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financial accounting 11th

Questions and Answers of Financial Accounting 11th

Explain and compute how tangible assets are written off over their useful lives and reported on the financial statements.
Explain and compute how intangible assets are written off over their useful lives and reported on the financial statements.
Explain how decreases in value, repairs, changes in productive capacity, and changes in estimates of useful life and salvage value of assets are reported on the financial statements.
Explain how the disposal of an asset is reflected in the financial statements.
Recognize and explain how long-term assets are reported on the financial statements, and prepare financial statements that include long-term assets.
Use return on assets (ROA) and the asset turnover ratio to help evaluate a firm's performance.
Identify and describe the business risks associated with long-term assets and the controls that can minimize those risks.
(Appendix) Explain how depreciation for financial statements differs from depreciation for taxes.
Describe the difference between tangible and intangible assets.
What is the difference between capitalizing and expensing a cost?
What is depreciation?
Explain the difference between depreciation and depletion.
How do firms determine the cost of property, plant, and equipment?
What is a basket purchase? What accounting problem does this type of purchase create, and how do firms remedy the accounting problem?
What is the carrying value, or book value, of an asset? Is this value equal to the market value of the asset? Explain your answer.
What is the residual value, or salvage value, of an asset?
How does depreciation apply the matching principle?
Explain the difference between the three depreciation methods allowed by GAAP.
What is a copyright and how is it accounted for?
What does it mean for an asset to be impaired?
How is a gain or loss on the disposal of an asset calculated? On which financial statement(s) would the gain or loss appear?
How does goodwill arise?
How is the return on assets (ROA) ratio calculated and what does this ratio measure?
How is the asset turnover ratio calculated and what does this ratio measure?
List two types of controls that safeguard assets.
Which of the following is an intangible asset?a. Franchiseb. Oil reservesc. Landd. Repairs
Depreciation is the systematic allocation of the cost of an asseta. Over the periods during which the asset is paid forb. Over the periods during which the market value of the asset decreasesc. Over
Writing off a cost meansa. Putting the cost on the balance sheet as an assetb. Evaluating the useful life of the assetc. Recording the cost as an expensed. Deferring the expense
Suppose a firm purchases a new building for \(\$ 500,000\) and spends an additional \(\$ 50,000\) making alterations to it before it can be used. How much will the firm record as the cost of the
Suppose a firm buys a piece of land with a building for \(\$ 100,000\). The firm's accountant wants to divide the cost between the land and building for the firm's financial records. Why?a. Land is
When an expenditure to repair an existing asset extends the useful life of the asset, the cost should bea. Classified as a revenue expenditure because it will result in increased revenueb.
When goodwill is determined to be impaired, a firm willa. Increase its book value to market valueb. Sell it immediatelyc. Reduce the value of the goodwill with a charge against income (impairment
When a company's balance sheet shows goodwill for \(\$ 300,000\), what does that mean?a. The company has developed a strong reputation valued at \(\$ 300,000\) if the company were to be sold.b. The
Suppose a firm purchased an asset for \(\$ 100,000\) and estimated, on the date of the purchase, its useful life as 10 years with no salvage value. The firm uses straight-line depreciation. After
Suppose a firm purchased an asset for \(\$ 50,000\) and depreciated it using straight-line depreciation for its 10 -year useful life, with no salvage value. At the end of the seventh year of use, the
Calculate the cost of an asset. (LO 1)Gruber Window Fashions bought a new wood-cutting machine as a part of its venture into manufacturing interior shutters. The invoice price of the machine was \(\$
Calculate the cost of an asset. (LO 1)Settler Company was quickly outgrowing its rented office space. The company decided that it could raise enough capital to buy land and build a new office
Account for basket purchase. (LO 1)Tylo Corporation obtained a building, its surrounding land, and a delivery truck in a lumpsum purchase for \(\$ 230,000\). An appraisal set the value of land at
Account for basket purchase. (LO 1)Villa Corporation purchased three buildings at a total cost of \(\$ 960,000\). The appraised values of the individual buildings were as follows:What amounts should
Calculate depreciation expense: straight-line. (LO 2)Calculate the annual straight-line depreciation expense for an asset that cost \(\$ 12,000\), has a useful life of 5 years, and has an estimated
Calculate depreciation expense: activity method. (LO 2)Using the activity method, calculate the first 2 years of depreciation expense for a copy machine that cost \(\$ 14,000\), has an estimated
Calculate depreciation expense: double-declining balance. (LO 2)Using the double-declining balance method, calculate the annual depreciation expense that will be recorded each year for an asset that
Determine the cost of an asset. (LO 1, 2)If an asset with no salvage value is being depreciated at a rate of \(\$ 1,000\) per year using the straight-line method over a useful life of 6 years, how
Calculate depreciation expense: straight-line. (LO 2)A machine is purchased on January 2, 2006, for \(\$ 50,000\), and it has an expected life of 4 years and no estimated salvage value. If the
Determine the useful life of an asset. (LO 2)Suppose an asset cost \(\$ 20,000\) and has an estimated salvage value of \(\$ 2,000\). At the end of 3 years, the carrying value of the asset is \(\$
Calculate depletion. (LO 2)CNA Enterprises purchases an oil field and expects it to produce \(1,000,000\) barrels of oil. The oil field, acquired in January 2006, cost CNA \(\$ 1.5\) million. In
Calculate depletion. (LO 2)Earthlink Mining purchased a copper mine for \(\$ 12,000,000\). The company expects the mine to produce \(6,000,000\) tons of copper over its 5 -year useful life. During
Amortization of intangible assets. (LO 3)Edgewood Company obtained a patent for a new invention. The costs associated with the patent totaled \(\$ 35,000\). With the rapid development of new
Analyze revenue and capital expenditures. (LO 4)For each of the following, tell whether it should be classified as (a) a revenue expenditure (expensed), (b) a capital expenditure (capitalized), or
Analyze revenue and capital expenditures. (LO 4)Categorize each of the following as a capital expenditure or a revenue expenditure (expense) for Dalton \(\&\) Sons and explain why.a. In accordance
Calculate depreciation expense with change in estimate of salvage value. (LO 4) On January 1, 2007, the Lance Corporation purchased a machine at a cost of \(\$ 55,000\). The machine was expected to
Account for asset impairment. (LO 4)Delta Airlines has determined that several of its planes are impaired. The book value of the planes is \(\$ 10\) million, but the fair market value of the planes
Account for disposal of an asset. (LO 5)A machine is purchased on January 2, 2005, for \(\$ 100,000\). It has an expected useful life of 10 years and no salvage value. After 9 years, the machine is
Account for disposal of an asset. (LO 5)The Topspin Company sold some old equipment for \(\$ 65,000\). The equipment originally cost \(\$ 100,000\), had an estimated useful life of 10 years, and had
Prepare financial statements. (LO 6)At what value are fixed assets such as property, plant, and equipment shown on the balance sheet? How is that amount calculated?
Calculate ratio analysis. (LO 7)Financial ratios are often used to evaluate a company's performance. What ratio(s) would provide information about how efficiently a company is using its assets?
Identify risks and controls. (LO 8)Write a paragraph describing a specific risk associated with long-term assets and some possible controls that might minimize the risk.
Identify risks and controls. (LO 8)Give an example of an industry with a particular interest in copyright laws. What risks do firms in that industry face?
(Appendix) Explain depreciation for taxes. (LO 9)What kind of depreciation do firms use for taxes? Explain. Why would the IRS allow such depreciation?
Account for basket purchase. (LO 1, 2)Coca-Cola purchases a building and land for \(\$ 180,000\). An independent appraiser provides the following market values: building- \(\$ 150,000\); land- \(\$
Calculate the cost of an asset and depreciation expense. (LO 1, 2)Corona Company purchased land for \(\$ 75,000\) cash and a building for \(\$ 300,000\) cash. The company paid real estate closing
Calculate depreciation expense: straight-line and activity methods. (LO 2) Best-Goods Company purchased a delivery truck for \(\$ 35,000\) on January 1, 2006. The truck had an estimated useful life
Calculate depreciation expense: straight-line and double-declining balance methods. (LO 2)On January 1, 2006, Norris Company purchased equipment for \(\$ 42,000\). Norris also paid \(\$ 1,200\) for
Calculate depreciation under alternative methods. (LO 2)Avery Corporation bought a new piece of equipment at the beginning of the year at a cost of \(\$ 15,400\). The estimated useful life of the
Calculate depreciation under alternative methods. (LO 2)Using the information from E4-5A, suppose the production in Year 5 was actually 9,000 rather than 7,500 units. How would this difference in
Calculate depreciation under alternative methods. (LO 2)}Propel Company bought a machine for \(\$ 65,000\) cash at the beginning of 2006. The estimated useful life is 5 years and the estimated
Calculate depletion. (LO 2)On January 1, 2008, American Oil Company purchased the rights to an offshore oil well for \(\$ 45,000,000\). The company expects the oil well to produce \(9,000,000\)
Amortize intangible assets. (LO 3)Becker and Associates registered a patent with the U.S. Patent and Trademark Office. The total cost of obtaining the patent was \(\$ 165,000\). Although the patent
Calculate goodwill. (LO 3)Carpenter Tools decides to acquire a small local tool company called Local Tools. Local Tools has net assets with a market value of \(\$ 230,000\) but Carpenter pays \(\$
Evaluate asset impairment. (LO 4)During its most recent fiscal year, Bargain Airlines grounded 10 of its 747 s due to a potential problem with the wing flaps. Although the planes had been repaired by
Distinguish between capital and revenue expenditures (expenses). (LO 1, 4) Classify the following items as either a capital expenditure or a revenue expenditure (an expense).a. Changed oil in the
Account for capital and revenue expenditures (expenses) and calculate depreciation expense. (LO 2, 4)Yester Mfg. Co. has had a piece of equipment for 6 years. At the beginning of the seventh year,
Account for capital and revenue expenditures (expenses) and calculate depreciation expense. (LO 2, 4)Sharper Company operates a small repair facility for its products. At the beginning of 2006, the
Account for disposal of an asset. (LO 5)Zellwiger Plumbing bought a van for \(\$ 60,000\). The van is expected to have a 10 -year useful life and a salvage value of \(\$ 4,000\).a. If Zellwiger sells
Account for disposal of an asset. (LO 5)Troy Wilson Athletic Gear purchased a packaging machine 4 years ago for \(\$ 18,000\). The machinery was expected to have a salvage value of \(\$ 2,000\) after
Account for disposal of an asset. (LO 5)Dave's Delivery disposed of a delivery truck after using it 4 years. The records of the company provide the following information:Calculate the gain or loss on
Account for disposal of an asset. (LO 5)Sweet Tooth Bakery disposed of an oven after using it for 4 years. The oven originally cost \(\$ 40,000\) and had associated accumulated depreciation of \(\$
Calculate gain or loss and cash flow. (LO 5, 6)Arco Incorporated sold assets with an original cost of \(\$ 15,000\) and accumulated depreciation of \(\$ 9,000\). If the cash proceeds from the sale
Prepare financial statements. (LO 6)For each of the following, give the financial statement on which it would appear.a. Book value of fixed assets of \(\$ 56,900\)b. Proceeds from sale of fixed
Calculate return on assets and asset turnover ratios. (LO 7)Using the Staples annual report in the appendix at the back of the book, calculate the following ratios for the most recent fiscal year and
Identify risks and controls. (LO 8)Look at Staples' annual report in the appendix at the back of the book. What types of fixed assets does the firm have? What risks do you think Staples faces with
Define accrual accounting and explain how income is measured.
Explain accruals and how they affect the financial statements; describe and perform the adjustments related to accruals.
Explain deferrals and how they affect the financial statements; describe and perform the adjustments related to deferrals.
Construct the basic financial statements from a given set of transactions that include accruals and deferrals and recognize the effect of these transactions on actual financial statements.
Compute and explain working capital and the quick ratio.
Explain the business risks associated with financial records and accounting information.
What is interest and how is it computed?
Name two common deferred expenses.
What does it mean to recognize revenue?
What is depreciation?
What is working capital and what does it indicate?
What is the quick ratio and what does it measure?
What risks are associated with the financial accounting records?
Which of the following accounts is a liability?a. Depreciation expenseb. Dividendsc. Accumulated depreciationd. Unearned advertising fees
Which of the following is an example of an accrual?a. Revenue collected in advanceb. Supplies purchased for cash but not yet usedc. Interest expense incurred but not yet paidd. Payment for insurance
Which of the following is an example of a deferral?a. Cash has not changed hands and services have not been rendered.b. Services have been rendered but nothing has been recorded.c. A business never
The carrying (book) value of an asset isa. An account with a credit balance that offsets an asset account on the balance sheetb. The original cost of an asset minus the accumulated depreciationc. The
Receiving a payment for a credit sale made in a previous accounting period willa. Decrease assets and decrease shareholders' equityb. Increase assets and increases liabilitiesc. Have no net effect on
When a company pays cash in June to a vendor for goods purchased in May, the transaction willa. Increase cash and decrease inventoryb. Decrease accounts payable and decrease cashc. Decrease accounts

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