Question 1

Which of the following assets does not decline in service potential over the course of its useful life?

Accepted Answer

A)  Equipment 
B)  Furnishings 
C)  Land 
D)  Fixtures 
A)  Equipment 
B)  Furnishings 
C)  Land 
D)  Fixtures

Question 2

The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

Accepted Answer

A) True 
 B)False

Question 3

In recording the acquisition cost of an entire business,

Accepted Answer

A)  goodwill is recorded as the excess of cost over the fair value of identifiable net assets. 
B)  assets are recorded at the seller's book values. 
C)  goodwill, if it exists, is never recorded. 
D)  goodwill is recorded as the excess of cost over the book value of identifiable net assets. 
A)  goodwill is recorded as the excess of cost over the fair value of identifiable net assets. 
B)  assets are recorded at the seller's book values. 
C)  goodwill, if it exists, is never recorded. 
D)  goodwill is recorded as the excess of cost over the book value of identifiable net assets.

Question 4

Units-of-activity is an appropriate depreciation method to use when

Accepted Answer

A)  it is impossible to determine the productivity of the asset. 
B)  the asset's use will be constant over its useful life. 
C)  the productivity of the asset varies significantly from one period to another. 
D)  the company is a manufacturing company. 
A)  it is impossible to determine the productivity of the asset. 
B)  the asset's use will be constant over its useful life. 
C)  the productivity of the asset varies significantly from one period to another. 
D)  the company is a manufacturing company.

Question 5

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

Accepted Answer

A)  Sales tax 
B)  Truck license 
C)  Freight charges 
D)  Cost of lettering on side of truck 
A)  Sales tax 
B)  Truck license 
C)  Freight charges 
D)  Cost of lettering on side of truck

Question 6

A company has the following assets: $$\begin{array} { l r } 
\text { Buildings and Equipment, less accumulated depreciation of } \$ 2,000,000 & \$ 9,600,000 \
\text { Copyrights } & 960,000 \
\text { Patents } & 4,000,000 \
\text { Timberlands, less accumulated depletion of } \$ 2,800,000 & 4,800,000
\end{array}$$ The total amount reported under Property, Plant, and Equipment would be

Accepted Answer

A)  $19,360,000. 
B)  $14,400,000. 
C)  $18,400,000. 
D)  $15,360,000. 
A)  $19,360,000. 
B)  $14,400,000. 
C)  $18,400,000. 
D)  $15,360,000.

Question 7

In an exchange of plant assets that has commercial substance

Accepted Answer

A)  neither gains nor losses are recognized immediately. 
B)  gains, but not losses, are recognized immediately. 
C)  losses, but not gains, are recognized immediately. 
D)  both gains and losses are recognized immediately. 
A)  neither gains nor losses are recognized immediately. 
B)  gains, but not losses, are recognized immediately. 
C)  losses, but not gains, are recognized immediately. 
D)  both gains and losses are recognized immediately.

Question 8

Depletion expense for a period is only recognized on natural resources that have been extracted and sold during the period.

Accepted Answer

A) True 
 B)False

Question 9

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

Accepted Answer

A)  20%. 
B)  25%. 
C)  40%. 
D)  5%. 
A)  20%. 
B)  25%. 
C)  40%. 
D)  5%.

Question 10

Useful life is expressed in terms of use expected from the asset under the

Accepted Answer

A)  declining-balance method. 
B)  straight-line method. 
C)  units-of-activity method. 
D)  none of these answer choices are correct. 
A)  declining-balance method. 
B)  straight-line method. 
C)  units-of-activity method. 
D)  none of these answer choices are correct.

Question 11

IFRS allows companies to revalue plant assets to fair value. When an asset has increased in value, where is the account "Revaluation Surplus" reported?

Accepted Answer

A)  On the income statement as part of income from continuing operations (other revenues and gains). 
B)  On the income statement as part of discontinued operations (discontinuing historical cost). 
C)  On the statement of financial position as part of accumulated comprehensive income (equity). 
D)  All of the choices are acceptable methods for the reporting of "Revaluation Surplus". 
A)  On the income statement as part of income from continuing operations (other revenues and gains). 
B)  On the income statement as part of discontinued operations (discontinuing historical cost). 
C)  On the statement of financial position as part of accumulated comprehensive income (equity). 
D)  All of the choices are acceptable methods for the reporting of "Revaluation Surplus".

Question 12

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

Accepted Answer

A) True 
 B)False

Question 13

A patent should

Accepted Answer

A)  be amortized over a period of 20 years. 
B)  not be amortized if it has an indefinite life. 
C)  be amortized over its useful life or 20 years, whichever is longer. 
D)  be amortized over its useful life or 20 years, whichever is shorter. 
A)  be amortized over a period of 20 years. 
B)  not be amortized if it has an indefinite life. 
C)  be amortized over its useful life or 20 years, whichever is longer. 
D)  be amortized over its useful life or 20 years, whichever is shorter.

Question 14

On July 4, 2015, Wyoming Mining Company purchased the mineral rights to a granite deposit for $1,600,000. It is estimated that the recoverable granite will be 400,000 tons. During 2015, 100,000 tons of granite was extracted and 60,000 tons were sold. The amount of the Depletion Expense recognized for 2015 would be

Accepted Answer

A)  $200,000. 
B)  $120,000. 
C)  $240,000. 
D)  $400,000. 
A)  $200,000. 
B)  $120,000. 
C)  $240,000. 
D)  $400,000.

Question 15

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Accepted Answer

A) True 
 B)False

Question 16

Research and development costs which result in a successful product which is patentable are charged to the Patent account.

Accepted Answer

A) True 
 B)False

Question 17

Moreno Company purchased equipment for $900,000 on January 1, 2014, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $40,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2016 will be

Accepted Answer

A)  $100,000. 
B)  $60,000. 
C)  $108,880. 
D)  $68,880. 
A)  $100,000. 
B)  $60,000. 
C)  $108,880. 
D)  $68,880.

Question 18

A loss on disposal of a plant asset is reported in the financial statements

Accepted Answer

A)  in the Other Revenues and Gains section of the income statement. 
B)  in the Other Expenses and Losses section of the income statement. 
C)  as a direct increase to the capital account on the balance sheet. 
D)  as a direct decrease to the capital account on the balance sheet. 
A)  in the Other Revenues and Gains section of the income statement. 
B)  in the Other Expenses and Losses section of the income statement. 
C)  as a direct increase to the capital account on the balance sheet. 
D)  as a direct decrease to the capital account on the balance sheet.

Question 19

Presto Company purchased equipment and these costs were incurred: $\begin{array}{lr}
\text { Cash price } & \$ 65,000 \
\text { Sales taxes } & 3,600 \
\text { Insurance during transit } & 640 \
\text { Installation and testing } & 860\
\text { Total costs }&\$70,100
\end{array}$ Presto will record the acquisition cost of the equipment as

Accepted Answer

A)  $65,000. 
B)  $68,600. 
C)  $69,240. 
D)  $70,100. 
A)  $65,000. 
B)  $68,600. 
C)  $69,240. 
D)  $70,100.

Question 20

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

Accepted Answer

A)  $ 8,400. 
B)  $18,667. 
C)  $14,000. 
D)  $11,200. 
A)  $ 8,400. 
B)  $18,667. 
C)  $14,000. 
D)  $11,200.

Which of the following assets does not decline in service potential over the course of its useful life?

The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

In recording the acquisition cost of an entire business,

Units-of-activity is an appropriate depreciation method to use when

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

A company has the following assets: Buildings and Equipment, less accumulated depreciation of \ 2,000,000 \ 9,600,000 Copyrights 960,000 Patents 4,000,000 Timberlands, less accumulated depletion of \ 2,800,000 4,800,000 The total amount reported under Property, Plant, and Equipment would be

In an exchange of plant assets that has commercial substance

Depletion expense for a period is only recognized on natural resources that have been extracted and sold during the period.

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

Useful life is expressed in terms of use expected from the asset under the

IFRS allows companies to revalue plant assets to fair value. When an asset has increased in value, where is the account "Revaluation Surplus" reported?

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

A patent should

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Research and development costs which result in a successful product which is patentable are charged to the Patent account.

A loss on disposal of a plant asset is reported in the financial statements

Presto Company purchased equipment and these costs were incurred: Cash price \ 65,000 Sales taxes 3,600 Insurance during transit 640 Installation and testing 860 Total costs \7 0,100 Presto will record the acquisition cost of the equipment as

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters

Exam 9: Plant Assets, Natural Resources, and Intangible Assets

Which of the following assets does not decline in service potential over the course of its useful life?

The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

In recording the acquisition cost of an entire business,

Units-of-activity is an appropriate depreciation method to use when

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

A company has the following assets: Buildings and Equipment, less accumulated depreciation of \ 2,000,000 \ 9,600,000 Copyrights 960,000 Patents 4,000,000 Timberlands, less accumulated depletion of \ 2,800,000 4,800,000 The total amount reported under Property, Plant, and Equipment would be

In an exchange of plant assets that has commercial substance

Depletion expense for a period is only recognized on natural resources that have been extracted and sold during the period.

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

Useful life is expressed in terms of use expected from the asset under the

IFRS allows companies to revalue plant assets to fair value. When an asset has increased in value, where is the account "Revaluation Surplus" reported?

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

A patent should

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Research and development costs which result in a successful product which is patentable are charged to the Patent account.

A loss on disposal of a plant asset is reported in the financial statements

Presto Company purchased equipment and these costs were incurred: Cash price \ 65,000 Sales taxes 3,600 Insurance during transit 640 Installation and testing 860 Total costs \7 0,100 Presto will record the acquisition cost of the equipment as

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Filters