ACTG 244 EXAM 2 QUESTIONS WITH VERIFIED
ANSWERS
The lower the gross profit percentage, the greater the impact on net income of an
increase in sales. - Answers - False
Buildings and equipment are depreciated down to the asset's salvage value and then no
further depreciation is recorded - Answers - True
All property, plant and equipment must be depreciated every year - Answers - False
To use the specific identification method, inventory goods must have a distinct way in
which to be recognized - Answers - True
When the value of inventory is less than you paid for it, accounting principles require
that the inventory be written down and an expense recorded. - Answers - True
Shipping costs are added to the cost of inventory only when they are paid by the
company, we are purchasing inventory from. - Answers - False
When recording the disposal of equipment, the accumulated depreciation of the
equipment must be removed from the book - Answers - True
NSF checks are subtracted from the cash balance reported by the bank in the bank
reconciliation - Answers - False
Markup percentage is calculated by dividing gross profit by sales - Answers - False
The purpose of recognizing depreciation is to have the balance sheet reflect the current
value of long-term assets - Answers - False
When a company uses the weighted (or moving) average method of inventory costing,
cost of goods sold will reflect a unit cost somewhere between those computed under the
FIFO and LIFO methods - Answers - True
Intangible assets benefit more than one year and do not have physical form - Answers -
True
The amount of cash to be shown as an asset on a company's balance sheet is the
amount of cash reported in the year-end bank statement - Answers - False
Useful life reflects the expected time that the asset will provide economic benefits to the
business. - Answers - True
, The amount we pay to have merchandise shipped to our company is part of the cost of
inventory but the amount paid to have merchandise shipped to our customers is a
selling expense - Answers - True
Gains and losses from disposal of property, plant and equipment are reported as non-
operating items in the income statement - Answers - True
The journal entry to record the sale of a building will include a debit to accumulated
depreciation. - Answers - True
The matching principle requires that we wait until we know the amount of uncollectible
accounts receivable before recording uncollectible account expense - Answers - False
The Loss on disposal of equipment account is closed at the end of the year. - Answers -
True
The primary objectives in accounting for inventories are to measure the cost of items
acquired and to match the cost of goods sold to the sales revenue. - Answers - True
A major disadvantage of the specific identification method is the increased record
keeping required - Answers - True
The fees charged by credit card companies are reported as a contra-revenue in the
income statement - Answers - False
A payment for repairing property plant and equipment is expensed, not added to the
cost of the asset - Answers - True
Because FIFO yields lower profits than LIFO in a period of steadily rising prices, the
FIFO method translates into lower tax payments - Answers - False
Gross margin percentage is calculated as (Sales - Cost of goods sold) divided by Sales
- Answers - True
Accelerated depreciation recognizes less depreciation expense in early years and more
in later years. - Answers - False
Intangible assets are expensed over their legal lives - Answers - False
The excess of the cost of a building over its accumulated depreciation at a point in time
is called "net book value" - Answers - True
If a long-term asset is sold for more than its net book value, the company records a
gain. - Answers - True
ANSWERS
The lower the gross profit percentage, the greater the impact on net income of an
increase in sales. - Answers - False
Buildings and equipment are depreciated down to the asset's salvage value and then no
further depreciation is recorded - Answers - True
All property, plant and equipment must be depreciated every year - Answers - False
To use the specific identification method, inventory goods must have a distinct way in
which to be recognized - Answers - True
When the value of inventory is less than you paid for it, accounting principles require
that the inventory be written down and an expense recorded. - Answers - True
Shipping costs are added to the cost of inventory only when they are paid by the
company, we are purchasing inventory from. - Answers - False
When recording the disposal of equipment, the accumulated depreciation of the
equipment must be removed from the book - Answers - True
NSF checks are subtracted from the cash balance reported by the bank in the bank
reconciliation - Answers - False
Markup percentage is calculated by dividing gross profit by sales - Answers - False
The purpose of recognizing depreciation is to have the balance sheet reflect the current
value of long-term assets - Answers - False
When a company uses the weighted (or moving) average method of inventory costing,
cost of goods sold will reflect a unit cost somewhere between those computed under the
FIFO and LIFO methods - Answers - True
Intangible assets benefit more than one year and do not have physical form - Answers -
True
The amount of cash to be shown as an asset on a company's balance sheet is the
amount of cash reported in the year-end bank statement - Answers - False
Useful life reflects the expected time that the asset will provide economic benefits to the
business. - Answers - True
, The amount we pay to have merchandise shipped to our company is part of the cost of
inventory but the amount paid to have merchandise shipped to our customers is a
selling expense - Answers - True
Gains and losses from disposal of property, plant and equipment are reported as non-
operating items in the income statement - Answers - True
The journal entry to record the sale of a building will include a debit to accumulated
depreciation. - Answers - True
The matching principle requires that we wait until we know the amount of uncollectible
accounts receivable before recording uncollectible account expense - Answers - False
The Loss on disposal of equipment account is closed at the end of the year. - Answers -
True
The primary objectives in accounting for inventories are to measure the cost of items
acquired and to match the cost of goods sold to the sales revenue. - Answers - True
A major disadvantage of the specific identification method is the increased record
keeping required - Answers - True
The fees charged by credit card companies are reported as a contra-revenue in the
income statement - Answers - False
A payment for repairing property plant and equipment is expensed, not added to the
cost of the asset - Answers - True
Because FIFO yields lower profits than LIFO in a period of steadily rising prices, the
FIFO method translates into lower tax payments - Answers - False
Gross margin percentage is calculated as (Sales - Cost of goods sold) divided by Sales
- Answers - True
Accelerated depreciation recognizes less depreciation expense in early years and more
in later years. - Answers - False
Intangible assets are expensed over their legal lives - Answers - False
The excess of the cost of a building over its accumulated depreciation at a point in time
is called "net book value" - Answers - True
If a long-term asset is sold for more than its net book value, the company records a
gain. - Answers - True
