ACCT 1A Lecture Notes - Lecture 2: Current Asset, Matching Principle, Historical Cost

5 views2 pages

amaranthgrasshopper262

25 Aug 2020

School

Irvine Valley College

Department

Accounting

Course

ACCT 1A

Professor

Bradshaw

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Cost/expenditure: amount of cash/equivalents paid or fair value of consideration given. Capitalise the cost and record it as an asset; Not capitalise the cost and record it as an expense. If an item does not meet the essential characteristics or recognition criteria of an asset, then it is an expense. Capitalising the cost (recording as assets) defers the recognition of expenses to later periods for the matching principle matching expenses to the period where the revenue is recognised. If a cost is incurred and expense is recognised in the same period: If a cost is incurred and expense is recognised in a later period: Current vs non-current assets was sold for ,000 cash. An inventory with a cost of ,000 is purchased with cash. An asset is classified as current if it satisfies any of the following: It is expected to be realised in, or is intended for sale or consumption in, the.

Related Questions

1. Which of the following identifies the proper order of theaccounting cycle?

A. Analyze, Journalize, Unadjusted Trial Balance

B. Analyze, Post, Unadjusted Trial Balance

C. Journalize, Post, Adjusted Trial Balance

D. Unadjusted Trial Balance, Adjusted Trial Balance, Close

E. Adjusted Trial Balance, Adjustments, Financial Statements

2. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three orsix-month periods

B. That are prepared before any adjustments have beenrecorded

C. That show the assets above the liabilities and theliabilities above the equity

D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid

E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues

3. The accounting principle that requires revenue to be reportedwhen earned is the:

A. Matching principle

B. Revenue recognition principle

C. Time period principle

D. Accrual reporting principle

E. Going-concern principle

4. Adjusting entries:

A. Affect only income statement accounts

B. Affect only balance sheet accounts

C. Affect both income statement and balance sheet accounts

D. Affect only cash flow statement accounts

E. Affect only equity accounts

5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned

B. Debit Cash and credit Unearned Legal Fees

C. Debit Unearned Legal Fees and credit Legal Fees Earned

D. Debit Legal Fees Earned and credit Unearned Legal Fees

E. Debit Unearned Legal Fees and credit Accounts Receivable

7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440

C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360

D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360

E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440

9. Unearned revenue is reported on the financial statementsas:

A. A revenue on the balance sheet

B. A liability on the balance sheet

C. An unearned revenue on the income statement

D. An asset on the balance sheet

E. An operating activity on the statement of cash flows

10. Which of the following assets is not depreciated?

A. Store fixtures

B. Computers

C. Land

D. Buildings

E. Vehicles

11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:

A. Intangible expenses

B. Prepaid expenses

C. Unearned expenses

D. Net expenses

E. Accrued expenses

13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called

A. Depreciation Expense

B. Unearned Depreciation

C. Prepaid Depreciation

D. Depreciation Value

E. Book Value

14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?

A. $3,250

B. $3,500

C. $4,000

D. $6,500

E. $7,000

15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?

A. $2,700

B. $2,900

C. $3,300

D. $3,500

E. $3,700

chocolatereindeer731

1.The useful life of a plant asset is:

The length of time it is used productively in a company'soperations

Never related to its physical life

Its productive life, but not to exceed one year

Determined by the FASB

Determined by law

2. Depreciation:

Measures the decline in market value of an asset

Measures physical deterioration of an asset

Is the process of allocating to expense the cost of a plantasset

Is an outflow of cash from the use of a plant asset

Is applied to land

3. Plant assets are

Tangible assets used in the operation of a business that have auseful life of more than one accounting period

Current assets

Held for sale

Intangible assets used in the operations of a business that havea useful life of more than one accounting period

Tangible assets used in the operation of business that have auseful life of less than one accounting period

4. A company has net sales of $870,000 and average accountsreceivable of $174,000. What is its accounts receivable turnoverfor the period?

0.20

5.00

20.0

73.0

1,825

5. FICA taxes include:

Social Security taxes

Charitable giving

Employee income taxes

Unemployment taxes

6. Times interest earned is calculated by:

Multiplying interest expense times income

Dividing interest expense by income before interest expense

Dividing income before interest expense and any income tax byinterest expense

Dividing interest and income tax expense by income beforeinterest and income tax expense

7. Amortization:

Is the systematic allocation of the cost of an intangible assetto expense over its estimated useful life

Is the process of allocating to expense the cost of a plantasset to the accounting periods benefiting from its use

Is the process of allocating the cost of natural resources toperiods when they are consumed

Is an accelerated form of expensing an asset's cost

Is the same as depletion

8. A method of estimating bad debts expense that involves adetailed examination of outstanding accounts and their length oftime past due is the:

Direct write-off method

Aging of accounts receivable method

Percentage of sales method

Aging of investments method

Percent of accounts receivable method

9. A company purchased a tract of land for its natural resourcesat a cost of $1,500,000. It expects to mine 2,000,000 tons of orefrom this land. The salvage value of the land is expected to be$250,000. The depletion expense per ton of ore is:

$0.75

$0.625

$0.875

$6.00

$8.00

10. The matching principle requires:

That expenses be ignored if their effect on the financialstatements are less important than revenues to the financialstatement user

The use of the direct write-off method for bad debts

The use of the allowance method of accounting for bad debts

That bad debts be disclosed in the financial statements

That bad debts not be written off

11. Liabilities:

Must be certain

Must sometimes be estimated

Must be for a specific amount

Must always have a definite date for payment

Must involve an outflow of cash

12. In the accounting records of a defendant, lawsuits:

Are estimated liabilities

Should always be recorded

Should always be disclosed

Should be recorded if payment for damages is probable and theamount can be reasonably estimated

13. A contingent liability:

Is always of a specific amount

Is a potential obligation that depends on a future event arisingout of a past transaction or event

Is an obligation not requiring future payment

Is an obligation arising from the purchase of goods or serviceson credit

Is an obligation arising from a future event

14. Total asset turnover is calculated by dividing:

Gross profit by average total assets

Average total assets by gross profit

Net sales by average total assets

Average total assets by net sales

Net assets by total assets

15. If the times interest ratio:

Increases, then risk increases

Increases, then risk decreases

Is greater than 1.5, then the company is in default

Is less than 1.5, the company is carrying too little debt

16. Promissory notes that require the issuer to make a series ofpayments consisting of both interest and principal are:

Debentures

Discounted notes

Installment notes

Indentures

Investment notes

17. A company borrowed $300,000 cash from the bank by signing a5-year, 8% installment note. The present value factor for anannuity at 8% for 5 years is 3.9927. Each annuity payment equals$75,137. The present value of the note is:

$75,137

$94,013

$300,000

$375,685

18. A bond traded at 102

burgundypug781

Hi there

Please answer the below in 15 mins, urgent. tahnks in advance:

1.The Tom Root Corporation guarantees its product againstdefects for one year. In what year should the corporation reportthe warranty expense?

Select one:

a. The cost of warranty is included in the product's sellingprice, and therefore warranty expense is never recorded.

b. in the year the product is sold

c. Expense is not disclosed because of the Liability forWarranty.

d. in the year the product becomes defective and is repaired orreplaced

2.Financial accounting focuses on the specific needs of decisionmakers external to the organization. Which of the following wouldnot be an external user?

Select one:

a. Internal Revenue Service

b. Vice President - Marketing

c. banks

d. stockholders

When dividends are paid,

Select one:

a. total assets remain the same.

b. total assets will decrease.

c. total assets will increase.

d. stockholders' equity will increase.

The basic rights usually attached to shares of common stockinclude:

Select one:

a. the guaranteed right to receive dividend payments eachyear.

b. the right to determine CEO's pay rate.

c. the right to vote on the matter brought before the annualshareholder meeting.

d. all of the above.

Outstanding shares of stock are:

Select one:

a. shares of stock owned by unknown individuals.

b. issued shares that are still in circulation.

c. also called treasury shares.

d. authorized shares that have not yet been issued.

Par value:

Select one:

a. specifies the exact amount for which an individual share ofstock must be sold.

b. is the maximum amount for which a share of stock may besold.

c. establishes the minimum price for the stock when issued.

d. is an amount determined by the marketplace when shares ofstock are sold.

Which of the following would not be a source of informationabout the financial condition of a company?

Select one:

a. the auditor's report

b. the company's 10K

c. articles in the business press

d. All of the above are sources.

In making investment and lending decisions:

Select one:

a. there is no relationship between risk and rate of return.

b. alternatives with the highest return generally have thelowest risk.

c. alternatives with the highest risk are selected.

d. alternatives with the lowest return generally have the lowestrisk.

8.ith which of the following would creditors be mostconcerned?

Select one:

a. dividends

b. profitability

c. future security prices

d. none of the above

A fiscal year:

Select one:

a. is any twelve consecutive months.

b. ends on December 31.

c. always ends at the end of the month.

d. end on June 30.

10.

The key components in measuring income are:

Select one:

a. assets and liabilities.

b. revenue and liabilities.

c. retained earnings and expenses.

d. revenue and expenses.

e. expenses and assets.

f. revenue and assets.

11.Which of the following help(s) determine when a sale shouldbe included in the income statement?

Select one:

a. recognition principle

b. cost recovery principle

c. matching principle

d. Both a. and c.

12.

The recording of expenses in the same time period as the relatedrevenues is called:

Select one:

a. matching.

b. accuracy.

c. allocation.

d. recognition.

carminetrout975

ACCT 1A Lecture Notes - Lecture 2: Current Asset, Matching Principle, Historical Cost

Document Summary

Get access

Related Documents

ACCT 1A Lecture Notes - Lecture 17: Deferred Income, Accrual, Accounting Information System

ACCT 1A Lecture Notes - Lecture 6: Income Statement, Financial Statement, Accrual

ACCT 1A Lecture Notes - Lecture 20: Operating Expense, Cash Flow, Accounts Receivable

Related Questions