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Home » Accounting » Page 62

Accounting

Q: the balance in the accumulated depreciation account represents the a.cash fund to be used to replace plant assets b.amount to be deducted from the cost of the plant asset to arrive at its fair market value c.amount charged to expense in the current period d.amount charged to expense since the acquisition of the plant asset

Q: which one of the following items is not a consideration when recording periodic depreciation expense on plant assets? a.salvage value b.estimated useful life c.cash needed to replace the plant asset d.cost

Q: Under the gross method of recording sales discounts, the adjusting entry at the end of the accounting period reduces Sales for the estimated sales discounts related to the current period’s sales that are expected to be taken in the next period. a. True b. False

Q: If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within 10 days, the amount of the purchases discount is $70. a. True b. False

Q: depreciation is the process of allocating the cost of a plant asset over its useful life in a(n) a.equal and equitable manner b.accelerated and accurate manner c.systematic and rational manner d.conservative market-based manner

Q: In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account. a. True b. False

Q: the cost of a long-term asset is expensed a.when it is paid for b.as the asset benefits the company c.in the period in which it is acquired d.in the period in which it is disposed of

Q: Revenue that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Revenue on the multiple-step income statement. a. True b. False

Q: accountants do not attempt to measure the change in a plant asset's market value during ownership because a.the assets are not held for resale b.plant assets cannot be sold c.losses would have to be recognized d.it is management's responsibility to determine fair values

Q: A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the sales discount. a. True b. False

Q: the book value of an asset is equal to the a.asset's fair value less its historical cost b.blue book value relied on by secondary markets c.replacement cost of the asset d.asset's cost less accumulated depreciation

Q: A seller may grant a buyer a reduction in selling price, and this is called a customer discount. a. True b. False

Q: recording depreciation each period is necessary in accordance with the a.going concern principle b.cost principle c.expense recognition principle d.asset valuation principle

Q: Because many companies use computerized accounting systems, periodic inventory is widely used. a. True b. False

Q: depreciation is a process of a.asset devaluation b.cost accumulation c.cost allocation d.asset valuation

Q: Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales. a. True b. False

Q: when estimating the useful life of an asset, accountants do not consider a.the cost to replace the asset at the end of its useful life b.vulnerability to obsolescence c.expected repairs and maintenance d.the intended use of the asset

Q: Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. The journal entry for this purchase will include a debit to Cash and a credit to Sales. a. True b. False

Q: in computing depreciation, salvage value is a.the fair value of a plant asset on the date of acquisition b.subtracted from accumulated depreciation to determine the plant asset's depreciable cost c.an estimate of a plant asset's value at the end of its useful life d.ignored in all the depreciation methods

Q: The seller records the sales tax as part of the sales amount. a. True b. False

Q: all of the following statements are false regarding depreciation except a.depreciation is an asset valuation process b.depreciation does not apply to land improvements c.recognizing depreciation results in the accumulation of cash for asset replacement d.depreciation does not apply to land

Q: On the merchandising income statement, sales will be reduced by administrative expenses to arrive at income from operations. a. True b. False

Q: all the following are needed for the computation of depreciation except a.training costs of manufacturing personnel b.cost c.salvage value d.estimated useful life

Q: Under a perpetual inventory system, the cost of merchandise on hand at the end of the year can only be determined by reviewing the ledger. a. True b. False

Q: all of the following statements about the useful life factor associated with depreciation are true except a.useful life is also called service life b.useful life is an estimate of productive life c.past experience with similar assets is helpful in establishing useful life d.useful life is also called expected trade-in value

Q: If the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the carrier, the terms are considered FOB destination. a. True b. False

Q: equipment was purchased for $60,000. freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. it is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. depreciation expense each year using the straight-line method will be a.$14,160 b.$11,760 c.$9,840 d.$9,600

Q: equipment was purchased for $51,000 on january 1, 2011. freight charges amounted to $2,100 and there was a cost of $6,000 for building a foundation and installing the equipment. it is estimated that the equipment will have a $9,000 salvage value at the end of its 5-year useful life. what is the amount of accumulated depreciation at december 31, 2012, if the straight-line method of depreciation is used? a.$20,040 b.$10,020 c.$8,580 d.$17,160

Q: If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30. a. True b. False

Q: There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales. a. True b. False

Q: equipment with a cost of $150,000 has an estimated salvage value of $10,000 and an estimated life of 4 years or 10,000 hours. it is to be depreciated by the straight-line method. what is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours? a.$37,500 b.$35,000 c.$37,800 d.$36,250

Q: A sales discount encourages customers to pay their invoice early. a. True b. False

Q: equipment with a cost of $256,000 has an estimated salvage value of $24,000 and an estimated life of 4 years or 12,000 hours. it is to be depreciated by the straight-line method. what is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? a.$64,000 b.$70,000 c.$66,000 d.$58,000

Q: In a merchandise business, sales minus operating expenses equals net income. a. True b. False

Q: a machine was purchased for $18,000 and it was estimated to have a $3,000 salvage value at the end of its useful life. monthly depreciation expense of $250 was recorded using the straight-line method. the annual depreciation rate is a.25% b.2% c.16% d.20%

Q: Freight is the amount paid by the seller to deliver merchandise sold to a customer under FOB shipping point terms. a. True b. False

Q: a truck was purchased for $90,000 and it was estimated to have an $6,000 salvage value at the end of its useful life. monthly depreciation expense of $700 was recorded using the straight-line method. the annual depreciation rate is a.12% b.2% c.8% d.10%

Q: Cost of merchandise sold is often the largest expense on a merchandising company’s income statement. a. True b. False

Q: a company purchased factory equipment on april 1, 2012, for $72,000. it is estimated that the equipment will have a $9,000 salvage value at the end of its 10-year useful life. using the straight-line method of depreciation, the amount to be recorded as depreciation expense at december 31, 2012, is a.$7,200 b.$6,300 c.$4,725 d.$5,400

Q: Purchased goods in transit, shipped FOB destination, should be excluded from the ending inventory of the buyer. a. True b. False

Q: the declining-balance method of depreciation produces a(n) a.decreasing depreciation expense each period b.increasing depreciation expense each period c.declining percentage rate each period d.constant amount of depreciation expense each period

Q: Large businesses that make sales to customers who use credit cards, such as American Express, generally treat these sales as cash sales. a. True b. False

Q: a company purchased factory equipment on june 1, 2012, for $80,000. it is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life. using the straight-line method of depreciation, the amount to be recorded as depreciation expense at december 31, 2012, is a.$7,500 b.$4,375 c.$3,750 d.$3,125

Q: Sellers and buyers are required to record trade discounts. a. True b. False

Q: the modified accelerated cost recovery system (macrs) is a depreciation method that a.is used for tax purposes b.must be used for financial statement purposes c.is required by the sec d.expenses an asset over a single year because capital acquisitions must be expensed in the year purchased

Q: Other revenue and expense items are not related to the primary operations of the business. a. True b. False

Q: which of the following methods will result in the highest depreciation in the first year? a.sum-of-years-digits b.time valuation c.straight-line d.declining-balance

Q: The adjusting entry for inventory shrinkage would generally include a debit to Cost of Merchandise Sold. a. True b. False

Q: which of the following methods of computing depreciation is production based? a.straight-line b.declining-balance c.units-of-activity d.none of these

Q: The chart of accounts for a merchandising business would include an account called Delivery Expense. a. True b. False

Q: management should select the depreciation method that a.is easiest to apply b.best measures the plant asset's market value over its useful life c.best measures the plant asset's contribution to revenue over its useful life d.has been used most often in the past by the company

Q: Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point. a. True b. False

Q: the depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is a.straight-line b.units-of-activity c.sum-of-years-digits d.none of these

Q: If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination. a. True b. False

Q: on november 1, 2011, love company places a new asset into service. the cost of the asset is $27,000 with an estimated 5-year life and $3,000 salvage value at the end of its useful life. what is the depreciation expense for 2012 if love company uses the straight-line method of depreciation? a.$1,200 b.$4,800 c.$800 d.$2700

Q: on october 1, 2012, mann company places a new asset into service. the cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life. what is the depreciation expense for 2012 if mann company uses the straight-line method of depreciation? a.$2,250 b.$12,000 c.$3,000 d.$6,000

Q: In a perpetual inventory system, when merchandise is returned to the supplier, Cost of Merchandise Sold is debited as part of the transaction. a. True b. False

Q: on january 1, a machine with a useful life of five years and a residual value of $5,000 was purchased for $25,000. what is the depreciation expense for year 2 under straight-line depreciation? a.$5,000 b.$15,000 c.$4,000 d.$12,000

Q: Sales is equal to the cost of merchandise sold less the gross profit. a. True b. False

Q: on january 1, a machine with a useful life of four years and a residual value of $8,000 was purchased for $40,000. what is the depreciation expense for year 2 under straight-line depreciation? a.$10,000 b.$16,000 c.$8,000 d.$20,000

Q: Under the periodic inventory system, the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory. a. True b. False

Q: Freight is considered a part of the buyer’s total cost of purchasing inventory under FOB shipping point terms. a. True b. False

Q: a plant asset was purchased on january 1 for $60,000 with an estimated salvage value of $12,000 at the end of its useful life. the current year's depreciation expense is $4,000 calculated on the straight-line basis and the balance of the accumulated depreciation account at the end of the year is $20,000. the remaining useful life of the plant asset is a.15 years b.12 years c.5 years d.7 years

Q: which depreciation method is most frequently used in businesses today? a.straight-line b.declining-balance c.units-of-activity d.double-declining-balance

Q: Most retailers record all credit card sales as credit sales. a. True b. False

Q: a plant asset was purchased on january 1 for $27,000 with an estimated salvage value of $3,000 at the end of its useful life. the current year's depreciation expense is $3,000 calculated on the straight-line basis and the balance of the accumulated depreciation account at the end of the year is $15,000. the remaining useful life of the plant asset is a.10 years b.8 years c.5 years d.3 years

Q: Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business. a. True b. False

Q: mitchell corporation bought equipment on january 1, 2012 .the equipment cost $120,000 and had an expected salvage value of $20,000. the life of the equipment was estimated to be 6 years. the depreciable cost of the equipment is a.$120,000 b.$100,000 c.$20,000 d.$16,667

Q: When merchandise that was sold is returned, a credit to Customer Refunds Payable is made. a. True b. False

Q: On the balance sheet, Allowance for Sales Discounts will appear as a contra asset account to Sales. a. True b. False

Q: mitchell corporation bought equipment on january 1, 2012 .the equipment cost $120,000 and had an expected salvage value of $20,000. the life of the equipment was estimated to be 6 years. the book value of the equipment at the beginning of the third year would be a.$120,000 b.$100,000 c.$86,667 d.$33,333

Q: mitchell corporation bought equipment on january 1, 2012 .the equipment cost $120,000 and had an expected salvage value of $20,000. the life of the equipment was estimated to be 6 years. the depreciation expense using the straight-line method of depreciation is a.$23,333 b.$24,000 c.$16,667 d.none of the above

Q: When the terms of sale are FOB shipping point, the buyer should pay the freight charges. a. True b. False

Q: When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount. a. True b. False

Q: pearson company bought a machine on january 1, 2012. the machine cost $108,000 and had an expected salvage value of $18,000. the life of the machine was estimated to be 5 years. the depreciable cost of the machine is a.$108,000 b.$90,000 c.$30,000 d.$18,000

Q: When companies use a perpetual inventory system, the journal entry for the purchase of inventory will include a debit to Purchases. a. True b. False

Q: pearson company bought a machine on january 1, 2012. the machine cost $108,000 and had an expected salvage value of $18,000. the life of the machine was estimated to be 5 years. the book value of the machine at the beginning of the third year would be a.$108,000 b.$90,000 c.$72,000 d.$36,000

Q: The asset turnover measures how effectively a business is using its assets to generate sales. a. True b. False

Q: pearson company bought a machine on january 1, 2012. the machine cost $108,000 and had an expected salvage value of $18,000. the life of the machine was estimated to be 5 years. the depreciation expense using the straight-line method of depreciation is a.$30,000 b.$21,600 c.$18,000 d.none of the above

Q: When merchandise is sold for $600 plus a 6% sales tax, the sales account should be credited for $636. a. True b. False

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