actg - exam 3

Which of the following should be included in the acquistion cost of a piece of equipment?

-transportation costs -installation costs -testing costs prior to placing the equipment into production -all

which of the following would most likely be classified as a current liability? -unearned rent -two-year notes payable -bonds payable -mortgage payable

-unearned rent

The journal entry to record the issuance of a note for the purpose of converting an existing account payable would be

debit accounts payable credit notes payable

The journal entry used to record the insurance of an interest-bearing note for the purpose of borrowing funds for the business is

debit cash credit notes payable

When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following

debit cash and accumulated depreciation credit machinery

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with which of the following entries?

debit machinery, accumulated depreciation and loss on exchange of machinery credit machinery and cash

the journal entry used to record the payment of a discounted note is

debit notes payable credit cash

The journal entry for recording payment for the short-term lease of a fixed asset would

debit rent expense credit cash

The entry to record the amortization of a premium on bonds payable on an interest payment due would

debit to interest expense and bonds payable credit crash

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date

one of the main disadvantages of the corporate form is the

double taxation on dividends

The ability of a corporation to obtain capital is

enhanced because limited liability and ease of share transferability

When the bonds are sold for more than their face value, the carrying amount of the bonds is equal to

face value plus the unamortized premium

Most employers are levied a tax on payrolls for

federal unemployment compensation

If bonds are issued at a premium, the stated interest rate is

higher than the market rate of interest

If bonds are issued at premium the stated interest rate is

higher than the market rate of interest

stockholders' equity

includes retained earnings and paid-in-capital

accumulated depreciation

is a contra asset account

Treasury stock share are

issued shares that have been required by a corporation

The excess of sales price of treasury stock over its cost should be credited to

paid-in-capital from sale of treasury stock

If common stock is issued for an amount greater than par value, the excess should be credited to

paid-in-capital in excess of par

which intangible assets are amortized over their useful life? -goodwill -patents -trademarks -all

patents

A fixed asset's estimated value at the time it is to be retired from service is called

residual value

residual value is also known as

salvage value trade-in value scrap value (NOT net book value)

Which of the following is NOT a right possessed by common stockholders of a corporation?

the right to receive a minimum amount of dividends

A characteristic of a fixed asset is that it is

used in the operations of a business

a characteristic of a fixed asset is that it is

used in the operations of a business

A current liability is a debt that is reasonably expected to be paid

within one year

Expected useful life is a. calculated when the asset is sold. b. estimated at the time that the asset is placed in service. c. determined each year that the depreciation calculation is made. d. none of the answers are correct.

B.) estimated at the time that the asset is placed in service

What taxes would be deducted in determining an employee's net pay?

FICA taxes

A bond indenture is

a contract between the corporation issuing the bonds and the bondholders

What is the market rate of interest on bonds higher than the contract rate the bonds will sell at

a discount

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

a discount

The entry to record the issuance of common stock at a price above par includes a debit to

cash

The interest rate specified in the bond indenture is called the

contract rate

A disadvantage of the corporate form of business entity is

corporations are subject to more governmental regulations