Question 1

A capital expenditure results in a debit to:

Accepted Answer

A)  an expense account. 
B)  a stockholders' equity account. 
C)  a liability account. 
D)  an asset account. 
A)  an expense account. 
B)  a stockholders' equity account. 
C)  a liability account. 
D)  an asset account.

Question 2

A company should choose a depreciation method that:

Accepted Answer

A)  best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B)  saves the most taxes by generating the highest amount of expense and decreasing the net income. 
C)  generates the most conservative estimate of the depreciation expense for the period. 
D)  shows the highest amount of net income. 
A)  best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B)  saves the most taxes by generating the highest amount of expense and decreasing the net income. 
C)  generates the most conservative estimate of the depreciation expense for the period. 
D)  shows the highest amount of net income.

Question 3

Stricker Company sold equipment for $4,000. This resulted in a $1,500 loss. What is the impact of this sale on the balance sheet?

Accepted Answer

A)  Reduces total assets 
B)  Increases total assets 
C)  Has no effect on total assets 
D)  Increases total assets and decreases total equity 
A)  Reduces total assets 
B)  Increases total assets 
C)  Has no effect on total assets 
D)  Increases total assets and decreases total equity

Question 4

How should intangible assets be disclosed on the balance sheet?

Accepted Answer

A)  As a reduction of stockholders' equity 
B)  At cost in the current assets section 
C)  At the estimated market value at the balance sheet date 
D)  Net of the costs already amortized 
A)  As a reduction of stockholders' equity 
B)  At cost in the current assets section 
C)  At the estimated market value at the balance sheet date 
D)  Net of the costs already amortized

Question 5

Gump Shrimp Company 
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
-
Refer to the information provided for Gump Shrimp Company. What was the book value of the ship at the end of the third year?

Accepted Answer

A)  $128,000 
B)  $512,000 
C)  $200,000 
D)  Need more information to determine this answer. 
A)  $128,000 
B)  $512,000 
C)  $200,000 
D)  Need more information to determine this answer.

Question 6

If a company's fixed asset turnover ratio decreased from 2010 to 2011, which of the following conclusions can be made?

Accepted Answer

A)  The company was more efficient during 2011 in using its fixed assets to produce profits 
B)  The company produced less sales in 2011 for each dollar invested in fixed assets compare to 2010. 
C)  The company was less profitable in 2010. 
D)  The company over invested in fixed assets in 2010. 
A)  The company was more efficient during 2011 in using its fixed assets to produce profits 
B)  The company produced less sales in 2011 for each dollar invested in fixed assets compare to 2010. 
C)  The company was less profitable in 2010. 
D)  The company over invested in fixed assets in 2010.

Question 7

Which of the following costs related to the purchase of production equipment incurred by ABC Company during 2011 would be considered a revenue expenditure?

Accepted Answer

A)  Installation costs for equipment 
B)  Purchase price of the equipment less the cash discount 
C)  Repair and maintenance costs during the equipment's first year of service 
D)  Transportation charges to deliver the equipment to ABC Company 
A)  Installation costs for equipment 
B)  Purchase price of the equipment less the cash discount 
C)  Repair and maintenance costs during the equipment's first year of service 
D)  Transportation charges to deliver the equipment to ABC Company

Question 8

Max's Tire Center Company 
Selected data from the financial statements of Max's Tire Center are provided below.
 
-Refer to the selected data provided for Max's Tire Center. Which of the following would result from a horizontal analysis of Max's income statement?

Accepted Answer

A)  Depreciation expense increased by $3,000 or 6.67% during 2012. 
B)  Depreciation expense increased by $3,000 or 7.14% during 2012. 
C)  Net sales is $370,000 in 2012. 
D)  The total assets is $500,000 in 2012. 
A)  Depreciation expense increased by $3,000 or 6.67% during 2012. 
B)  Depreciation expense increased by $3,000 or 7.14% during 2012. 
C)  Net sales is $370,000 in 2012. 
D)  The total assets is $500,000 in 2012.

Question 9

The depreciation method that does not use salvage value in calculating the first year's depreciation expense is:

Accepted Answer

A)  straight-line method 
B)  units-of-activity method 
C)  double-declining-balance method 
D)  straight-line method and units-of-activity method 
A)  straight-line method 
B)  units-of-activity method 
C)  double-declining-balance method 
D)  straight-line method and units-of-activity method

Question 10

Victor Company purchased a patent for $250,000 at the beginning of 2011, and estimated that its expected useful life was 10 years. The patent has a legal life of 20 years. What amount should be recorded as amortization expense for the patent in 2011?

Accepted Answer

A)  $ -0- 
B)  $ 8,333 
C)  $12,500 
D)  $25,000 
A)  $ -0- 
B)  $ 8,333 
C)  $12,500 
D)  $25,000

Question 11

Lighting Company sold an old machine on December 31, 2011, for $22,000 cash. The following data was available when the truck sold:   When this transaction is recorded, it should include:

Accepted Answer

A)  debit of $7,000 to the loss on disposal account. 
B)  credit of $22,000 to the truck account. 
C)  credit of $7,000 to the gain on disposal account. 
D)  credit of $15,000 to the gain on disposal account. 
A)  debit of $7,000 to the loss on disposal account. 
B)  credit of $22,000 to the truck account. 
C)  credit of $7,000 to the gain on disposal account. 
D)  credit of $15,000 to the gain on disposal account.

Question 12

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 the right to produce or sell a published work.

Accepted Answer

Refer to Exhibit 8-1. ________

Question 13

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. Determine the fixed asset turnover ratio for Everett for 2011.

Accepted Answer

A)  2.10 times 
B)  1.60 times 
C)  4.00 times 
D)  2.39 times 
A)  2.10 times 
B)  1.60 times 
C)  4.00 times 
D)  2.39 times

Question 14

Clear Window Cleaners 
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
-
Refer to the information provided for Clear Window Cleaners. Clear Window is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2011?

Accepted Answer

A)  Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. 
B)  Straight-line depreciation creates both the larger expense and the larger tax savings. 
C)  Double-declining-balance depreciation creates both the larger expense and the larger tax savings. 
D)  Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings. 
A)  Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. 
B)  Straight-line depreciation creates both the larger expense and the larger tax savings. 
C)  Double-declining-balance depreciation creates both the larger expense and the larger tax savings. 
D)  Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

Question 15

The exclusive right to use a certain name or symbol is called as:

Accepted Answer

A)  franchise. 
B)  patent. 
C)  trademark. 
D)  copyright. 
A)  franchise. 
B)  patent. 
C)  trademark. 
D)  copyright.

Question 16

Which of the following is an intangible asset?

Accepted Answer

A)  Oil 
B)  Goodwill 
C)  Retained earnings 
D)  Land 
A)  Oil 
B)  Goodwill 
C)  Retained earnings 
D)  Land

Question 17

Clear Window Cleaners 
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
-
Refer to the information provided for Clear Window Cleaners. By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the equipment?

Accepted Answer

A)  The salvage value of $3,000. 
B)  Cost less total depreciation. 
C)  Cost plus total depreciation. 
D)  Total depreciation expenses under double-declining-balance and straight-line depreciation are equal. 
A)  The salvage value of $3,000. 
B)  Cost less total depreciation. 
C)  Cost plus total depreciation. 
D)  Total depreciation expenses under double-declining-balance and straight-line depreciation are equal.

Question 18

Arnold, Inc. purchased a truck on January 1, 2009, for $40,000. The truck had an estimated life of 5 years and an estimated salvage value of $5,000. Arnold Inc. used the straight-line method to depreciate the asset. On July 1, 2012, the truck was sold for $7,000 cash. The journal entry to record the sale of the truck in 2012:

Accepted Answer

A)  decreases equity. 
B)  increases total assets. 
C)  decreases total expenses. 
D)  increases net income. 
A)  decreases equity. 
B)  increases total assets. 
C)  decreases total expenses. 
D)  increases net income.

Question 19

Clear Window Cleaners 
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
-
Refer to the information provided for Clear Window Cleaners. What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation in the first year of the equipment?

Accepted Answer

A)  $11,200 
B)  $13,200 
C)  $21,200 
D)  $12,720 
A)  $11,200 
B)  $13,200 
C)  $21,200 
D)  $12,720

Question 20

Xtra Company purchased goodwill from Argus for $144,000. Argus had developed the goodwill over 6 years. How much would Xtra amortize the goodwill for its first year?

Accepted Answer

A)  $8,640 
B)  $24,000 
C)  Goodwill is not amortized. 
D)  Not enough information. 
A)  $8,640 
B)  $24,000 
C)  Goodwill is not amortized. 
D)  Not enough information.

A capital expenditure results in a debit to:

A company should choose a depreciation method that:

Stricker Company sold equipment for $4,000. This resulted in a $1,500 loss. What is the impact of this sale on the balance sheet?

How should intangible assets be disclosed on the balance sheet?

If a company's fixed asset turnover ratio decreased from 2010 to 2011, which of the following conclusions can be made?

Which of the following costs related to the purchase of production equipment incurred by ABC Company during 2011 would be considered a revenue expenditure?

Max's Tire Center Company Selected data from the financial statements of Max's Tire Center are provided below. -Refer to the selected data provided for Max's Tire Center. Which of the following would result from a horizontal analysis of Max's income statement?

The depreciation method that does not use salvage value in calculating the first year's depreciation expense is:

Victor Company purchased a patent for $250,000 at the beginning of 2011, and estimated that its expected useful life was 10 years. The patent has a legal life of 20 years. What amount should be recorded as amortization expense for the patent in 2011?

Lighting Company sold an old machine on December 31, 2011, for $22,000 cash. The following data was available when the truck sold: When this transaction is recorded, it should include:

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 the right to produce or sell a published work.

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. Determine the fixed asset turnover ratio for Everett for 2011.

The exclusive right to use a certain name or symbol is called as:

Which of the following is an intangible asset?

Xtra Company purchased goodwill from Argus for $144,000. Argus had developed the goodwill over 6 years. How much would Xtra amortize the goodwill for its first year?

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

A capital expenditure results in a debit to:

A company should choose a depreciation method that:

Stricker Company sold equipment for $4,000. This resulted in a $1,500 loss. What is the impact of this sale on the balance sheet?

How should intangible assets be disclosed on the balance sheet?

If a company's fixed asset turnover ratio decreased from 2010 to 2011, which of the following conclusions can be made?

Which of the following costs related to the purchase of production equipment incurred by ABC Company during 2011 would be considered a revenue expenditure?

Max's Tire Center Company Selected data from the financial statements of Max's Tire Center are provided below. -Refer to the selected data provided for Max's Tire Center. Which of the following would result from a horizontal analysis of Max's income statement?

The depreciation method that does not use salvage value in calculating the first year's depreciation expense is:

Victor Company purchased a patent for $250,000 at the beginning of 2011, and estimated that its expected useful life was 10 years. The patent has a legal life of 20 years. What amount should be recorded as amortization expense for the patent in 2011?

Lighting Company sold an old machine on December 31, 2011, for $22,000 cash. The following data was available when the truck sold: When this transaction is recorded, it should include:

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 the right to produce or sell a published work.

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. Determine the fixed asset turnover ratio for Everett for 2011.

The exclusive right to use a certain name or symbol is called as:

Which of the following is an intangible asset?

Xtra Company purchased goodwill from Argus for $144,000. Argus had developed the goodwill over 6 years. How much would Xtra amortize the goodwill for its first year?

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