Question 1

A company should choose a depreciation method that

Accepted Answer

A)  best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B)  saves the most taxes. 
C)  minimizes net income 
D)  shows the highest amount of net income. 
A)  best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B)  saves the most taxes. 
C)  minimizes net income 
D)  shows the highest amount of net income.

Question 2

Royal Company purchased a dump truck at the beginning of 2012 at a cost of $60,000. The truck had an estimated life of 6 years and an estimated residual value of $24,000. On January 1, 2014, the company made major repairs of $20,000 to the truck that extended the life 1 year. Thus, starting with 2014, the truck has a remaining life of 5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation method.
When calculating depreciation for 2014, Royal should

Accepted Answer

A)  add the $20,000 to the book value at December 31, 2013 and then allocate the revised basis over the remaining adjusted useful life of 5 years. 
B)  report the effect of the change in life as an expense on the income statement in 2013. 
C)  ignore the change in life on the original cost of $60,000 and depreciate the additional $20,000 cost separately over its useful life. 
D)  expense the $20,000 and depreciate the original cost of $60,000 over its revised estimated total live of 7 years. 
A)  add the $20,000 to the book value at December 31, 2013 and then allocate the revised basis over the remaining adjusted useful life of 5 years. 
B)  report the effect of the change in life as an expense on the income statement in 2013. 
C)  ignore the change in life on the original cost of $60,000 and depreciate the additional $20,000 cost separately over its useful life. 
D)  expense the $20,000 and depreciate the original cost of $60,000 over its revised estimated total live of 7 years.

Question 3

Depreciation has no effect on income taxes, since it only reduces a plant asset's book value.

Accepted Answer

A) True 
 B)False

Question 4

Creighton, Inc. determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment which it purchased 2 years ago. When accounting for the change in its accounting estimates, Creighton must

Accepted Answer

A)  correct the financial statements of prior years' affected by the errors in the estimates. 
B)  determine the book value at the point of change and depreciate that amount over the remaining useful life. 
C)  add the amount of the error to the amount of the current year's depreciation expense. 
D)  determine the effect of the error and report it as a loss on the income statement in Other Revenues and Expenses. 
A)  correct the financial statements of prior years' affected by the errors in the estimates. 
B)  determine the book value at the point of change and depreciate that amount over the remaining useful life. 
C)  add the amount of the error to the amount of the current year's depreciation expense. 
D)  determine the effect of the error and report it as a loss on the income statement in Other Revenues and Expenses.

Question 5

Distinguish between current assets and operating assets.

Accepted Answer

Operating assets constitute the major pr

Question 6

For each of the following items, indicate whether each would be treated as a
-Costs incurred after putting the asset into service which keep the asset in normal operating condition.

Accepted Answer

A) capital expenditure 
B) revenue expenditure 
A) capital expenditure 
B) revenue expenditure

Question 7

Given below are several accounts and balances from Carrier Corporation's 2015 financial statements. Prepare the Property, Plant, and Equipment section of the balance sheet and a partial income statement in the space provided below using the accounts provided.

Accepted Answer

BALANCE SHEET
Proper

Question 8

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000. What amount of cash was received from the sale?

Accepted Answer

A)  $26,000 
B)  $14,000. 
C)  $20,000. 
D)  $94,000. 
A)  $26,000 
B)  $14,000. 
C)  $20,000. 
D)  $94,000.

Question 9

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method:
-Purchase of equipment for cash

Accepted Answer

A) Operating 
B) Investing 
C) Financing 
D) Not separately reported on a statement of cash flows 
A) Operating 
B) Investing 
C) Financing 
D) Not separately reported on a statement of cash flows

Question 10

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

Accepted Answer

A)  record the $500,000 acquisition cost in an account called Land and Buildings. 
B)  depreciate the $500,000 acquisition cost, less any residual value, over the expected useful life of the building. 
C)  because part of the purchase involved land, record all of the cost in the Land account. 
D)  allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values. 
A)  record the $500,000 acquisition cost in an account called Land and Buildings. 
B)  depreciate the $500,000 acquisition cost, less any residual value, over the expected useful life of the building. 
C)  because part of the purchase involved land, record all of the cost in the Land account. 
D)  allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

Question 11

Distinguish between tangible and intangible operating assets.

Accepted Answer

Tangible operating assets have physical

Question 12

Tasty Catering purchased a van on January 1, 2014 for $48,000. The company decided to depreciate the van over a 5-year period using the straight-line method. The company estimated its residual value at $3,000. Show how the costs should be presented on Tasty's balance sheet and income statement for the full year ended June 30, 2016. Label the statements properly.

Accepted Answer

BALANCE SHEET
Property, plant,

Question 13

The three reasons why a company might choose an accelerated depreciation method are
__________________________________________________,
__________________________________________________, and
__________________________________________________.

Accepted Answer

1. To minimize income and taxe

Question 14

Wind Chime and Fire Hut Companies purchased identical equipment having an estimated useful life of ten years. Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?

Accepted Answer

A)  Wind Chime's depreciation expense will be greater in the second year than Fire Hut's depreciation expense. 
B)  Fire Hut's book value will be greater than Wind Chime's book value at the end of year one. 
C)  Wind Chime's net income will be greater than Fire Hut's net income in year nine. 
D)  Fire Hut's book value will be less than Wind Chime's book value at the end of year two. 
A)  Wind Chime's depreciation expense will be greater in the second year than Fire Hut's depreciation expense. 
B)  Fire Hut's book value will be greater than Wind Chime's book value at the end of year one. 
C)  Wind Chime's net income will be greater than Fire Hut's net income in year nine. 
D)  Fire Hut's book value will be less than Wind Chime's book value at the end of year two.

Question 15

On January 2, 2013, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Accepted Answer

A)  Gain of $2,000 
B)  Loss of $11,000 
C)  Loss of $2,000 
D)  Gain of $3,000 
A)  Gain of $2,000 
B)  Loss of $11,000 
C)  Loss of $2,000 
D)  Gain of $3,000

Question 16

Fall Corp. uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets?

Accepted Answer

A)  Double-declining-balance 
B)  Revenue expenditure method 
C)  Straight-line 
D)  Units-of-production 
A)  Double-declining-balance 
B)  Revenue expenditure method 
C)  Straight-line 
D)  Units-of-production

Question 17

Wyoming Real Estate purchased a building for $600,000 in 2002. At the end of 2014, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Wyoming rejected the offer. What
Amount should is recorded on Wyoming's records at the end of 2014 in the account called Buildings?

Accepted Answer

A)  $1,000,000 
B)  $900,000 
C)  $600,000 
D)  $450,000 
A)  $1,000,000 
B)  $900,000 
C)  $600,000 
D)  $450,000

Question 18

Which of the following below is an example of a capital expenditure?

Accepted Answer

A)  cleaning the carpet in the front room 
B)  tune-up for a company truck 
C)  replacing an engine in a company car 
D)  replacing all burned-out light bulbs in the factory 
A)  cleaning the carpet in the front room 
B)  tune-up for a company truck 
C)  replacing an engine in a company car 
D)  replacing all burned-out light bulbs in the factory

Question 19

A change in estimate should be recorded .

Accepted Answer

currently and prospectively
Fo

Question 20

In general, FASB standards concerning property, plant, and equipment are similar to the international accounting standards, with two important differences.

Accepted Answer

A) True 
 B)False

A company should choose a depreciation method that

Depreciation has no effect on income taxes, since it only reduces a plant asset's book value.

Creighton, Inc. determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment which it purchased 2 years ago. When accounting for the change in its accounting estimates, Creighton must

Distinguish between current assets and operating assets.

For each of the following items, indicate whether each would be treated as a -Costs incurred after putting the asset into service which keep the asset in normal operating condition.

Given below are several accounts and balances from Carrier Corporation's 2015 financial statements. Prepare the Property, Plant, and Equipment section of the balance sheet and a partial income statement in the space provided below using the accounts provided.

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000. What amount of cash was received from the sale?

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method: -Purchase of equipment for cash

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

Distinguish between tangible and intangible operating assets.

The three reasons why a company might choose an accelerated depreciation method are , , and __.

On January 2, 2013, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Fall Corp. uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets?

Which of the following below is an example of a capital expenditure?

A change in estimate should be recorded .

In general, FASB standards concerning property, plant, and equipment are similar to the international accounting standards, with two important differences.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

Filters

Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

A company should choose a depreciation method that

Depreciation has no effect on income taxes, since it only reduces a plant asset's book value.

Creighton, Inc. determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment which it purchased 2 years ago. When accounting for the change in its accounting estimates, Creighton must

Distinguish between current assets and operating assets.

For each of the following items, indicate whether each would be treated as a -Costs incurred after putting the asset into service which keep the asset in normal operating condition.

Given below are several accounts and balances from Carrier Corporation's 2015 financial statements. Prepare the Property, Plant, and Equipment section of the balance sheet and a partial income statement in the space provided below using the accounts provided.

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000. What amount of cash was received from the sale?

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method: -Purchase of equipment for cash

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

Distinguish between tangible and intangible operating assets.

The three reasons why a company might choose an accelerated depreciation method are __________________________________________________, __________________________________________________, and __________________________________________________.

On January 2, 2013, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Fall Corp. uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets?

Which of the following below is an example of a capital expenditure?

A change in estimate should be recorded .

In general, FASB standards concerning property, plant, and equipment are similar to the international accounting standards, with two important differences.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

Filters

The three reasons why a company might choose an accelerated depreciation method are , , and __.