accounting test 4 ch.9 and 10


Depreciation is an allocation method, not a valuation method.
true or false


Accumulated Depreciation is classified as an expense.
true or false


Tax accounting and financial accounting use the same depreciation calculations and there are no differences in the results between the two accounting systems.
true or false

A warehouse used to store inventory.

Which of the following would be properly classified as a long-lived asset?
a. A car held for resale by an automobile dealership.
b. Accounts receivable.
c. Merchandise inventory held for resale.
d. A warehouse used to store inventory.

long-lived assets with no physical substance.

Intangible assets are:
a. long-lived assets with no physical substance.
b. unnecessary for most major companies.
c. all current assets.
d. any assets acquired without using cash.

Capitalizing a cost means to record it as an asset.

Which of the following statements about capitalizing costs is correct?
a. Capitalizing costs refers to the process of converting assets to expenses.
b. All costs incurred to acquire an asset may be capitalized.
c. Capitalizing a cost means to record it as

$3.2 million as equipment.

Your company buys a computer system for $3 million and pays the vendor $200,000 to install the computer system. Your company should record:
a. $3 million as equipment and $200,000 as expenses.
b. $3.2 million as expenses.
c. $2.8 million as equipment and

To match the cost of the asset to the period in which it generates revenue

Which of the following statements most appropriately describes the purpose of depreciating a long-lived tangible asset?
a. To indicate how the asset has physically deteriorated
b. To show that the asset will eventually and gradually become obsolete
c. To


A company began the year with Property and Equipment costing $680,000 and accumulated depreciation of $120,000. The only change affecting the long-lived assets account during the year is the $55,000 of depreciation expense that must be recorded for the ye

residual value.

The book value of a depreciable asset can never be less than its:
a. historical cost.
b. market value.
c. capitalized cost.
d. residual value.

purchase price installation costs renovation costs

to get the cost of the machine you add
_ _ , _ _, _ _

depreciation expense accumulated depreciation

journal entry for depreciation expense
debit _ _
and credit _ _

accumulated depreciation

for depreciation expense to get the number you add up the _ _ of all the different machines

straight-line method

_ _ _Allocates the depreciable cost of an asset in equal periodic amounts over its useful life. it is used when usage is in the same period

units of production

_ _ _ it is used when it varies each period
Allocates the depreciable cost of an asset over its useful life based on its output during the period in relation to its total estimated output.

double declining method

_ _ _ it is used when the asset is more efficient (generates more revenues) in early years but less so over time; also used for tax
Allocates the cost of an asset over its useful life based on a multiple of (often two times) the straight-line rate.

(cost - residual value) x 1/useful life

straight line formula for depreciation expense

depreciation cost

(cost - residual value) = _ _
straight line

depreciation rate

1/useful life = _ _
straight line

(cost - residual value) x actual production this period/estimated production this period

units of production method formula for depreciation expense

(cost - accumulated depreciation) x 2/useful life

double declining method formula for depreciation expense

the productivity of the asset varies significantly from one period to another

The units-of-production method of depreciation is an appropriate method to use when
a. it is impossible to determine the productivity of an asset
b. the productivity of the asset varies significantly from one period to another
c. the company is a service


_ assets are physical


_ assets have no physical substance unlimited life as long as it stays protected special rights exist 1. patent 2. copyright - exclusive right to publicize and sell 3. trademarks


_ mcdonalds golden arches applies sign this mickey mouse snoopy


_ for tangible assets
1. do not depreciate land
2. depreciation is not intended to measure how much wear and tear on the asset
3. it is intended to match revenues with expenses
not only tangible assets but also long lived assets

depreciable costs

_ _ "capitalized" costs
going to be insured every step of the way
ex. brand new MRI
installation cost - capitalized
sales tax - capitalized
insurance - capitalized

asset cost

_ _ al the capitalized cost of the asset

useful life

_ _ useful economic life to the current owner

residual value

_ _ (savage value_ what the company get when it disposes of the asset

asset cost - residual

depreciable cost formula

asset cost - accumulated depreciation

carrying value formula (book value)e

current liabilities

_ _payable in name paid off in a year

long term liabilities

_ _ _ will not be paid off in a year whole lot of liabilities

cash unearned revenue unearned revenue service revenue

journal entry for liabilities 1
debit _
credit _ _
second journal entry
debit _ _
credit _ _


don't forget have to use _ for every transaction

cash sales revenue sales tax payable
COGS inventory

journal entry for transaction
debit _
credit _ _
credit _ _ _
second journal entry
debit _
credit _


for liabilities it is never going to be an _ on the seller

gross salaries wages - employee income tax - employee FICA

formula for net pay

employer FICA = employee FICA

these two things are the same formula for tax things
_ _ = _ _

gross salaries and wages + employer FICA + unemployment tax

total payroll cost formula

add two debits

total payroll expense formula for journal entries
_ _ _

salaries and wages expense
withheld income tax payable
FICA payable
payroll tax expense
FICA payable
unemployment taxes payable

journal entries for the taxes liabilities
debit _ _ _ _
credit _ _ _ _
credit _ _
credit _
debit _ _ _
credit _ _
credit _ _ _


_ way that a corporation can borrow money from the public they could borrow from bank if need to get large sum of money bank won't lend instead sell this to public to get this money

1000 6

almost all corporate bonds are denominated this way $_ per bond
interest rate _% annual


_ on this day last interest payment and principle repayment

interest expense
bonds payable

journal entries for bonds
debit _ _
credit _
debit _ _
credit _

secured debt

_ _ tied to a specific piece of property

unsecured debt

_ _ not tied to any specific piece of property


_ no promise at all if you have stock in company that goes bankrupt you get tax deduction

large small

bonds enable company to borrow _ sums of money by borrowing _ sums frmo lots of people

principal x rate x time

don't forget this formula _ X _ x _
interest formula

Subscriptions received in advance

Which of the following is an example of a liability?
A) Supplies
B) Accounts receivable
C) Subscriptions received in advance
D) Prepaid advertising

FICA taxes

Which of the following must be paid by both the employer and employee?
a. FICA taxes
b. State unemployment taxes
c. Federal unemployment taxes
d. Federal withholding taxes.


During one pay period, your company distributes $130,500 to employees as net pay. The income tax withholdings were $19,000 and the FICA withholdings were $5,000. Total payroll costs to the company for this pay period, excluding any unemployment taxes, wer


On January 1, 2016, a company purchased a machine for $138,000 with an expected life of 5 years and a residual value of $12,000. In addition, the company paid delivery costs of $1,200 and $4,800 to have the machine installed. The company uses the double-d

total liabilities/total assets

debts to assets ratio


To record a cost as an asset rather than an expense.

ordinary repairs and maintenances

_ _ _Expenditures for the normal operating upkeep of long-lived assets, recorded as expenses.

extraordinary repairs

_ _ Infrequent expenditures that increase an asset's economic usefulness in the future and that are capitalized.

long-lived assets

_-_ _ resources owned by a business that enable it to produce the goods or services that are sold to customers

land improvements

_ _ include sidewalks pavement landscaping fencing lighting and sprinkler systems added to improve usefulness of land

construction in progress

_ _ _ includes the costs of constructing new buildings and equipment


_ is never used up

fixed assets interest loans ordinary

other costs that are expensed when incurred include insurance for _ _ in use, _ on _ to purchase fixed assets, and _ repairs and maintenance


_ the allocation of the depreciable cost of long-lived tangible assets over their productive lives using a systematic and rational method

carrying value

_ book the acquisition cost of an asset less accumulated depreciation

depreciable cost

_ _ the portion of the asset's cost that will be used i generating revenue calculated as asset cost minus residual value


_ a special name image or slogan identified with a product or company


_ a form of protection provided to the original authors of literary musical artisitci dramatic adn other works of authorship


_ a right to exclude others from making using selling or importing an invention

licensing rights

_ _ the limited permission to use property according to specific terms and conditions set out in a contract


_ a contractual right to sell certain products or services use certain trademarks or perform activities in a certain geographical region


_ the premium a company pays to obtain the favorable associated with another company

research and development

_ _ expenditures that may someday lead to patents copyrights or other intangible assets the uncertainty about their future benefits requires that they be expensed

net assets

_ _ the shorthand term used to refer to assets minus liabilities


_ the process of allocating the cost of intangible assets over their limited useful lives


an abbreviation for "earnings before interest, taxes, depreciation and amortization" which is a measure of operating performance that some managers and analysts use in place of net income


_ the process of allocating a natural resource's cost over the period of its extraction or harvesting

accrued liabilities

_ _ liabilities for expenses that have been incurred but not paid at the end of the accounting period

maturity date

_ _ the date on which the bonds are due to be aid in full

face value

_ _ the payment made when the bond matures

stated interest rate

_ _ _ the rate stated on teh face of the bond that is used to compute interest payments

issue price

the amount of money that a lender pays and the company receives when a bond is issued

present value

_ _ a mathematical calculation that determines the amount that one or more payments made in the future are worth today


_ the amount by which a bond's issue price exceeds its face value


_ the amount by which a bonds issue price is less than its face value

market interst rate

_ _ _ the rate of interest that investors demand from a bond

debt-to-assets ratio

indicates financing risk by computing the proportion of total assets financed by debt

cash note payable

record note
debit _
credit _ _

interest expense interest payable

record adjusting entry for interest
debit _ _
credit _ _

note payable interest payable interest expense cash

record payment of the note and the interest on the maturity date
debit _ _
debit _ _
debit _ _
credit _

cash bonds payable interest expense cash

On January 1, Applied Technologies Corporation (ATC) issued $500,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market interest rate was 10 percent. The bonds pay interest once pe


when it gives you quoted price of 101 you take the original price x 101% that is the cash and then you _ the new number from the original

original cost - accumulated depreciation

how to find the gain or loss of disposal
_ _ - _ _ and then see whether this number is higher or lower than what it sold for

none cash accumulated depreciation - equipment gain on disposal equipment none accumulated depreciation-equipment loss on disposal equipment

Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:
Asset Original
Cost Residual
Value Estimated
Life Accumulated
Machine A $ 30,000 $ 3,000 5 years $ 21,60