Question 1

Which of the following methods of computing depreciation is production based?

Accepted Answer

A) Straight-line 
B) Declining-balance 
C) Units-of-activity 
D) None of these answer choices are correct. 
A) Straight-line 
B) Declining-balance 
C) Units-of-activity 
D) None of these answer choices are correct. C

Question 2

A plant asset must be fully depreciated before it can be removed from the books.

Accepted Answer

A) True 
 B)False  False

Question 3

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

Accepted Answer

A) True 
 B)False  False

Question 4

When an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired.

Accepted Answer

A) True 
 B)False

Question 5

Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 10,000 hours.It is to be depreciated by the units-of-activity method.What is the amount of depreciation for the first full year, during which the equipment was used for 2,700 hours?

Accepted Answer

A) $112,500. 
B) $105,000. 
C) $113,400. 
D) $108,750. 
A) $112,500. 
B) $105,000. 
C) $113,400. 
D) $108,750.

Question 6

Danford Trucking purchased a tractor trailer for $147,000.Danford 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 $21,000.If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record?

Accepted Answer

A) $9,333 
B) $11,760 
C) $10,080 
D) $10,888 
A) $9,333 
B) $11,760 
C) $10,080 
D) $10,888

Question 7

The return on assets ratio can be computed from the profit margin ratio and the asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 8

Compton Inc.made a $500 ordinary repair to a piece of equipment.Compton's accountant debited this amount to the asset account, Equipment, and credited Cash.Was this the correct entry and if not, why not?

Accepted Answer

A) Yes, this was the correct entry. 
B) No, the correct entry would be a debit to Maintenance and Repairs Expense and a credit to Cash. 
C) No, the correct entry would be a debit to Cash and a credit to Maintenance and Repairs Expense. 
D) No, the correct entry would be a debit to Service Revenue and a credit to Cash. 
A) Yes, this was the correct entry. 
B) No, the correct entry would be a debit to Maintenance and Repairs Expense and a credit to Cash. 
C) No, the correct entry would be a debit to Cash and a credit to Maintenance and Repairs Expense. 
D) No, the correct entry would be a debit to Service Revenue and a credit to Cash.

Question 9

When an asset is sold, a gain is realized when the

Accepted Answer

A) sale price exceeds the book value of the asset sold. 
B) sale price exceeds the original cost of the asset sold. 
C) book value exceeds the sale price of the asset sold. 
D) sale price exceeds the depreciable cost of the asset sold. 
A) sale price exceeds the book value of the asset sold. 
B) sale price exceeds the original cost of the asset sold. 
C) book value exceeds the sale price of the asset sold. 
D) sale price exceeds the depreciable cost of the asset sold.

Question 10

The book value of an asset is equal to the

Accepted Answer

A) asset's fair 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 fair 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 11

A change in the estimated useful life of equipment requires

Accepted Answer

A) a retroactive change in the amount of periodic depreciation recognized in previous years. 
B) that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. 
C) that the amount of periodic depreciation be changed in the current year and in future years. 
D) that income for the current year be increased. 
A) a retroactive change in the amount of periodic depreciation recognized in previous years. 
B) that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. 
C) that the amount of periodic depreciation be changed in the current year and in future years. 
D) that income for the current year be increased.

Question 12

Goodwill

Accepted Answer

A) may be expensed upon purchase if desired. 
B) can be sold by itself to another company. 
C) can be purchased and charged directly to stockholders' equity. 
D) is only recorded when the purchase of an entire business occurs. 
A) may be expensed upon purchase if desired. 
B) can be sold by itself to another company. 
C) can be purchased and charged directly to stockholders' equity. 
D) is only recorded when the purchase of an entire business occurs.

Question 13

Land improvements are generally charged to the Land account.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is included in the cost of constructing a building?

Accepted Answer

A) Cost of paving a parking lot. 
B) Cost of repairing vandalism damage incurred shortly after construction is complete. 
C) Interest incurred during construction. 
D) Cost of removing the demolished building existing on the land when it was purchased. 
A) Cost of paving a parking lot. 
B) Cost of repairing vandalism damage incurred shortly after construction is complete. 
C) Interest incurred during construction. 
D) Cost of removing the demolished building existing on the land when it was purchased.

Question 15

Which of the following is not an intangible asset arising from a government grant?

Accepted Answer

A) Goodwill 
B) Patent 
C) Trademark 
D) Trade name 
A) Goodwill 
B) Patent 
C) Trademark 
D) Trade name

Question 16

On July 1, 2021, Fleming Company sells machinery for $240,000.The machinery originally cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000.The Accumulated Depreciation account had a balance of $350,000 on January 1, 2021 using the straight-line method.The gain or loss on disposal is

Accepted Answer

A) $40,000 gain. 
B) $10,000 loss. 
C) $20,000 loss. 
D) $10,000 gain. 
A) $40,000 gain. 
B) $10,000 loss. 
C) $20,000 loss. 
D) $10,000 gain.

Question 17

Which of the following assets does not decline in service potential over the course of its useful life?

Accepted Answer

A) Equipment 
B) Furnishings 
C) Land 
D) Fixtures 
A) Equipment 
B) Furnishings 
C) Land 
D) Fixtures

Question 18

Research and development costs

Accepted Answer

A) are classified as intangible assets. 
B) must be expensed when incurred under generally accepted accounting principles. 
C) should be included in the cost of the patent they relate to. 
D) are capitalized and then amortized over a period not to exceed 20 years. 
A) are classified as intangible assets. 
B) must be expensed when incurred under generally accepted accounting principles. 
C) should be included in the cost of the patent they relate to. 
D) are capitalized and then amortized over a period not to exceed 20 years.

Question 19

One advantage of leasing a long-term asset is that it can reduce the risk of obsolescence.

Accepted Answer

A) True 
 B)False

Question 20

Givens Retail purchased land for a new parking lot for $125,000.The paving cost $175,000 and the lights to illuminate the new parking area cost $60,000.Which of the following statements is true with respect to these additions?

Accepted Answer

A) $300,000 should be debited to the Land account. 
B) $235,000 should be debited to Land Improvements. 
C) $360,000 should be debited to the Land account. 
D) $360,000 should be debited to Land Improvements. 
A) $300,000 should be debited to the Land account. 
B) $235,000 should be debited to Land Improvements. 
C) $360,000 should be debited to the Land account. 
D) $360,000 should be debited to Land Improvements.

Which of the following methods of computing depreciation is production based?

A plant asset must be fully depreciated before it can be removed from the books.

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

When an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired.

Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 10,000 hours.It is to be depreciated by the units-of-activity method.What is the amount of depreciation for the first full year, during which the equipment was used for 2,700 hours?

The return on assets ratio can be computed from the profit margin ratio and the asset turnover ratio.

Compton Inc.made a $500 ordinary repair to a piece of equipment.Compton's accountant debited this amount to the asset account, Equipment, and credited Cash.Was this the correct entry and if not, why not?

When an asset is sold, a gain is realized when the

The book value of an asset is equal to the

A change in the estimated useful life of equipment requires

Goodwill

Land improvements are generally charged to the Land account.

Which of the following is included in the cost of constructing a building?

Which of the following is not an intangible asset arising from a government grant?

Which of the following assets does not decline in service potential over the course of its useful life?

Research and development costs

One advantage of leasing a long-term asset is that it can reduce the risk of obsolescence.

Givens Retail purchased land for a new parking lot for $125,000.The paving cost $175,000 and the lights to illuminate the new parking area cost $60,000.Which of the following statements is true with respect to these additions?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

Filters

Exam 9: Reporting and Analyzing Long-Lived Assets

Which of the following methods of computing depreciation is production based?

A plant asset must be fully depreciated before it can be removed from the books.

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

When an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired.

Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 10,000 hours.It is to be depreciated by the units-of-activity method.What is the amount of depreciation for the first full year, during which the equipment was used for 2,700 hours?

The return on assets ratio can be computed from the profit margin ratio and the asset turnover ratio.

Compton Inc.made a $500 ordinary repair to a piece of equipment.Compton's accountant debited this amount to the asset account, Equipment, and credited Cash.Was this the correct entry and if not, why not?

When an asset is sold, a gain is realized when the

The book value of an asset is equal to the

A change in the estimated useful life of equipment requires

Goodwill

Land improvements are generally charged to the Land account.

Which of the following is included in the cost of constructing a building?

Which of the following is not an intangible asset arising from a government grant?

Which of the following assets does not decline in service potential over the course of its useful life?

Research and development costs

One advantage of leasing a long-term asset is that it can reduce the risk of obsolescence.

Givens Retail purchased land for a new parking lot for $125,000.The paving cost $175,000 and the lights to illuminate the new parking area cost $60,000.Which of the following statements is true with respect to these additions?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

Filters