Question 1

Costs incurred to keep assets in normal operating condition are called revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 2

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 3

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 4

All of the following statements are true except:

Accepted Answer

A)  International accounting standards are more flexible in allowing the use of fair market values for intangible assets. 
B)  FASB standards require all research and development costs to be expensed. 
C)  IFRS requires all research and development costs to be expensed. 
D)  Under IFRS, fair market values for intangibles require an active market. 
A)  International accounting standards are more flexible in allowing the use of fair market values for intangible assets. 
B)  FASB standards require all research and development costs to be expensed. 
C)  IFRS requires all research and development costs to be expensed. 
D)  Under IFRS, fair market values for intangibles require an active market.

Question 5

Select the account that would be increased to show each of the following costs.
-The transportation charges related to the acquisition costs of a new piece of machinery

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 6

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Accepted Answer

A) True 
 B)False

Question 7

Research and development costs are

Accepted Answer

A)  treated as an expense when incurred. 
B)  capitalized but not amortized. 
C)  capitalized and amortized over the periods that will probably benefit from the research and development. 
D)  included with the cost of the patent resulting from the research and development. 
A)  treated as an expense when incurred. 
B)  capitalized but not amortized. 
C)  capitalized and amortized over the periods that will probably benefit from the research and development. 
D)  included with the cost of the patent resulting from the research and development.

Question 8

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

Accepted Answer

A) True 
 B)False

Question 9

Blanket Airlines acquires a new aircraft.It has an estimated life of 15 years and should be used for 15,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

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 10

How should intangible assets be disclosed on the balance sheet?

Accepted Answer

A)  As a reduction of stockholders' equity 
B)  At cost in the current assets section 
C)  at the estimated market value at the balance sheet date 
D)  Net of the costs already amortized 
A)  As a reduction of stockholders' equity 
B)  At cost in the current assets section 
C)  at the estimated market value at the balance sheet date 
D)  Net of the costs already amortized

Question 11

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 12

Wexford Co.purchased a new delivery truck at the beginning of 2016.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2016.The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017.The number of expected miles over five years is 100,000.
​
-Refer to information for Wexford Co. ​
What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation over the 5-year life of the truck?

Accepted Answer

A)  $ -0- 
B)  $ 7,000 
C)  $37,000 
D)  $ 6,000 
A)  $ -0- 
B)  $ 7,000 
C)  $37,000 
D)  $ 6,000

Question 13

On January 2, 2016, 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 14

The income statement of Hope Market, Inc.reported a gain from the sale of land.How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

Accepted Answer

A)  The entire proceeds from the sale of the land are reported as an investing activity. 
B)  The gain on the sale of land is reported in the Investing Activities category as a cash flow from the sale of land. 
C)  The entire proceeds from the sale of the land are reported as an operating activity. 
D)  The cash received from the sale of land is reported in the financing activity category as a cash flow from the sale of land. 
A)  The entire proceeds from the sale of the land are reported as an investing activity. 
B)  The gain on the sale of land is reported in the Investing Activities category as a cash flow from the sale of land. 
C)  The entire proceeds from the sale of the land are reported as an operating activity. 
D)  The cash received from the sale of land is reported in the financing activity category as a cash flow from the sale of land.

Question 15

Flexibility in valuation of property, plant, and equipment under IFRS may cause problems with comparability of one company with another.

Accepted Answer

A) True 
 B)False

Question 16

Calhoun, Inc.purchased equipment at the beginning of 2016 for $180,000.Calhoun decided to depreciate the equipment over a 5-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Rose's financial statements at December 31, 2016?

Accepted Answer

A)  The book value of the equipment is $108,000. 
B)  The book value of the equipment is $72,000. 
C)  The total accumulated depreciation is $90,000. 
D)  Depreciation expense for 2016 is $60,000. 
A)  The book value of the equipment is $108,000. 
B)  The book value of the equipment is $72,000. 
C)  The total accumulated depreciation is $90,000. 
D)  Depreciation expense for 2016 is $60,000.

Question 17

On January 1, 2016, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Accepted Answer

A)  Assets and Stockholders' Equity increase $1,000. 
B)  Assets decrease and Stockholders' Equity increases $3,000. 
C)  Assets and Stockholders' Equity decrease $1,000. 
D)  Assets and Stockholders' Equity decrease $3,000. 
A)  Assets and Stockholders' Equity increase $1,000. 
B)  Assets decrease and Stockholders' Equity increases $3,000. 
C)  Assets and Stockholders' Equity decrease $1,000. 
D)  Assets and Stockholders' Equity decrease $3,000.

Question 18

Acquisition cost should not include expenditures unrelated to the acquisition, like repair costs for damages incurred during installation, or costs incurred after the asset was installed and use begun.

Accepted Answer

A) True 
 B)False

Question 19

Given below are several accounts and balances from Carrier Corporation's 2016 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. $\begin{array}{lr}
\text { Depreciation expense } & \$ 59,800 \
\text { Accumulated depreciation } & 257,400 \
\text { Gain on sale of plant asset } & 19,500 \
\text { Building } & 585,000 \
\text { Land } & 120,000 \
\text { Cash received from sale of plant asset } & 52,000
\end{array}$

$\begin{array}{l}
\text { BALANCE SHEET } &
\text { INCOME STATEMENT }\\hline
\end{array}$ ​

Accepted Answer

The answer of Given below are several accounts and balances...

Question 20

Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017.
​
-Refer to the information for Norwood, Inc, ​
Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017?

Accepted Answer

A)  Straight-line 
B)  Double-declining-balance 
C)  Units-of-production 
D)  All methods produce the same expense in 2017. 
A)  Straight-line 
B)  Double-declining-balance 
C)  Units-of-production 
D)  All methods produce the same expense in 2017.

Costs incurred to keep assets in normal operating condition are called revenue expenditures.

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

A company should choose a depreciation method that

All of the following statements are true except:

Select the account that would be increased to show each of the following costs. -The transportation charges related to the acquisition costs of a new piece of machinery

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Research and development costs are

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

Blanket Airlines acquires a new aircraft.It has an estimated life of 15 years and should be used for 15,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

How should intangible assets be disclosed on the balance sheet?

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?

On January 2, 2016, 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?

The income statement of Hope Market, Inc.reported a gain from the sale of land.How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

Flexibility in valuation of property, plant, and equipment under IFRS may cause problems with comparability of one company with another.

On January 1, 2016, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Acquisition cost should not include expenditures unrelated to the acquisition, like repair costs for damages incurred during installation, or costs incurred after the asset was installed and use begun.

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 True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters

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

Costs incurred to keep assets in normal operating condition are called revenue expenditures.

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

A company should choose a depreciation method that

All of the following statements are true except:

Select the account that would be increased to show each of the following costs. -The transportation charges related to the acquisition costs of a new piece of machinery

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Research and development costs are

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

Blanket Airlines acquires a new aircraft.It has an estimated life of 15 years and should be used for 15,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

How should intangible assets be disclosed on the balance sheet?

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?

On January 2, 2016, 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?

The income statement of Hope Market, Inc.reported a gain from the sale of land.How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

Flexibility in valuation of property, plant, and equipment under IFRS may cause problems with comparability of one company with another.

On January 1, 2016, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Acquisition cost should not include expenditures unrelated to the acquisition, like repair costs for damages incurred during installation, or costs incurred after the asset was installed and use begun.

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 True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters