Question 1

With respect to depreciation policies, the principle of consistency means:

Accepted Answer

A)  a company should disclose on the ﬁnancial statements the depreciation method for all its capital assets. 
B)  a company should use the same depreciation method from year to year for a given capital asset. 
C)  a company should use the same depreciation methods as other companies in the same industry. 
D)  a company should use the same depreciation method in computing depreciation expense on all its assets. 
A)  a company should disclose on the ﬁnancial statements the depreciation method for all its capital assets. 
B)  a company should use the same depreciation method from year to year for a given capital asset. 
C)  a company should use the same depreciation methods as other companies in the same industry. 
D)  a company should use the same depreciation method in computing depreciation expense on all its assets.

Question 2

Pied Piper Pies has been in business 8 years with 4 stores in the San Francisco bay area. Their local reputation for making savory pies such as curried potatoes is well recognized. A national food distributor has offered to purchase the company. Pied Piper has $1.2 million of assets on their books but those assets have $1.5 million in value at fair market value and $.3 million of liabilities. If the distributor offers to buy Pied Piper for $3.5 million and assume the liabilities of Pied Piper. How much goodwill, if any, is included in the purchase price?

Accepted Answer

$2.3 million ($3.5 m

Question 3

Airbury Company acquired manufacturing equipment at an invoice price of $80,000 and paid $750 to have it delivered to the factory. $400 was spent to repair a door that was damaged while installing the equipment. At what amount should this equipment be recorded on the company's books?

Accepted Answer

A)  $80,000 
B)  $80,400 
C)  $80,750 
D)  $81,150 
A)  $80,000 
B)  $80,400 
C)  $80,750 
D)  $81,150

Question 4

Chamber Company purchased a truck on January 1, 20X1, at a cash cost of $10,600. The estimated residual value was $400 and the estimated useful life 4 years. The company uses straight-line depreciation computed monthly. On July 1, 20X4, the company sold the truck for $1,700 cash.
A. What was the depreciation expense amount per month?
B. What was the amount of accumulated depreciation at July 1, 20X4?
C. Give the required journal entries on the date of disposal, July 1, 20X4. (Assume no 20X4 depreciation had yet been recorded).

Accepted Answer

A.($10,000 - 400)/48 - $212.50 per month

Question 5

In January, 20X7, Barton Iron Ore purchased a mineral mine for $5.1 million with removable ore estimated by geological surveys at 2 million tons. The property has an estimated value of $300,000 after the iron ore has been extracted. The company incurred $1.5 million of development costs preparing the mine for production. During 20X7, 400,000 tons were sold. What is the amount of depletion that Pratt should expense for 20X7?

Accepted Answer

A)  $1,200,000 
B)  $1,320,000 
C)  $1,020,000 
D)  $960,000 
A)  $1,200,000 
B)  $1,320,000 
C)  $1,020,000 
D)  $960,000

Question 6

WD Company reports proﬁt in 20X3 of $1,300 million and depreciation expense of $851 million. They also report investment in new theme parks, resorts, and other property of $2,134 million for 20X3. Which of the following disclosures would appear on their statement of cash ﬂows?

Accepted Answer

A)  Depreciation of $851 million would be deducted from proﬁt under operating activities and the $2,134 million would be added under investing activities. 
B)  Depreciation of $851 million would be added to proﬁt under operating activities and the $2,134 million would be added under investing activities. 
C)  Depreciation of $851 million would be added to proﬁt under operating activities and the $2,134 million would be deducted under investing activities. 
D)  Depreciation of $851 million would be deducted from proﬁt under operating activities and the $2,134 million would be deducted under investing activities. 
A)  Depreciation of $851 million would be deducted from proﬁt under operating activities and the $2,134 million would be added under investing activities. 
B)  Depreciation of $851 million would be added to proﬁt under operating activities and the $2,134 million would be added under investing activities. 
C)  Depreciation of $851 million would be added to proﬁt under operating activities and the $2,134 million would be deducted under investing activities. 
D)  Depreciation of $851 million would be deducted from proﬁt under operating activities and the $2,134 million would be deducted under investing activities.

Question 7

On January 1, 20X3, Enid Corporation purchased a patent from another company for $190,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. The amortization expense for 20X3 is:

Accepted Answer

A)  $19,000. 
B)  $12,667. 
C)  $85,000. 
D)  $68,000. 
A)  $19,000. 
B)  $12,667. 
C)  $85,000. 
D)  $68,000.

Question 8

The apportionment of the acquisition cost of an operational asset to future periods in which the beneﬁts contribute to earning revenue must be which of the following?

Accepted Answer

A)  Random. 
B)  Impaired. 
C)  Revised annually. 
D)  Rational. 
A)  Random. 
B)  Impaired. 
C)  Revised annually. 
D)  Rational.

Question 9

Which of the following statements is false?

Accepted Answer

A)  A company can change the method used for depreciating assets if the change can be justified because it provides a better measure of the company's profit. 
B)  A change in estimate requires the company to recalculate and restate all the prior years' estimates of depreciation and adjust the impact on the statement of financial position and income statement. 
C)  A change in estimate is frequently necessary because the estimates of useful lives or residual values may change over time because conditions change. 
D)  Either a change in estimate or a change in method can only be justified on the basis it provides a better measure of profit. 
A)  A company can change the method used for depreciating assets if the change can be justified because it provides a better measure of the company's profit. 
B)  A change in estimate requires the company to recalculate and restate all the prior years' estimates of depreciation and adjust the impact on the statement of financial position and income statement. 
C)  A change in estimate is frequently necessary because the estimates of useful lives or residual values may change over time because conditions change. 
D)  Either a change in estimate or a change in method can only be justified on the basis it provides a better measure of profit.

Question 10

When an asset is retired, the amount of the gain is equal to:

Accepted Answer

A)  the asset's carrying amount. 
B)  the difference between the carrying amount and the proceeds. 
C)  the accumulated depreciation. 
D)  the amount of cash received. 
A)  the asset's carrying amount. 
B)  the difference between the carrying amount and the proceeds. 
C)  the accumulated depreciation. 
D)  the amount of cash received.

Question 11

Belton Corporation uses straight-line depreciation and, for assets acquired during the fiscal year, follows the policy of recording a full month's depreciation for all assets acquired on or before the 15th of the month. No depreciation is recorded for the month if an asset is acquired after the 15th. On May 22, 20X1, Belton purchased a car that cost $22,000 which had an estimated residual value of $2,000 and an estimated useful life of five years. To the nearest dollar, what is the amount of depreciation that should be recorded on the car for 20X1?

Accepted Answer

A)  $2,000 
B)  $2,333 
C)  $2,667 
D)  $4,000 
A)  $2,000 
B)  $2,333 
C)  $2,667 
D)  $4,000

Question 12

Barton Iron Ore, owns the following equipment: $$\begin{array} { | l | r | } 
\hline \text { Carrying amount } & \$ 80,000 \
\hline \text { Value in use } & \$ 68,000 \
\hline \text { Fair value less selling costs } & \$ 72,000 \
\hline
\end{array}$$ The recoverable amount to be used in the determination of impairment is

Accepted Answer

A)  $80,000 
B)  $68,000 
C)  $72,000 
D)  Cannot be determined 
A)  $80,000 
B)  $68,000 
C)  $72,000 
D)  Cannot be determined

Question 13

An asset is always sold for its residual value at the end of the asset's useful life.

Accepted Answer

A) True 
 B)False

Question 14

On January 1, 20X1, Reagan Company purchased a machine. The price quoted by the seller was $10,000 less 2% if paid within 15 days of the invoice date. Paid with cash were: transportation, $300; installation, $600; and sales tax, $200. Give the entry to record the acquisition assuming the discount was taken.

Accepted Answer

Please review the following information:

Question 15

A loss on disposal of an asset is reported in the ﬁnancial statements

Accepted Answer

A)  in the operating section of the income statement. 
B)  in the non-operating section of the income statement. 
C)  as part of Other Comprehensive Income. 
D)  as part of Cost of Goods Sold. 
A)  in the operating section of the income statement. 
B)  in the non-operating section of the income statement. 
C)  as part of Other Comprehensive Income. 
D)  as part of Cost of Goods Sold.

Question 16

Impairment losses on goodwill are never reversed.

Accepted Answer

A) True 
 B)False

Question 17

In accounting for tangible operational assets, the continuity assumption is important because of which of the following?

Accepted Answer

A)  It helps a company decide whether to use straight-line depreciation or an accelerated depreciation method. 
B)  It justiﬁes depreciating the asset over its expected useful life, without anticipating that the business will liquidate in the near future. 
C)  It provides justiﬁcation for including residual values in calculating depreciation. 
D)  It is consistent with maintaining assets in the accounting records at market value rather than acquisition cost. 
A)  It helps a company decide whether to use straight-line depreciation or an accelerated depreciation method. 
B)  It justiﬁes depreciating the asset over its expected useful life, without anticipating that the business will liquidate in the near future. 
C)  It provides justiﬁcation for including residual values in calculating depreciation. 
D)  It is consistent with maintaining assets in the accounting records at market value rather than acquisition cost.

Question 18

Which of the following costs would be excluded from the acquisition cost of equipment purchased from a supplier?

Accepted Answer

A)  Cost to install the equipment. 
B)  The cost of freight paid to get the equipment to our factory. 
C)  The cost to widen an entrance in the building to bring the equipment into the facilities. 
D)  A purchases discount offered by the supplier. 
A)  Cost to install the equipment. 
B)  The cost of freight paid to get the equipment to our factory. 
C)  The cost to widen an entrance in the building to bring the equipment into the facilities. 
D)  A purchases discount offered by the supplier.

Question 19

Here are selected 20X3 transactions of Avery Corporation. $$\begin{array} { | l | l | } 
\hline \text { Jan. 1 } & \begin{array} { l } 
\text { Retired a piece of machinery that had been purchased ten years earlier on January 1. } \
\text { The machine cost } \$ 62,000 \text { and had a useful life of } 10 \text { years with no residual value. }
\end{array} \
\hline \text { June 30 } & \begin{array} { l } 
\text { Sold a computer that was purchased on January 1, 20X1. The computer cost } \$ 39,000 \
\text { and had a useful of } 3 \text { years with no residual value. The computer was sold for } \$ 5,000 \
\text { cash. }
\end{array} \
\hline \text { Dec. 31 } & \begin{array} { l } 
\text { Sold a delivery truck for } \$ 9,000 \text { cash. The truck cost } \$ 25,000 \text { when it was purchased } \
\text { on January 1, 20X0, and was depreciated based on a 5-year useful life with a } \$ 3,000 \
\text { residual value. }
\end{array} \
\hline
\end{array}$$ Avery Corporation uses straight-line depreciation. Required: Prepare all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable.

Accepted Answer

Please review the following information

Question 20

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

Accepted Answer

A) True 
 B)False

With respect to depreciation policies, the principle of consistency means:

Airbury Company acquired manufacturing equipment at an invoice price of $80,000 and paid $750 to have it delivered to the factory. $400 was spent to repair a door that was damaged while installing the equipment. At what amount should this equipment be recorded on the company's books?

WD Company reports proﬁt in 20X3 of $1,300 million and depreciation expense of $851 million. They also report investment in new theme parks, resorts, and other property of $2,134 million for 20X3. Which of the following disclosures would appear on their statement of cash ﬂows?

On January 1, 20X3, Enid Corporation purchased a patent from another company for $190,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. The amortization expense for 20X3 is:

The apportionment of the acquisition cost of an operational asset to future periods in which the beneﬁts contribute to earning revenue must be which of the following?

Which of the following statements is false?

When an asset is retired, the amount of the gain is equal to:

Barton Iron Ore, owns the following equipment: Carrying amount \ 80,000 Value in use \ 68,000 Fair value less selling costs \ 72,000 The recoverable amount to be used in the determination of impairment is

An asset is always sold for its residual value at the end of the asset's useful life.

A loss on disposal of an asset is reported in the ﬁnancial statements

Impairment losses on goodwill are never reversed.

In accounting for tangible operational assets, the continuity assumption is important because of which of the following?

Which of the following costs would be excluded from the acquisition cost of equipment purchased from a supplier?

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Fraud, Internal Control, and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

With respect to depreciation policies, the principle of consistency means:

Airbury Company acquired manufacturing equipment at an invoice price of $80,000 and paid $750 to have it delivered to the factory. $400 was spent to repair a door that was damaged while installing the equipment. At what amount should this equipment be recorded on the company's books?

WD Company reports proﬁt in 20X3 of $1,300 million and depreciation expense of $851 million. They also report investment in new theme parks, resorts, and other property of $2,134 million for 20X3. Which of the following disclosures would appear on their statement of cash ﬂows?

On January 1, 20X3, Enid Corporation purchased a patent from another company for $190,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. The amortization expense for 20X3 is:

The apportionment of the acquisition cost of an operational asset to future periods in which the beneﬁts contribute to earning revenue must be which of the following?

Which of the following statements is false?

When an asset is retired, the amount of the gain is equal to:

Barton Iron Ore, owns the following equipment: Carrying amount \ 80,000 Value in use \ 68,000 Fair value less selling costs \ 72,000 The recoverable amount to be used in the determination of impairment is

An asset is always sold for its residual value at the end of the asset's useful life.

A loss on disposal of an asset is reported in the ﬁnancial statements

Impairment losses on goodwill are never reversed.

In accounting for tangible operational assets, the continuity assumption is important because of which of the following?

Which of the following costs would be excluded from the acquisition cost of equipment purchased from a supplier?

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Fraud, Internal Control, and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement Cash Flows

Measuring and Evaluating Financial Performance

Filters