Question 1

The accounting life of intangible assets is determined by:

Accepted Answer

A)  only their legal lives. 
B)  only their useful lives. 
C)  their legal lives or useful lives, whichever is shorter. 
D)  the tax life mandated by the IRS. 
A)  only their legal lives. 
B)  only their useful lives. 
C)  their legal lives or useful lives, whichever is shorter. 
D)  the tax life mandated by the IRS. C

Question 2

Fly High Airlines acquires a new aircraft. It has an estimated life of 10 years and should be used for 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

Accepted Answer

A)  Double-declining-balance method 
B)  Revenue expenditure method 
C)  Straight-line method 
D)  Units-of-activity method 
A)  Double-declining-balance method 
B)  Revenue expenditure method 
C)  Straight-line method 
D)  Units-of-activity method D

Question 3

ABC and XYZ Companies purchased identical equipment having an estimated useful life of ten years. ABC uses the straight-line depreciation method and XYZ uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?

Accepted Answer

A)  ABC's depreciation expense will be greater in the second year than XYZ's depreciation expense. 
B)  XYZ's book value will be greater than ABC's book value at the end of year one. 
C)  ABC's net income will be greater than XYZ's net income in year nine. 
D)  XYZ's book value will be less than ABC's book value at the end of year two. 
A)  ABC's depreciation expense will be greater in the second year than XYZ's depreciation expense. 
B)  XYZ's book value will be greater than ABC's book value at the end of year one. 
C)  ABC's net income will be greater than XYZ's net income in year nine. 
D)  XYZ's book value will be less than ABC's book value at the end of year two. D

Question 4

According to accounting standards, the costs of intangible assets with an indefinite life, such as goodwill, should:

Accepted Answer

A)  not be amortized, but should be reviewed annually for impairment. 
B)  be reported on the statement of retained earnings in the year in which it is acquired. 
C)  be amortized over a reasonable period of time not to exceed 40 years. 
D)  be debited to an expense account entirely in the year in which acquired. 
A)  not be amortized, but should be reviewed annually for impairment. 
B)  be reported on the statement of retained earnings in the year in which it is acquired. 
C)  be amortized over a reasonable period of time not to exceed 40 years. 
D)  be debited to an expense account entirely in the year in which acquired.

Question 5

Goodwill can be recorded as an asset when a(n):

Accepted Answer

A)  business has above normal profitability compared to other businesses in its industry. 
B)  business can determine that it has created customer goodwill and name recognition. 
C)  offer is received to purchase the business at a price in excess of the value of the assets. 
D)  business is purchased and payment is made in excess of the value of the net assets. 
A)  business has above normal profitability compared to other businesses in its industry. 
B)  business can determine that it has created customer goodwill and name recognition. 
C)  offer is received to purchase the business at a price in excess of the value of the assets. 
D)  business is purchased and payment is made in excess of the value of the net assets.

Question 6

Resources that are used in operations more than one year with no physical substance are called:

Accepted Answer

A)  current assets. 
B)  intangible assets. 
C)  plant assets. 
D)  property, plant, and equipment. 
A)  current assets. 
B)  intangible assets. 
C)  plant assets. 
D)  property, plant, and equipment.

Question 7

Exhibit 8-1
For each of the following sentences, select the word or group of words that best completes the statement.
  
Refer to Exhibit 8-1. ____________________ is an account that can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.

Accepted Answer

Refer to Exhibit 8-1. __________________

Question 8

Expenditures that increase the expected useful life or productivity of the asset are:

Accepted Answer

A)  committed expenditures. 
B)  revenue expenditures. 
C)  current expenditures. 
D)  capital expenditures. 
A)  committed expenditures. 
B)  revenue expenditures. 
C)  current expenditures. 
D)  capital expenditures.

Question 9

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:

Accepted Answer

A)  investing activities. 
B)  financing activities. 
C)  noncash investing and financing activities. 
D)  operating activities. 
A)  investing activities. 
B)  financing activities. 
C)  noncash investing and financing activities. 
D)  operating activities.

Question 10

Which balance sheet section is most affected by investing activities?

Accepted Answer

A)  Current assets and current liabilities. 
B)  Long-term assets. 
C)  Long-term liabilities. 
D)  Stockholders' equity. 
A)  Current assets and current liabilities. 
B)  Long-term assets. 
C)  Long-term liabilities. 
D)  Stockholders' equity.

Question 11

Everett, Inc. 
Information for Everett, Inc. for 2011 and 2010 is presented below. Everett uses the straight-line depreciation method.
 
- Refer to the information provided for Everett, Inc. Using the data for 2011, determine the average age of Everett's fixed assets.

Accepted Answer

A)  1.60 years 
B)  3.50 years 
C)  4.00 years 
D)  10.00 years 
A)  1.60 years 
B)  3.50 years 
C)  4.00 years 
D)  10.00 years

Question 12

All of the following below are needed for the calculation of straight-line depreciation except:

Accepted Answer

A)  cost. 
B)  salvage value. 
C)  useful life. 
D)  units produced. 
A)  cost. 
B)  salvage value. 
C)  useful life. 
D)  units produced.

Question 13

On January 1, 2011, James Company sold a machine for $10,000 that it had used for several years. The machine was purchased at $22,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Accepted Answer

A)  Gain of $10,000 
B)  Loss of $13,000 
C)  Loss of $3,000 
D)  Gain of $3,000 
A)  Gain of $10,000 
B)  Loss of $13,000 
C)  Loss of $3,000 
D)  Gain of $3,000

Question 14

American Corporation purchased a building for $900,000 at the end of year 2002. The building will be depreciated over 40 years and is estimated to have a $100,000 salvage value. At the end of 2012, when it had a book value of $700,000, it was appraised for $1,100,000. A potential buyer offered $900,000. American rejected the offer. At what amount should the net book value of the building be at the end of 2012.

Accepted Answer

A)  $1,100,000 
B)  $ 900,000 
C)  $ 600,000 
D)  $ 700,000 
A)  $1,100,000 
B)  $ 900,000 
C)  $ 600,000 
D)  $ 700,000

Question 15

Depreciation is:

Accepted Answer

A)  the process of systematically and rationally allocating the cost of a fixed asset over its useful life. 
B)  an accumulation of funds to replace the related plant asset. 
C)  the difference between the replacement cost and salvage value of an asset. 
D)  the cash allocated each period to maintain a plant asset. 
A)  the process of systematically and rationally allocating the cost of a fixed asset over its useful life. 
B)  an accumulation of funds to replace the related plant asset. 
C)  the difference between the replacement cost and salvage value of an asset. 
D)  the cash allocated each period to maintain a plant asset.

Question 16

Zero, Inc. purchased equipment at the beginning of 2011 for $200,000. Zero decided to depreciate the equipment over a 5-year period using the double-declining-balance method. Zero estimated the equipment's salvage value at $20,000. Which of the following statements is correct concerning Zero's financial statements at December 31, 2011?

Accepted Answer

A)  The book value of the equipment is $120,000. 
B)  The book value of the equipment is $80,000. 
C)  The total accumulated depreciation is $90,000. 
D)  Depreciation expense for 2011 is $72,000. 
A)  The book value of the equipment is $120,000. 
B)  The book value of the equipment is $80,000. 
C)  The total accumulated depreciation is $90,000. 
D)  Depreciation expense for 2011 is $72,000.

Question 17

Exhibit 8-1
For each of the following sentences, select the word or group of words that best completes the statement.
  
Refer to Exhibit 8-1. ____________________ is a cost that improves an operating asset and is added to the asset account.

Accepted Answer

Refer to Exhibit 8-1. ________

Question 18

Land is not depreciated because:

Accepted Answer

A)  it appreciates in value. 
B)  its revenue generating potential is limited by wear and tear. 
C)  it has a useful life that is limited to the period of time a company is in business. 
D)  it will provide future benefits for the company for an unlimited period of time. 
A)  it appreciates in value. 
B)  its revenue generating potential is limited by wear and tear. 
C)  it has a useful life that is limited to the period of time a company is in business. 
D)  it will provide future benefits for the company for an unlimited period of time.

Question 19

Plant assets are depreciated because:

Accepted Answer

A)  the accrual basis of accounting requires matching of costs to revenues. 
B)  cash basis of accounting requires depreciation. 
C)  the book values equal market values. 
D)  the replacement cost of plant assets may fluctuate over time. 
A)  the accrual basis of accounting requires matching of costs to revenues. 
B)  cash basis of accounting requires depreciation. 
C)  the book values equal market values. 
D)  the replacement cost of plant assets may fluctuate over time.

Question 20

Which of the following is an example of a capital expenditure?

Accepted Answer

A)  Cleaning the carpet in the front room 
B)  Tune-up for a company truck 
C)  Replacing an engine in a company car 
D)  Replacing all burned-out light bulbs in the factory 
A)  Cleaning the carpet in the front room 
B)  Tune-up for a company truck 
C)  Replacing an engine in a company car 
D)  Replacing all burned-out light bulbs in the factory

The accounting life of intangible assets is determined by:

Fly High Airlines acquires a new aircraft. It has an estimated life of 10 years and should be used for 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

According to accounting standards, the costs of intangible assets with an indefinite life, such as goodwill, should:

Goodwill can be recorded as an asset when a(n):

Resources that are used in operations more than one year with no physical substance are called:

Expenditures that increase the expected useful life or productivity of the asset are:

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:

Which balance sheet section is most affected by investing activities?

Everett, Inc. Information for Everett, Inc. for 2011 and 2010 is presented below. Everett uses the straight-line depreciation method. - Refer to the information provided for Everett, Inc. Using the data for 2011, determine the average age of Everett's fixed assets.

All of the following below are needed for the calculation of straight-line depreciation except:

On January 1, 2011, James Company sold a machine for $10,000 that it had used for several years. The machine was purchased at $22,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Depreciation is:

Exhibit 8-1 For each of the following sentences, select the word or group of words that best completes the statement. Refer to Exhibit 8-1. ____________________ is a cost that improves an operating asset and is added to the asset account.

Land is not depreciated because:

Plant assets are depreciated because:

Which of the following is an example of a capital expenditure?

Financial Accounting

Corporate Financial Statements

Recording Accounting Transactions

Accrual Accounting and Adjusting Entries

Internal Control and Cash

Receivables

Inventory

Liabilities

Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 8: Fixed Assets and Intangible Assets

The accounting life of intangible assets is determined by:

Fly High Airlines acquires a new aircraft. It has an estimated life of 10 years and should be used for 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

According to accounting standards, the costs of intangible assets with an indefinite life, such as goodwill, should:

Goodwill can be recorded as an asset when a(n):

Resources that are used in operations more than one year with no physical substance are called:

Expenditures that increase the expected useful life or productivity of the asset are:

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under:

Which balance sheet section is most affected by investing activities?

Everett, Inc. Information for Everett, Inc. for 2011 and 2010 is presented below. Everett uses the straight-line depreciation method. - Refer to the information provided for Everett, Inc. Using the data for 2011, determine the average age of Everett's fixed assets.

All of the following below are needed for the calculation of straight-line depreciation except:

On January 1, 2011, James Company sold a machine for $10,000 that it had used for several years. The machine was purchased at $22,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Depreciation is:

Exhibit 8-1 For each of the following sentences, select the word or group of words that best completes the statement. Refer to Exhibit 8-1. ____________________ is a cost that improves an operating asset and is added to the asset account.

Land is not depreciated because:

Plant assets are depreciated because:

Which of the following is an example of a capital expenditure?

Financial Accounting

Corporate Financial Statements

Recording Accounting Transactions

Accrual Accounting and Adjusting Entries

Internal Control and Cash

Receivables

Inventory

Liabilities

Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

Filters