Question 1

Acquisition costs are also known as replacement costs.

Accepted Answer

A) True 
 B)False

Question 2

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:
-Depreciation expense

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 3

A building with an appraisal value of $167,000 is made available at an offer price of $162,000. The purchaser acquires the property for $25,000 in cash, a 90-day note payable for $75,000, and a mortgage amounting to $65,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

Accepted Answer

A)  $167,000 
B)  $162,000 
C)  $165,000 
D)  $140,000 
A)  $167,000 
B)  $162,000 
C)  $165,000 
D)  $140,000

Question 4

Assume that Rocket Company purchased an asset on January 1, 2014, for $62,400. The asset had an estimated life of eight years and an estimated residual value of $8,000. The company used the straight-line method to depreciate the asset. On July 1, 2016, the asset was sold for $52,000.
REQUIRED:
1. Identify the effects of the transactions to record depreciation for 2016 and all transactions necessary for the sale of the asset.
2. How should the gain or loss on the sale of the asset be presented on the income statement?

Accepted Answer

1.
July 1 To record depreciation of asse

Question 5

Wang Fitness Co. purchased a patent at the beginning of 2015 for $120,000. Economic benefits were expected for only 12 years, but the patent's legal life is 17 years. Also during 2015, the company incurred research and development costs of $50,000.
A. Determine the following amounts:
1. Research and development expense for 2015
2. Patent amortization expense for 2015
B. Prepare the intangible assets section of the balance sheet at December 31, 2015.

Accepted Answer

A. Expense amounts for 2015
Research and

Question 6

Use the following Assets section of Hu Corporation's balance sheets for the years ended December 31, 2015 and
2014 to answer the questions that follow.
HU CORPORATION
Assets Section of Consolidated Balance Sheets in millions
at December 31,2015 2014
ASSETS Current Assets
   $1,889 and $97
   Hu Corporation recorded depreciation expense of $344 million for 2014.
-Refer to the information for Hu Corporation.
Required:
1 Explain the impact on net income and cash flows of Hu using straight-line depreciation for financial reporting and accelerated depreciation methods for income tax purposes.
2 In the notes to the financial statements, Hu indicates that it uses different depreciation methods for different types of plant and equipment assets. Explain why Hu might follow this policy.

Accepted Answer

1 Accelerated depreciation allows a comp

Question 7

Ramirez Stores purchased a trademark at the beginning of 2013 for $340,000. Economic benefits were expected for 10 years, but the trademark's legal life was 20 years. Also, during 2013, Ramirez incurred research and development costs of $200,000. The book value of the trademarks at December 31, 2013, is

Accepted Answer

A)  $506,000 
B)  $306,000 
C)  $323,000 
D)  $486,000 
A)  $506,000 
B)  $306,000 
C)  $323,000 
D)  $486,000

Question 8

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Accepted Answer

A) True 
 B)False

Question 9

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale?

Accepted Answer

A)  $30,000. 
B)  $36,000. 
C)  $41,000. 
D)  $128,000. 
A)  $30,000. 
B)  $36,000. 
C)  $41,000. 
D)  $128,000.

Question 10

Select where the following accounts would be reported on Coca­Cola's financial statements. Select all that apply.
-Select where the following accounts would be reported on CocaCola's
financial statements. Select all that apply.
Cash received from the sale of a plant asset focus on just the cash received

Accepted Answer

A)  Balance Sheet - Property, Plant, and Equipment 
B)  Balance Sheet - Intangible Assets 
C)  Balance Sheet - Current Assets 
D)  Balance Sheet - Other Assets 
E)  Income Statement - Operating Section
F) Income Statement - Other Revenue and Expense Section
G) Statement of Cash Flows 
A)  Balance Sheet - Property, Plant, and Equipment 
B)  Balance Sheet - Intangible Assets 
C)  Balance Sheet - Current Assets 
D)  Balance Sheet - Other Assets 
E)  Income Statement - Operating Section
F) Income Statement - Other Revenue and Expense Section
G) Statement of Cash Flows

Question 11

Shidan Apartments purchased an apartment building to rent to university students on November 18, 2015. The following costs were incurred during 2015, before the tenants moved in:

Accepted Answer

The answer of Shidan Apartments purchased an apartment building to...

Question 12

For each of the following items, indicate whether each would be treated as a
-Costs incurred prior to using the asset, such as costs to prepare the asset for use, installation costs.

Accepted Answer

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

Question 13

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

Accepted Answer

A)  not be amortized. 
B)  be reported on the statement of retained earnings in the year in which acquired. 
C)  be amortized over a reasonable period of time not to exceed 40 years. 
D)  increase an expense account entirely in the year in which acquired. 
A)  not be amortized. 
B)  be reported on the statement of retained earnings in the year in which acquired. 
C)  be amortized over a reasonable period of time not to exceed 40 years. 
D)  increase an expense account entirely in the year in which acquired.

Question 14

Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?

Accepted Answer

A)  Depreciation expense is a negative amount in the Investing Activities section and therefore is a positive amount in the Operating Activities section. 
B)  Depreciation provides cash and therefore must be added to net income. 
C)  Depreciation was deducted in arriving at net income on the accrual basis of accounting; however, it did not require the use of cash. 
D)  Depreciation reduced the book value of plant assets and, therefore, must be reported as an investing activity. 
A)  Depreciation expense is a negative amount in the Investing Activities section and therefore is a positive amount in the Operating Activities section. 
B)  Depreciation provides cash and therefore must be added to net income. 
C)  Depreciation was deducted in arriving at net income on the accrual basis of accounting; however, it did not require the use of cash. 
D)  Depreciation reduced the book value of plant assets and, therefore, must be reported as an investing activity.

Question 15

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Accepted Answer

A) True 
 B)False

Question 16

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are __________________________________ and
__________________________________

Accepted Answer

Purchase of plant as

Question 17

Select the account that would be increased to show each of the following costs.
-The sales taxes paid related to a machine purchased.

Accepted Answer

A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account 
A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account

Question 18

Sara's Designs purchased equipment at the beginning of 2015 for $11,000. Sara decided to depreciate the equipment over a 5-year period using the straight-line method. Sara estimated the equipment's residual value at $1,000. The estimated fair market value at the end of 2015 was $10,000. Which of the following statements is
Correct concerning Sara's financial statements at December 31, 2015?

Accepted Answer

A)  The book value of the equipment is $7,200. 
B)  The book value of the equipment is $9,000. 
C)  The total accumulated depreciation is $2,200. 
D)  The equipment will be reported on the balance sheet at it fair market value of $10,000. 
A)  The book value of the equipment is $7,200. 
B)  The book value of the equipment is $9,000. 
C)  The total accumulated depreciation is $2,200. 
D)  The equipment will be reported on the balance sheet at it fair market value of $10,000.

Question 19

Several years ago, Laurel Company purchased a patent and has since been amortizing it on a straight-line basis over its estimated useful life. The company's comparative balance sheets contain the following items:
   A. How much amortization expense was recorded during 2015?
B. How is the amortization expense reported on the company's statement of cash flows?
C. How much was the original cost of the patent?
D. How many years has the patent been amortized?

Accepted Answer

A. $70,000 - $52,500 = $17,500
B. If the

Question 20

All of the following statements are true except:

Accepted Answer

A)  IFRS requires that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. 
B)  The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually. 
C)  IFRS does not have a specific rule that requires residual value and asset life to be reviewed annually. 
D)  The FASB generally requires operating assets to be recorded at acquisition cost, less depreciation, and the assets' values are not changed to reflect their fair market values or selling prices. 
A)  IFRS requires that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. 
B)  The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually. 
C)  IFRS does not have a specific rule that requires residual value and asset life to be reviewed annually. 
D)  The FASB generally requires operating assets to be recorded at acquisition cost, less depreciation, and the assets' values are not changed to reflect their fair market values or selling prices.

Acquisition costs are also known as replacement costs.

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: -Depreciation expense

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale?

Shidan Apartments purchased an apartment building to rent to university students on November 18, 2015. The following costs were incurred during 2015, before the tenants moved in:

For each of the following items, indicate whether each would be treated as a -Costs incurred prior to using the asset, such as costs to prepare the asset for use, installation costs.

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?

Lenders are interested in the value of operating assets as collateral when making lending decisions.

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are and

Select the account that would be increased to show each of the following costs. -The sales taxes paid related to a machine purchased.

All of the following statements are true except:

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

Acquisition costs are also known as replacement costs.

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: -Depreciation expense

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale?

Shidan Apartments purchased an apartment building to rent to university students on November 18, 2015. The following costs were incurred during 2015, before the tenants moved in:

For each of the following items, indicate whether each would be treated as a -Costs incurred prior to using the asset, such as costs to prepare the asset for use, installation costs.

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?

Lenders are interested in the value of operating assets as collateral when making lending decisions.

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are __________________________________ and __________________________________

Select the account that would be increased to show each of the following costs. -The sales taxes paid related to a machine purchased.

All of the following statements are true except:

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

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are and