FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Setting up New Team Members

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

The formula for computing annual depreciation expense using the double declining balance method includes the cost of the asset, its salvage value, and the expected useful life of the asset.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

If a company owns a machine for its entire expected useful life, it will have the same total depreciation expense over the asset's life if it uses the double declining balance method and if it uses the straight-line method.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

Most companies compute depletion on natural resources (such as oil wells) using the double declining balance method.

Under GAAP, revenue can never be recognized before a company receives cash from the customer.

The straight-line method of allocating asset cost over time is always the theoretically best method.

Most companies compute depletion on natural resources (such as oil wells) using the units of production method.

One of the criteria under GAAP for recognizing revenue is that an earnings process must be substantially complete.

When a company sells a product, and receives its payments in installments over time, it should never recognize all the revenue at the time of shipment of the product.

The Jones Company makes sales on an installment basis. In 2016, it sells items with a cost of $20 million. The total sales price is $25 million. Ignoring interest payments, customers pay in five equal installments, of $5 million each, with one payment in each of 2016, 2017, 2018, 2019, and 2020. If the company uses the installment method of accounting for this sale, the gross profit it will recognize in 2016 is

Under GAAP, tax expense is always computed on a cash basis.

Under GAAP rules, a company would not be able to recognize revenue at the time it delivered a product to the customer if

Companies usually allocate prepaid expenses, such as prepaid insurance, to expense in equal amounts each time period.

When a company sells a product, and receives its payments in installments over time, it should recognize the revenue at the time of sale unless there are major uncertainties regarding the amount of money it will ultimately collect.

In general, the cost recovery method of accounting for a single installment sale is less conservative than the installment method.

In which of the following cases, under GAAP, will a company usually not be able to recognize revenues at the time of shipment?

If a company owns a truck for five years, it will have higher depreciation expense every year it owns the truck if it uses the double declining balance method than if it uses the straight-line method.

The problem of allocating expenses over time was first considered by accountants in the 1960s.

Under GAAP, a company may freely choose whether to use the percentage of completion method, or the completed contract method, of accounting for long-term contracts. Neither method is preferred by the FASB.

The basic revenue recognition criteria, under GAAP, are that revenue should not be recognized until:

"Allocation" over time involves taking one total number and dividing that total into parts which we then associate with particular time periods.