Question 1

Management should select the depreciation method that

Accepted Answer

A)  is easiest to apply. 
B)  best measures the plant asset's market value over its useful life. 
C)  best measures the plant asset's contribution to revenue over its useful life. 
D)  has been used most often in the past by the company. 
A)  is easiest to apply. 
B)  best measures the plant asset's market value over its useful life. 
C)  best measures the plant asset's contribution to revenue over its useful life. 
D)  has been used most often in the past by the company.

Question 2

During the current year, Marin Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over which the asset should be amortized. Explain your answer.
(a) Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended.
(b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Marin Company expects the trademark to contribute to revenue indefinitely.
(c) Marin Company acquires a patent for $2,000,000. The company selling the patent has spent $1,000,000 on the research and development of it. The patent has a remaining life of 15 years.
(d) Marin Company is spending considerable time and money in developing a different patent for another product. So far $3,000,000 has been spent this year on research and development. Marin Company is very confident they will obtain this patent in the next few years.

Accepted Answer

(a) Operating Expense. Only successful p

Question 3

212. Santayana Company purchased a machine on January 1, 2016, for $60,000 with an estimated salvage value of $15,000 and an estimated useful life of 8 years. On January 1, 2018, Santayana decides the machine will last 12 years from the date of purchase. The salvage value is still estimated at $15,000. Using the straight-line method, the new annual depreciation will be

Accepted Answer

A)  $3,375. 
B)  $3,750. 
C)  $4,500. 
D)  $5,000. 
A)  $3,375. 
B)  $3,750. 
C)  $4,500. 
D)  $5,000.

Question 4

Kahn Mining Company purchased a mine for $60 million which is estimated to have 250,000 tons of ore and a salvage value of $10 million.
(a) In the first year, 50,000 tons of ore are extracted and sold. Prepare the journal entry to record depletion expense for the first year.
(b) In the second year, 150,000 tons of ore are extracted but only 125,000 tons are sold. Prepare the journal entry to record depletion expense for the second year.
(c) What amount and in what account are the tons of ore not sold reported?

Accepted Answer

(a) Calculation of the depletion expense

Question 5

Kingston Company purchased a piece of equipment on January 1, 2018. The equipment cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000. What was the depreciation expense for the asset for 2019 under the double-declining-balance method?

Accepted Answer

A)  $21,667. 
B)  $37,500. 
C)  $50,000. 
D)  $39,063. 
A)  $21,667. 
B)  $37,500. 
C)  $50,000. 
D)  $39,063.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

On January 1, 2013, Santo Company purchased a computer system for $30,500. The system had an estimated useful life of 5 years and no salvage value. At January 1, 2018, the company revised the remaining useful life to two years. What amount of depreciation will be recorded for 2018 and 2019?

Accepted Answer

Original depreciation: $30,500

Question 8

The method most commonly used to compute depletion is the

Accepted Answer

A)  straight-line method. 
B)  double-declining-balance method. 
C)  units-of-activity method. 
D)  effective interest method. 
A)  straight-line method. 
B)  double-declining-balance method. 
C)  units-of-activity method. 
D)  effective interest method.

Question 9

The ___________________ is calculated by dividing net sales by average total assets.

Accepted Answer

The answer of The ___________________ is calculated by dividing net...

Question 10

The entry to record depletion expense

Accepted Answer

A)  decreases stockholders' equity and assets. 
B)  decreases net income and increases liabilities. 
C)  decreases assets and liabilities. 
D)  decreases assets and increases liabilities. 
A)  decreases stockholders' equity and assets. 
B)  decreases net income and increases liabilities. 
C)  decreases assets and liabilities. 
D)  decreases assets and increases liabilities.

Question 11

The cost of natural resources is not allocated to expense because the natural resources are replaceable only by an act of nature.

Accepted Answer

A) True 
 B)False

Question 12

A company purchased factory equipment for $700,000. It is estimated that the equipment will have a $70,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

Accepted Answer

A)  $280,000. 
B)  $168,000. 
C)  $252,000. 
D)  $120,960. 
A)  $280,000. 
B)  $168,000. 
C)  $252,000. 
D)  $120,960.

Question 13

Identify the following expenditures as capital expenditures or revenue expenditures.
(a) Replacement of worn out gears on factory machinery.
(b) Construction of a new wing on an office building.
(c) Painting the exterior of a building.
(d) Oil change on a company truck.
(e) Painting and lettering of a used truck upon acquisition of the truck.
(f) Overhaul of a truck motor. One year extension in useful life is expected.
(g) Purchased a wastebasket at a cost of $10.

Accepted Answer

(a) revenue (e) capi

Question 14

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 15

Grayson's Lumber Mill sold two machines in 2019. The following information pertains to the two machines:   
Instructions
(a) Compute the depreciation on each machine to the date of disposal.
(b) Prepare the journal entries in 2019 to record 2019 depreciation and the sale of each machine.

Accepted Answer

@#IMG-DLM& **$30,000

Question 16

Improvements are

Accepted Answer

A)  revenue expenditures. 
B)  debited to an appropriate asset account when they increase useful life. 
C)  debited to accumulated depreciation when they do not increase useful life. 
D)  debited to an appropriate expense account when they do not increase useful life. 
A)  revenue expenditures. 
B)  debited to an appropriate asset account when they increase useful life. 
C)  debited to accumulated depreciation when they do not increase useful life. 
D)  debited to an appropriate expense account when they do not increase useful life.

Question 17

Paneling 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 18

Mather Company purchased equipment on January 1, 2018 at a total invoice cost of $336,000; additional costs of $6,000 for freight and $30,000 for installation were incurred. The equipment has an estimated salvage value of $12,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2019 if the straight-line method of depreciation is used is:

Accepted Answer

A)  $129,600. 
B)  $132,000. 
C)  $144,000. 
D)  $148,800. 
A)  $129,600. 
B)  $132,000. 
C)  $144,000. 
D)  $148,800.

Question 19

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 20

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

Accepted Answer

A) True 
 B)False

Exam 9: Plant Assets, Natural Resources, and Intangible Assets

Management should select the depreciation method that

Kingston Company purchased a piece of equipment on January 1, 2018. The equipment cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000. What was the depreciation expense for the asset for 2019 under the double-declining-balance method?

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

On January 1, 2013, Santo Company purchased a computer system for $30,500. The system had an estimated useful life of 5 years and no salvage value. At January 1, 2018, the company revised the remaining useful life to two years. What amount of depreciation will be recorded for 2018 and 2019?

The method most commonly used to compute depletion is the

The ___________________ is calculated by dividing net sales by average total assets.

The entry to record depletion expense

The cost of natural resources is not allocated to expense because the natural resources are replaceable only by an act of nature.

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

Grayson's Lumber Mill sold two machines in 2019. The following information pertains to the two machines: Instructions (a) Compute the depreciation on each machine to the date of disposal. (b) Prepare the journal entries in 2019 to record 2019 depreciation and the sale of each machine.

Improvements are

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

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

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

Filters