Question 1

Cost allocation of an intangible asset is referred to as

Accepted Answer

A)  amortization. 
B)  depletion. 
C)  accretion. 
D)  capitalization. 
A)  amortization. 
B)  depletion. 
C)  accretion. 
D)  capitalization.

Question 2

Rooney Company incurred $280,000 of research and development cost in its laboratory to develop a patent granted on January 1, 2010. On July 31, 2010, Rooney paid $42,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2010, should be:

Accepted Answer

A)  $280,000. 
B)  $42,000. 
C)  $322,000. 
D)  $238,000. 
A)  $280,000. 
B)  $42,000. 
C)  $322,000. 
D)  $238,000.

Question 3

The book value of a plant asset is always equal to its fair market value.

Accepted Answer

A) True 
 B)False

Question 4

The Nichols Clinic purchased a new surgical laser for $80,000. The estimated salvage value is $5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5.
Instructions
(a) Compute the annual depreciation for each of the five years under each of the following methods:
(1) straight-line.
(2) units-of-activity.
(b) If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer.
(c) Which method would result in the lowest reported income in the first year? Which method would result in the lowest total reported income over the five-year period?

Accepted Answer

@#IMG-DLM& (b) The units-of-activity method can be

Question 5

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Accepted Answer

A) True 
 B)False

Question 6

Equipment was purchased for $75,000. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 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)  $17,700. 
B)  $14,700. 
C)  $12,300. 
D)  $12,000. 
A)  $17,700. 
B)  $14,700. 
C)  $12,300. 
D)  $12,000.

Question 7

Ordinary repairs which maintain operating efficiency and expected productive life are called _______________.

Accepted Answer

revenue ex

Question 8

The cost of a patent should be amortized over its ____________ life or its ____________ life, whichever is shorter.

Accepted Answer

legal, use

Question 9

If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is received,

Accepted Answer

A)  a gain on disposal will be recorded. 
B)  phantom depreciation must be taken as though the asset were still on the books. 
C)  a loss on disposal will be recorded. 
D)  no gain or loss on disposal will be recorded. 
A)  a gain on disposal will be recorded. 
B)  phantom depreciation must be taken as though the asset were still on the books. 
C)  a loss on disposal will be recorded. 
D)  no gain or loss on disposal will be recorded.

Question 10

Identify the item below where the terms are not related.

Accepted Answer

A)  Equipment-depreciation 
B)  Franchise-depreciation 
C)  Copyright-amortization 
D)  Oil well-depletion 
A)  Equipment-depreciation 
B)  Franchise-depreciation 
C)  Copyright-amortization 
D)  Oil well-depletion

Question 11

Kennett Company purchased a machine on January 1, 2010. In addition to the purchase price paid, the following additional costs were incurred: (a) sales tax paid on the purchase price, (b) transportation and insurance costs while the machinery was in transit from the seller, (c) personnel training costs for initial operation of the machinery, (d) annual city operating license, (e) major overhaul to extend the life of the machinery, (f) lubrication of the machinery gearing before the machinery was placed into service, (g) lubrication of the machinery gearing after the machinery was placed into service, and (h) installation costs necessary to secure the machinery to the building flooring.
Instructions
Indicate whether the items (a) through (h) are capital or revenue expenditures in the spaces provided: C = Capital, R = Revenue.
(a)_____________ (b)______________ (c)______________ (d)______________
(e)_____________ (f)______________ (g)______________ (h)______________

Accepted Answer

(a) Capital (b) Capi

Question 12

A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in the current and future periods, but not to prior periods.

Accepted Answer

A) True 
 B)False

Question 13

On July 4, 2010, Wyoming Mining Company purchased the mineral rights to a granite deposit for $800,000. It is estimated that the recoverable granite will be 400,000 tons. During 2010, 100,000 tons of granite was extracted and 60,000 tons were sold. The amount of the Depletion Expense recognized for 2010 would be

Accepted Answer

A)  $100,000. 
B)  $60,000. 
C)  $120,000. 
D)  $200,000. 
A)  $100,000. 
B)  $60,000. 
C)  $120,000. 
D)  $200,000.

Question 14

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

Accepted Answer

A)  book value of the old asset. 
B)  fair market value of the old asset. 
C)  book value of the asset acquired. 
D)  fair market value of the new asset. 
A)  book value of the old asset. 
B)  fair market value of the old asset. 
C)  book value of the asset acquired. 
D)  fair market value of the new asset.

Question 15

If a plant asset is retired before it is fully depreciated, and the salvage value received is less than the asset's book value,

Accepted Answer

A)  a gain on disposal occurs. 
B)  a loss on disposal occurs. 
C)  there is no gain or loss on disposal. 
D)  additional depreciation expense must be recorded. 
A)  a gain on disposal occurs. 
B)  a loss on disposal occurs. 
C)  there is no gain or loss on disposal. 
D)  additional depreciation expense must be recorded.

Question 16

All of the following are intangible assets except

Accepted Answer

A)  copyrights. 
B)  goodwill. 
C)  patents. 
D)  research and development costs. 
A)  copyrights. 
B)  goodwill. 
C)  patents. 
D)  research and development costs.

Question 17

The units-of-activity method is generally not suitable for

Accepted Answer

A)  airplanes. 
B)  buildings. 
C)  delivery equipment. 
D)  factory machinery. 
A)  airplanes. 
B)  buildings. 
C)  delivery equipment. 
D)  factory machinery.

Question 18

Ron's Quik Shop bought machinery for $25,000 on January 1, 2010. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2011, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2011?

Accepted Answer

A)  $4,000 
B)  $2,000 
C)  $3,333 d $5,000 
A)  $4,000 
B)  $2,000 
C)  $3,333 d $5,000

Question 19

A term that is not synonymous with property, plant, and equipment is

Accepted Answer

A)  plant assets. 
B)  fixed assets. 
C)  intangible assets. 
D)  long-lived tangible assets. 
A)  plant assets. 
B)  fixed assets. 
C)  intangible assets. 
D)  long-lived tangible assets.

Question 20

The book value of a plant asset is the difference between the

Accepted Answer

A)  replacement cost of the asset and its historical cost. 
B)  cost of the asset and the amount of depreciation expense for the year. 
C)  cost of the asset and the accumulated depreciation to date. 
D)  proceeds received from the sale of the asset and its original cost. 
A)  replacement cost of the asset and its historical cost. 
B)  cost of the asset and the amount of depreciation expense for the year. 
C)  cost of the asset and the accumulated depreciation to date. 
D)  proceeds received from the sale of the asset and its original cost.

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

Cost allocation of an intangible asset is referred to as

Rooney Company incurred $280,000 of research and development cost in its laboratory to develop a patent granted on January 1, 2010. On July 31, 2010, Rooney paid $42,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2010, should be:

The book value of a plant asset is always equal to its fair market value.

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Ordinary repairs which maintain operating efficiency and expected productive life are called _______________.

The cost of a patent should be amortized over its ____________ life or its ____________ life, whichever is shorter.

If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is received,

Identify the item below where the terms are not related.

A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in the current and future periods, but not to prior periods.

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

If a plant asset is retired before it is fully depreciated, and the salvage value received is less than the asset's book value,

All of the following are intangible assets except

The units-of-activity method is generally not suitable for

A term that is not synonymous with property, plant, and equipment is

The book value of a plant asset is the difference between the

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 cost of a patent should be amortized over its life or its life, whichever is shorter.