Question

6. An estimated liability is a POSSIBLE obligation if a certain event occurs. The estimated realizable accounts receivable is what the company anticipates that it will collect The term 'capitalizing a cost' means charging it to stockholder's equity. _8. 19. The working capital (current) ratio is an indicator of a company's liquidity. 10. 12. 13. Accounts Receivable is an example of an intangible asset. Merchandise Inventory would be debited when goods are purchased by a company that uses a periodic inventory system. Accumulated depreciation is an account that appears in the income statement. Sales Discounts is added to the Sales account when computing a company's net sales. If goods are shipped FOB destination, the seller records revenue from the sale when the goods arrive at their destination when the transaction is complete. Plant assets are reported on a balance sheet at their adjusted fair market value through depreciation. Canceled checks are checks the bank has paid and deducted from the customer's account during the period. The matching principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income. Deferred income is an example of a revenue account that increases equity 16. 18. 19. A credit memo on a bank statement is an example of a timing difference.

Answer 1

6. True. An estimated liability is a debt or obligation of an unknown amount that can be reasonably estimated. In other words, it's a known liability that management knows exists, but there is no way of knowing the exact amount of the liability.

7.True

8. False. A capitalized cost is an expense that is added to thecost basis of a fixed asset on a company's balance sheet. Capitalized costs are not expensed in the period they were incurred but recognized over a period of time via depreciation or amortization

9. True. The working capital ratio is a measure of liquidity, revealing whether a business can pay its obligations.

10.False. Itangibles assets are patents, copyrights, franchises or licenses, trademarks or trade names, and goodwill.

11.False. A periodic inventory system only updates the ending inventory balance in the general ledger when a physical inventory count is conducted. Since physical inventory counts are time-consuming, few companies do them more than once a quarter or year. In the meantime, the inventory account in the accounting system continues to show the cost of the inventory that was recorded as of the last physical inventory count. Under the periodic inventory system, all purchases made between physical inventory counts are recorded in a purchases account. When a physical inventory count is done, the balance in the purchases account is then shifted into the inventory account, which in turn is adjusted to match the cost of the ending inventory.

12. False Accumulated depreciation is a contra-asset account that reduces the worth of the corresponding fixed resource. The accumulated depreciation lies right underneath the "property, plant and equipment" account in a statement of financial position, also known as abalance sheet or report on financial condition.

13.False Sales Discounts is a contra-revenue account; it is subtracted from Sales when computing a company’s net sales.

14. True. If the shipment is designated as freight on board (FOB) destination, ownership transfers to the buyer as soon as the shipment arrives at the buyer

15. True With the revaluation model, a fixed asset is originally recorded at cost, but the carrying value of the fixed asset can then be increased or decreased depending on the fair market value of the fixed asset

16. True Checks the bank has paid and deducted from the customer's account during the period

17.True The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

18. True When a company earns defered income that had been prepaid by a customer, the company's balance sheet's liability deferred income will decrease and retained earnings will increase.

19. True