final exam (pt 4)
when a customer pays in advance for a product or service, they advance payment received by the company is recorded as:
A debit to an asset and a credit to a liability account
Which of the following represents a characteristic of a liability?
A probable future sacrifice of economic benefits. Arising from present obligations to other entities. Resulting from past transactions or events.
which of the following expenditures should be recorded as an asset?
An addition which increases future benefit.
Which of the following is not a current liability?
An unused line of credit.
The acid-test ratio is
Cash, current investments, and accounts receivable divided by current liabilities
A long-term asset is recorded at the:
Cost of the asset plus all costs necessary to the asset ready for use.
Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record?
Debit Cash, $5,000; Credit Notes Payable, $5,000.
which of the following correctly describes the nature of depreciation?
Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.
Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably possible, a contingent liability should be:
Disclosed but not reported as a liability.
which of the following increases an employers payroll costs?
Employer's FICA contribution.
Which of the following is paid by both employee and the employer?
FICA taxes
which of the following statements regarding liabilities is not true?
Liabilities result from future transactions.
Which of the following will maximize net income by minimizing depreciation expense in the first year of the assets life?
Long service life, high residual value, and straight-line depreciation.
Current liabilities
May include contingent liabilities
which of the following will result in higher depreciation expense in the first year of the assets life?
Short service life and low residual value.
Which of the following is true and comparing the current ratio with acid test ratio?
The current ratio will always be at least as large as the acid-test ratio.
The amount of the gain on the sale of equipment equals:
The selling price minus the book value of the equipment.
which of the following statements is false regarding the amortization of intangible assets?
The service life of an intangible asset is always equal to its legal life.
if equipment is retired, which of the following accounts would be debited?
accumulated depreciation
The assets cost less accumulated depreciation is called:
book value
Accumulated depreciation is:
contra asset
The current ratio is:
current assets divided by current liabilities
Which of the following is reported as a current liability?
current portion of long-term debt
travel planners, Inc. Borrowed $5000 from first state bank and signed a promissory note. What entry should first state bank record?
debit notes receivable credit cash
which of the following intangible assets are not amortized?
goodwill
which of the following is not included in calculating the acid-test ratio?
inventory
Federal and state income taxes withheld by employers from their employees payroll are initially recorded with a credit to a(n)?
liability
assuming a current ratio of 1.00 and a acid test ratio of 0.75, how will the purchase of inventory with cash affect each ratio?
no change to the current ratio and decrease the acid test ratio
which of the following expenditures should be recorded as an expense?
ordinary repairs and maintenance
an exclusive 20 year right to manufacture a product or to use a process is a:
patent
which of the following is not recorded as an intangible asset in the balance sheet?
research and development
The seller collect sales taxes from the customer at the time of sale and reports the sales taxes as
sales tax payable
which of the following is not deducted from an employee's salary?
unemployment taxes
