Question 1

The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not classified as plant assets?

Accepted Answer

A) Buildings. 
B) Patent. 
C) Land improvements. 
D) Land. 
E) Machinery and equipment. 
A) Buildings. 
B) Patent. 
C) Land improvements. 
D) Land. 
E) Machinery and equipment.

Question 3

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Accepted Answer

A) Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500. 
B) Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100. 
C) Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100. 
D) Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500. 
E) Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500. 
A) Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500. 
B) Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100. 
C) Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100. 
D) Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500. 
E) Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.

Question 4

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the book value of the machine at the end of the second year?

Accepted Answer

A) $81,600. 
B) $190,000. 
C) $180,000. 
D) $144,400. 
E) $108,400. 
A) $81,600. 
B) $190,000. 
C) $180,000. 
D) $144,400. 
E) $108,400.

Question 5

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

Accepted Answer

A) A debit to Accumulated Depreciation of $47,000. 
B) A credit to Accumulated Depreciation of $40,000. 
C) A debit to Cash of $42,000. 
D) A credit to Gain on Sale of $2,000. 
E) A credit to Machinery of $47,000. 
A) A debit to Accumulated Depreciation of $47,000. 
B) A credit to Accumulated Depreciation of $40,000. 
C) A debit to Cash of $42,000. 
D) A credit to Gain on Sale of $2,000. 
E) A credit to Machinery of $47,000.

Question 6

The specific meaning of goodwill in accounting is:

Accepted Answer

A) The cost of developing, maintaining, or enhancing the value of a trademark. 
B) The amount by which a company's value exceeds the value of its individual assets and liabilities. 
C) The support of the board of directors for the operating decisions of management. 
D) Long term assets held as investment. 
E) Rights granted an entity to deliver a product or service under specified conditions. 
A) The cost of developing, maintaining, or enhancing the value of a trademark. 
B) The amount by which a company's value exceeds the value of its individual assets and liabilities. 
C) The support of the board of directors for the operating decisions of management. 
D) Long term assets held as investment. 
E) Rights granted an entity to deliver a product or service under specified conditions.

Question 7

Depletion is the process of allocating the cost of natural resources to periods when they are consumed.

Accepted Answer

A) True 
 B)False

Question 8

Merchant Company purchased property for a building site. The costs associated with the property were: $\begin{array} { l  }
 \text { Purchase price}&\$185,000 \
 \text {Real estate commissions }& 15,000\
 \text {Legal fees }&700 \
 \text {Expenses of clearing the land }&2,000 \
 \text { Expenses to remove old building}&4,000 \
\end{array}$
 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

Accepted Answer

A) $200,000 to Land; $6,700 to Building. 
B) $185,000 to Land; $21,700 to Building. 
C) $200,700 to Land; $6,000 to Building. 
D) $206,700 to Land; $0 to Building. 
E) $187,700 to Land; $19,000 to Building. 
A) $200,000 to Land; $6,700 to Building. 
B) $185,000 to Land; $21,700 to Building. 
C) $200,700 to Land; $6,000 to Building. 
D) $206,700 to Land; $0 to Building. 
E) $187,700 to Land; $19,000 to Building.

Question 9

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

Accepted Answer

A) True 
 B)False

Question 10

Accounting for the exchange of assets depends on whether the transaction has commercial substance; commercial substance implies that it alters the company's future cash flows.

Accepted Answer

A) True 
 B)False

Question 11

Explain the purpose of and method of depreciation for partial years.

Accepted Answer

Partial years' depreciation is often req

Question 12

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the second year?

Accepted Answer

A) $48,133. 
B) $23,750. 
C) $86,133. 
D) $45,600. 
E) $81,600. 
A) $48,133. 
B) $23,750. 
C) $86,133. 
D) $45,600. 
E) $81,600.

Question 13

Capital expenditures, also called balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period.

Accepted Answer

A) True 
 B)False

Question 14

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Accepted Answer

A) True 
 B)False

Question 15

Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000. The new sailboat had an invoice price of
$270,000. Hunter received a trade in allowance of $70,000 on the old sailboat, which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat. If this transaction has commercial substance, what amount of gain or loss should be recorded on this exchange?

Accepted Answer

A) $10,000 gain. 
B) $0 gain or loss. 
C) $60,000 loss. 
D) $10,000 loss. 
E) $70,000 loss. 
A) $10,000 gain. 
B) $0 gain or loss. 
C) $60,000 loss. 
D) $10,000 loss. 
E) $70,000 loss.

Question 16

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year's depreciation is:

Accepted Answer

A) Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000. 
B) Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000. 
C) Debit Depreciation Expense $2,000, credit Office Equipment $2,000. 
D) Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143. 
E) Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143. 
A) Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000. 
B) Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000. 
C) Debit Depreciation Expense $2,000, credit Office Equipment $2,000. 
D) Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143. 
E) Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.

Question 17

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Define plant assets and identify the four primary issues in accounting for them.

Accepted Answer

Plant assets are tangible assets used in

Question 19

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

Accepted Answer

A) $544. 
B) $1,200. 
C) $1,224. 
D) $600. 
E) $2,176. 
A) $544. 
B) $1,200. 
C) $1,224. 
D) $600. 
E) $2,176.

Question 20

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

Accepted Answer

A) True 
 B)False

The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

Which of the following is not classified as plant assets?

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

The specific meaning of goodwill in accounting is:

Depletion is the process of allocating the cost of natural resources to periods when they are consumed.

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

Accounting for the exchange of assets depends on whether the transaction has commercial substance; commercial substance implies that it alters the company's future cash flows.

Explain the purpose of and method of depreciation for partial years.

Capital expenditures, also called balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period.

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year's depreciation is:

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Define plant assets and identify the four primary issues in accounting for them.

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

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

The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

Which of the following is not classified as plant assets?

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

The specific meaning of goodwill in accounting is:

Depletion is the process of allocating the cost of natural resources to periods when they are consumed.

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

Accounting for the exchange of assets depends on whether the transaction has commercial substance; commercial substance implies that it alters the company's future cash flows.

Explain the purpose of and method of depreciation for partial years.

Capital expenditures, also called balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period.

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year's depreciation is:

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Define plant assets and identify the four primary issues in accounting for them.

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

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