11. The characteristic shared by all liabilities is that they: A. obligate the c
ID: 2477052 • Letter: 1
Question
11. The characteristic shared by all liabilities is that they:
A. obligate the company to do something in the future.
B. result in an inflow of resources to the company.
C. provide a future economic benefit.
D always end in the word "payable."
12. Extending credit to customers will introduce all of the following additional costs except:
A. delayed receipt of cash may result in requiring the company to take out short-term loans and incur interest costs.
B. decreased gross profit from reduced sales.
C. bad debt costs will result when amounts cannot be collected from customers.
D. increased wage costs will be incurred to hire people to evaluate whether each customer is creditworthy, track how much each customer owes, and follow up to collect the receivable from each customer.
13. Your company pays $620,000 for a patent that has 10 years remaining. Each year, your company should:
A. report no Amortization Expense because patents are not subject to amortization.
B. debit Intangible assets and credit Accumulated Amortization for an amount equal to 20% of book value.
C. debit Amortization expense for $62,000 and credit Patent for $62,000.
D. debit Amortization Expense for $62,000 and credit Accumulated Depreciation for $62,000.
14. Vertical analysis:
A. identifies trends over time.
B. involves comparing amounts across different financial statements.
C. identifies the relative contribution made by each financial statement line item.
D. provides an understanding of the relationships among various items on financial statements by expressing the differences in terms of dollars.
15. Which of the following statements regarding sales returns and allowances is correct?
A. The Sales Returns & Allowances account is an example of a contra-asset account.
B. The Sales Returns & Allowances account balance should be added to the Sales account balance when computing net sales.
C. Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.
D. Recording a sales allowance requires two entries.
Explanation / Answer
11
The characteristic shared by all liabilities is that they:
answer is
A. obligate the company to do something in the future.
12.Extending credit to customers will introduce all of the following additional costs except:
answer is
B. decreased gross profit from reduced sales
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