Question 1

Depletion is:

Accepted Answer

A) Also called amortization. 
B) An increase in the value of a natural resource when incurred. 
C) Calculated using the double-declining balance method. 
D) The process of allocating the cost of natural resources to the period when it is consumed. 
E) The process of allocating the cost of intangibles to periods when they are used. 
A) Also called amortization. 
B) An increase in the value of a natural resource when incurred. 
C) Calculated using the double-declining balance method. 
D) The process of allocating the cost of natural resources to the period when it is consumed. 
E) The process of allocating the cost of intangibles to periods when they are used.

Question 2

Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000. Gaston asks $30,000 for the equipment but sells the equipment for $26,000. Which of the following would not be part of the journal entry to record the disposal of the equipment?

Accepted Answer

A) Credit Gain on Disposal of Equipment $3,500. 
B) Debit Accumulated Depreciation $61,000. 
C) Debit Loss on Disposal of Equipment $3,500. 
D) Credit Equipment $90,500. 
E) Debit Cash $26,000. 
A) Credit Gain on Disposal of Equipment $3,500. 
B) Debit Accumulated Depreciation $61,000. 
C) Debit Loss on Disposal of Equipment $3,500. 
D) Credit Equipment $90,500. 
E) Debit Cash $26,000.

Question 3

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Accepted Answer

A) True 
 B)False

Question 4

Holding a copyright:

Accepted Answer

A) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
B) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years. 
C) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
E) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years. 
A) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
B) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years. 
C) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
E) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years.

Question 5

Duncan reported net sales of $2,523 million and average total assets of $1,476 million. Its total asset turnover equals 1.71.

Accepted Answer

A) True 
 B)False

Question 6

Land improvements are:

Accepted Answer

A) Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. 
B) Expensed in the period incurred. 
C) Included in the cost of the land account. 
D) Assets that increase the usefulness of land, and like land, are not depreciated. 
E) Also called basket purchases. 
A) Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. 
B) Expensed in the period incurred. 
C) Included in the cost of the land account. 
D) Assets that increase the usefulness of land, and like land, are not depreciated. 
E) Also called basket purchases.

Question 7

Revenue expenditures:

Accepted Answer

A) Are debited to asset accounts when incurred. 
B) Extend the asset's useful life. 
C) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities. 
D) Are known as balance sheet expenditures because they relate to plant assets. 
E) Substantially benefit future periods. 
A) Are debited to asset accounts when incurred. 
B) Extend the asset's useful life. 
C) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities. 
D) Are known as balance sheet expenditures because they relate to plant assets. 
E) Substantially benefit future periods.

Question 8

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

Accepted Answer

A) True 
 B)False

Question 9

A total asset turnover ratio of 3.5 indicates that:

Accepted Answer

A) For every $1 in assets, the firm earned $3.50 in net income. 
B) For every $1 in assets, the firm produced $3.50 in net sales during the period. 
C) For every $1 in assets, the firm paid $3.50 in expenses during the period. 
D) For every $1 in assets, the firm earned gross profit of $3.50 during the period. 
E) For every $1 in sales, the firm acquired $3.50 in assets during the period. 
A) For every $1 in assets, the firm earned $3.50 in net income. 
B) For every $1 in assets, the firm produced $3.50 in net sales during the period. 
C) For every $1 in assets, the firm paid $3.50 in expenses during the period. 
D) For every $1 in assets, the firm earned gross profit of $3.50 during the period. 
E) For every $1 in sales, the firm acquired $3.50 in assets during the period.

Question 10

Owning a patent:

Accepted Answer

A) Gives the owner exclusive rights to manufacture and sell a patented item or to use a process for 20 years. 
B) Gives the owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
C) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years. 
D) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
E) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
A) Gives the owner exclusive rights to manufacture and sell a patented item or to use a process for 20 years. 
B) Gives the owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
C) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years. 
D) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
E) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately.

Question 11

Total asset cost plus depreciation expense equals book value.

Accepted Answer

A) True 
 B)False

Question 12

The term, obsolescence, as it relates to the useful life of an asset, refers to:

Accepted Answer

A) The end of an asset's useful life. 
B) Intangible assets that have been fully amortized. 
C) The insufficient capacity of a company's plant assets to meet the company's productive demands. 
D) A plant asset that is no longer useful in producing goods and services with a competitive advantage. 
E) An asset's salvage value becoming less than its replacement cost. 
A) The end of an asset's useful life. 
B) Intangible assets that have been fully amortized. 
C) The insufficient capacity of a company's plant assets to meet the company's productive demands. 
D) A plant asset that is no longer useful in producing goods and services with a competitive advantage. 
E) An asset's salvage value becoming less than its replacement cost.

Question 13

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market)values.

Accepted Answer

A) True 
 B)False

Question 14

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the double-declining-balance method.

Accepted Answer

A) $17,400. 
B) $20,880. 
C) $16,000. 
D) $18,379. 
E) $16,900. 
A) $17,400. 
B) $20,880. 
C) $16,000. 
D) $18,379. 
E) $16,900.

Question 15

Ordinary repairs meet all of the following criteria except:

Accepted Answer

A) Are necessary if an asset is to perform to expectations over its useful life. 
B) Include cleaning, lubricating, and normal adjusting. 
C) Extend the useful life of an asset beyond its original estimate. 
D) Are treated as expenses. 
E) Are expenditures to keep an asset in normal operating condition. 
A) Are necessary if an asset is to perform to expectations over its useful life. 
B) Include cleaning, lubricating, and normal adjusting. 
C) Extend the useful life of an asset beyond its original estimate. 
D) Are treated as expenses. 
E) Are expenditures to keep an asset in normal operating condition.

Question 16

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

Accepted Answer

A) Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900. 
B) Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900. 
C) Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000. 
D) Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900. 
E) Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000. 
A) Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900. 
B) Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900. 
C) Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000. 
D) Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900. 
E) Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.

Question 17

If a machine is damaged during unpacking, the repairs are added to its cost.

Accepted Answer

A) True 
 B)False

Question 18

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

Accepted Answer

A) A gain on sale of $2,000. 
B) A loss on sale of $45,000. 
C) A loss on sale of $5,000. 
D) A loss on sale of $2,000. 
E) A gain on sale of $5,000. 
A) A gain on sale of $2,000. 
B) A loss on sale of $45,000. 
C) A loss on sale of $5,000. 
D) A loss on sale of $2,000. 
E) A gain on sale of $5,000.

Question 19

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

Accepted Answer

A) True 
 B)False

Question 20

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S. federal income tax laws and may be used for financial reporting.

Accepted Answer

A) True 
 B)False

Depletion is:

Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000. Gaston asks $30,000 for the equipment but sells the equipment for $26,000. Which of the following would not be part of the journal entry to record the disposal of the equipment?

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Holding a copyright:

Duncan reported net sales of $2,523 million and average total assets of $1,476 million. Its total asset turnover equals 1.71.

Land improvements are:

Revenue expenditures:

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

A total asset turnover ratio of 3.5 indicates that:

Owning a patent:

Total asset cost plus depreciation expense equals book value.

The term, obsolescence, as it relates to the useful life of an asset, refers to:

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market)values.

Ordinary repairs meet all of the following criteria except:

If a machine is damaged during unpacking, the repairs are added to its cost.

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S. federal income tax laws and may be used for financial reporting.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters

Exam 10: Plant Assets, Natural Resoures, and Intangibles

Depletion is:

Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000. Gaston asks $30,000 for the equipment but sells the equipment for $26,000. Which of the following would not be part of the journal entry to record the disposal of the equipment?

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Holding a copyright:

Duncan reported net sales of $2,523 million and average total assets of $1,476 million. Its total asset turnover equals 1.71.

Land improvements are:

Revenue expenditures:

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

A total asset turnover ratio of 3.5 indicates that:

Owning a patent:

Total asset cost plus depreciation expense equals book value.

The term, obsolescence, as it relates to the useful life of an asset, refers to:

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market)values.

Ordinary repairs meet all of the following criteria except:

If a machine is damaged during unpacking, the repairs are added to its cost.

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S. federal income tax laws and may be used for financial reporting.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters