Question 1

The entry to record patent amortization usually includes a credit to

Accepted Answer

A)  Amortization Expense. 
B)  Accumulated Amortization. 
C)  Accumulated Depreciation. 
D)  Patents. 
A)  Amortization Expense. 
B)  Accumulated Amortization. 
C)  Accumulated Depreciation. 
D)  Patents.

Question 2

Gagner Clinic purchases land for $130,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Gagner Clinic record as the cost for the land?

Accepted Answer

A)  $132,200 
B)  $130,000 
C)  $134,700 
D)  $132,500 
A)  $132,200 
B)  $130,000 
C)  $134,700 
D)  $132,500

Question 3

A company purchased a patent on January 1, 2010, for $2,000,000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30, 2010, the company paid legal costs of $135,000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortize the patent at year end on December 31, 2010.
(b) Clark Company purchased a franchise from Tastee Food Company for $400,000 on January 1, 2010. The franchise is for an indefinite time period and gives Clark Company the exclusive rights to sell Tastee Wings in a particular territory. Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting entry at year end on December 31, 2010.
(c) Hulse Company incurred research and development costs of $500,000 in 2010 in developing a new product. Prepare the necessary journal entries during 2010 to record these events and any adjustments at year end on December 31, 2010.

Accepted Answer

The answer of A company purchased a patent on January...

Question 4

Salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation.

Accepted Answer

A) True 
 B)False

Question 5

Compute the asset turnover ratio based on the following:

Accepted Answer

The answer of Compute the asset turnover ratio based on...

Question 6

Accumulated Depletion

Accepted Answer

A)  is used by all companies with natural resources. 
B)  has a normal debit balance. 
C)  is a contra-asset account. 
D)  is never shown on the balance sheet. 
A)  is used by all companies with natural resources. 
B)  has a normal debit balance. 
C)  is a contra-asset account. 
D)  is never shown on the balance sheet.

Question 7

Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Accepted Answer

A)  $14,160. 
B)  $11,760. 
C)  $9,840. 
D)  $9,600. 
A)  $14,160. 
B)  $11,760. 
C)  $9,840. 
D)  $9,600.

Question 8

When estimating the useful life of an asset, accountants do not consider

Accepted Answer

A)  the cost to replace the asset at the end of its useful life. 
B)  obsolescence factors. 
C)  expected repairs and maintenance. 
D)  the intended use of the asset. 
A)  the cost to replace the asset at the end of its useful life. 
B)  obsolescence factors. 
C)  expected repairs and maintenance. 
D)  the intended use of the asset.

Question 9

The four subdivisions for plant assets are

Accepted Answer

A)  land, land improvements, buildings, and equipment. 
B)  intangibles, land, buildings, and equipment. 
C)  furnishings and fixtures, land, buildings, and equipment. 
D)  property, plant, equipment, and land. 
A)  land, land improvements, buildings, and equipment. 
B)  intangibles, land, buildings, and equipment. 
C)  furnishings and fixtures, land, buildings, and equipment. 
D)  property, plant, equipment, and land.

Question 10

A loss on disposal of a plant asset can only occur if the cash proceeds received from the asset sale is less than the asset's book value.

Accepted Answer

A) True 
 B)False

Question 11

Natural resources have two distinguishing characteristics (1) they are physically _______________ in operations, and (2) they are _________________ only by an act of nature.

Accepted Answer

extracted,

Question 12

The book value of an asset is equal to the

Accepted Answer

A)  asset's market value less its historical cost. 
B)  blue book value relied on by secondary markets. 
C)  replacement cost of the asset. 
D)  asset's cost less accumulated depreciation. 
A)  asset's market value less its historical cost. 
B)  blue book value relied on by secondary markets. 
C)  replacement cost of the asset. 
D)  asset's cost less accumulated depreciation.

Question 13

Which of the following statements is not true when a fully depreciated plant asset is retired?

Accepted Answer

A)  The plant asset's book value is equal to its estimated salvage value. 
B)  The accumulated depreciation account is debited. 
C)  The asset account is credited. 
D)  The plant asset's original cost equals its book value. 
A)  The plant asset's book value is equal to its estimated salvage value. 
B)  The accumulated depreciation account is debited. 
C)  The asset account is credited. 
D)  The plant asset's original cost equals its book value.

Question 14

Sargent Corporation bought equipment on January 1, 2010. The equipment cost $90,000 and had an expected salvage value of $15,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

Accepted Answer

A)  $17,500. 
B)  $18,000. 
C)  $12,500. 
D)  none of the above. 
A)  $17,500. 
B)  $18,000. 
C)  $12,500. 
D)  none of the above.

Question 15

To qualify as natural resources in the accounting sense, assets must be

Accepted Answer

A)  underground. 
B)  replaceable. 
C)  of a mineral nature. 
D)  physically extracted in operations. 
A)  underground. 
B)  replaceable. 
C)  of a mineral nature. 
D)  physically extracted in operations.

Question 16

Steve White the new controller of Weinberg Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2010. His findings are as follows.   
All assets are depreciated by the straight-line method. Weinberg Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Steve's proposed changes.
Instructions
(a) Compute the revised annual depreciation on each asset in 2010. (Show computations.)
(b) Prepare the entry (or entries) to record depreciation on the building in 2010.

Accepted Answer

The answer of Steve White the new controller of Weinberg...

Question 17

A change in the estimated salvage value of a plant asset requires a restatement of prior years' depreciation.

Accepted Answer

A) True 
 B)False

Question 18

All of the following factors in computing depreciation are estimates except

Accepted Answer

A)  cost. 
B)  residual value. 
C)  salvage value. 
D)  useful life. 
A)  cost. 
B)  residual value. 
C)  salvage value. 
D)  useful life.

Question 19

Which of the following statements concerning financial statement presentation is not a true statement?

Accepted Answer

A)  Intangibles are reported separately under Intangible Assets. 
B)  The balances of major classes of assets may be disclosed in the footnotes. 
C)  The balances of the accumulated depreciation of major classes of assets may be disclosed in the footnotes. 
D)  The balances of all individual assets, as they appear in the subsidiary plant ledger, should be disclosed in the footnotes. 
A)  Intangibles are reported separately under Intangible Assets. 
B)  The balances of major classes of assets may be disclosed in the footnotes. 
C)  The balances of the accumulated depreciation of major classes of assets may be disclosed in the footnotes. 
D)  The balances of all individual assets, as they appear in the subsidiary plant ledger, should be disclosed in the footnotes.

Question 20

When constructing a building, a company is permitted to include the acquisition cost and certain interest costs incurred in financing the project.

Accepted Answer

A) True 
 B)False

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

The entry to record patent amortization usually includes a credit to

Gagner Clinic purchases land for $130,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Gagner Clinic record as the cost for the land?

Salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation.

Compute the asset turnover ratio based on the following:

Accumulated Depletion

When estimating the useful life of an asset, accountants do not consider

The four subdivisions for plant assets are

A loss on disposal of a plant asset can only occur if the cash proceeds received from the asset sale is less than the asset's book value.

Natural resources have two distinguishing characteristics (1) they are physically _______________ in operations, and (2) they are _________________ only by an act of nature.

The book value of an asset is equal to the

Which of the following statements is not true when a fully depreciated plant asset is retired?

Sargent Corporation bought equipment on January 1, 2010. The equipment cost $90,000 and had an expected salvage value of $15,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

To qualify as natural resources in the accounting sense, assets must be

A change in the estimated salvage value of a plant asset requires a restatement of prior years' depreciation.

All of the following factors in computing depreciation are estimates except

Which of the following statements concerning financial statement presentation is not a true statement?

When constructing a building, a company is permitted to include the acquisition cost and certain interest costs incurred in financing the project.

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

Natural resources have two distinguishing characteristics (1) they are physically _ in operations, and (2) they are ___ only by an act of nature.