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CLEMSON / Accounting / ACCT 2010 / Is it true when long-lived assets found on a company's balance sheet m

Is it true when long-lived assets found on a company's balance sheet m

Is it true when long-lived assets found on a company's balance sheet m

Description

School: Clemson University
Department: Accounting
Course: Financial Accounting Concepts
Professor: Professor philo
Term: Fall 2015
Tags: accouting
Cost: 50
Name: ACCT TEST 3 STUYGUIDE
Description: Chapters 8, 9, and 10
Uploaded: 10/31/2016
4 Pages 36 Views 5 Unlocks
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CHAPTER EIGHT


Is it true when long-lived assets found on a company's balance sheet may include some that have no physical substance?



True or False

1. The allowance method for uncollectible accounts conforms to the expense recognition principle. TRUE  2. When a company routinely sells on credit, it is inevitable that some of its customers will not pay the  amount owed. TRUE

3. Credit card companies charge a fee to the seller that accepts the credit cards. This fee is recorded by the  seller as a non-operating expense on its income statement. FALSE

4. Interest revenue from notes receivable is typically reported on a multiple step income statement as a part of  Income from Operations. FALSE

5. Factoring refers to an arrangement in which a company sells its receivables to another company and  receives cash immediately. TRUE


Is it true when assets purchased as a group?



6. The Allowance for Doubtful Accounts account is a temporary account which is closed to Retained Earnings  at the end of the accounting period. FALSE

7. The accounts receivable account for each customer is called a subsidiary account. TRUE  8. If the receivables turnover ratio rises significantly, the increase may be a signal that the company is  extending credit to high-risk borrowers or allowing an overly generous repayment schedule. FALSE 9. The percentage of credit sales method focuses on estimating the ending balance to be reported in the  Allowance for Doubtful Account, whereas the aging of accounts receivable method focuses on estimating  Bad Debt Expense for the period. FALSE

10. Interest on a two-month, 7%, $1,000 note would be calculated as $1,000 × 0.07 × 2 FALSE


Is it true when accumulated depreciation classified as an expense?



LearnSmart

1. The challenge businesses face when estimating the allowance for previously recorded sales is that AT THE  TIME OF THE SALE, IT IS KNOWN WHICH PARTICULAR CUSTOMER WILL BE A “BAD” CUSTOMER  We also discuss several other topics like What is cognitive dissonance?

2. The 3 variables needed to calculate interest ARE THE PRINCIPAL, TIME PERIOD COVERED IN THE  INTEREST CALCULATION, AND ANNUAL INTEREST RATE

3. Sales on account will cause an increase in ACCOUNTS RECEIVABLE ON THE BALANCE SHEET AD  SALES REVENUE ON THE INCOME STATEMENT  

4. Notes receivable differ from accounts receivable in the notes receivable GENERALLY CHARGE THE  BORROWERS INTEREST FROM THE DAY THEY ARE SIGNED TO THE DAY THEY ARE  COLLECTED We also discuss several other topics like What is the best definition of economics?

5. The DIRECT write-off method is not allowed under GAAP

6. During the year, ABC Corp. realizes that a particular customer will never play. What action should ABC  take? WRITE OFF THE UNCOLLECTIBLE ACCOUNT AND ITS CORRESPONDING ALLOWANCE  FROM THE ACCOUNTING RECORDS  

7. Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?  DEBIT BAD DEBT EXPENSE AND CREDIT ALLOWNACE FOR DOUBTFUL ACCOUNTS 8. Which of the following are contra-asset accounts? ALLOWANCE FOR DOUBTFUL ACCOUNTS AND  ACCUMULATED DEPRECIATION

9. Bad debt expense IS A COST OF EXTENDING CREDIT TO CUSTOMERS AND IS AN ESTIMATE 10. THE RECEIPT OF AN INTEREST PAYMENT is recorded with a debit to cash and a credit to interest  receivable  

11. An AGING of accounts receivables method is based on the amount of days the receivables have been  unpaid. When determining the desired amount of the allowance for doubtful accounts, the older receivables  are assigned to a higher percent then newer ones

12. The accounting principle that governs the recording of bad debt expense in the same period as sales  revenue is called the EXPENSE RECOGNITION (MATCHING) PRINCIPLE

13. An adjusting entry to accrue for interest earned is often needed when a company has NOTES  RECEIVABLE We also discuss several other topics like What are the roles of money?

14. ADJUSTING ENTRY TO RECORD INTEREST OWNED is a debit to interest receiable and a credit to  interest revenue

15. A company’s bad debt expense reports the ESTIMATED AMOUNT OF THIS PERIOD’S CREDIT  SALES THAT CUSTOMERS WILL FAIL TO PAY

16. An objective of the expense recognition (matching) principle is to have bad debt expense debited in THE  SAME PERIOD THE RELATED CREDIT SALES ARE RECORDED

17. Accounts receivable represent AMOUNTS OWNED TO A BUSINESS BY ITS CUSTOMERS 18. The advantage of extending credit to customers is that it helps customers to buy products and services,  thereby increasing the seller’s revenue. The disadvantages of extending credit are costs related to BAD  DEBT EXPENSE

19. Removing an uncollectible account and its corresponding allowance from the accounting records is calledA  WRITE-OFF

20. A 2-month interest calculation on a 3-year, 12% annual rate, $1000 notes receivable has a time variable of  2/12

CHAPTER NINE

True or False If you want to learn more check out How do you derive a demand curve from an indifference curve?

1. Long-lived assets found on a company's balance sheet may include some assets that  have no physical substance. TRUE

2. When assets are purchased as a group, the total cost must be divided up and allocated  to each asset in proportion to the market value of the assets as a whole. TRUE 3. Accumulated Depreciation is classified as an expense. FALSE

4. Depreciation is an allocation method, not a valuation method. TRUE If you want to learn more check out Tell us something about the japan tsunami.
Don't forget about the age old question of What is welfare economics?

5. When the amount of annual depreciation is revised because of a change in the estimated  useful life of an asset, prior years' financial statements should be restated. FALSE 6. When an asset is sold and its book value exceeds its selling price, net income will  increase. FALSE

7. The useful life of an asset is always measured in units of time, such as years or months. FALSE

8. Some analysts compare companies by focusing on earnings before interest, taxes,  depreciation, and amortization (EBITDA), rather than net income. TRUE

9. The calculation for depletion of natural resources is similar to the calculation for  depreciation when the units-of-production method is used. TRUE

10. Extraordinary repairs, replacements, and additions are added to the appropriate asset  accounts rather than being recorded as expenses. TRUE

LearnSmart

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

2. Straight line, units of production, and declining balances are commonly used  DEPRICIATION methods

3. Long-lived assets are ASSETS ACCQUIRED FOR USE OVER 1 OR MORE YEARS  AND USED BY THE BUSINESS

4. Another term for long lived tangible assets is FIXED assets and is found on the  financial statement called the BALANCE SHEET

5. Which account is credited in a journal entry to record depreciation on machinery? ACCUMULATED DEPRECIATION

6. Tangible assets are first recorded at ALL COSTS TO ACQUIRE THEM AND  PREPARE THEM FOR USE

7. A company might record an involuntary disposal of an asset IF THE ASSET WAS  SERIOUSLY DAMAGED IN A FIRE

8. Intangible assets are MACHINERY, CASH REGISTERS, PARKING LOTS FOR  CUSTOMERS TO USE, FACTORY BUILDINGS

9. When recording losses on the sale of fixed assets, the account, loss on disposal, is  increased with a debit

10. The formula for the fixed asset turnover ratio equals net SALES divided by abrage  net fixed assets

11. LAND ON WHICH TO BUILD A NEW STORE- long lived asset

12. Tangible assets- computers, delivery equipment, furniture

13. Another term for residual value is SALVAGE value

14. 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 15. DEPLETION is the process used to allocate the cost of natural resources to the  period in which the resources are used to help generate revenue

16. If a cost is capitalized, it is recorded as an ASSET, not an expense

17. Intangible assets- TRADEMARKS, BRAND NAMES, PATENTS

18. An intangible asset may be recorded only if PURCHASED

CHAPTER TEN

True or false  

1. Callable bonds can be converted to stock. FALSE

2. The effective-interest method of amortization is considered a conceptually superior method  of accounting for bonds. TRUE

3. If the market rate exceeds the stated interest rate, a bond will sell at a premium. false 4. The principal of a loan does not include any interest charges. TRUE

5. The debt-to-assets ratio indicates financing risk by computing the proportion of total assets  financed by debt. TRUE

6. Bonds allow a company to borrow large sums of money from many different investors. TRUE 7. An entertainment company received $6 million in cash for advance season ticket sales. Prior  to the beginning of the season, these sales should be recorded as a liability. TRUE 8. If the likelihood of a loss is reasonably possible, a contingent liability is recorded by making  an appropriate journal entry. False

9. Bonds that are backed by a company's assets are referred to as "secured" bonds. true 10. FICA payments consist of Social Security taxes and Medicare taxes. True

LearnSmart

1. A bond’s maturity date is THE DATE ON WHICH THE BOND PRINCIPAL WILL BE REPAID  IN FULL

2. Long- term liabilities are accounted for in the same way as short-term liabilities, except that  long-term liabilities are on the books for more than one YEAR

3. A bond’s stated interest rate is ALWAYS EXPRESSED AS AN ANNUAL INTERST RATE  AND USED TO CALCULATE INTEREST PAYMENTS

4. Employees’ gross earnings differ from their net pay because of PAYROL DECUCATIONS  5. Liabilities are classified as current if they WILL BE PAID WITHIN THE COMPANY’S  OPERATING CYCLE OR WITHIN 1 YEAR, WHICHEVER IS LONGER

6. The entry to record the payment of previous purchases made on account includes a CREDIT  TO CASH and DEBIT TO ACCOUNTS PAYABLE  

7. The entry to record the initial borrowing of cash by issuing a promissory note causes an  INCREASE IN LIABILITIES and INCREASE IN ASSETS

8. The entry to record the initial borrowing of cash by issuing a promissory note includes a debit  to CASH and a credit to NOTES PAYABLE

9. Bonds are financial INSTRUMENTS that outline the future payments a company promises to  make in exchange for receiving a sum of money now

10. The stated rate is the rate used to determine the INTEREST PAYMENT 11. Issuing a note payable for cash immediately results in an INCREASE IN ASSETS AND AN  INCREASE IN LIABILITIES  

12. Long term liabilities – BONDS PAYABLE DUE IN 20 YEARS and NOTES PAYABLE DUE IN  3 YEARS

13. From the issuing company’s perspective, a bond is a liability. From a bondholder’s  perspective, the bond is an INVESTMENT

14. The stated rate REMAINS THE SAME THROUGHOUT THE LIFE OF THE BONDS

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