Question 1

If a company uses the same depreciation method as other firms in the same industry, investors will have enhanced comparability of the financial reporting results.

Accepted Answer

A) True 
 B)False

Question 2

Fabian Woodworks
​
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
-Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2021?

Accepted Answer

A) $ 8,000 
B) $ 6,000 
C) $10,000 
D) $ 4,000 
A) $ 8,000 
B) $ 6,000 
C) $10,000 
D) $ 4,000

Question 3

A ____________________ is a cost that improves an operating asset and is therefore added to the asset account.

Accepted Answer

The answer of A ____________________ is a cost that improves...

Question 4

Floors 4 U uses straight-line depreciation for its equipment. The company purchased equipment for $250,000 and estimated its useful life at 8 years. The bookkeeper failed to consider the residual value of $25,000. What is the impact on earnings per share and operating income of failing to consider the residual value?

Accepted Answer

A) Earnings per share will be overstated and operating income will be understated. 
B) Earnings per share will be understated and operating income will be overstated. 
C) Both earnings per share and operating income will be overstated. 
D) Both earnings per share and operating income will be understated. 
A) Earnings per share will be overstated and operating income will be understated. 
B) Earnings per share will be understated and operating income will be overstated. 
C) Both earnings per share and operating income will be overstated. 
D) Both earnings per share and operating income will be understated.

Question 5

On January 1, 2019, a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000. On July 1, 2021, the machine was sold for $7,000 cash. The journal entry to record the sale

Accepted Answer

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

Question 6

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Accepted Answer

A) True 
 B)False

Question 7

Select the account to which each of the following costs would be debited. (Choices may be used more than once.)
-The annual painting costs of an office building.

Accepted Answer

A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account 
A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account

Question 8

Fernbank Farms
​
This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000.
-Refer to Fernbank Farms. When calculating depreciation for 2021, the company's accountant should

Accepted Answer

A) add the $30,000 to the book value at December 31, 2020, and then allocate the revised depreciation basis over the remaining adjusted useful life of 5 years. 
B) report the effect of the change in life as an expense on the income statement in 2019. 
C) ignore the change in life on the original cost of $100,000 and depreciate the additional $30,000 cost separately over its useful life. 
D) expense the $30,000 and depreciate the original cost of $100,000 over its revised estimated total live of 7 years. 
A) add the $30,000 to the book value at December 31, 2020, and then allocate the revised depreciation basis over the remaining adjusted useful life of 5 years. 
B) report the effect of the change in life as an expense on the income statement in 2019. 
C) ignore the change in life on the original cost of $100,000 and depreciate the additional $30,000 cost separately over its useful life. 
D) expense the $30,000 and depreciate the original cost of $100,000 over its revised estimated total live of 7 years.

Question 9

A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-A state agency required that a pollution-control device be installed on the equipment at a cost of $5,000.

Accepted Answer

A) This item should be included as part of the cost of the equipment. 
B) This item should be considered a revenue expenditure. 
A) This item should be included as part of the cost of the equipment. 
B) This item should be considered a revenue expenditure.

Question 10

Natural resources can be replaced or restored only by an act of nature.

Accepted Answer

A) True 
 B)False

Question 11

Two reasons why a company might choose an accelerated depreciation method are _______________, and ______________.

Accepted Answer

to minimize income and taxes
t

Question 12

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, for $20,000 cash. The following data were available at the time of sale:   When this transaction is recorded, it should include a

Accepted Answer

A) debit of $80,000 to the Loss on Disposal account. 
B) credit of $20,000 to the Equipment account. 
C) credit of $5,000 to the Gain on Disposal account. 
D) debit of $20,000 to the Accumulated Depreciation account. 
A) debit of $80,000 to the Loss on Disposal account. 
B) credit of $20,000 to the Equipment account. 
C) credit of $5,000 to the Gain on Disposal account. 
D) debit of $20,000 to the Accumulated Depreciation account.

Question 13

A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-The company purchased a three-year liability insurance policy to cover possible damage caused by the new equipment at a cost of $6,000.

Accepted Answer

A) This item should be included as part of the cost of the equipment. 
B) This item should be considered a revenue expenditure. 
A) This item should be included as part of the cost of the equipment. 
B) This item should be considered a revenue expenditure.

Question 14

What is the relationship between the book value of a plant asset, the market value of the plant asset, and the salvage value of a plant asset? Explain.

Accepted Answer

The book value of a plant asset is the a

Question 15

A company purchased equipment at the beginning of the year for $21,000 and decided to depreciate it over a 5-year period using the straight-line method. The equipment's residual value was estimated at $1,000. The estimated fair market value at the end of the year was $20,000. Which of the following statements is correct at the end of the year?

Accepted Answer

A) The balance in the Equipment account is $17,000. 
B) The book value of the equipment is $17,000. 
C) The total accumulated depreciation is $4,200. 
D) The equipment will be reported on the balance sheet at it fair market value of $20,000. 
A) The balance in the Equipment account is $17,000. 
B) The book value of the equipment is $17,000. 
C) The total accumulated depreciation is $4,200. 
D) The equipment will be reported on the balance sheet at it fair market value of $20,000.

Question 16

Select the account to which each of the following costs would be debited. (Choices may be used more than once.)
-The costs paid to clear land.

Accepted Answer

A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account 
A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account

Question 17

Farley Mills purchased new machinery at the beginning of 2019 for $200,000. The machines had an estimated life of 5 years, an estimated residual value of $25,000, and were depreciated using the straight-line method. At the beginning of 2020, the machines were sold for $150,000 because management was unhappy with their performance.
?
Determine the following amounts:
A)Book value of the machinery at the end of 2019.
B)Gain (loss) on the disposal of the machinery at the beginning of 2020 (Indicate the amount and whether a gain or loss).

Accepted Answer

A)Depreciation expense:($200,0

Question 18

Fernbank Farms
​
This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000.
-Refer to Fernbank Farms. What amount should be recorded as depreciation expense each year starting in 2021?

Accepted Answer

A) $16,000 
B) $18,000 
C) $13,600 
D) $12,400 
A) $16,000 
B) $18,000 
C) $13,600 
D) $12,400

Question 19

Match these terms with their correct definition.
-Occurs when a company determines that an asset is no longer useful

Accepted Answer

A) Franchise 
B) Intangible operating assets 
C) Natural resources 
D) Operating assets 
E) Organizational costs
F)Property, plant, and equipment
G)Trademark
H)Voluntary disposal 
A) Franchise 
B) Intangible operating assets 
C) Natural resources 
D) Operating assets 
E) Organizational costs
F)Property, plant, and equipment
G)Trademark
H)Voluntary disposal

Question 20

Match these terms with their correct definition.
-Exclusive right to conduct a certain type of business in some particular geographic area

Accepted Answer

A) Franchise 
B) Intangible operating assets 
C) Natural resources 
D) Operating assets 
E) Organizational costs
F)Property, plant, and equipment
G)Trademark
H)Voluntary disposal 
A) Franchise 
B) Intangible operating assets 
C) Natural resources 
D) Operating assets 
E) Organizational costs
F)Property, plant, and equipment
G)Trademark
H)Voluntary disposal

If a company uses the same depreciation method as other firms in the same industry, investors will have enhanced comparability of the financial reporting results.

A ____________________ is a cost that improves an operating asset and is therefore added to the asset account.

On January 1, 2019, a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000. On July 1, 2021, the machine was sold for $7,000 cash. The journal entry to record the sale

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The annual painting costs of an office building.

Natural resources can be replaced or restored only by an act of nature.

Two reasons why a company might choose an accelerated depreciation method are _, and .

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, for $20,000 cash. The following data were available at the time of sale: When this transaction is recorded, it should include a

What is the relationship between the book value of a plant asset, the market value of the plant asset, and the salvage value of a plant asset? Explain.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The costs paid to clear land.

Match these terms with their correct definition. -Occurs when a company determines that an asset is no longer useful

Match these terms with their correct definition. -Exclusive right to conduct a certain type of business in some particular geographic area

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Current and Contingent Liabilities

Long Term Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

Finance and Stock Market Equilibrium

Filters

Exam 7: Operating Assets

If a company uses the same depreciation method as other firms in the same industry, investors will have enhanced comparability of the financial reporting results.

A ____________________ is a cost that improves an operating asset and is therefore added to the asset account.

On January 1, 2019, a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000. On July 1, 2021, the machine was sold for $7,000 cash. The journal entry to record the sale

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The annual painting costs of an office building.

Natural resources can be replaced or restored only by an act of nature.

Two reasons why a company might choose an accelerated depreciation method are _______________, and ______________.

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, for $20,000 cash. The following data were available at the time of sale: When this transaction is recorded, it should include a

What is the relationship between the book value of a plant asset, the market value of the plant asset, and the salvage value of a plant asset? Explain.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The costs paid to clear land.

Match these terms with their correct definition. -Occurs when a company determines that an asset is no longer useful

Match these terms with their correct definition. -Exclusive right to conduct a certain type of business in some particular geographic area

Accounting and The Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control And Cash

Sales And Receivables

Cost Of Goods Sold and Inventory

Current and Contingent Liabilities

Long Term Liabilities

Stockholders Apos Equity

The Statement Of Cash Flows

Financial Statement Analysis

Finance and Stock Market Equilibrium

Filters

Two reasons why a company might choose an accelerated depreciation method are _, and .