Question 1

Which of the following statements is correct with respect to the sale of a depreciable asset?

Accepted Answer

A) A gain occurs when the selling price exceeds book value. 
B) A sale for a gain results in a decrease in total assets. 
C) A sale for a loss results in an increase in total assets. 
D) A loss occurs when the selling price is more than book value. 
A) A gain occurs when the selling price exceeds book value. 
B) A sale for a gain results in a decrease in total assets. 
C) A sale for a loss results in an increase in total assets. 
D) A loss occurs when the selling price is more than book value. A

Question 2

Allison Company purchased a machine for $1,200,000 at the beginning of 2018.Allison was using the double-declining-balance (200%)method to depreciate the asset and its useful life was estimated to be 5 years with a residual value of $200,000.At the end of 2019,Allison Co.estimates the future cash flows from the asset to be equal to $500,000 and the fair value to be $450,000.
What is the amount of the impairment loss?

Accepted Answer

At the end of year two,the machine's book value would be $432,000 (year 1 depreciation $480,000 plus year 2 depreciation of $288,000 would be deducted from the asset's cost of $1,200,000).Since the future cash flows are not below the asset's book value,there is no impairment loss.

Question 3

Beckworth Company purchased a truck on January 1,2018,at a cash cost of $10,600.The estimated residual value was $400 and the estimated useful life 4 years.The company uses straight-line depreciation computed monthly.On July 1,2021,the company sold the truck for $1,900 cash.
A.What was the depreciation expense amount per month?
B.What was the amount of accumulated depreciation at July 1,2021?
C.Prepare the required journal entries on the date of disposal,July 1,2021.(Assume no 2021 depreciation had yet been recorded)

Accepted Answer

A.($10,600 - $400)÷ 48 = $212.50 per month
B.$212.50 × 42 months = $8,925
C.

Question 4

The fixed asset turnover ratio measures the amount of operating income generated per dollar of average fixed assets.

Accepted Answer

A) True 
 B)False

Question 5

On December 31,2019,Hamilton Inc.sold a used industrial crane for $600,000 cash.The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31,2019.What is the gain or loss from the December 31,2019 equipment sale?

Accepted Answer

A) $600,000 gain. 
B) $600,000 loss. 
C) $200,000 loss. 
D) $200,000 gain. 
A) $600,000 gain. 
B) $600,000 loss. 
C) $200,000 loss. 
D) $200,000 gain.

Question 6

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

Accepted Answer

A) True 
 B)False

Question 7

In accounting for depreciation,acquisition cost and useful life usually are known quantities,whereas residual value is an estimate because it relates to an amount in the future.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not true in comparing U.S.GAAP and International Financial Reporting Standards (IFRS)?

Accepted Answer

A) IFRS and U.S.GAAP both allow intangible assets to be reported at their cost minus accumulated amortization. 
B) U.S.GAAP requires expensing of all costs of research and development. 
C) IFRS allows for adjustments for increases in fair value of tangible assets. 
D) IFRS requires capitalizing of research costs and expensing of development costs. 
A) IFRS and U.S.GAAP both allow intangible assets to be reported at their cost minus accumulated amortization. 
B) U.S.GAAP requires expensing of all costs of research and development. 
C) IFRS allows for adjustments for increases in fair value of tangible assets. 
D) IFRS requires capitalizing of research costs and expensing of development costs.

Question 9

Which of the following statements regarding the fixed asset turnover ratio is incorrect?

Accepted Answer

A) The numerator is net operating income. 
B) The denominator is average net fixed assets. 
C) The ratio is used to assess a company's effectiveness in generating sales from its fixed assets. 
D) The ratio increases when a company sells a factory building for a gain. 
A) The numerator is net operating income. 
B) The denominator is average net fixed assets. 
C) The ratio is used to assess a company's effectiveness in generating sales from its fixed assets. 
D) The ratio increases when a company sells a factory building for a gain.

Question 10

An expenditure is capitalized when it is reported as an expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 11

Waterloo Corporation purchased factory equipment for a cost of $1,800,000.There was also the cost of $100,000 for delivery,$220,000 for installation and modifications to the factory building,and $60,000 in interest costs on borrowed funds used to acquire the equipment.
Calculate the acquisition cost of the new equipment.

Accepted Answer

Equipment cost = $2,120,000 =

Question 12

Covey Company purchased a machine on January 1,2019,by paying cash of $250,000.The machine has an estimated useful life of five years,is expected to produce 500,000 units,and has an estimated residual value of $25,000.
A.Calculate depreciation expense to the nearest whole dollar for each year of the machine's useful life under.
1.Straight-line depreciation method.
2.Double declining-balance method.
B.What is the book value of the machine after three years using the double declining-balance method?
C.What is the book value of the machinery after three years using the straight-line method?
D.If the machine was used to produce and sell 120,000 units in 2019,what would be the depreciation expense using the units-of-production method?

Accepted Answer

A.1.Straight-line depreciation for years

Question 13

Prepare the required adjusting journal entry at December 31,2019,the end of the annual accounting period for the three items below.Assume that no adjusting entries have been made during the year.If no entry is required,explain why.
A.Polk Company acquired a patent that cost $6,000 on January 1,2019.The patent was registered on January 1,2015.The useful life of a patent is 20 years from registration.
B.Polk Company acquired a gravel pit on January 1,2019,that cost $24,000.The company estimates that 30,000 tons of gravel can be extracted economically.When all the gravel has been extracted,no residual value is anticipated.During 2019,4,000 tons were extracted and sold.
C.On January 1,2019,Polk Company acquired a used dump truck that cost $6,000 to use hauling gravel.The company estimated a residual value of 10% of cost and a useful life 4 years.The company uses straight-line depreciation.

Accepted Answer

A.
 @#IMG-DLM& $6,000 ÷ 20 years = $300/

Question 14

Which of the following journal entries is correct when a company owns its office building for many years and now sells the building?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

During 2019,the Bowtie Company reported net income of $1,872 million,depreciation expense of $1,412 million and $978 million paid for purchases of property,plant,and equipment.Using the indirect method of preparing the statement of cash flows,what would be the effect on cash flows from operating activities during 2019?

Accepted Answer

A) Cash flows from operating activities would be increased by depreciation expense and decreased by the property,plant,and equipment purchases. 
B) Cash flow from operating activities would be increased by depreciation expense and by the property,plant,and equipment purchases. 
C) Cash flow from operating activities would be increased by depreciation expense but the property,plant,and equipment purchases would have no effect on cash flow from operating activities. 
D) Depreciation is a noncash expense and would not be used to calculate cash flow from operating activities. 
A) Cash flows from operating activities would be increased by depreciation expense and decreased by the property,plant,and equipment purchases. 
B) Cash flow from operating activities would be increased by depreciation expense and by the property,plant,and equipment purchases. 
C) Cash flow from operating activities would be increased by depreciation expense but the property,plant,and equipment purchases would have no effect on cash flow from operating activities. 
D) Depreciation is a noncash expense and would not be used to calculate cash flow from operating activities.

Question 16

Natural resource depletion is recognized on the income statement for all resources removed during the period whether they are sold or not.

Accepted Answer

A) True 
 B)False

Question 17

Frankel Feed purchased a new machine on January 1,Year 1.Relevant information is as follows:
   It is now the beginning of year 6 and the management reevaluated the estimates related to the machine.
Compute the depreciation expense for year 6 under each of the following independent cases:

Accepted Answer

Annual straight-line depreciation expens

Question 18

Which of the following is not true regarding certain assets?

Accepted Answer

A) A copyright provides the right to publish,use,and sell equipment. 
B) A trademark provides the right to a name,image,or slogan identified with a product. 
C) The cost to design a software program for manufacturing equipment will be expensed as research and development expense. 
D) A patent on equipment enables the inventor to sell that equipment. 
A) A copyright provides the right to publish,use,and sell equipment. 
B) A trademark provides the right to a name,image,or slogan identified with a product. 
C) The cost to design a software program for manufacturing equipment will be expensed as research and development expense. 
D) A patent on equipment enables the inventor to sell that equipment.

Question 19

Patents,trademarks,and franchises are examples of tangible assets.

Accepted Answer

A) True 
 B)False

Question 20

The Wilson Company has provided the following information: • Net sales,$200,000
• Net operating income,$40,000
• Net income,$20,000
• Average total assets,$125,000
• Average net fixed assets;$80,000
What is Wilson's fixed asset turnover ratio?

Accepted Answer

A) 1.60 
B) 2.50 
C) 0.25 
D) 0.50 
A) 1.60 
B) 2.50 
C) 0.25 
D) 0.50

Which of the following statements is correct with respect to the sale of a depreciable asset?

The fixed asset turnover ratio measures the amount of operating income generated per dollar of average fixed assets.

On December 31,2019,Hamilton Inc.sold a used industrial crane for $600,000 cash.The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31,2019.What is the gain or loss from the December 31,2019 equipment sale?

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

In accounting for depreciation,acquisition cost and useful life usually are known quantities,whereas residual value is an estimate because it relates to an amount in the future.

Which of the following is not true in comparing U.S.GAAP and International Financial Reporting Standards (IFRS)?

Which of the following statements regarding the fixed asset turnover ratio is incorrect?

An expenditure is capitalized when it is reported as an expense on the income statement.

Which of the following journal entries is correct when a company owns its office building for many years and now sells the building?

Natural resource depletion is recognized on the income statement for all resources removed during the period whether they are sold or not.

Frankel Feed purchased a new machine on January 1,Year 1.Relevant information is as follows: It is now the beginning of year 6 and the management reevaluated the estimates related to the machine. Compute the depreciation expense for year 6 under each of the following independent cases:

Which of the following is not true regarding certain assets?

Patents,trademarks,and franchises are examples of tangible assets.

The Wilson Company has provided the following information: • Net sales,$200,000 • Net operating income,$40,000 • Net income,$20,000 • Average total assets,$125,000 • Average net fixed assets;$80,000 What is Wilson's fixed asset turnover ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 8: Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Which of the following statements is correct with respect to the sale of a depreciable asset?

The fixed asset turnover ratio measures the amount of operating income generated per dollar of average fixed assets.

On December 31,2019,Hamilton Inc.sold a used industrial crane for $600,000 cash.The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31,2019.What is the gain or loss from the December 31,2019 equipment sale?

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

In accounting for depreciation,acquisition cost and useful life usually are known quantities,whereas residual value is an estimate because it relates to an amount in the future.

Which of the following is not true in comparing U.S.GAAP and International Financial Reporting Standards (IFRS)?

Which of the following statements regarding the fixed asset turnover ratio is incorrect?

An expenditure is capitalized when it is reported as an expense on the income statement.

Which of the following journal entries is correct when a company owns its office building for many years and now sells the building?

Natural resource depletion is recognized on the income statement for all resources removed during the period whether they are sold or not.

Frankel Feed purchased a new machine on January 1,Year 1.Relevant information is as follows: It is now the beginning of year 6 and the management reevaluated the estimates related to the machine. Compute the depreciation expense for year 6 under each of the following independent cases:

Which of the following is not true regarding certain assets?

Patents,trademarks,and franchises are examples of tangible assets.

The Wilson Company has provided the following information: • Net sales,$200,000 • Net operating income,$40,000 • Net income,$20,000 • Average total assets,$125,000 • Average net fixed assets;$80,000 What is Wilson's fixed asset turnover ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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