Question 1

A company has the following assets:   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. B

Question 2

Goodwill

Accepted Answer

A)  is only recorded when generated internally. 
B)  can be subdivided and sold in parts. 
C)  can only be identified with the business as a whole. 
D)  can be defined as normal earnings less accumulated amortization. 
A)  is only recorded when generated internally. 
B)  can be subdivided and sold in parts. 
C)  can only be identified with the business as a whole. 
D)  can be defined as normal earnings less accumulated amortization. C

Question 3

Depletion is

Accepted Answer

A)  a decrease in market value of natural resources. 
B)  the amount of spoilage that occurs when natural resources are extracted. 
C)  the allocation of the cost of natural resources to expense. 
D)  the method used to record unsuccessful patents. 
A)  a decrease in market value of natural resources. 
B)  the amount of spoilage that occurs when natural resources are extracted. 
C)  the allocation of the cost of natural resources to expense. 
D)  the method used to record unsuccessful patents. C

Question 4

When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Able Towing Company purchased a tow truck for $75,000 on January 1, 2010. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $15,000. On December 31, 2012, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2012) and the salvage value to $2,500. What was the depreciation expense for 2012?

Accepted Answer

A)  $7,500. 
B)  $6,000. 
C)  $18,750. 
D)  $15,125. 
A)  $7,500. 
B)  $6,000. 
C)  $18,750. 
D)  $15,125.

Question 7

A truck was purchased for $120,000 and it was estimated to have a $24,000 salvage value at the end of its useful life. Monthly depreciation expense of $2,000 was recorded using the straight-line method. The annual depreciation rate is

Accepted Answer

A)  20%. 
B)  2%. 
C)  8%. 
D)  25%. 
A)  20%. 
B)  2%. 
C)  8%. 
D)  25%.

Question 8

On January 1, 2010, Lakeside Enterprises purchased natural resources for $1,200,000. The company expects the resources to produce 12,000,000 units of product. (1) What is the depletion cost per unit? (2) If the company mined and sold 20,000 units in January, what is depletion expense for the month?

Accepted Answer

(1) Depletion cost per unit: $

Question 9

On May 1, 2010, Pinkley Company sells office furniture for $90,000 cash. The office furniture originally cost $225,000 when purchased on January 1, 2003. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $22,500. What gain should be recognized on the sale?

Accepted Answer

A)  $6,750. 
B)  $13,500. 
C)  $14,250. 
D)  $27,000. 
A)  $6,750. 
B)  $13,500. 
C)  $14,250. 
D)  $27,000.

Question 10

Match the items below by entering the appropriate code letter in the space provided.
A. Plant assets 
B. Depreciation
C. Book value 
D. Salvage value 
E. Straight-line method 
1. Small expenditures which primarily benefit the current period.
F. Units-of-activity method
 G. Double-declining-balance method
H. MACRS
I. Revenue expenditure
J. Capital expenditure
2. Cost less accumulated depreciation.
3. An accelerated depreciation method used for financial statement purposes.
4. Tangible resources that are used in operations and are not intended for resale.
5. Equal amount of depreciation each period.
6. Expected cash value of the asset at the end of its useful life.
7. Allocation of the cost of a plant asset to expense over its useful life.
8. Material expenditures which increase an asset's operating efficiency, productive capacity, or useful life.
9. An accelerated depreciation method used for tax purposes.
10. Useful life is expressed in terms of units of production or expected use.

Accepted Answer

1. I 6. D
2. C 7. B

Question 11

Santayana Company purchased a machine on January 1, 2008, for $12,000 with an estimated salvage value of $3,000 and an estimated useful life of 8 years. On January 1, 2010, Santayana decides the machine will last 12 years from the date of purchase. The salvage value is still estimated at $3,000. Using the straight-line method, the new annual depreciation will be

Accepted Answer

A)  $675. 
B)  $750. 
C)  $900. 
D)  $1,000. 
A)  $675. 
B)  $750. 
C)  $900. 
D)  $1,000.

Question 12

A purchased patent has a legal life of 20 years. It should be

Accepted Answer

A)  expensed in the year of acquisition. 
B)  amortized over 20 years regardless of its useful life. 
C)  amortized over its useful life if less than 20 years. 
D)  not amortized. 
A)  expensed in the year of acquisition. 
B)  amortized over 20 years regardless of its useful life. 
C)  amortized over its useful life if less than 20 years. 
D)  not amortized.

Question 13

In computing depreciation, salvage value is

Accepted Answer

A)  the fair market value of a plant asset on the date of acquisition. 
B)  subtracted from accumulated depreciation to determine the plant asset's depreciable cost. 
C)  an estimate of a plant asset's value at the end of its useful life. 
D)  ignored in all the depreciation methods. 
A)  the fair market value of a plant asset on the date of acquisition. 
B)  subtracted from accumulated depreciation to determine the plant asset's depreciable cost. 
C)  an estimate of a plant asset's value at the end of its useful life. 
D)  ignored in all the depreciation methods.

Question 14

A coal company invests $16 million in a mine estimated to have 20 million tons of coal and no salvage value. It is expected that the mine will be in operation for 5 years. In the first year, 1,000,000 tons of coal are extracted and sold. What is the depletion expense for the first year?

Accepted Answer

A)  $800,000 
B)  $320,000 
C)  $80,000 
D)  Cannot be determined from the information provided. 
A)  $800,000 
B)  $320,000 
C)  $80,000 
D)  Cannot be determined from the information provided.

Question 15

The cost of a patent must be amortized over a 20-year period.

Accepted Answer

A) True 
 B)False

Question 16

Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions?

Accepted Answer

A)  $30,000 should be debited to the Land account. 
B)  $15,000 should be debited to Land Improvements. 
C)  $45,000 should be debited to the Land account. 
D)  $45,000 should be debited to Land Improvements. 
A)  $30,000 should be debited to the Land account. 
B)  $15,000 should be debited to Land Improvements. 
C)  $45,000 should be debited to the Land account. 
D)  $45,000 should be debited to Land Improvements.

Question 17

The asset turnover ratio is computed by dividing

Accepted Answer

A)  net income by average total assets. 
B)  net sales by average total assets. 
C)  net income by ending total assets. 
D)  net sales by ending total assets. 
A)  net income by average total assets. 
B)  net sales by average total assets. 
C)  net income by ending total assets. 
D)  net sales by ending total assets.

Question 18

Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as

Accepted Answer

A)  capital expenditures. 
B)  expense expenditures. 
C)  improvements. 
D)  revenue expenditures. 
A)  capital expenditures. 
B)  expense expenditures. 
C)  improvements. 
D)  revenue expenditures.

Question 19

Grimwood Trucking purchased a tractor trailer for $98,000. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $14,000. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

Accepted Answer

A)  $7,000 
B)  $8,820 
C)  $7,560 
D)  $8,167 
A)  $7,000 
B)  $8,820 
C)  $7,560 
D)  $8,167

Question 20

Powell's Courier Service recorded a loss of $3,000 when it sold a van that originally cost $28,000 for $5,000. Accumulated depreciation on the van must have been

Accepted Answer

A)  $26,000. 
B)  $8,000. 
C)  $25,000. 
D)  $20,000. 
A)  $26,000. 
B)  $8,000. 
C)  $25,000. 
D)  $20,000.

Exam 10: Plant Assets, Natural Resources, and Intangible Assets

A company has the following assets: The total amount reported under Property, Plant, and Equipment would be

Goodwill

Depletion is

When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

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

A truck was purchased for $120,000 and it was estimated to have a $24,000 salvage value at the end of its useful life. Monthly depreciation expense of $2,000 was recorded using the straight-line method. The annual depreciation rate is

On January 1, 2010, Lakeside Enterprises purchased natural resources for $1,200,000. The company expects the resources to produce 12,000,000 units of product. (1) What is the depletion cost per unit? (2) If the company mined and sold 20,000 units in January, what is depletion expense for the month?

On May 1, 2010, Pinkley Company sells office furniture for $90,000 cash. The office furniture originally cost $225,000 when purchased on January 1, 2003. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $22,500. What gain should be recognized on the sale?

A purchased patent has a legal life of 20 years. It should be

In computing depreciation, salvage value is

A coal company invests $16 million in a mine estimated to have 20 million tons of coal and no salvage value. It is expected that the mine will be in operation for 5 years. In the first year, 1,000,000 tons of coal are extracted and sold. What is the depletion expense for the first year?

The cost of a patent must be amortized over a 20-year period.

Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions?

The asset turnover ratio is computed by dividing

Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as

Powell's Courier Service recorded a loss of $3,000 when it sold a van that originally cost $28,000 for $5,000. Accumulated depreciation on the van must have been

Accounting in Action

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Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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