CHAPTER 9, 10, 11 TRUE FALSE

Question 1

ALL PLANT ASSETS (FIXED ASSETS) MUST BE DEPRECIATED FOR ACCOUNTING PURPOSES.

Answer

true

Question 2

WHEN PURCHASING LAND, THE COSTS FOR CLEARING, DRAINING, FILLING, AND GRADING SHOULD BE CHARGED TO A LAND IMPROVEMENTS ACCOUNT.

Answer

true

Question 3

WHEN PURCHASING DELIVERY EQUIPMENT, SALES TAXES AND MOTOR VEHICLE LICENSES SHOULD BE CHARGED TO DELIVERY EQUIPMENT.

Answer

true

Question 4

LAND IMPROVEMENTS ARE GENERALLY CHARGED TO THE LAND ACCOUNT.

Answer

true

Question 5

ONCE COST IS ESTABLISHED FOR A PLANT ASSET, IT BECOMES THE BASIS OF ACCOUNTING FOR THE ASSET UNLESS THE ASSET APPRECIATES IN VALUE, IN WHICH CASE, MARKET VALUE BECOMES THE BASIS FOR ACCOUNTABILITY.

Answer

true

Question 6

THE BOOK VALUE OF A PLANT ASSET IS ALWAYS EQUAL TO ITS FAIR MARKET VALUE.

Answer

true

Question 7

RECORDING DEPRECIATION ON PLANT ASSETS AFFECTS THE BALANCE SHEET AND THE INCOME STATEMENT.

Answer

true

Question 8

THE DEPRECIABLE COST OF A PLANT ASSET IS ITS ORIGINAL COST MINUS OBSOLESCENCE.

Answer

true

Question 9

RECORDING DEPRECIATION EACH PERIOD IS AN APPLICATION OF THE EXPENSE RECOGNITION PRINCIPLE.

Answer

true

Question 10

THE ACCUMULATED DEPRECIATION ACCOUNT REPRESENTS A CASH FUND AVAILABLE TO REPLACE PLANT ASSETS.

Answer

true

Question 11

IN CALCULATING DEPRECIATION, BOTH PLANT ASSET COST AND USEFUL LIFE ARE BASED ON ESTIMATES.

Answer

true

Question 12

USING THE UNITS-OF-ACTIVITY METHOD OF DEPRECIATING FACTORY EQUIPMENT WILL GENERALLY RESULT IN MORE DEPRECIATION EXPENSE BEING RECORDED OVER THE LIFE OF THE ASSET THAN IF THE STRAIGHT-LINE METHOD HAD BEEN USED.

Answer

true

Question 13

SALVAGE VALUE IS NOT SUBTRACTED FROM PLANT ASSET COST IN DETERMINING DEPRECIATION EXPENSE UNDER THE DECLINING-BALANCE METHOD OF DEPRECIATION.

Answer

true

Question 14

THE DECLINING-BALANCE METHOD OF DEPRECIATION IS CALLED AN ACCELERATED DEPRECIATION METHOD BECAUSE IT DEPRECIATES AN ASSET IN A SHORTER PERIOD OF TIME THAN THE ASSET'S USEFUL LIFE.

Answer

true

Question 15

UNDER THE DOUBLE-DECLINING-BALANCE METHOD, THE DEPRECIATION RATE USED EACH YEAR REMAINS CONSTANT.

Answer

true

Question 16

THE IRS DOES NOT REQUIRE THE TAXPAYER TO USE THE SAME DEPRECIATION METHOD ON THE TAX RETURN THAT IS USED IN PREPARING FINANCIAL STATEMENTS.

Answer

true

Question 17

A CHANGE IN THE ESTIMATED USEFUL LIFE OF A PLANT ASSET MAY CAUSE A CHANGE IN THE AMOUNT OF DEPRECIATION RECOGNIZED IN THE CURRENT AND FUTURE PERIODS, BUT NOT TO PRIOR PERIODS.

Answer

true

Question 18

A CHANGE IN THE ESTIMATED SALVAGE VALUE OF A PLANT ASSET REQUIRES A RESTATEMENT OF PRIOR YEARS' DEPRECIATION.

Answer

true

Question 19

TO DETERMINE A NEW DEPRECIATION AMOUNT AFTER A CHANGE IN ESTIMATE OF A PLANT ASSET'S USEFUL LIFE, THE ASSET'S REMAINING DEPRECIABLE COST IS DIVIDED BY ITS REMAINING USEFUL LIFE.

Answer

true

Question 20

ADDITIONS AND IMPROVEMENTS TO A PLANT ASSET THAT INCREASE THE ASSET'S OPERATING EFFICIENCY, PRODUCTIVE CAPACITY, OR EXPECTED USEFUL LIFE ARE GENERALLY EXPENSED IN THE PERIOD INCURRED.

Answer

true

Question 21

A CURRENT LIABILITY MUST BE PAID OUT OF CURRENT EARNINGS

Answer

true

Question 22

CURRENT LIABILITIES ARE EXPECTED TO BE PAID WITHIN ONE YEAR OF THE OPERATING CYCLE, WHICHEVER IS LONGER

Answer

true

Question 23

THE RELATIONSHIP BETWEEN CURRENT LIABILITIES AND CURRENT ASSETS IS IMPORTANT IN EVALUATING A COMPANY'S ABILITY TO PAY OFF ITS LONG-TERM DEBT

Answer

true

Question 24

A COMPANY WHOSE CURRENT LIABILITIES EXCEED ITS CURRENT ASSETS MAY HAVE A LIQUIDITY PROBLEM

Answer

true

Question 25

NOTES PAYABLE USUALLY REQUIRE THE BORROWER TO PAY INTEREST

Answer

true

Question 26

NOTES PAYABLE ARE OFTEN USED INSTEAD OF ACCOUNTS PAYABLE

Answer

true

Question 27

A NOTE PAYABLE MUST ALWAYS BE PAID BEFORE AN ACCOUNT PAYABLE

Answer

true

Question 28

A $60,000, 8%, 9-MONTH NOTE PAYABLE REQUIRES AN INTEREST PAYMENT OF $3,600 AT MATURITY

Answer

true

Question 29

MOST NOTES ARE NOT INTEREST BEARING

Answer

true

Question 30

WITH AN INTEREST-BEARING NOTE, THE AMOUNT OF CASH RECEIVED UPON ISSUANCE OF THE NOTE GENERALLY EXCEEDS THE NOTE'S FACE VALUE

Answer

true

Question 31

INTEREST EXPENSE ON A NOTE PAYABLE IS ONLY RECORDED AT MATURITY

Answer

true

Question 32

INTEREST EXPENSE IS REPORTED UNDER OTHER EXPENSES AND LOSSES IN THE INCOME STATEMENT

Answer

true

Question 33

UNEARNED REVENUES SHOULD BE CLASSIFIED AS OTHER REVENUES AND GAINS ON THE INCOME STATEMENT

Answer

true

Question 34

THE HIGHER THE SALES TAX RATE, THE MORE PROFIT A RETAILER CAN EARN

Answer

true

Question 35

METROPOLITAN SYMPHONY SELLS 200 SEASON TICKETS FOR $50,000 THAT REPRESENTS A FIVE CONCERT SEASON. THE AMOUNT OF UNEARNED TICKET REVENUE AFTER THE SECOND CONCERT IS $20,000

Answer

true

Question 36

DURING THE MONTH, A COMPANY SELLS GOODS FOR A TOTAL OF $108,000 WHICH INCLUDES SALES TAXES OF $8,000; THEREFORE, THE COMPANY SHOULD RECOGNIZE $100,000 IN SALES REVENUES AND $8,000 IN SALES TAX EXPENSE

Answer

true

Question 37

CURRENT MATURITIES OF LONG-TERM DEBT REFERS TO THE AMOUNT OF INTEREST ON A NOTE PAYABLE THAT MUST BE PAID IN THE CURRENT YEAR

Answer

true

Question 38

THE CURRENT RATIO PERMITS ANALYSTS TO COMPARE THE LIQUIDITY OF DIFFERENT SIZED COMPANIES

Answer

true

Question 39

WORKING CAPITAL IS CURRENT ASSETS DIVIDED BY CURRENT LIABILITIES

Answer

true

Question 40

FICA TAXES WITHHELD AND FEDERAL INCOME INCOME TAXES WITHHELD ARE MANDATORY PAYROLL DEDUCTIONS

Answer

true

Question 41

A CORPORATION IS NOT AN ENTITY WHICH IS SEPARATE AND DISTINCT FROM ITS OWNERS.

Answer

true

Question 42

A CORPORATION CAN BE ORGANIZED FOR THE PURPOSE OF MAKING A PROFIT OR IT MAY BE NOT-FOR-PROFIT.

Answer

true

Question 43

A CORPORATION ACTS UNDER ITS OWN NAME RATHER THAN IN THE NAME OF ITS STOCKHOLDERS.

Answer

true

Question 44

IF A CORPORATION PAYS TAXES ON ITS INCOME, THEN STOCKHOLDERS WILL NOT HAVE TO PAY TAXES ON THE DIVIDENDS RECEIVED FROM THAT CORPORATION.

Answer

true

Question 45

A CORPORATION MUST BE INCORPORATED IN EACH STATE IN WHICH IT DOES BUSINESS.

Answer

true

Question 46

A STICKHOLDER HAS THE RIGHT TO VOTE IN THE ELECTION OF THE BOARD OF DIRECTORS.

Answer

true

Question 47

A PROXY IS A LEGAL DOCUMENT THAT INSTRUCTS A STOCKHOLDER'S AGENT HOW TO VOTE SHARES OF STOCK FOR THE STOCKHOLDER.

Answer

true

Question 48

AS SOON AS A CORPORATION IS AUTHORIZED TO ISSUE STOCK, AN ACCOUNTING JOURNAL ENTRY SHOULD BE MADE RECORDING THE TOTAL VALUE OF THE SHARES AUTHORIZED.

Answer

true

Question 49

THE PAR VALUE OF COMMON STOCK MUST ALWAYS BE EQUAL TO ITS MARKET VALUE ON THE DATE THE STOCK IS ISSUED.

Answer

true

Question 50

WHEN NO-PAR VALUE STOCK DOES NOT HAVE A STATED VALUE, THE ENTIRE PROCEEDS FROM THE ISSUANCE OF THE STOCK BECOMES LEGAL CAPITAL.

Answer

true

Question 51

A CORPORATION CAN ISSUE MORE SHARES THAN IT IS AUTHORIZED IN ITS CHARTER, IF THE BOARD OF DIRECTORS APPROVES OF AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES.

Answer

true

Question 52

THE MARKET VALUE OF A CORPORATION'S STOCK IS DETERMINED BY THE NUMBER OF SHARES THAT THE CORPORATION HAS BEEN AUTHORIZED TO ISSUE.

Answer

true

Question 53

STOCK CAN BE ISSUED ONLY IN EXCHANGE FOR CASH.

Answer

true

Question 54

THE PAR VALUE OF STOCK ISSUED FOR NON-CASH ASSETS IS NEVER A FACTOR IN DETERMINING THE COST OF THE ASSETS RECEIVED.

Answer

true

Question 55

THE ACQUISITION OF TREASURY STOCK BY A CORPORATION INCREASES TOTAL ASSETS AND TOTAL STOCKHOLDERS' EQUITY.

Answer

true

Question 56

TREASURY STOCK SHOULD NOT BE CLASSIFIED AS A CURRENT ASSET.

Answer

true

Question 57

TREASURY STOCK PURCHASED FOR $25 PER SHARE THAT IS REISSUED AT $20 PER SHARE, RESULTS IN A LOSS ON SALE OF TREASURY STOCK BEING RECOGNIZED ON THE INCOME STATEMENT.

Answer

true

Question 58

TREASURY STOCK IS A CONTRA STOCLHOLDERS' EQUITY ACCOUNT.

Answer

true

Question 59

THE NUMBER OF COMMON SHARES OUTSTANDING CAN NEVER BE GREATER THAN THE NUMBER OF SHARES ISSUED.

Answer

true

Question 60

PREFERRED STOCK HAS CONTRACTUAL PREFERENCE OVER COMMON STOCK IN CERTAIN AREAS.

Answer

true

CHAPTER 9, 10, 11 TRUE FALSE

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