ACCT 5312 HW 5-8 Multiple Choice

An accounts receivable results from the sale of:

goods and services to customers on account.

The balance sheet presentation of accounts receivable net of the allowance for bad debts has the effect of stating accounts receivable at:

net realizable value.

If an organization purchases $3,000 of supplies on account, with terms of 2/10, n30:

$2,940 can be paid within 10 days of the invoice date, or $3,000 must be paid within 30 days of the invoice date.

When a company buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land:

the total cost of the land and old building are capitalized as land cost.

Depreciation, in accounting, is a process that results in:

spreading the cost of an asset over its useful life to the entity.

Azubuike Limited purchased inventory, land, and a building for a lump-sum purchase price of $1,500,000 from a bankrupt competitor. Appraised values were as follows: inventory, $200,000; land $600,000; building, $1,200,000. The land should recorded as an asset on Azubuike’s books for:

$450,000.

Speedbag, Incorporated purchased equipment at a cost of $60,000 on July 1, 2023. The expected useful life is 4 years and the asset is expected to have salvage value of $10,000. Speedbag depreciates its assets using the straight-line method.

What is the company's depreciation expense for the year ended December 31, 2023?

$6,250

Speedbag, Incorporated purchased equipment at a cost of $60,000 on July 1, 2023. The expected useful life is 4 years and the asset is expected to have salvage value of $10,000. Speedbag depreciates its assets using the straight-line method.

What is the accumulated depreciation for this asset on December 31, 2024?

$18,750

When a depreciable asset is sold:

a gain arises if the sales proceeds exceed the net book value.

Leasehold is an example of which of the following types of assets?

Intangible asset

Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

amortization.

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI:

is more than the fair value of the net assets of the acquired company.

Interest on a Note Payable is most appropriately accrued:

as of the end of each accounting period during which the note is a liability.

The purpose of reporting Current Maturities of Long-Term debt is to:

all of these answers are correct.

An Accounts Payable normally results from which of the following transactions?

Purchasing goods and services from suppliers on credit

A loan discount is:

the interest amount that is subtracted from the loan principal (and effectively prepaid) when a loan is obtained on a discount basis.

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is

magazines are mailed to subscribers.

On June 1, 2022, an advance rent payment of $8,400, representing a four-month prepayment for the months of June, July, August, and September, was received in cash from the company’s tenant.

The adjusting entry that will be made at the end of each month to show the amount of rent “earned” during the month is:

Debit	Unearned Rent Revenue	2,100
Credit	Rent Revenue		2,100

For the payroll period ended on May 7, 2022, gross pay was $102,000, net pay was $78,000, and various withholdings totaled $24,000. The journal entry to show the effects of the payroll accrual on May 7, 2022 is:

Debit	Wages Expense	102,000
Credit	Withholding Liabilities		24,000
Credit	Wages Payable		78,000

Financial leverage refers to which of the following?

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE).

The noncurrent Deferred Tax Liability account arises because:

some expenses are deducted for tax purposes before they are deducted for book purposes.

The largest item of the Deferred Tax Liability for most companies is caused by:

differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes.

Which of the following is not a stockholders' equity account?

Accumulated depreciation

Which of the following is not usually a right or attribute of preferred stock?

Having a claim to dividends in excess of the annual dividend requirement if dividends on common stock exceed dividends on preferred stock.

The declaration of a cash dividend by the directors results in:

a decrease in retained earnings and an increase in current liabilities.

Springer Company was incorporated on January 1, 2022, at which time 500,000 shares of $1 par value common stock were authorized, and 210,000 of these shares were issued for $9 per share. Net income for the year ended December 31, 2022, was $1,900,000. Springer Company’s board of directors declared dividends of $1.40 per share of common stock on December 31, 2022, payable on January 27, 2023.

The entry to record the payment of dividends on January 27, 2023 is:

Debit	Dividends Payable	294,000
Credit	Cash		294,000

The principal reason for a company having a common stock split is to:

decrease the market value per share of common stock.

On May 24, 2022, ARCC, Limited purchased 700 shares of its own $10 par value common stock in the market for $58 per share. On July 17, 2022, the company sold 600 of these shares in the open market at a price of $63 per share.

The entry to record the purchase of the treasury stock on May 24, 2022 is:

Debit	Treasury Stock	40,600
Credit	Cash		40,600

"Noncontrolling interest":

is the portion of equity in a subsidiary not attributable, directly or indirectly, to the parent company, and reported on the balance sheet within equity, but separate from the parent company's equity.