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a) net income will be understated
b) stockholders' equity will be understated
c) Allowance for Doubtful accounts will be overstated
d) net Accounts Receivable will be overstated
Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debt expense for the period?
The balance of Allowance for Doubtful Accounts prior to making adjusting entry to record Bad Debts Expense
a) is relevant when using the percentage of receivables basis
b) is relevant when using the direct write-off method
c) is relevant to both the percentage of receivables basis and the direct write-off method
d) will never show a debit balance at this stage in the accounting cycle
If the company fails to record estimated bad debts expense,
a) cash realizable value is understated
b) expenses are understated
c) revenues are understated
d) receivables are understated
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
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
Becky's Blooms purchased a delivery van for $20,000. The company was given a $2,000 cash discount by the dealer, and paid $1,000 sales tax. Annual insurance on the van is $500. As a result of the purchase, by how much will Becky's Blooms increase its van account?
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
Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years of 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?
Use the following to answer the question below,
Brinkman Corporation bought equipment on January 1, 2007. The equipment cost $90,000 and had an expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.
The book value of the equipment at the beginning of the 3rd year would be
An expenditure for which of the following items would be considered a revenue expenditure?
a) plant asset
b) ordinary repair
Equipment costing $20,000 with a salvage value of $4,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no charge in the salvage value, the depreciation expense for year 3 would be
Which of the following is not true of ordinary repairs?
a) They primarily benefit the current accounting period
b) They can be referred to as revenue expenditures
c) They maintain the expected productive life of the asset
d) They increase the productive capacity of the asset
A plant asset with a cost of $90,000 and accumulated depreciation of $85,500 is sold for $10,500. What is the amount of the gain or loss on disposal of the plant asset?
a) $10,500 loss
b) $6,000 loss
c) $6,000 gain
d) $10,500 gain
A loss on disposal of a plant asset is reported in the financial statements
a) in the Other Revenues and Gains section of the income statement
b) in the Other Expenses and Losses section of the income statement
c) as a direct increase to the capital account on the balance sheet
d) as a direct decrease to the capital account on the balance sheet
Ambrose Associates sold office furniture for $8,000. The furniture has an original cost of $24,000 and accumulated depreciation of $12,000. As a result of the sale,
a) net income will increase $8,000
b) net income will increase $4,000
c) net income will decrease $4,000
d) net income will decrease $8,000
An asset that cannot be sold individually in the market place is
a) a patent
c) a copyright
d) a trade name
On July 1, 2007, Bartin Company purchased the copyright to Motion Computer Tutorials for $120,000. It is estimated that the copyright will have a useful life of 5 years. The amount of Amortization Expense recognized for the year 2007 would be
Cost allocation of an int