A company should choose a depreciation method that
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best allocates the original cost of the asset to the periods benefited by the use of the asset.
saves the most taxes.
minimizes net income.
shows the highest amount of net income.
Goodwill can be recorded as an asset when a(n)
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business has above normal profitability compared to other businesses in its industry.
business can determine that it has created customer goodwill and name recognition.
offer is received to purchase the business at a price in excess of the value of the assets.
business is purchased and payment is made in excess of the value of the net assets.
Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should
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not be amortized.
be reported on the statement of retained earnings in the year in which acquired.
be amortized over a reasonable period of time not to exceed 40 years.
increase an expense account entirely in the year in which acquired.
With respect to the statement of cash flows,
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repurchase of stock is a financing activity.
a stock split is a financing activity.
a stock dividend is an investing activity.
the declaration of a cash dividend account is an operating activity.
When bonds are issued by a company, the recording of the transaction will include an
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increase in liabilities and a decrease in stockholders’ equity.
increase in liabilities and an increase in stockholders’ equity.
increase in assets and an increase in liabilities.
increase in assets and an increase in stockholders’ equity.
The Retained Earnings account balance for a large corporation is $10,000,000. This amount represents
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earnings that have not been distributed to shareholders.
cash in the bank.
the amount of cash available for dividends.
revenues for all past years of operations.
All of the following are reasons for a company to repurchase its previously issued stock, except:
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to support the market price of the stock
to resell to employees
to increase the shares outstanding
for bonuses to employees
Which one of the following is an investing activity of a business?
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Paying for purchases of inventory.
Issuing stock for cash.
Borrowing money from a bank.
Purchasing a manufacturing plant for cash.
Which one of the following is an operating activity of a business?
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Paying for purchases of inventory.
Issuing stock for cash.
Borrowing money from a bank.
Purchasing a manufacturing plant.
During December, Dobson Inc. purchased $800 of supplies for use in its business. At the end of December, 20% of the supplies were still on hand, but only 75% had been paid. What amounts will appear on the company’s balance sheet on December 31?
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Supplies on Hand, $800; Accounts Payable, $600
Supplies on Hand, $160; Accounts Payable, $200
Supplies on Hand, $640; Accounts Payable, $200
Supplies on Hand, $160; Accounts Payable, $800
All of the following are included in the acquisition cost of property, plant, and equipment except:
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transportation costs
taxes on the purchase
installation costs
maintenance costs
The effect of recording depreciation for the year is a(n)
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decrease in assets and a decrease in net income.
decrease in assets but no change in owners’ equity.
increase in assets and an increase in net income.
decrease in net income and no change in assets.
Pat & Co. reported net income for the current year. Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?
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Cash dividends were paid to stockholders during the year.
Depreciation expense was recorded for the year.
A bank loan was repaid during the year.
Equipment was purchased for cash during the year.
A company’s balance sheet shows the account, Notes Payable. This resulted from a loan made by the company’s bank. If the end-of-year balance in the notes payable account exceeds the beginning-of-year balance by $5,000, this is shown on the cash flow statement as an
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inflow of cash of $5,000 in the operating activities category.
outflow of cash of $5,000 in the operating activities category.
inflow of cash of $5,000 in the financing activities category.
outflow of cash of $5,000 in the financing activities category.
On July 1, 2012, Watson Company received a $20,000 promissory note for services from Jeffs Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2013. The effect on Watson’s financial statements on July 1, 2012 is as follows.
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Assets increase; owners’ equity increases.
Assets decrease and owners’ equity decreases.
Assets decrease.
No net change in assets.
During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?
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Any method in which the company uses a periodic inventory system.
FIFO
LIFO
weighted average cost
The ending inventory balance represents
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expired costs and is reported on the balance sheet as an asset.
the cost of goods sold during the current period and is reported on the balance sheet as an asset.
expired costs and is reported on the income statement as an expense.
unexpired costs and is reported on the balance sheet as an asset.