Question 1

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 2

On March 1, 2015, Landon Company acquired real estate on which it planned to construct a small office building. The company paid $90,000 in cash. An old warehouse on the property was razed at a cost of $7,600; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $4,000 real estate broker's fee, $7,800 architect's fee, and $14,000 to put in driveways and a parking lot.
Instructions
Determine the amount to be reported as the cost of the land.

Accepted Answer

The answer of On March 1, 2015, Landon Company acquired...

Question 3

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 4

The Accumulated Depletion account is deducted from the cost of the natural resource in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Alvarado Company purchased a new machine for $400,000. It is estimated that the machine will have a $40,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used.
Instructions
Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life.

Accepted Answer

Declining-balance rate = 2 ÷ 5

Question 6

The ________________ method of computing depreciation expense results in an equal amount of periodic depreciation throughout the service life of the plant asset.

Accepted Answer

The answer of The ________________ method of computing depreciation expense...

Question 7

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 8

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

Accepted Answer

The answer of In recording the purchase of a business,...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If disposal of a plant asset occurs at any time during the year, ___________________ for the fraction of the year to the date of disposal must be recorded.

Accepted Answer

The answer of If disposal of a plant asset occurs...

Question 11

An asset was purchased for $250,000. It had an estimated salvage value of $50,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $40,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would be

Accepted Answer

A)  $30,000. 
B)  $22,000. 
C)  $15,000. 
D)  $21,000. 
A)  $30,000. 
B)  $22,000. 
C)  $15,000. 
D)  $21,000.

Question 12

268For each item listed below, enter a code letter in the blank space to indicate the allocation terminology for the item. Use the following codes for your answer:

Accepted Answer

1. N 5. A 9. A
2. N

Question 13

On July 1, 2018, Melton Inc. invested $560,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2018, 100,000 tons of ore were mined and sold.
Instructions
(a) Prepare the journal entry to record depletion expense.
(b) Assume that the 100,000 tons of ore were mined, but only 85,000 units were sold. How are the costs applicable to the 15,000 unsold units reported?

Accepted Answer

(a) @#IMG-DLM& (b) The costs pertaining

Question 14

Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally

Accepted Answer

A)  expensed when incurred. 
B)  capitalized as a part of the cost of the asset. 
C)  debited to the Accumulated Depreciation account. 
D)  not recorded until they become material in amount. 
A)  expensed when incurred. 
B)  capitalized as a part of the cost of the asset. 
C)  debited to the Accumulated Depreciation account. 
D)  not recorded until they become material in amount.

Question 15

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 16

Drago Company purchased equipment on January 1, 2018, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2019, if the straight-line method of depreciation is used?

Accepted Answer

A)  $240,000 
B)  $480,000 
C)  $234,000 
D)  $468,000 
A)  $240,000 
B)  $480,000 
C)  $234,000 
D)  $468,000

Question 17

A computer company has $2,800,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss after these R & D costs are accounted for?

Accepted Answer

A)  $800,000 loss 
B)  $2,000,000 net income 
C)  $0 
D)  Cannot be determined from the information provided. 
A)  $800,000 loss 
B)  $2,000,000 net income 
C)  $0 
D)  Cannot be determined from the information provided.

Question 18

A company has the following assets:   The total amount reported under Property, Plant, and Equipment would be

Accepted Answer

A)  $19,360,000. 
B)  $14,400,000. 
C)  $18,400,000. 
D)  $15,360,000. 
A)  $19,360,000. 
B)  $14,400,000. 
C)  $18,400,000. 
D)  $15,360,000.

Question 19

Depreciation is a process of

Accepted Answer

A)  asset devaluation. 
B)  cost accumulation. 
C)  cost allocation. 
D)  asset valuation. 
A)  asset devaluation. 
B)  cost accumulation. 
C)  cost allocation. 
D)  asset valuation.

Question 20

During 2018, Rathke Corporation reported net sales of $3,000,000, net income of $1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Rathke's asset turnover is

Accepted Answer

A)  3 times. 
B)  2.4 times. 
C)  2.0 times. 
D)  .96 times. 
A)  3 times. 
B)  2.4 times. 
C)  2.0 times. 
D)  .96 times.

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

A patent

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.

The Accumulated Depletion account is deducted from the cost of the natural resource in the balance sheet.

The ________________ method of computing depreciation expense results in an equal amount of periodic depreciation throughout the service life of the plant asset.

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

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

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

If disposal of a plant asset occurs at any time during the year, ___________________ for the fraction of the year to the date of disposal must be recorded.

268For each item listed below, enter a code letter in the blank space to indicate the allocation terminology for the item. Use the following codes for your answer:

Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally

Accumulated Depletion

A computer company has $2,800,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss after these R & D costs are accounted for?

A company has the following assets: The total amount reported under Property, Plant, and Equipment would be

Depreciation is a process of

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

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