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Accounting
Q:
The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account:June 1Balance25 units at $60 6Sale20 units 8Purchase20 units at $61 16Sale10 units 20Purchase20 units at $62 23Sale25 units 30Purchase15 units at $63Determine the cost of the ending inventory at June 30, using (a) the first-in, first-out (FIFO) method and (b) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory.
Q:
the _______________ ratio is calculated by dividing net sales by average total assets.
Q:
an overall measure of profitability is the ______________________ ratio.
Q:
On the basis of the following data for Sanford Industries as of December 31, determine the value of the inventory at the lower of cost or market. Also, show how the merchandise inventory would appear on the balance sheet (assume that the cost was determined by the FIFO method). Apply lower of cost or market to each inventory item.CommodityInventory QuantityCost per UnitMarket Value per UnitSize 49$17$19Size 510 17 14Size 614 20 22Size 712 13 15
Q:
the cost of a patent should be amortized over its __________________ life or its _______________ life, whichever is shorter.
Q:
in recording the purchase of a business, goodwill should be recorded for the excess of ________________ over the _________________ of the net assets acquired.
Q:
the declining-balance method of computing depreciation expense involves multiplying a _______________ book value by a _______________ percentage.
Q:
match the items below by entering the appropriate code letter in the space provided.A. Plant assets B. Depreciation C. Book value D. Salvage value E. Straight-line method F. Units-of-activity methodG. Double-declining-balance methodH. MACRSI. Revenue expendituresJ. Capital expenditures
Q:
a. Explain the effect of the following on the financial statements: Goods held on consignment were included in the ending inventory count. Goods purchased FOB shipping point were in transit on the last day of the year. These goods were not counted as part of ending inventory. Goods sold FOB shipping point were in transit on the last day of the year. These goods were not counted as part of ending inventory.b. What happens if inventory errors are not found and corrected?
Q:
match the items below by entering the appropriate code letter in the space provided.A. Gain on disposal B. Loss on disposal C. Trademark D. Capital lease E. Asset turnover ratio F. Return on assets ratioG. GoodwillH. AmortizationI. Intangible assetJ. Research and development costs
Q:
Beginning inventory, purchases, and sales data for hammers are as follows: Mar. 3Inventory12 units at $15 11Purchase13 units at $17 14Sale18 units 21Purchase 9 units at $20 25Sale10 unitsAssuming the business maintains a perpetual inventory system, complete the subsidiary inventory ledger and determine the cost of merchandise sold and ending inventory under the following assumptions:a. First-in, first-outPurchases Cost ofMerchandise Sold Inventory DateQty.Unit CostTotal CostQty.Unit CostTotal CostQty.Unit CostTotal CostMar. 3 11 14 21 25 Balances b. Last-in, first-out PurchasesCost of Merchandise Sold Inventory DateQty.Unit CostTotal CostQty.Unit CostTotal CostQty.Unit CostTotal CostMar. 3 11 14 21 25 Balances
Q:
in general, how does one determine whether or not an expenditure should be included in the acquisition cost of property, plant, and equipment?
Q:
how is the cost for a plant asset measured in a cash transaction? in a noncash transaction?
Q:
The beginning inventory and purchases of an item for the period were as follows: Beginning inventory 6 units at $70 eachFirst purchase10 units at $75 eachSecond purchase18 units at $80 eachThird purchase10 units at $90 eachThe company uses the periodic system, and there were 15 units in the inventory at the end of the period. Determine the cost of the 15 units in the inventory by each of the following methods, presenting details of your computations: (a) first-in, first-out; (b) last-in, first-out; (c) weighted average cost. Do not round your intermediate computations. Round your final answer to two decimal places.
Q:
comment on the validity of the following statements: as an asset loses its ability to provide services, cash needs to be set aside to replace it. depreciation accomplishes this goal.
Q:
the declining-balance method is an accelerated method of depreciation. briefly explain what is meant by an accelerated method of depreciation and justify the choosing of an accelerated method.
Q:
($755 30 units) + ($785 200 units) + ($805 10 units) = $187,700
Q:
identify the factors that are considered in classifying an expenditure as a capital or a revenue expenditure. are there instances where it may be difficult to classify an expenditure as one or the other (e.g., the purchase of a wastebasket that has a useful life of 5 years and cost $10)? what basis would be used in a decision?
Q:
Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations.May 1 Purchased 500 units @ $25.00 each. 4 Purchased 300 units @ $24.00 each. 6 Sold 400 units @ $38.00 each. 8 Purchased 700 units @ $23.00 each. 13 Sold 450 units @ $37.50 each. 20 Purchased 250 units @ $25.25 each. 22 Sold 275 units @ $36.00 each. 27 Sold 300 units @ $37.00 each. 28 Purchased 550 units @ $26.00 each. 30 Sold 100 units @ $39.00 each.Determine the total sales, cost of merchandise sold, gross profit, and ending inventory using each of the following inventory methods:1. FIFO perpetual2. FIFO periodic3. LIFO perpetual4. LIFO periodic5. Weighted average cost periodic (round average to nearest cent)
Q:
how is a gain or a loss on the sale of a plant asset computed?
Q:
goodwill is an unusual asset in that it cannot be sold individually apart from a business as a whole. if goodwill is an intangible asset, why can't it be sold like other intangible assets such as copyrights and patents? briefly explain what makes goodwill different.
Q:
physician reference service (prs) provides services to physicians including research assistance, diagnosis coding, and medical practice software including an advanced medical record cross-referencing system. prs is aggressive in monitoring other firms' offerings and ensuring that its services are comparable to all others.because of its need to stay abreast of new product offerings, prs spends a lot of money sending professionals to trade shows. in addition, prs has agreements with several clients whereby the client requests a presentation of a competitor's services. a prs employee poses as an employee of the client's office and attends the presentation, obtaining as much data and sample information as possible. the cost of the travel and attending presentations is charged to product development and expensed during the current year.in april of this year, prs began selling a software product substitute before the competitor's software was released. the competitor, compu-med, sued for copyright infringement and won. prs had to withdraw its product from the market and pay $1.5 million in damages. prs immediately negotiated an agreement with compu-med to sell compu-med's product (since it was prohibited from offering its own version for five years). this agreement cost an additional $1.3 million, but it allowed prs to continue to offer a full line of services.Required:1. What are the ethical issues?2. What should Kelly do?
Q:
Match each of the following merchandise items to its status (a or b) as part of Hampton Co.’s. current inventory.a. Include in inventory countb. Exclude from inventory countMerchandise shipped to a customer FOB destination was picked up by the freight company on December 28 but had not arrived at its destination as of December 31.
Q:
As a recent graduate of State University you're aware that IFRS requires component depreciation for plant assets. A friend has asked you to succinctly explain what component depreciation means. Which of the following correctly describes component depreciation?a. The method used to ensure that the depreciation rate remains constant from year to year.b. The method that requires that significant parts of a plant asset with different useful lives be depreciated separately.c. The method used to prorate annual depreciation on a time basis.d. The method of depreciation recommended for an asset that is expected to be significantly more productive in the first half of its useful life.
Q:
IFRS allows companies to revalue plant assets to fair value. Which of the following statements is true regarding revaluation?a. At the time a company purchases an asset it must decide whether to follow revaluation procedures for the asset; once the election is made, it must be followed for the remainder of the asset's useful life.b. Assets that are experiencing rapid price changes must be revalued quarterly, other assets can be revalued on an annual basis.c. The journal entry to record a revaluation when the asset's price has increased includes a credit to the account revaluation surplus.d. All of the choices are correct regarding revaluation of plant assets.
Q:
IFRS allows companies to revalue plant assets to fair value. When an asset has increased in value, where is the account "Revaluation Surplus" reported?a. On the income statement as part of income from continuing operations (other revenues and gains).b. On the income statement as part of discontinued operations (discontinuing historical cost).c. On the statement of financial position as part of accumulated comprehensive income (equity).d. All of the choices are acceptable methods for the reporting of "Revaluation Surplus".
Q:
Nicholson Company purchased equipment on January 1, 2010, for €20,000 with an estimated residual value of €5,000 and estimated useful life of 8 years. On January 1, 2012, Nicholson decided the equipment will last 12 years from the date of purchase. The residual value is still estimated at €5,000. Using the straight-line method the new annual depreciation will be:a. €1,125.b. €1,250.c. €1,500.d. €1,667.
Q:
An asset was purchased for ¥150,000. It had an estimated residual value of ¥30,000 and an estimated useful life of 10 years. After 5 years of use, the estimated residual value is revised to ¥24,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would bea. ¥18,000.b. ¥13,200.c. ¥9,000.d. ¥12,600.
Q:
Match each of the following situations to its impact (a–c) on the current year's net income.a. Net income for the current year will be overstated.b. Net income for the current year will be understated.c. There will be no error effect on net income.The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.
Q:
Under U.S. GAAPa. Property, plant, and equipment may not be revalued.b. Component depreciation is not required.c. Research and development costs are expensed as incurred.d. All of the choices are correct.
Q:
Which of the following statements concerning IFRS and U.S. GAAP is true?a. IFRS permits revaluation of all intangible assets, whereas U.S. GAAP prohibits revaluation of intangible assets.b. Gains on exchange of assets when the exchange has commercial substance are recognized under both IFRS and U.S. GAAP.c. Changes in depreciation method under IFRS are reported in current and future periods, under U.S. GAAP such changes are treated as prior period adjustments.d. All of the choices are true regarding IFRS and U.S. GAAP.
Q:
A company decides to exchange its old machine and ¥770,000 cash for a new machine. The old machine has a book value of ¥630,000 and a fair value of ¥700,000 on the date of the exchange. The cost of the new machine would be recorded ata. ¥1,400,000.b. ¥1,470,000.c. ¥1,330,000.d. cannot be determined.
Q:
For each of the following unrelated transactions, (a) determine the amount of the amortization for the current year, and (b) present the adjusting entries required to record amortization at year end.(1) Costs (it was not acquired) of $30,000 were incurred on January 1 to obtain a patent. On January 31, $38,610 was spent in legal costs to successfully defend the patent against competitors. The patent has an estimated legal life of 12 years.(2) A company acquired a copyright for $140,000. The copyright has a useful life of 50 years
Q:
when purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to delivery equipment.
Q:
when purchasing land, the costs for clearing, draining, filling, and grading should be charged to a land improvements account.
Q:
all plant assets (fixed assets) must be depreciated for accounting purposes.
Q:
once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability.
Q:
land improvements are generally charged to the land account.
Q:
Match each of the following descriptions to the appropriate inventory system (a or b).a. Perpetualb. PeriodicWhen using this system, a physical inventory is necessary to determine cost of merchandise sold.
Q:
recording depreciation each period is an application of the matching principle.
Q:
the depreciable cost of a plant asset is its original cost minus obsolescence.
Q:
recording depreciation on plant assets affects the balance sheet and the income statement.
Q:
the book value of a plant asset is always equal to its fair market value.
Q:
Match each of the following descriptions to the appropriate cost flow assumption (a–c).a. FIFOb. LIFOc. Weighted average costCost of the latest purchases are assigned to ending inventory
Q:
certain types of leases, called capital leases, allow the lessee to account for the transaction as a rental.
Q:
under an operating lease, both the leased asset and the liability are shown on the balance sheet.
Q:
the irs does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.
Q:
using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.
Q:
the declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.
Q:
in calculating depreciation, both plant asset cost and useful life are based on estimates.
Q:
the accumulated depreciation account represents a cash fund available to replace plant assets.
Q:
capital expenditures are expenditures that increase the company's investment in productive facilities.
Q:
additions and improvements to a plant asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.
Q:
when a change in estimate is made, there is no correction of previously recorded depreciation expense.
Q:
Match each of the following descriptions to the appropriate document used for inventory control (a–c). a. Receiving reportb. Vendor’s invoicec. Purchase orderEstablishes an initial record of the receipt of inventory
Q:
a change in the estimated salvage value of a plant asset requires a restatement of prior years' depreciation.
Q:
a change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in the current and future periods, but not to prior periods.
Q:
ordinary repairs should be recognized when incurred as revenue expenditures.
Q:
if the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.
Q:
companies only dispose of plant assets by either sale or exchange.
Q:
a permanent decline in the market value of an asset is referred to as an impairment.
Q:
a characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.
Q:
a loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the same way as a gain on disposal.
Q:
The days' sales in inventory measures the a. length of time it takes to acquire, sell, and replace the inventory b. length of time it takes to acquire and receive payment for the inventory c. number of days inventory is on hand prior to sale d. number of days inventory takes to arrive after ordering
Q:
the book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.
Q:
Kristin’s Boutique has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory? a. Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin’s Boutique as of December 31. b. Kristin's has merchandise on consignment from Abby Co. in its store. c. Kristin's has sent merchandise to various retailers on a consignment basis. d. Kristin's has merchandise on hand that has been returned by customers because of wrong size.
Q:
if a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.
Q:
Which of the following companies would be more likely to use the specific identification inventory costing method? a. Gordon’s Jewelers b. Lowe’s c. Best Buy d. Walmart
Q:
a plant asset must be fully depreciated before it can be removed from the books.
Q:
Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the a. customer's ledger b. creditor's ledger c. inventory ledger d. purchase ledger
Q:
the asset turnover ratio is calculated as net sales divided by ending total assets.
Q:
the return on assets ratio can be computed from the profit margin ratio and the asset turnover ratio.
Q:
The method of estimating inventory that uses records of the selling prices of the merchandise is called the a. retail method b. gross profit method c. inventory turnover method d. weighted average cost method
Q:
the return on assets ratio indicates how efficiently a company uses its assets.
Q:
a loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.
Q:
Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error? a. Owner's equity is overstated. b. Cost of merchandise sold is overstated. c. Gross profit is understated. d. Net income is understated.
Q:
the cost of an intangible asset must be amortized over a 20-year period.
Q:
Under the _____ inventory method, accounting records maintain a continuously updated inventory value. a. retail b. periodic c. physical d. perpetual
Q:
intangible assets are rights, privileges, and competitive advantages that result from ownership of long-lived assets without physical substance.
Q:
Which of the following measures the relationship between cost of merchandise sold and the amount of inventory carried during the period? a. inventory turnover b. fixed asset turnover c. retail method of inventory costing d. gross profit method of inventory costing