1. It is necessary for a company to use the same depreciation method for all of
ID: 2488849 • Letter: 1
Question
1. It is necessary for a company to use the same depreciation method for all of its depreciable assets.
2. Receiving payment prior to delivering goods or services causes a current liability to be incurred.
3. An employee's take home pay is equal to gross pay less all voluntary deductions.
4. For paying their payroll, most employers use payroll checks drawn on a special bank account.
5. Organizational expenses are classified as intangible assets on the balance sheet.
6. The declaration of a cash dividend decreases a corporation's stockholders equity and decreases its assets.
7. A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a 5-for-1 stock split, the number of shares outstanding after the split will be 40,000.
8. A bond is usually divided into a number of individual bonds of $500 each.
9. The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond.
10. The special fund that is set aside to provide for the payment of bonds at maturity is called a sinking fund.
TRUE OR FALSE?? FOR EACH
Explanation / Answer
Answer:
1. FALSE
Company can use different method for different classes of assets. Generally one method of depreciation is required for all of its depreciable assets under one class.
2. TRUE
Receiving payment prior to delivering goods or services causes a current liability to be incurred on the basis of accrual accounting. It is an unearned revenue that will be converted into revenue when goods or services will be delivered. Therefore until that time it is shown as Current Liability.
3. FALSE
It is False statement that an employee's take home pay is equal to gross pay less all voluntary deductions. There are some duductions which are not voluntary like professional taxes and withholding tax (TDS) and the company is bound to deduct these taxes from employee's salary before paying to employees.
4. TRUE
For paying their payroll, most employers use payroll checks drawn on a special bank account. Generally company opens special bank account or salary account for their each employee to pay their payroll in that account.
5. PARTLY TRUE
Organizational expenses are classified as intangible assets on the balance sheet is a partly true statement. Organizational Expenses may be capitalised and view as an asset but it is not necessary that it is an intangible assets. They may be expensed as and when incurred in profit and loss statement.
6. FALSE
On declaration of cash dividend, Retained Earnings are decreased and current liability as Dividend Payable are increased but on payment of cash dividend corporation's assets (Cash) and stockholder's equitys are decreased.
7. FALSE
Number of Shares outstanding after the split will be 50,000 (10,000 x 5 / 1 = 50,000 Shares)
8. FALSE
A bond can be divided into a number of individual bonds of any value.
9. TRUE
The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond.
10. TRUE
The special fund that is set aside to provide for the payment of bonds at maturity is called a sinking fund.
Sinking Fund is a special type of fund which is created for repayment of bonds at maturity and company will set aside some money in this fund which will help to them in repayment of bonds payment at maturity.
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