Question 1

Which of the following statements about capitalized costs and expenses is correct?

Accepted Answer

A) Capitalized costs decrease stockholders' equity. 
B) Expenses increase stockholders' equity. 
C) Capitalized costs increase long-lived assets. 
D) Expenses increase assets. 
A) Capitalized costs decrease stockholders' equity. 
B) Expenses increase stockholders' equity. 
C) Capitalized costs increase long-lived assets. 
D) Expenses increase assets.

Question 2

Ordinary repairs and maintenance:

Accepted Answer

A) are part of the asset cost of equipment and facilities. 
B) are recorded as expenses. 
C) are always recorded as liabilities. 
D) improve the asset beyond the current accounting period. 
A) are part of the asset cost of equipment and facilities. 
B) are recorded as expenses. 
C) are always recorded as liabilities. 
D) improve the asset beyond the current accounting period.

Question 3

Match each asset with the appropriate category.
-Warehouse

Accepted Answer

A) I - Intangible long-lived asset 
B) N - Not a long-lived asset 
C) T - Tangible long-lived asset 
A) I - Intangible long-lived asset 
B) N - Not a long-lived asset 
C) T - Tangible long-lived asset

Question 4

On January 1,Weldon Weston Co.purchased equipment for $250,000.It has an estimated useful life of five years and its residual value is $25,000.The company has a calendar year-end.Using the straight-line method,depreciation expense for the first year of its life equals:

Accepted Answer

A) $45,000. 
B) $50,000. 
C) $90,000. 
D) $100,000. 
A) $45,000. 
B) $50,000. 
C) $90,000. 
D) $100,000.

Question 5

Tangible assets are first recorded at:

Accepted Answer

A) all costs to acquire them and prepare them for use. 
B) current market value or resale value. 
C) the amount of cash paid for them. 
D) cost minus residual (or salvage)value. 
A) all costs to acquire them and prepare them for use. 
B) current market value or resale value. 
C) the amount of cash paid for them. 
D) cost minus residual (or salvage)value.

Question 6

Which of the following assets would be amortized?

Accepted Answer

A) Land improvements 
B) Trademarks 
C) Goodwill 
D) Franchise 
A) Land improvements 
B) Trademarks 
C) Goodwill 
D) Franchise

Question 7

Assuming two companies use the same accounting methods,other things being equal,the company with a higher fixed asset turnover ratio:

Accepted Answer

A) has a greater amount invested in fixed assets than a company with a lower fixed asset turnover ratio. 
B) has less invested in fixed assets than a company with a lower fixed asset turnover ratio. 
C) generates less sales revenue than a company with a lower fixed asset turnover ratio. 
D) makes better use of its fixed assets to generate revenues than a company with a lower fixed asset turnover ratio. 
A) has a greater amount invested in fixed assets than a company with a lower fixed asset turnover ratio. 
B) has less invested in fixed assets than a company with a lower fixed asset turnover ratio. 
C) generates less sales revenue than a company with a lower fixed asset turnover ratio. 
D) makes better use of its fixed assets to generate revenues than a company with a lower fixed asset turnover ratio.

Question 8

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected residual value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Accepted Answer

A) gain of $6,000. 
B) gain of $4,000. 
C) loss of $4,000. 
D) loss of $6,000. 
A) gain of $6,000. 
B) gain of $4,000. 
C) loss of $4,000. 
D) loss of $6,000.

Question 9

Ms.Gardenia,the bookkeeper,made a mistake and recorded depreciation expense for the year twice.This error will cause:

Accepted Answer

A) assets to be overstated. 
B) liabilities to be understated. 
C) stockholders' equity to be understated. 
D) stockholders' equity to be overstated. 
A) assets to be overstated. 
B) liabilities to be understated. 
C) stockholders' equity to be understated. 
D) stockholders' equity to be overstated.

Question 10

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following items does not affect the calculation of depreciation expense?

Accepted Answer

A) Economic benefits generated by the asset. 
B) Useful life of the asset. 
C) Residual value of the asset. 
D) Capitalized cost of the asset. 
A) Economic benefits generated by the asset. 
B) Useful life of the asset. 
C) Residual value of the asset. 
D) Capitalized cost of the asset.

Question 12

Match each term with the appropriate definition.Not all definitions will be used.
-Copyright

Accepted Answer

A) Net sales revenue divided by average net fixed assets. 
B) Costs that are expensed in the period incurred. 
C) A contractual agreement that allows limited permission for use of a property. 
D) Net income divided by average total assets. 
E) An estimate of how long a tangible asset will last before it physically wears out.
F)Asset cost minus residual value.
G)Costs that are recorded as revenues.
H)An estimate of how long a company will use a particular asset.
I)Allocating the cost of tangible assets over their limited useful life.
J)A cumulative record of depreciation expense,accumulated depreciation and book value.
K)Asset cost minus accumulated depreciation.
L)Grants the exclusive right to sell or use a creative work.
M)The method whereby different parts of an asset may be depreciated over different useful lives under IFRS.
N)The principle that companies wish to pay the lowest possible tax at the last possible time.
O)Allocating the cost of intangible assets over their limited useful life. 
A) Net sales revenue divided by average net fixed assets. 
B) Costs that are expensed in the period incurred. 
C) A contractual agreement that allows limited permission for use of a property. 
D) Net income divided by average total assets. 
E) An estimate of how long a tangible asset will last before it physically wears out.
F)Asset cost minus residual value.
G)Costs that are recorded as revenues.
H)An estimate of how long a company will use a particular asset.
I)Allocating the cost of tangible assets over their limited useful life.
J)A cumulative record of depreciation expense,accumulated depreciation and book value.
K)Asset cost minus accumulated depreciation.
L)Grants the exclusive right to sell or use a creative work.
M)The method whereby different parts of an asset may be depreciated over different useful lives under IFRS.
N)The principle that companies wish to pay the lowest possible tax at the last possible time.
O)Allocating the cost of intangible assets over their limited useful life.

Question 13

Riley,Inc.began the year with Property and Equipment costing $1,020,000 and accumulated depreciation of $180,000.The only change affecting the long-lived assets account during the year is the $82,500 of depreciation expense that must be recorded for the year.What is the amount of Property and Equipment,net,to be reported on the balance sheet at the end of the year?

Accepted Answer

A) $1,020,000 
B) $937,500 
C) $757,500 
D) $840,000 
A) $1,020,000 
B) $937,500 
C) $757,500 
D) $840,000

Question 14

The fair value of land owned by a company has increased this year.The journal entry to record this increase in fair value would include:

Accepted Answer

A) a credit to Gain on Asset Value Increase. 
B) a debit to Land. 
C) a credit to Non-Impairment of Asset. 
D) nothing;no entry would be made according to GAAP. 
A) a credit to Gain on Asset Value Increase. 
B) a debit to Land. 
C) a credit to Non-Impairment of Asset. 
D) nothing;no entry would be made according to GAAP.

Question 15

Tonto Company purchased property for $280,000.The property included a building,equipment and land.The building was appraised at $173,600,the land at $126,000,and the equipment at $50,400.What is the amount of cost to be allocated to the building in the accounting records?

Accepted Answer

A) $93,333 
B) $138,880 
C) $173,600 
D) $280,000 
A) $93,333 
B) $138,880 
C) $173,600 
D) $280,000

Question 16

Loss on Impairment is a(n):

Accepted Answer

A) operating expense that appears on the balance sheet. 
B) reduction to depreciation expense for the year. 
C) contra-revenue account. 
D) operating expense that appears on the income statement. 
A) operating expense that appears on the balance sheet. 
B) reduction to depreciation expense for the year. 
C) contra-revenue account. 
D) operating expense that appears on the income statement.

Question 17

Match each term with the appropriate definition.Not all definitions will be used.
-Revenue expenditures

Accepted Answer

A) Net sales revenue divided by average net fixed assets. 
B) Costs that are expensed in the period incurred. 
C) A contractual agreement that allows limited permission for use of a property. 
D) Net income divided by average total assets. 
E) An estimate of how long a tangible asset will last before it physically wears out.
F)Asset cost minus residual value.
G)Costs that are recorded as revenues.
H)An estimate of how long a company will use a particular asset.
I)Allocating the cost of tangible assets over their limited useful life.
J)A cumulative record of depreciation expense,accumulated depreciation and book value.
K)Asset cost minus accumulated depreciation.
L)Grants the exclusive right to sell or use a creative work.
M)The method whereby different parts of an asset may be depreciated over different useful lives under IFRS.
N)The principle that companies wish to pay the lowest possible tax at the last possible time.
O)Allocating the cost of intangible assets over their limited useful life. 
A) Net sales revenue divided by average net fixed assets. 
B) Costs that are expensed in the period incurred. 
C) A contractual agreement that allows limited permission for use of a property. 
D) Net income divided by average total assets. 
E) An estimate of how long a tangible asset will last before it physically wears out.
F)Asset cost minus residual value.
G)Costs that are recorded as revenues.
H)An estimate of how long a company will use a particular asset.
I)Allocating the cost of tangible assets over their limited useful life.
J)A cumulative record of depreciation expense,accumulated depreciation and book value.
K)Asset cost minus accumulated depreciation.
L)Grants the exclusive right to sell or use a creative work.
M)The method whereby different parts of an asset may be depreciated over different useful lives under IFRS.
N)The principle that companies wish to pay the lowest possible tax at the last possible time.
O)Allocating the cost of intangible assets over their limited useful life.

Question 18

At the beginning of 2017,your company buys a $30,000 piece of equipment that it expects to use for 4 years.The equipment has an estimated residual value of $2,000.The company expects to produce a total of 200,000 units.Actual production is as follows: 44,000 units in 2017,53,000 units in 2018,51,000 units in 2019,and 52,000 units in 2020.
Required:
Part a.Determine the depreciable cost.
Part b.Calculate the depreciation expense per year under the straight-line method.
Part c.Use the straight-line method to prepare a depreciation schedule (that shows the Depreciation Expense,Accumulated Depreciation,and Net Book Value by year).
Part d.Calculate the depreciation rate per unit under the units-of-production method.
Part e.Use the units-of-production method to prepare a depreciation schedule (that shows the Depreciation Expense,Accumulated Depreciation,and Net Book Value by year).

Accepted Answer

Part a
Depreciable cost = Cost − Residua

Question 19

Maxim,Inc.changed its depreciation method from units-of-production to straight-line.Maxim is:

Accepted Answer

A) only allowed to make this change if it gets permission from the IRS. 
B) only allowed to make this change if it can show the change results in a lower net income. 
C) not allowed to change depreciation methods. 
D) only allowed to make this change if it can show the change results in a better measure of the business's income. 
A) only allowed to make this change if it gets permission from the IRS. 
B) only allowed to make this change if it can show the change results in a lower net income. 
C) not allowed to change depreciation methods. 
D) only allowed to make this change if it can show the change results in a better measure of the business's income.

Question 20

Crown King Burgers purchased new soda machines for $900,000 and pays $100,000 for installation costs.One-half of the total cost or $500,000 is paid in cash;a note in the amount of $500,000 is signed.How should the company record this transaction?

Accepted Answer

A) Debit Cash for $500,000,debit Notes Payable for $500,000,and credit Equipment for $1,000,000. 
B) Debit Equipment for $1,000,000,credit Cash for $500,000,and credit Notes Payable for $500,000. 
C) Debit cash for $500,000,debit Notes Payable for $500,000,credit Equipment for $900,000,and credit Operating Expenses for $100,000. 
D) Debit Equipment for $900,000,debit Operating Expenses for $100,000,credit cash for $500,000,and credit Notes Payable for $500,000. 
A) Debit Cash for $500,000,debit Notes Payable for $500,000,and credit Equipment for $1,000,000. 
B) Debit Equipment for $1,000,000,credit Cash for $500,000,and credit Notes Payable for $500,000. 
C) Debit cash for $500,000,debit Notes Payable for $500,000,credit Equipment for $900,000,and credit Operating Expenses for $100,000. 
D) Debit Equipment for $900,000,debit Operating Expenses for $100,000,credit cash for $500,000,and credit Notes Payable for $500,000.

Which of the following statements about capitalized costs and expenses is correct?

Ordinary repairs and maintenance:

Match each asset with the appropriate category. -Warehouse

On January 1,Weldon Weston Co.purchased equipment for $250,000.It has an estimated useful life of five years and its residual value is $25,000.The company has a calendar year-end.Using the straight-line method,depreciation expense for the first year of its life equals:

Tangible assets are first recorded at:

Which of the following assets would be amortized?

Assuming two companies use the same accounting methods,other things being equal,the company with a higher fixed asset turnover ratio:

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected residual value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Ms.Gardenia,the bookkeeper,made a mistake and recorded depreciation expense for the year twice.This error will cause:

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

Which of the following items does not affect the calculation of depreciation expense?

Match each term with the appropriate definition.Not all definitions will be used. -Copyright

The fair value of land owned by a company has increased this year.The journal entry to record this increase in fair value would include:

Tonto Company purchased property for $280,000.The property included a building,equipment and land.The building was appraised at $173,600,the land at $126,000,and the equipment at $50,400.What is the amount of cost to be allocated to the building in the accounting records?

Loss on Impairment is a(n):

Match each term with the appropriate definition.Not all definitions will be used. -Revenue expenditures

Maxim,Inc.changed its depreciation method from units-of-production to straight-line.Maxim is:

Crown King Burgers purchased new soda machines for $900,000 and pays $100,000 for installation costs.One-half of the total cost or $500,000 is paid in cash;a note in the amount of $500,000 is signed.How should the company record this transaction?

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

Receivables,Bad Debt Expense,and Interest Revenue

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 9: Long-Lived Tangible and Intangible Assets

Which of the following statements about capitalized costs and expenses is correct?

Ordinary repairs and maintenance:

Match each asset with the appropriate category. -Warehouse

On January 1,Weldon Weston Co.purchased equipment for $250,000.It has an estimated useful life of five years and its residual value is $25,000.The company has a calendar year-end.Using the straight-line method,depreciation expense for the first year of its life equals:

Tangible assets are first recorded at:

Which of the following assets would be amortized?

Assuming two companies use the same accounting methods,other things being equal,the company with a higher fixed asset turnover ratio:

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected residual value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Ms.Gardenia,the bookkeeper,made a mistake and recorded depreciation expense for the year twice.This error will cause:

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

Which of the following items does not affect the calculation of depreciation expense?

Match each term with the appropriate definition.Not all definitions will be used. -Copyright

The fair value of land owned by a company has increased this year.The journal entry to record this increase in fair value would include:

Tonto Company purchased property for $280,000.The property included a building,equipment and land.The building was appraised at $173,600,the land at $126,000,and the equipment at $50,400.What is the amount of cost to be allocated to the building in the accounting records?

Loss on Impairment is a(n):

Match each term with the appropriate definition.Not all definitions will be used. -Revenue expenditures

Maxim,Inc.changed its depreciation method from units-of-production to straight-line.Maxim is:

Crown King Burgers purchased new soda machines for $900,000 and pays $100,000 for installation costs.One-half of the total cost or $500,000 is paid in cash;a note in the amount of $500,000 is signed.How should the company record this transaction?

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

Receivables,Bad Debt Expense,and Interest Revenue

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters