Question 1

Which of the following transactions will have no effect on the liquidity metric of a company? ​

Accepted Answer

A)  ​Purchasing an asset 
B)  ​Selling an asset for no loss and no gain 
C)  ​Selling an asset for loss 
D)  ​Discarding a fully depreciated asset 
A)  ​Purchasing an asset 
B)  ​Selling an asset for no loss and no gain 
C)  ​Selling an asset for loss 
D)  ​Discarding a fully depreciated asset

Question 2

Which of the following is the effect of recording a depletion expense on the profitability and liquidity metrics of a company?

Accepted Answer

A)  It affects asset turnover while cash flow is unaffected. 
B)  Its asset turnover decreases. 
C)  Its affects the Statement of Cash Flows. 
D)  Operating assets increase. 
A)  It affects asset turnover while cash flow is unaffected. 
B)  Its asset turnover decreases. 
C)  Its affects the Statement of Cash Flows. 
D)  Operating assets increase.

Question 3

If an asset is discarded, a loss is recognized equal to its salvage value.

Accepted Answer

A) True 
 B)False

Question 4

A drilling company purchased a mining site for $450,000 on July 1, 2016.The company expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will be recovered.During 2016, the company extracted 5,800 tons of ore.The depletion expense for the year 2016 is:

Accepted Answer

A)  $45,000. 
B)  $50,800. 
C)  $5,860. 
D)  $32,625. 
A)  $45,000. 
B)  $50,800. 
C)  $5,860. 
D)  $32,625.

Question 5

Companies usually compute depletion by using the double-declining-balance method.

Accepted Answer

A) True 
 B)False

Question 6

For each of the following items indicate whether the transactions listed below increased (+), decreased (-) or had no effect (0) by inserting the appropriate symbol.
? $\begin{array}{|l|l|c|c|c|c|c|}
 \hline&&\text { Net } &&&\text { Owners' }& \text { Cash } \ 
&&\text { Income } & \text { Assets } & \text { Liab. } & \text { Equity }&\text { Flows }\
\hline\text { (a) } & \text { Record depreciation expense } & \
\hline \text { (b) } & \text { Sold equipment for cash at a } & \
&\text { loss } & \
\hline \text { (c) } & \text { Recorded loss on impaired } & \
 & \text { goodwill } \
\hline \text { (d) } & \text { Recorded depletion expense } & \
\hline & \text { Recorded a capital } \
\text { (e) } & \begin{array}{l}
\text { expenditure and issued a note } \
\text { payable }
\end{array} & \
\hline
\end{array}$

Accepted Answer

None

Question 7

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:

Accepted Answer

A)  recognize a loss on the income statement under other expenses. 
B)  recognize a loss on the income statement under operating expenses. 
C)  recognize a gain on the income statement under other revenues. 
D)  recognize a gain on the income statement under revenues. 
A)  recognize a loss on the income statement under other expenses. 
B)  recognize a loss on the income statement under operating expenses. 
C)  recognize a gain on the income statement under other revenues. 
D)  recognize a gain on the income statement under revenues.

Question 8

A machine with a useful life of 6 years and a residual value of $3,000 was purchased at the beginning of year 1 for $30,000.The machine was sold for $15,000 on April 1 in year 4.
(a)What was the book value of the machine at the end of year 3 assuming the straight-line method of depreciation is used?
(b)Illustrate the effects on the accounts and financial statements of the depreciation from January 1 to April 1 of year 4.
(c)Illustrate the effects on the accounts and financial statements of the sale of the machine on April 1.

Accepted Answer

(a)$16,500 = ($30,000 - $13,500)?? @#LAT-DLM& 
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Question 9

A company acquired some land for $75,000 to construct a new office complex.Legal fees paid were $2,750, delinquent taxes assumed were $3,250, and $6,350 was paid to remove an old building.Materials salvaged from the demolition of the building were sold for $2,300.Determine the cost of the land to be reported on the balance sheet.

Accepted Answer

A)  $85,050 
B)  $89,650 
C)  $84,100 
D)  $87,350 
A)  $85,050 
B)  $89,650 
C)  $84,100 
D)  $87,350

Question 10

Identify each of the following expenditures as chargeable to (a) Land, (b) Land Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) Other accounts.
(1)Cost of paving parking area for employees and customers.
(2)Insurance during construction of building.
(3)Interest incurred on money borrowed for construction of building.
(4)Fee paid for installation of equipment.
(5)Special foundation for new equipment acquired.
(6)Transit insurance on new equipment.
(7)Freight charges on new equipment.
(8)Cost of repairing vandalism damage to equipment during installation.
(9)Sales tax on new equipment.
(10)Cost incurred in repairing damage resulting from installation of new equipment.
(11)Cost of landfill for building site.
(12)Cost of lubricating oil purchased for periodic oil changes for equipment.
(13)Parking lot lighting.
(14)Installing a fence around the parking lot.
(15)Repainting the trim on a building.
(16)Special assessment paid to city for extension of water main to the property.
(17)Cost of razing and removing the old building on property acquired for a building site.
(18)Delinquent real estate taxes assumed by purchaser on property acquired for a building site.
(19)Attorney's fee for title search.
(20)Architect's fee for building plans and supervision of construction.

Accepted Answer

(a)11, 16, 17, 18, 1

Question 11

Recording depreciation:

Accepted Answer

A)  decreases liability and cash flow. 
B)  decreases net income but has no effect on cash flows. 
C)  decreases capital and operating expense. 
D)  decreases retained earning but has no effect on fixed assets. 
A)  decreases liability and cash flow. 
B)  decreases net income but has no effect on cash flows. 
C)  decreases capital and operating expense. 
D)  decreases retained earning but has no effect on fixed assets.

Question 12

Which of the following statement is true about intangible assets?

Accepted Answer

A)  They are usually presented in the balance sheet as fixed assets. 
B)  They are short-lived assets. 
C)  They are not held for resale. 
D)  They have physical existence. 
A)  They are usually presented in the balance sheet as fixed assets. 
B)  They are short-lived assets. 
C)  They are not held for resale. 
D)  They have physical existence.

Question 13

You have been hired by a high-growth startup company to assist in the determination of what depreciation method to employ for financial reporting.The company's fixed assets are equally divided among buildings and high-tech equipment (heavily used in the initial years).
(a)Can the company select different methods of depreciation for financial reporting? Explain.
(b)Explain to company management which method of depreciation would be suitable for each type of fixed assets the company employs.Also, state why.
(c)Which method of depreciation would the company choose for taxes? Explain why.

Accepted Answer

(a)Yes, generally accepted accounting pr

Question 14

The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use.

Accepted Answer

A) True 
 B)False

Question 15

Fixed assets are reported at their book value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following intangible assets are amortized over their useful life?

Accepted Answer

A)  Trademarks 
B)  Goodwill 
C)  Patents 
D)  All of the above 
A)  Trademarks 
B)  Goodwill 
C)  Patents 
D)  All of the above

Question 17

A company purchased an oil well for $10 million.It is estimated that 5 million barrels can be extracted from the well.Determine depletion expense assuming 4 million barrels are extracted and sold during the year.

Accepted Answer

A)  $1,250,000 
B)  $8,000,000 
C)  $12,500,000 
D)  $8,750,000 
A)  $1,250,000 
B)  $8,000,000 
C)  $12,500,000 
D)  $8,750,000

Question 18

The book value of an asset is computed as the asset's:

Accepted Answer

A)  current market value less tax expense. 
B)  fair value less residual value. 
C)  discounted value plus accumulated depreciation. 
D)  cost less accumulated depreciation. 
A)  current market value less tax expense. 
B)  fair value less residual value. 
C)  discounted value plus accumulated depreciation. 
D)  cost less accumulated depreciation.

Question 19

​Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

Accepted Answer

A)  ​Both profitability and liquidity will remain unaffected. 
B)  ​Both profitability and liquidity will decrease. 
C)  ​Profitability will increase, whereas liquidity will remain unaffected. 
D)  ​Liquidity will decrease, whereas profitability will increase. 
A)  ​Both profitability and liquidity will remain unaffected. 
B)  ​Both profitability and liquidity will decrease. 
C)  ​Profitability will increase, whereas liquidity will remain unaffected. 
D)  ​Liquidity will decrease, whereas profitability will increase.

Question 20

The asset turnover is calculated as _____.

Accepted Answer

A)  net income divided by average long-term operating assets 
B)  net sales divided by cost of the assets 
C)  average long-term operating assets divided by net sales 
D)  net sales divided by average long-term operating assets 
A)  net income divided by average long-term operating assets 
B)  net sales divided by cost of the assets 
C)  average long-term operating assets divided by net sales 
D)  net sales divided by average long-term operating assets

Which of the following transactions will have no effect on the liquidity metric of a company?

Which of the following is the effect of recording a depletion expense on the profitability and liquidity metrics of a company?

If an asset is discarded, a loss is recognized equal to its salvage value.

A drilling company purchased a mining site for $450,000 on July 1, 2016.The company expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will be recovered.During 2016, the company extracted 5,800 tons of ore.The depletion expense for the year 2016 is:

Companies usually compute depletion by using the double-declining-balance method.

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:

Recording depreciation:

Which of the following statement is true about intangible assets?

The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use.

Fixed assets are reported at their book value on the balance sheet.

Which of the following intangible assets are amortized over their useful life?

A company purchased an oil well for $10 million.It is estimated that 5 million barrels can be extracted from the well.Determine depletion expense assuming 4 million barrels are extracted and sold during the year.

The book value of an asset is computed as the asset's:

Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

The asset turnover is calculated as _____.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 7: Fixed Assets, Natural Resources, and Intangible Assets

Which of the following transactions will have no effect on the liquidity metric of a company? ​

Which of the following is the effect of recording a depletion expense on the profitability and liquidity metrics of a company?

If an asset is discarded, a loss is recognized equal to its salvage value.

A drilling company purchased a mining site for $450,000 on July 1, 2016.The company expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will be recovered.During 2016, the company extracted 5,800 tons of ore.The depletion expense for the year 2016 is:

Companies usually compute depletion by using the double-declining-balance method.

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:

Recording depreciation:

Which of the following statement is true about intangible assets?

The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use.

Fixed assets are reported at their book value on the balance sheet.

Which of the following intangible assets are amortized over their useful life?

A company purchased an oil well for $10 million.It is estimated that 5 million barrels can be extracted from the well.Determine depletion expense assuming 4 million barrels are extracted and sold during the year.

The book value of an asset is computed as the asset's:

​Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

The asset turnover is calculated as _____.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Which of the following transactions will have no effect on the liquidity metric of a company?

Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?