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Intro To Financial Accounting

False
Unearned revenue is classified as an expense account
True
the debit side of a transaction is the left side and the credit side is the right side of the transaction
True
assets have a normal balance of debit
false
liabilities and equity have a normal balance of debit
true
expenses and dividends are increased when they are debited
false
after posting a transaction to the general ledger one should then record the transaction in the general journal
false
dez’s diner purchased supplies on account. in order to record a journal entry for this event would– Debit Supplies and Debit Cash
true
romos construction co purchased a piece of equipment for cash. in order to record a journal entry for this event one would– Debit Equipment and Credit Cash
True
the trial balance lists all accounts balances in the general ledger
true
the debt ratio = total liabilities/ total assets
false
companies that use accrual accounting recognize revenues and expenses at the time that cash is paid or received
false
cash basis accounting is compliant with GAAP while accrual basis accounting is not compliant with GAAP
true
the adjusting entry for expired prepaid insurance is a — Debit to an Expense and a Credit to the Prepaid Insurance
false
depreciation represents a plant asset’s decline in a market value
true
accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset
false
another name for unearned revenue is accrued revenue
true
an accrued expense is a transaction where a company pays cash after an expense is recognized
true
adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account
true
a deferral describes a transaction in which cash is paid prior to the recognition of an expense or in which cash is received prior to the recognition of a revenue
false
a prepaid expense is NOT an example of a deferral
false
goods sold on consignment are included in the consignees merchandise inventory
true
under the fifo costing method, the oldest cost is of goods available for sale is used
true
when the purchase price of inventory is rising, the fifo method produces a lower of cost of goods sold than lifo
false
inventory cost= invoice cost+ cost necessary to receive inventory + selling expenses
false
an understatement of the ending inventory balance will understate cost of goods sold and overstate net income
false
the its requires that companies use the same costing method for tax purposes as it does for its financial statements, regardless of the method used
false
errors in the period-end inventory balances only have an impact on the current periods records and financial statements
false
whether prices are rising or falling, fifo always will yield the highest gross profit and net income
true
accounting principles require that inventory be reported at the market value of replacing inventory when market value is lower than cost
true
goods that are damaged or obsolete are not counted in inventory if they are unsellable
false
plant assets refer to nonphysical assets that are used in the operations of a business
true
salvage value is an estimate of an asset’s value at the end of its benefit period
true
depreciation does not measure the decline in the market value of an asset each period
false
depreciation is higher in earlier years and is lower in the later years when using the straight-line method
true
an assets cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use
true
the purchase of a property that included land, building, and related improvements is called a lump sum or basket purchase
false
total asset cost plus depreciation expense equals book value
true
the units of production method of depreciation charges a varying amount of expense for each period of an assets useful life depending on its usage
true
a plant assets useful life is the length of time it is productively used in a company’s operation.
cost-salvage/ total units of capacity
depletion per unit
depletion per unit x units extracted and sold
depletion expense
2 methods of accounting bad debts
1) direct write off
2) allowance method
method of bad debts that shows
-what customers can pay off
-does not match best w/ sales and expenses
-materiality
-can use this method if its not a big amount
direct write off
method of bad debts that shows
-estimated bad debts
-reports AR on balance sheets and estimated amount of cash to be collected
allowance method
cash flow that deals with current assets and liabilities
operating
cash flow that deals with long term assets
investing
cash flow that deals with long term liabilities and equity
financing
total liabilities / total assets
debt ratio
opportunity, rationalization, financial pressure
fraud triangle
net income/average total assets
return on assets

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