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Accounting
Q:
A payroll register usually shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period.
Q:
Employers are required to pay state and federal payroll taxes.
Q:
A corporation has a $42,000 credit balance in the Income Tax Payable account. Period-end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.
Q:
Vacation benefits are a form of estimated liabilities for an employer.
Q:
An estimated liability is a known obligation of an uncertain amount that can at least be reasonably estimated.
Q:
FUTA requires employers to pay a federal unemployment tax on the first $7,000 in salary or wages paid to each employee.
Q:
A high merit rating means that an employer has high employee turnover or seasonal hiring.
Q:
The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.
Q:
Employers must pay FICA taxes that are equal to the amount being withheld from their employees.
Q:
The amount of federal income tax withheld is based on the employee's annual earnings rate plus the number of withholding allowances claimed by the employee.
Q:
Required employee payroll deductions include income taxes, Social Security taxes, pension and health contributions, union dues, and charitable giving.
Q:
Social security payments are made up of Social Security taxes and Medicare taxes.
Q:
The matching principle requires that interest expense not be accrued on a note payable until the note is paid, even if the end of an accounting period occurs between the signing of a note payable and its maturity date.
Q:
A note payable can be used to extend the payment due on an account payable.
Q:
Promissory notes are nonnegotiable, which means they cannot be transferred from party to party.
Q:
A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is longer.
Q:
A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is equal to .4.
Q:
When the times interest earned ratio declines, the likelihood of default on liabilities increases.
Q:
Experience shows that when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods, the default rate on liabilities increases sharply.
Q:
The times interest earned ratio is calculated by dividing income before interest expense and income taxes by interest expense.
Q:
Times interest earned can be calculated by multiplying income by the interest rate on a company's debt.
Q:
A high value for the times interest earned ratio means that a company is of high risk to the borrower.
Q:
When there is little uncertainty surrounding current liabilities, both GAAP and IFRS require companies to record them in a similar manner.
Q:
Accounting for contingent liabilities covers three possibilities. (1) The future event is probable and the amount cannot be reasonably estimated. (2) The future event is remote or unlikely to recur. (3) The likelihood of the liability to occur is impossible.
Q:
Debt guarantees are not disclosed because the guarantor is not the primary debtor.
Q:
Uncertainties from the development of new competing products are contingent liabilities.
Q:
The full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.
Q:
Payroll taxes are considered to be contingent liabilities.
Q:
A lawsuit is an example of a contingent liability for the defendant.
Q:
A contingent liability is a potential obligation that depends on a future event arising from a future transaction or event.
Q:
The Orlando Magic received $6 million cash in advance season ticket sales. Prior to the beginning of the basketball season, these sales are recorded as a credit to unearned season ticket revenue.
Q:
Known liabilities are obligations set by agreements, contracts, or laws and are measurable and definitely determinable.
Q:
When companies pay the government collected sales tax, sales taxes payable is credited and cash is debited.
Q:
Unearned revenues are listed on the balance sheet under liabilities.
Q:
Unearned revenue is another name for sales.
Q:
Trade accounts payable are amounts owed to suppliers for products or services purchased on credit.
Q:
A liability does not exist if there is any uncertainty about whom to pay, when to pay, or how much to pay.
Q:
A company can have a liability even if the amount of the obligation is unknown.
Q:
A single liability can be divided between current and noncurrent liabilities.
Q:
Current liabilities are obligations not due within one year or the company's operating cycle, whichever is longer.
Q:
A liability is a probable future payment of assets or services that a company is currently obligated to make as a result of past transactions or events.
Q:
To compute the amount of tax withheld from an employee's pay, employers can use a _______________________________________________________ table.
Q:
Vacation benefits are a type of _______________ liability.
Q:
A _____________________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for every pay period.
Q:
____________________________ are banks authorized to accept deposits of amounts payable to the federal government, including amounts due for payroll taxes.
Q:
Companies with many employees often use a special ____________________ account to pay employees.
Q:
A _____________________ is a seller's obligation to replace or correct a product or service that fails to perform as expected within a specified period.
Q:
Employer payroll taxes are an added employee _______________ beyond the wages and salaries earned by the employees.
Q:
__________ allowances are items that reduce the amount of federal income taxes owed by the individual.
Q:
Gross pay less all deductions is called ____________________.
Q:
______________________ is the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes.
Q:
A _______________________ is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.
Q:
The difference between the amount borrowed and the amount repaid is referred to as _______________.
Q:
Times interest earned ratio is computed by dividing _______________ by interest expense.
Q:
Contingent liabilities are recorded if the future event is _______________ and the amount owed can be _______________.
Q:
A ________________________ is a potential obligation arising from a past transaction or event that depends on a future event.
Q:
On April 1, 2013, a company discarded a machine that had cost $10,000 and had accumulated depreciation of $8,000 as of December 31, 2012. The asset had a five-year life and no salvage value. Prepare the journal entries to record the updating of the depreciation expense and discarding of this asset.
Q:
A company purchased and installed a machine on January 1, 2010, at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machine was disposed of on July 1, 2013. a. Prepare the general journal entry to update depreciation to July 1, 2013.
b. Prepare the general journal entry to record the disposal of the machine under each of these three independent situations:
(1) The machine was sold for $22,000 cash.
(2) The machine was sold for $15,000 cash.
(3) The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.
Q:
A company purchased a heating system on January 2, 2000, for $225,000. The system had an estimated useful life of 15 years. On January 3, 2013, the company completed a renovation of the system that cost of $33,000 and now expects the system to be more efficient to last eight years beyond the original estimate. The company uses the straight-line method of depreciation.
a. Prepare the journal entry at January 3, 2013, to record the renovation of the heating system.
b. Prepare the journal entry at December 31, 2013, to record the depreciation for 2013.
Q:
Mahoney Company had the following transactions involving plant assets during 2012 and 2013. Unless otherwise indicated, all transactions were for cash. 2012 Jan. 2
Purchased a truck for $50,000. Sales tax on the truck was $3,000, and the license was $250. The truck is expected to have a $4,000 salvage value and a four-year life. Jan. 3
Paid $1,500 to have the companys logo painted on the truck. This did not change the trucks salvage value. Dec.31
Recorded straight-line depreciation on the truck. 2013 Jan. 5
Paid $5,000 to put a bigger engine in the truck. This new engine is expected to make the truck run more efficiently and will increase the trucks useful life by one year. The salvage value remained at $4,000. Mar. 1
Paid $2,000 to replace a broken tailgate. The tailgate was damaged when a heavy carton was inadvertently dropped on it. Dec.31
Recorded straight-line depreciation on the truck. Prepare the general journal entries to record these transactions.
Q:
The Weiss Company purchased a truck for $95,000 on January 2, 2011. The truck was estimated to have a $3,000 salvage value and a four-year life. The truck was depreciated using the straight-line method. During 2013, it was obvious that the truck's total useful life would be six years rather than four and the salvage at the end of the sixth year would be $1,500. Determine the depreciation expense for the truck for the six years of its life. Year
Depreciation Expense 2011 2012 2013 2014 2015 2016
Q:
A company entered into the following transactions concerning its computer system:
On January 1, 2012 purchased a computer system that cost $1,480,000. The estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to be used. On January 1, 2013 the company determined that the estimated useful life of the computer would be 4 years instead of 3 years. The estimated salvage value will only be $10,000.
a. Prepare the journal entry to record depreciation expense for 2012.
b. Prepare the journal entry to record depreciation expense for 2013.
Q:
On April 1, 2012, SAS Corp. purchased and placed in service a plant asset. The following information is available regarding the plant asset: Acquisition cost
$130,000 Estimated salvage value
$15,000 Estimated useful life
5 years Make the necessary adjusting journal entries at December 31, 2012, and December 31, 2013, to record depreciation for each year under the following depreciation methods:
a. Straight-line
b. Double-declining-balance.
Q:
On September 30 of the current year, a company acquired and placed in service a machine at a cost of $700,000. It has been estimated that the machine has a service life of five years and a salvage value of $40,000. Using the double-declining-balance method of depreciation, prepare a schedule showing depreciation amounts for the current year and the next four years (round answers to the nearest dollar). The company closes its books on December 31 of each year.
Q:
On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced.
Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses:
a. The straight-line method of depreciation.
b. The units-of-production method of depreciation.
c. The double-declining balance method of depreciation.
Q:
Beauty Company purchased a machine valued at $565,000 on September 1. The equipment has an estimated useful life of eight years or 5.5 million units. The equipment is estimated to have a salvage value of $48,300. Assuming the double declining balance method of depreciation is used, what is depreciation expense that needs to be recorded at the end of the second year?
Q:
A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or 6 million units. The equipment is estimated to have a salvage value of $35,000. Assuming the straight-line method of depreciation, what is the book value at the end of the second year?
Q:
A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or 6 million units. The equipment is estimated to have a salvage value of $35,000. Assuming the units of production method of depreciation, what is the annual depreciation for the second year if .5 million units were produced?
Q:
A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or 6 million units. The equipment is estimated to have a salvage value of $35,000. Assuming the double-declining-balance method of depreciation, what is depreciation for the second year?
Q:
A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or 6 million units. The equipment is estimated to have a salvage value of $35,000. Assuming the straight-line method of depreciation, what is depreciation for the second year?
Q:
A company purchased a machine for $75,000 that was expected to last six years and have a salvage value of $6,000. At the beginning of the machine's fourth year, the company decided that the machine's estimated useful life should be revised to a total of 10 years instead of 6 years. Also, the salvage value was re-estimated to be $5,500. Straight-line depreciation was used throughout the machine's life. Calculate the depreciation expense for the fourth year of the machine's useful life.
Q:
A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value. At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600. What amount of depreciation should be recorded in each of the machine's remaining three years?
Q:
A company's property records revealed the following information about its plant assets: Machine No.
Cost
Salvage Value
Purchase Date
Depreciation Method and Estimate Life 1
$42,000
$3,000
10/1/12
Straight-line (3 years) 2
86,000
8,600
7/1/12
Double-declining-balance (5 years) Calculate the depreciation expense for each machine for the year ended December 31, 2013, and for the year ended December 31, 2012.
Machine 1:
2012 _______________________
2013 _______________________ Machine 2:
2012 _______________________
2013 _______________________
Q:
Describe the accounting for intangible assets, including their acquisition, cost allocation, and accounts involved.
Q:
Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.
Q:
Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.
Q:
Explain (in detail) how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.
Q:
How is the cost principle applied to plant asset acquisitions, including lump-sum purchases?
Q:
Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.
Q:
Compare the different depreciation methods (straight-line, units-of-production, and double-declining-balance) with respect to the computation of depreciation per period and the total depreciation over the life of the asset.