Question 1

If a machine is damaged during unpacking, the repairs are added to its cost.

Accepted Answer

A) True 
 B)False  False

Question 2

On July 1, 2020, Suntera Corp. purchased and placed in service a machine with a cost of $460,000. Suntera estimated the service life to be 5 years or 30,000 units of output, with an estimated residual value of $6,000. During 2020, 2,600 units were produced.
(a) The straight-line method of depreciation
(b) The units-of-production method of depreciation

Accepted Answer

$\begin{array}{|l|r|r|}
\hline \text { (a) }(\$ 460,000-6,000) / 5 \text { years } \times 6 / 12=45,400 & \
\hline \text { Dec 31, 2020 Depreciation Expense, Machine } & 45,400 \
\hline \text { Accumulated Depreciation, Machine } & &45,400 \
\hline\
\hline \text { (b) }(\$ 460,000-6,000) / 30,000 \text { units }=\$ 15.13 / \text { unit } & \
\hline 2,600 \text { units } \times \$ 15.13 \text { /unit }=39,338 & \
\hline & \
\hline \text { Dec 31, 2020 Depreciation Expense, Machine } & 39,338\
\hline \text { Accumulated Depreciation, Machine } &  &39,338\
\hline
\end{array}$

Question 3

A change in accounting estimate is

Accepted Answer

A)  Reflected only in current and future financial statements 
B)  Reflected in current and future financial statements and also requires modification of past statements 
C)  A change in a calculated amount used in the financial statements resulting from new information or subsequent developments and from better insight or improved judgment 
D)  Both reflected only in current and future financial statements and a change in a calculated amount used in the financial statements resulting from new information or subsequent developments and from better insight or improved judgment 
E)  None of these 
A)  Reflected only in current and future financial statements 
B)  Reflected in current and future financial statements and also requires modification of past statements 
C)  A change in a calculated amount used in the financial statements resulting from new information or subsequent developments and from better insight or improved judgment 
D)  Both reflected only in current and future financial statements and a change in a calculated amount used in the financial statements resulting from new information or subsequent developments and from better insight or improved judgment 
E)  None of these D

Question 4

Additional subsequent expenditures that result in future economic benefits and can be reliably measured should be treated as a(n)

Accepted Answer

A)  Revenue expenditure 
B)  Asset expenditure 
C)  Capital expenditure 
D)  Contributed capital expenditure 
E)  Balance sheet expenditure 
A)  Revenue expenditure 
B)  Asset expenditure 
C)  Capital expenditure 
D)  Contributed capital expenditure 
E)  Balance sheet expenditure

Question 5

Legal permissions for the extraction of oil and gas from the earth are known as

Accepted Answer

A)  Trademarks 
B)  Patents 
C)  Drilling rights 
D)  Copyrights 
E)  Leaseholds 
A)  Trademarks 
B)  Patents 
C)  Drilling rights 
D)  Copyrights 
E)  Leaseholds

Question 6

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and will have a residual value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

Accepted Answer

A) True 
 B)False

Question 7

SportsWorld uses straight-line depreciation for a piece of equipment that cost $12,000, had a trade-in value of $2,000, and a five-year service life. At the end of the third year, the trade-in value was revised to $1,200 and the useful life increased to a total of 6 years. Calculate the amount of depreciation expense for each of the remaining years of the asset's useful life.

Accepted Answer

A)  $1,000 
B)  $1,467 
C)  $1,800 
D)  $1,600 
E)  $2,160 
A)  $1,000 
B)  $1,467 
C)  $1,800 
D)  $1,600 
E)  $2,160

Question 8

Obsolescence

Accepted Answer

A)  Occurs when an asset is at the end of its useful life 
B)  Refers to a condition where a property, plant and equipment asset is no longer useful in producing goods and services 
C)  Refers to a condition where the capacity of a property, plant and equipment asset is too small to meet the company's productive demands 
D)  Is the same as inadequacy 
E)  None of these 
A)  Occurs when an asset is at the end of its useful life 
B)  Refers to a condition where a property, plant and equipment asset is no longer useful in producing goods and services 
C)  Refers to a condition where the capacity of a property, plant and equipment asset is too small to meet the company's productive demands 
D)  Is the same as inadequacy 
E)  None of these

Question 9

Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

Accepted Answer

A) True 
 B)False

Question 10

Capital cost allowance

Accepted Answer

A)  Is the income tax act equivalent of depreciation 
B)  Is acceptable for financial reporting 
C)  Is not required for tax reporting 
D)  Is not used in Canada 
E)  All of these 
A)  Is the income tax act equivalent of depreciation 
B)  Is acceptable for financial reporting 
C)  Is not required for tax reporting 
D)  Is not used in Canada 
E)  All of these

Question 11

Goodwill is depreciated over its useful life as estimated by the business's management.

Accepted Answer

A) True 
 B)False

Question 12

Revenue expenditures are additional costs of property, plant and equipment that provide material benefits extending beyond the current period.

Accepted Answer

A) True 
 B)False

Question 13

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Accepted Answer

A) True 
 B)False

Question 14

Explain (1) depreciation for partial years and (2) revision of depreciation when estimates change.

Accepted Answer

(1) Partial years' depreciation is often

Question 15

On January 1, 2019, Friar Company purchased a machine for $180,000 that was expected to last 6 years and have a residual value of $16,000. On January 4, 2022, Friar Company paid $25,000 for improvements to the machine, which increased the total estimated useful life from 6 to 10 years and increased the residual value to $19,500. Friar uses straight-line depreciation. (1) What account should be debited in the journal entry to record the $25,000 improvements? (2) What amount of depreciation expense should be recorded for 2022?

Accepted Answer

The answer of On January 1, 2019, Friar Company purchased...

Question 16

Wilkins Company exchanged its old computer for a newer model. The Old Computer was purchased for $22,000, with related accumulated depreciation of $15,500 to the date of the exchange. The new computer had a cash price of $30,200, and Wilkins Company was given a $7,500 trade-in allowance. This transaction has commercial substance. Prepare the general journal entry to record the exchange, recording the new computer in an account called New Computer.

Accepted Answer

The answer of Wilkins Company exchanged its old computer for...

Question 17

Subsequent capital expenditures

Accepted Answer

A)  Are expenditures making a property, plant and equipment asset more efficient 
B)  Are often called improvements 
C)  Are added to the cost of the asset 
D)  Often extend an asset's useful life 
E)  All of these 
A)  Are expenditures making a property, plant and equipment asset more efficient 
B)  Are often called improvements 
C)  Are added to the cost of the asset 
D)  Often extend an asset's useful life 
E)  All of these

Question 18

Mandy Manufacturing purchased a machine on August 1, 2019, and it was installed and ready to run on January 1, 2020. The following costs were incurred in the purchase and installation of the machine.
 $$\begin{array} { | l | r | } 
\hline \text { Invoice Price } & \$ 1,400,000 \
\hline \text { Freight costs } & 8,000 \
\hline \text { Purchase discount } & 3,000 \
\hline \text { Installation costs } & 68,000 \
\hline \text { Electrical and power conrections } & 33,000 \
\hline \text { Repairs to correct darnage incurred during uncrating } & 13,000 \
\hline \text { Adjustrnents costs } & 46,000 \
\hline \text { Spare parts for future use } & 26,000 \
\hline \text { Provincial sales tax } & 84,000 \
\hline \text { Fines incurred during the trarsport and uploading of the machine } & 100 \
\hline \text { Cost of special foundation for the machine } & 7,000 \
\hline
\end{array}$$ Calculate the depreciable cost of the machine.

Accepted Answer

The answer of Mandy Manufacturing purchased a machine on August...

Question 19

When originally purchased, a vehicle had cost $23,000, with an estimated residual value of $1,500, and an estimated useful life of 8 years. After 4 years of straight-line depreciation, the estimated useful life was revised from 8 to 6 years, but with zero residual value. The depreciation expense in year 5 should be

Accepted Answer

A)  $5,543.75 
B)  $2.687.50 
C)  $6,125.00 
D)  $10,750.00 
E)  $2,856.25 
A)  $5,543.75 
B)  $2.687.50 
C)  $6,125.00 
D)  $10,750.00 
E)  $2,856.25

Question 20

SportsWorld uses straight-line depreciation for a piece of equipment that cost $12,000, had a salvage value of $2,000, and a five-year service life. At the end of the first year, an impairment loss of $2,000 was recognized on the asset. Calculate the amount of depreciation expense for each of the remaining years of the asset's useful life.

Accepted Answer

A)  $1,500 
B)  $1,600 
C)  $2,500 
D)  $1,800 
E)  $2,000 
A)  $1,500 
B)  $1,600 
C)  $2,500 
D)  $1,800 
E)  $2,000

If a machine is damaged during unpacking, the repairs are added to its cost.

A change in accounting estimate is

Additional subsequent expenditures that result in future economic benefits and can be reliably measured should be treated as a(n)

Legal permissions for the extraction of oil and gas from the earth are known as

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and will have a residual value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

Obsolescence

Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

Capital cost allowance

Goodwill is depreciated over its useful life as estimated by the business's management.

Revenue expenditures are additional costs of property, plant and equipment that provide material benefits extending beyond the current period.

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Explain (1) depreciation for partial years and (2) revision of depreciation when estimates change.

Subsequent capital expenditures

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Payroll Liabilities

Accounting Information Systems

Filters

Exam 9: Property, Plant and Equipment Intangibles

If a machine is damaged during unpacking, the repairs are added to its cost.

A change in accounting estimate is

Additional subsequent expenditures that result in future economic benefits and can be reliably measured should be treated as a(n)

Legal permissions for the extraction of oil and gas from the earth are known as

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and will have a residual value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

Obsolescence

Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

Capital cost allowance

Goodwill is depreciated over its useful life as estimated by the business's management.

Revenue expenditures are additional costs of property, plant and equipment that provide material benefits extending beyond the current period.

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Explain (1) depreciation for partial years and (2) revision of depreciation when estimates change.

Subsequent capital expenditures

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Payroll Liabilities

Accounting Information Systems

Filters