Question

5. Which of is a true statement as it relates to impairments of plant assets? a. The assets are recorded at the book value of the asset b. The impairment amount is capitalized and depreciated along with the cost of the c The impairment amount is added to the plant asset account in the year the decline d. They are written down to the new fair value turing the year in which the dedine original asset of value occurs occurs 6 Which of the following ratios indicates how efficiently a company uses it assets to generate sales? a. Profit margin b. Asset turnover c. Returm on assets 7For which of the following pairs of costs will a company record no amortization expense? a. b. Copyrights and licenses c. Franchises and patents d. Goodwill and trade names Research and development costs and goodwill Big Town Retailers operates in Florida and collects sales taxes from customers on all purchases. How should these sales taxes be reported when collected? a. As an expense on the income statement b. As sales revenue along with the selling price of the items sold -8. c. As unearned revenues d. As a current liability until paid to the State of Florida 9. Which of the following amounts are deducted from employees' paychecks? a. FICA Taxes Payable and State Unemployment Taxes Payable b. Federal Unemployment Taxes Payable and State Unemployment Taxes Payable c. d. Federal Unemployment Taxes Payable and FICA Taxes Payable Federal Income Taxes Payable and FICA Taxes Payable 10. To what is the current market value of bonds equal when determining their issue price? a. The present value of the bonds future cash flows b. The sum of the future interest payments, plus the principal payment when the bonds mature c. The difference between the face value of the bonds and the contractual interest rate d. The cash that will be paid to the investor when the bonds mature Failure to record a liability will probably a. understate net income b. result in overstated total liabilities and owner's equity. c. understate the debt total assets ratio. 11. d. make a company appear to be less solvent

Answer 1

5. Solution: The correct option is “ d”

An asset is said to be impaired when a company's asset has a market price less than the book value as on the company's balance sheet date. A loss on impairment is recognized as a debit to Loss on Impairment (impairment is the difference between the new fair market value and current book value of the asset) and a credit to the asset.The loss will reduce income in the income statement and simultaneously reduce total assets on the balance sheet.

6. Solution: The correct option is “ b”

The asset turnover ratio represents and measures the value of a company's sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue

7. Solution: The correct option is “ d”

Amortization of intangibles is the process of expensing the cost of an intangible asset over the projected life of the asset. A company's brand name is considered an indefinite intangible asset and also Indefinite life intangible assets, such as goodwill, are not amortized

8.Solution: The correct option is “ d”

Big Town Retailers after collecting the sales tax must keep records on how much has been collected . The amount that is coolected goes into the "Sales Tax Payable" liability account, in the accounting system prevailing with Big Town Retailers. Until it is paid to the State of Florida.