Question 1

The most commonly used method of depreciation is

Accepted Answer

A)  straight-line. 
B)  capital cost allowance. 
C)  declining-balance. 
D)  units-of-activity. 
A)  straight-line. 
B)  capital cost allowance. 
C)  declining-balance. 
D)  units-of-activity.

Question 2

Under ASPE, property, plant, and equipment must be recognized using the revaluation model.

Accepted Answer

A) True 
 B)False

Question 3

Bayside Ltd. owns a piece of land it had purchased in 2016 for $400,000. When they started to develop the land in 2017, they discovered that there were environmental problems with the land. It is now estimated to be worth only $150,000. Which of the following is the correct way to account for this?

Accepted Answer

A)  No accounting is necessary because the land is recorded at its historical cost, not its market value. 
B)  The land account should be written down to $150,000 and a loss recognized. 
C)  The land should be written off completely because now the company cannot use it for the purpose they intended to. 
D)  The land should be depreciated at a new rate to reflect the decline in its value. 
A)  No accounting is necessary because the land is recorded at its historical cost, not its market value. 
B)  The land account should be written down to $150,000 and a loss recognized. 
C)  The land should be written off completely because now the company cannot use it for the purpose they intended to. 
D)  The land should be depreciated at a new rate to reflect the decline in its value.

Question 4

A building currently has a net book value of $650,000 after three years of straight-line depreciation totalling $150,000. The estimated residual value is $50,000. What was the building's original cost?

Accepted Answer

A)  $900,000 
B)  $850,000 
C)  $800,000 
D)  $750,000 
A)  $900,000 
B)  $850,000 
C)  $800,000 
D)  $750,000

Question 5

If management wanted to show an increasing income over the life of an asset which method of depreciation should they choose?

Accepted Answer

A)  capital cost allowance 
B)  declining-balance 
C)  units-of-activity 
D)  straight-line 
A)  capital cost allowance 
B)  declining-balance 
C)  units-of-activity 
D)  straight-line

Question 6

A machine was built for $125,500 during July; the cost included $750 in interest expense. The company had to pay $4,000 for shipping and another $2,000 for insuring the parts. Following ASPE, the capitalized cost of the equipment was

Accepted Answer

A)  $124,750. 
B)  $125,500. 
C)  $131,500. 
D)  $132,250. 
A)  $124,750. 
B)  $125,500. 
C)  $131,500. 
D)  $132,250.

Question 7

The ultimate sales value of a long-term asset is referred to as its

Accepted Answer

A)  residual value. 
B)  value in use. 
C)  net book value. 
D)  historical value. 
A)  residual value. 
B)  value in use. 
C)  net book value. 
D)  historical value.

Question 8

The depreciation method that most closely resembles what is allowable for tax purposes under CRA is

Accepted Answer

A)  the straight line method. 
B)  units of activity method. 
C)  the declining balance method. 
D)  depletion method. 
A)  the straight line method. 
B)  units of activity method. 
C)  the declining balance method. 
D)  depletion method.

Question 9

Assets that produce their greatest benefits to a firm early in their useful life should be depreciated using the

Accepted Answer

A)  straight-line method. 
B)  declining-balance method. 
C)  compound interest method. 
D)  units-of-activity method. 
A)  straight-line method. 
B)  declining-balance method. 
C)  compound interest method. 
D)  units-of-activity method.

Question 10

Upon the disposal of an asset, if the proceeds are greater than the carrying value of the asset the company must

Accepted Answer

A)  recognize a loss. 
B)  recognize a gain. 
C)  adjust the accumulated depreciation account so the carrying value equals the proceeds. 
D)  adjust the carrying value to market value. 
A)  recognize a loss. 
B)  recognize a gain. 
C)  adjust the accumulated depreciation account so the carrying value equals the proceeds. 
D)  adjust the carrying value to market value.

Question 11

Proctor Paper Products purchased a machine on January 1, 2017 at a cost of $380,000 with an estimated residual value of $30,000 at the end of its estimated useful life of 8 years. On January 1, 2013 Proctor Paper estimates that the machine only has a remaining life of 5 years and a residual value of $20,000. Proctor Paper uses straight-line depreciation. Depreciation expense for 2019 would be

Accepted Answer

A)  $48,500. 
B)  $54,500. 
C)  $57,000. 
D)  $72,000. 
A)  $48,500. 
B)  $54,500. 
C)  $57,000. 
D)  $72,000.

Question 12

Mertle Holdings Co. purchased 12 acres of land with an office building and warehouse on it for $2,000,000. The assets were appraised at: land $1,000,000, building $600,000, and warehouse $900,000. The assets were carried on the seller's books at: land $800,000, building $500,000, and warehouse $700,000. At what cost should the purchasing company record each of the assets?

Accepted Answer

The answer of Mertle Holdings Co. purchased 12 acres of...

Question 13

Electronics R Us spent $25,000 on research and development to create a new product. The product was successfully developed and launched into the market. How should the research and development costs be treated?

Accepted Answer

A)  The full $25,000 should be capitalized. 
B)  The research portion of the $25,000 should be capitalized. 
C)  The research portion of the $25,000 should be expensed. 
D)  The full $25,000 should be expensed. 
A)  The full $25,000 should be capitalized. 
B)  The research portion of the $25,000 should be capitalized. 
C)  The research portion of the $25,000 should be expensed. 
D)  The full $25,000 should be expensed.

Question 14

In 2017 as part of a property purchase, Melrose Ltd. incurred and paid 2016 property taxes. These costs should be

Accepted Answer

A)  recognized as an impairment loss. 
B)  recognized on the Statement of Income as an expense. 
C)  recognized as a capital cost. 
D)  not be taken into consideration, these costs are irrelevant. 
A)  recognized as an impairment loss. 
B)  recognized on the Statement of Income as an expense. 
C)  recognized as a capital cost. 
D)  not be taken into consideration, these costs are irrelevant.

Question 15

Harmax Limited spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year. How should the patent be reflected in the financial statements?

Accepted Answer

A)  the full $25,000 expensed in the year 
B)  $5,000 capitalized as Patent asset and the $20,000 expensed 
C)  $20,000 capitalized as Patent asset and the $5,000 expensed 
D)  the full $25,000 capitalized in the year 
A)  the full $25,000 expensed in the year 
B)  $5,000 capitalized as Patent asset and the $20,000 expensed 
C)  $20,000 capitalized as Patent asset and the $5,000 expensed 
D)  the full $25,000 capitalized in the year

Question 16

The cash inflows generated from a long-term asset will be received over several future periods.

Accepted Answer

A) True 
 B)False

Question 17

The maximum capital cost allowance (CCA) that may be deducted for new assets is

Accepted Answer

A)  the same as the depreciation calculated for the year. 
B)  restricted by the residual value. 
C)  restricted to 50% of the normal amount. 
D)  is the annual amount prorated based on when the asset was purchased during the year. 
A)  the same as the depreciation calculated for the year. 
B)  restricted by the residual value. 
C)  restricted to 50% of the normal amount. 
D)  is the annual amount prorated based on when the asset was purchased during the year.

Question 18

Changes in the estimates for residual value or useful life result in changes in the depreciation expense calculation. These changes are handled

Accepted Answer

A)  retroactively. 
B)  as cumulative changes. 
C)  prospectively. 
D)  as prior period adjustments. 
A)  retroactively. 
B)  as cumulative changes. 
C)  prospectively. 
D)  as prior period adjustments.

Question 19

On July 1, 2017 a truck was sold for $10,000. The company originally paid $28,000 on June 30, 2010 and has recorded accumulated depreciation on it to date of $15,000. The entry to record the sale would include a

Accepted Answer

A)  credit to accumulated depreciation for $15,000. 
B)  debit to trucks for $28,000. 
C)  credit to gain on sale of truck for $3,000. 
D)  debit to loss on sale of truck for $3,000. 
A)  credit to accumulated depreciation for $15,000. 
B)  debit to trucks for $28,000. 
C)  credit to gain on sale of truck for $3,000. 
D)  debit to loss on sale of truck for $3,000.

Question 20

Which of the following statements is true with respect to capitalizing asset costs?

Accepted Answer

A)  All additional costs related to acquiring an asset should be expensed. 
B)  Land cannot be depreciated so it should just be expensed when acquired. 
C)  When costs are capitalized, the company gets the tax deduction immediately. 
D)  Some small expenses related to the purchase of an asset can be expensed for simplicity. 
A)  All additional costs related to acquiring an asset should be expensed. 
B)  Land cannot be depreciated so it should just be expensed when acquired. 
C)  When costs are capitalized, the company gets the tax deduction immediately. 
D)  Some small expenses related to the purchase of an asset can be expensed for simplicity.

The most commonly used method of depreciation is

Under ASPE, property, plant, and equipment must be recognized using the revaluation model.

Bayside Ltd. owns a piece of land it had purchased in 2016 for $400,000. When they started to develop the land in 2017, they discovered that there were environmental problems with the land. It is now estimated to be worth only $150,000. Which of the following is the correct way to account for this?

A building currently has a net book value of $650,000 after three years of straight-line depreciation totalling $150,000. The estimated residual value is $50,000. What was the building's original cost?

If management wanted to show an increasing income over the life of an asset which method of depreciation should they choose?

A machine was built for $125,500 during July; the cost included $750 in interest expense. The company had to pay $4,000 for shipping and another $2,000 for insuring the parts. Following ASPE, the capitalized cost of the equipment was

The ultimate sales value of a long-term asset is referred to as its

The depreciation method that most closely resembles what is allowable for tax purposes under CRA is

Assets that produce their greatest benefits to a firm early in their useful life should be depreciated using the

Upon the disposal of an asset, if the proceeds are greater than the carrying value of the asset the company must

Electronics R Us spent $25,000 on research and development to create a new product. The product was successfully developed and launched into the market. How should the research and development costs be treated?

In 2017 as part of a property purchase, Melrose Ltd. incurred and paid 2016 property taxes. These costs should be

Harmax Limited spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year. How should the patent be reflected in the financial statements?

The cash inflows generated from a long-term asset will be received over several future periods.

The maximum capital cost allowance (CCA) that may be deducted for new assets is

Changes in the estimates for residual value or useful life result in changes in the depreciation expense calculation. These changes are handled

On July 1, 2017 a truck was sold for $10,000. The company originally paid $28,000 on June 30, 2010 and has recorded accumulated depreciation on it to date of $15,000. The entry to record the sale would include a

Which of the following statements is true with respect to capitalizing asset costs?

Overview of Corporate Financial Reporting

Nalyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Incom

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Filters

Exam 8: Inventory

The most commonly used method of depreciation is

Under ASPE, property, plant, and equipment must be recognized using the revaluation model.

Bayside Ltd. owns a piece of land it had purchased in 2016 for $400,000. When they started to develop the land in 2017, they discovered that there were environmental problems with the land. It is now estimated to be worth only $150,000. Which of the following is the correct way to account for this?

A building currently has a net book value of $650,000 after three years of straight-line depreciation totalling $150,000. The estimated residual value is $50,000. What was the building's original cost?

If management wanted to show an increasing income over the life of an asset which method of depreciation should they choose?

A machine was built for $125,500 during July; the cost included $750 in interest expense. The company had to pay $4,000 for shipping and another $2,000 for insuring the parts. Following ASPE, the capitalized cost of the equipment was

The ultimate sales value of a long-term asset is referred to as its

The depreciation method that most closely resembles what is allowable for tax purposes under CRA is

Assets that produce their greatest benefits to a firm early in their useful life should be depreciated using the

Upon the disposal of an asset, if the proceeds are greater than the carrying value of the asset the company must

Electronics R Us spent $25,000 on research and development to create a new product. The product was successfully developed and launched into the market. How should the research and development costs be treated?

In 2017 as part of a property purchase, Melrose Ltd. incurred and paid 2016 property taxes. These costs should be

Harmax Limited spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year. How should the patent be reflected in the financial statements?

The cash inflows generated from a long-term asset will be received over several future periods.

The maximum capital cost allowance (CCA) that may be deducted for new assets is

Changes in the estimates for residual value or useful life result in changes in the depreciation expense calculation. These changes are handled

On July 1, 2017 a truck was sold for $10,000. The company originally paid $28,000 on June 30, 2010 and has recorded accumulated depreciation on it to date of $15,000. The entry to record the sale would include a

Which of the following statements is true with respect to capitalizing asset costs?

Overview of Corporate Financial Reporting

Nalyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Incom

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Filters