if the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized

true

in a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible net assets, with the remainder recorded as goodwill.

true

internally generated goodwill should not be capitalized in the accounts

true

some intangible assets are not required to be amortized

true

the cost of acquiring a customer list from another company is recorded as an intangible assets

true