The accumulated depreciation account should show:
Answer(s): C
Depreciation recognized and accumulated on fixed assets still on the books is reflected in the Accumulated Depreciation account(s).
While comparing a firm that expenses costs with one that capitalizes them:
Answer(s): B
Expensing charges the entire cost to CFO while capitalization leads to a charge against the investing cash flow.Over time, depreciation reduces the tax payments. Hence, the cumulative difference in the CFOs increases over time. The expensing firm reports lower income in the first year and hence, pays lower taxes.
On June 30, 1996, Union Inc. purchased goodwill for $125,000 when it acquired the net assets of Apex Corp. During 1996, Union incurred additional costs of developing goodwill by training Apex employees ($50,000) and hiring additional Apex employees ($25,000). Before amortization of goodwill, Union's December 31, 1996 balance sheet should report goodwill of ________.
Answer(s): E
Goodwill is recorded only when it is purchased. In this case, only $125,000 was purchased goodwill. The costs incurred to maintain, develop, or restore goodwill must be expensed. In this case, $75,000 will be expensed.
Which of the following is/are true under accrual accounting?
Accrual accounting follows the Matching Principle, which requires that revenues and gains be recognized when earned and expenses and losses be recognized when incurred. Hence, revenue recognition is completely separate from cash flows. In the sales process, the earnings process is completed when goods are delivered and that's when revenue is recognized under accrual accounting.
Revenues of an entity are usually measured by the exchange values of the assets or liabilities involved.Recognition of revenue does not occur until
Revenues are only recognized when they have been earned. Simply exchanging assets or liabilities does not result in revenue recognition.
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