Question 1

The cost of a purchased building includes all of the following except

Accepted Answer

A)  closing costs. 
B)  real estate broker's commission. 
C)  remodeling costs. 
D)  All of these are included. 
A)  closing costs. 
B)  real estate broker's commission. 
C)  remodeling costs. 
D)  All of these are included.

Question 2

A patent

Accepted Answer

A)  has a legal life of 40 years. 
B)  is nonrenewable. 
C)  can be renewed indefinitely. 
D)  is rarely subject to litigation because it is an exclusive right. 
A)  has a legal life of 40 years. 
B)  is nonrenewable. 
C)  can be renewed indefinitely. 
D)  is rarely subject to litigation because it is an exclusive right.

Question 3

The allocation of the cost of an asset to expense over its useful life is called _________________ for tangible plant assets, ________________ for natural resources, and _________________ for intangible assets.

Accepted Answer

depreciati

Question 4

A company exchanges its old office equipment and $40,000 for new office equipment. The old office equipment has a book value of $28,000 and a fair market value of $20,000 on the date of the exchange. The cost of the new office equipment would be recorded at

Accepted Answer

A)  $68,000. 
B)  $60,000. 
C)  $48,000. 
D)  cannot be determined. 
A)  $68,000. 
B)  $60,000. 
C)  $48,000. 
D)  cannot be determined.

Question 5

On January 1, 2008 Marsh Company purchased and installed a telephone system at a cost of $20,000. The equipment was expected to last five years with a salvage value of $3,000. On January 1, 2009 more telephone equipment was purchased to tie-in with the current system for $10,000. The new equipment is expected to have a useful life of four years. Through an error, the new equipment was debited to Telephone Expense. Marsh Company uses the straight-line method of depreciation.
Instructions
Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation Expense, and Net Income for each year and in total beginning in 2009 through the useful life of the new equipment.

Accepted Answer

The answer of On January 1, 2008 Marsh Company purchased...

Question 6

Additions and improvements

Accepted Answer

A)  occur frequently during the ownership of a plant asset. 
B)  normally involve immaterial expenditures. 
C)  increase the book value of plant assets when incurred. 
D)  typically only benefit the current accounting period. 
A)  occur frequently during the ownership of a plant asset. 
B)  normally involve immaterial expenditures. 
C)  increase the book value of plant assets when incurred. 
D)  typically only benefit the current accounting period.

Question 7

In an exchange of plant assets that has commercial substance, any difference between the fair market value and the book value of the old plant asset is

Accepted Answer

A)  recorded as a gain or loss. 
B)  recorded if a gain but is deferred if a loss. 
C)  recorded if a loss but is deferred if a gain. 
D)  deferred if either a gain or loss. 
A)  recorded as a gain or loss. 
B)  recorded if a gain but is deferred if a loss. 
C)  recorded if a loss but is deferred if a gain. 
D)  deferred if either a gain or loss.

Question 8

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 9

Each of the following is used in computing revised annual depreciation for a change in estimate except

Accepted Answer

A)  book value. 
B)  cost. 
C)  depreciable cost. 
D)  remaining useful life. 
A)  book value. 
B)  cost. 
C)  depreciable cost. 
D)  remaining useful life.

Question 10

A truck that cost $36,000 and on which $30,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash. The entry to record this event would include a

Accepted Answer

A)  gain of $3,000. 
B)  loss of $3,000. 
C)  credit to the Truck account for $6,000. 
D)  credit to Accumulated Depreciation for $30,000. 
A)  gain of $3,000. 
B)  loss of $3,000. 
C)  credit to the Truck account for $6,000. 
D)  credit to Accumulated Depreciation for $30,000.

Question 11

An exchange of plant assets has commercial substance if the future cash flows change as a result of the exchange.

Accepted Answer

A) True 
 B)False

Question 12

A factory machine was purchased for $75,000 on January 1, 2010. It was estimated that it would have a $15,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2010. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2010 would be

Accepted Answer

A)  $7,500. 
B)  $12,000. 
C)  $15,000. 
D)  $6,000. 
A)  $7,500. 
B)  $12,000. 
C)  $15,000. 
D)  $6,000.

Question 13

In recording the purchase of a business, goodwill should be recorded for the excess of ______________ over the _______________ of the net assets acquired.

Accepted Answer

cost, fair

Question 14

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 15

Intangible assets

Accepted Answer

A)  should be reported under the heading Property, Plant, and Equipment. 
B)  are not reported on the balance sheet because they lack physical substance. 
C)  should be reported as Current Assets on the balance sheet. 
D)  should be reported as a separate classification on the balance sheet. 
A)  should be reported under the heading Property, Plant, and Equipment. 
B)  are not reported on the balance sheet because they lack physical substance. 
C)  should be reported as Current Assets on the balance sheet. 
D)  should be reported as a separate classification on the balance sheet.

Question 16

The paneling of the body of an open pickup truck would be classified as a(n)

Accepted Answer

A)  revenue expenditure. 
B)  addition. 
C)  improvement. 
D)  ordinary repair. 
A)  revenue expenditure. 
B)  addition. 
C)  improvement. 
D)  ordinary repair.

Question 17

Andy's, a popular pizza hang-out, has a thriving delivery business. Andy's has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows:   
Instructions
(a) Determine the depreciation rates per mile for each car.
(b) Determine the Depreciation Expense for each car for the current year.
(c) Make one compound journal entry to record the annual Depreciation Expense for the fleet.

Accepted Answer

The answer of Andy's, a popular pizza hang-out, has a...

Question 18

During 2010, Stein Corporation reported net sales of $3,000,000 and net income of $1,800,000. Stein also reported beginning total assets of $1,000,000 and ending total assets of $1,500,000. Stein's asset turnover ratio is

Accepted Answer

A)  3.0 times. 
B)  2.4 times. 
C)  2.0 times. 
D)  1.4 times. 
A)  3.0 times. 
B)  2.4 times. 
C)  2.0 times. 
D)  1.4 times.

Question 19

Recording depreciation each period is necessary in accordance with the

Accepted Answer

A)  going concern principle. 
B)  cost principle. 
C)  matching principle. 
D)  asset valuation principle. 
A)  going concern principle. 
B)  cost principle. 
C)  matching principle. 
D)  asset valuation principle.

Question 20

The depreciable cost of a plant asset is its original cost minus obsolescence.

Accepted Answer

A) True 
 B)False

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

The cost of a purchased building includes all of the following except

A patent

The allocation of the cost of an asset to expense over its useful life is called _________________ for tangible plant assets, ________________ for natural resources, and _________________ for intangible assets.

A company exchanges its old office equipment and $40,000 for new office equipment. The old office equipment has a book value of $28,000 and a fair market value of $20,000 on the date of the exchange. The cost of the new office equipment would be recorded at

Additions and improvements

In an exchange of plant assets that has commercial substance, any difference between the fair market value and the book value of the old plant asset is

In recording the acquisition cost of an entire business,

Each of the following is used in computing revised annual depreciation for a change in estimate except

A truck that cost $36,000 and on which $30,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash. The entry to record this event would include a

An exchange of plant assets has commercial substance if the future cash flows change as a result of the exchange.

In recording the purchase of a business, goodwill should be recorded for the excess of ______________ over the _______________ of the net assets acquired.

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

Intangible assets

The paneling of the body of an open pickup truck would be classified as a(n)

During 2010, Stein Corporation reported net sales of $3,000,000 and net income of $1,800,000. Stein also reported beginning total assets of $1,000,000 and ending total assets of $1,500,000. Stein's asset turnover ratio is

Recording depreciation each period is necessary in accordance with the

The depreciable cost of a plant asset is its original cost minus obsolescence.

Accounting in Action

The Recording Process

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

Filters

The allocation of the cost of an asset to expense over its useful life is called _ for tangible plant assets, for natural resources, and _ for intangible assets.

In recording the purchase of a business, goodwill should be recorded for the excess of over the _ of the net assets acquired.