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ACC 120 Test Chapters 9, 11, 13, 14
Terms in this set (70)
What is included in the cost of a plant asset?
Amounts paid to make the asset ready for its intended use
You own a delivery truck, what cost will be treated as a revenue expenditure?
Oil change and lube (routine maintenance, not major overhauls)
What depreciation method writes off a higher amount of depreciation in the early years than in later years?
Double declining balance method
What tax is paid by employer only?
Federal Unemployment tax
what is included in cost?
Capital and Revenue expenditures
Useful life and residual value are estimated
Depreciable cost formula
Cost - Residual Value = depreciable cost
Do you depreciate below residual value?
No. It stays at residual value, no matter how many years you keep it beyond its useful life
Book Value =
Cost - Accumulated Appreciation
In Double Down Balance Method, the last year of useful life is a:
"Plug figure" to reach residual amount
Which depreciation method is best for tax purposes?
Double Declining Balance Method
Asset bought for $24000, residual value of $4000 after 5 years. If you sell it after year one for $18,000, how much do you profit or lose?
(Purchase price - residual value)/ useful life
(24000 - 4000)/5 years= $4000 a year.
Year one: 24000-4000= $20000 book value
Sold for $2000 under book value, so loss of $2000
Which tax has a ceiling on the amount of annual earnings subject to tax?
FICA - OASDI taxes
Once the cap has been reached, does the employer still have to pay FUTA and SUTA to the government and record a payroll tax expense?
No, there are $0 FUTA and SUTA taxes paid by the employer once the cap has been reached.
Does a company record gross pay amount or net pay amount for the journal entry for payment of salaries?
What is the entry to record payment of salaries?
Debit to Salaries and Wages Payable and Credit to Cash (amount is net salaries, not gross)
Schedule that summarizes earnings, withholdings and net pay for each employee
What asset category would include the cost of clearing land and tearing down buildings?
Record plant asset at market value or cost?
Expected cash value of an asset at the end of its useful life
Photocopier cost $95000, you trash it after it has depreciated $88000, is this a gain, loss, or neither?
Loss of $7000
Journal entry for interest accrued by a borrower on a notes payable:
Debit interest expense
Credit interest payable
What deduction is paid by BOTH employer and employee?
The journal entry to record gross pay for a company?
Debit Salaries and Wages Expense
Which depreciation method allocates a varying amount of depreciation each year based on an asset's usage?
Units of production method
Formula for double declining method:
(cost-Accumulated depreciation) x 2 x (1/useful life)
Is there accumulated depreciation for the first year in the double declining method?
Formula for straight line depreciation
(cost - residual value)/useful life
Formula for Units of Production method of depreciation
(cost - residual value)/useful life in units
At the maturity of a note payable, what do you pay?
Principal + Interest
What is required to be deducted from employee's paychecks?
Federal income tax
Why do many companies require photo ID from someone picking up their paycheck?
To avoid writing checks to a fictitious person
Does a corporation have to pay income taxes on its business earnings?
Retained earnings of a corporation are:
internally generated capital raised from profitable operations
Journal entry by a corporation to declare a dividend:
Debit retained earnings
Journal entry for PAYMENT date (not record date) for declared dividends of common stock:
Debit Dividends Payable - Common, Credit Cash
Shares of stock held by stockholders
Have the first claim on dividend funds
What happens when a previously declared dividend is paid?
What is a reason for splitting stock?
Reduce the market price of the stock
Paid in capital consists of:
Amounts from stockholders in exchange for stock
Journal entry to record issuance of 5000 shares of $10 common stock at $13 per share:
Cash debited $65000
When a cash dividend is declared:
stockholders equity decreases
Issuing stock is a debit to:
Paying dividends and paying off loans are:
The 3 sections of the Statement of Cash Flow report only:
Activities that involve cash
Selling property, plant and equipment is a:
Cash inflow from investing activities
Cash inflows are a positive amount on the
Statement of cash flows
Cash outflows are a negative amount on the
statement of cash flows
Operating Activities include:
Cash from customers for sales and services (inflow/+)
Interest and dividend income (Inflow/+)
Purchase of inventory or payment of operating expense (Outflow/-)
Interest expense and income tax expense (Outflow/-)
Investing Activities include:
sale of property, plant, equipment and investments (inflow/+)
collection of long term notes receivable (inflow/+)
Purchasing property, plant, equipment, and investments (outflow/-)
Loans made to borrowers (outflow/-)
Financing Activities include:
From issuance of stock and selling treasury stock (inflow/+)
From receipt of borrowing money (inflow/+)
Payment of dividends & buying treasury stock(outflow/-)
Repayments of loans (outflow/-)
Non-cash investing and Financing Activities:
On a separate schedule that includes investing and financing activities that don't include cash
Which section of the statement of cash flows is presented differently between the direct and indirect method?
Does the operating activities section of the statement of cash flows reflect current cash flows that affect current assets and liabilities?
Does the statement of cash flow show the link between accrual based income and the cash reported on the balance sheet?
What is the order of sections on a statement of cash flows?
Operating, Investing, Financing
Issuing common stock for cash is what on the statement of cash flows?
Positive cash flow in financing section
Where will cash paid for the purchase of equipment be shown on the statement of cash flows?
Investing activities (outflow)
The indirect method begins with net income and adjusts it to net operating cash flows...T or F
Cash borrowed on a mortgage note would go in which section of the statement of cash flows?
Interest accounts are separate from the loan amount:
When do you do an adjusting entry when a payable account is still open?
When the account is still open at year end
Gross pay - Deductions -
2 sources of stockholder equity
Paid in capital
On the date that dividends are declared:
Debit retained earnings, credit dividends payable
(there is no journal entry for the record date)
On the date that dividends are paid:
Debit dividends payable
Retained earnings and cash
Is there a journal entry for a stock split?
What is on the statement of cash flows?
Where money came from
Where money went
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