Question 1

Many companies use accelerated depreciation in computing taxable income because:

Accepted Answer

A) it reports higher net income in the early years as compared to other methods. 
B) it is required by IFRS. 
C) it is easier than straight-line deprecation. 
D) it postpones tax payments until later years because it lowers taxable income in the early years. 
A) it reports higher net income in the early years as compared to other methods. 
B) it is required by IFRS. 
C) it is easier than straight-line deprecation. 
D) it postpones tax payments until later years because it lowers taxable income in the early years.

Question 2

Which of the following characteristics is not associated with intangible assets?

Accepted Answer

A) Lack physical substance. 
B) Those with an unlimited life are not amortized. 
C) Usually have a residual value. 
D) Amortization expense is reported each period for those with finite lives. 
A) Lack physical substance. 
B) Those with an unlimited life are not amortized. 
C) Usually have a residual value. 
D) Amortization expense is reported each period for those with finite lives.

Question 3

City View Limousine depreciates its stretch Hummer using the units-of-production depreciation method and bases usage on the miles driven per year.The estimated useful life of the vehicle is 250,000 miles.The vehicle was purchased for $115,000 and is not expected to have any residual value at the end of its life.It was driven a total of 40,000 miles during the first year of its useful life and 25,000 miles during the second year.What is the amount of Accumulated Depreciation recorded on the vehicle at the end of those two years?

Accepted Answer

A) $70,769 
B) $29,900 
C) $46,000 
D) $18,400 
A) $70,769 
B) $29,900 
C) $46,000 
D) $18,400

Question 4

The book value of a depreciable asset can never be less than its:

Accepted Answer

A) historical cost. 
B) market value. 
C) capitalized cost. 
D) residual value. 
A) historical cost. 
B) market value. 
C) capitalized cost. 
D) residual value.

Question 5

California Spas recently learned that the value of its building required a write-down because of the discovery that it was on an earthquake fault line.The building cost $2,000,000 and has a book value of $1,570,000 before the discovery and the fair value was $975,000 after the discovery.Which of the following journal entries will be used to record the asset impairment?

Accepted Answer

A) Debit Impairment Loss and credit Accumulated Depreciation for $595,000 
B) Debit Depreciation Expense and credit Building for $595,000 
C) Debit Accumulated Depreciation and credit Building for $430,000 
D) Debit Impairment Loss and credit Accumulated Depreciation for $430,000 
A) Debit Impairment Loss and credit Accumulated Depreciation for $595,000 
B) Debit Depreciation Expense and credit Building for $595,000 
C) Debit Accumulated Depreciation and credit Building for $430,000 
D) Debit Impairment Loss and credit Accumulated Depreciation for $430,000

Question 6

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Accepted Answer

A) reduces book value below residual value. 
B) does not consider the useful life of the asset in the calculation of depreciation. 
C) cannot be used for tax purposes. 
D) uses book value instead of depreciable cost in the calculation of depreciation. 
A) reduces book value below residual value. 
B) does not consider the useful life of the asset in the calculation of depreciation. 
C) cannot be used for tax purposes. 
D) uses book value instead of depreciable cost in the calculation of depreciation.

Question 7

Which of the following is the depreciation formula for the revision of an estimate?

Accepted Answer

A) (Book value − New residual value)× (1 ÷ Remaining life) 
B) (Cost − residual value)× (1 ÷ Life) 
C) (Book value − new residual value)× (1 ÷ Life) 
D) (Cost − residual value)× (1 ÷ Remaining life) 
A) (Book value − New residual value)× (1 ÷ Remaining life) 
B) (Cost − residual value)× (1 ÷ Life) 
C) (Book value − new residual value)× (1 ÷ Life) 
D) (Cost − residual value)× (1 ÷ Remaining life)

Question 8

Which account is credited in a journal entry to record depreciation on machinery?

Accepted Answer

A) Depreciation Expense 
B) Accumulated Depreciation 
C) Machinery 
D) Cash 
A) Depreciation Expense 
B) Accumulated Depreciation 
C) Machinery 
D) Cash

Question 9

If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

Accepted Answer

A) Net income is overstated. 
B) Revenues are understated. 
C) Expenses are overstated. 
D) Assets are overstated. 
A) Net income is overstated. 
B) Revenues are understated. 
C) Expenses are overstated. 
D) Assets are overstated.

Question 10

If net sales revenue and the average book value of fixed assets both rise 5%:

Accepted Answer

A) the fixed asset turnover ratio will rise. 
B) the fixed asset turnover ratio will fall. 
C) the fixed asset turnover ratio will stay the same. 
D) the impact on the fixed asset turnover ratio cannot be determined since the beginning values are unknown. 
A) the fixed asset turnover ratio will rise. 
B) the fixed asset turnover ratio will fall. 
C) the fixed asset turnover ratio will stay the same. 
D) the impact on the fixed asset turnover ratio cannot be determined since the beginning values are unknown.

Question 11

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Accepted Answer

A) $5,000,000 to purchase the land. 
B) $5,000 paid to Jack Mogul for a title search. 
C) $50,000 paid to cut down timber to make way for ski runs 
D) $7,500 paid for a party to celebrate the grand opening. 
A) $5,000,000 to purchase the land. 
B) $5,000 paid to Jack Mogul for a title search. 
C) $50,000 paid to cut down timber to make way for ski runs 
D) $7,500 paid for a party to celebrate the grand opening.

Question 12

Which of the following companies (all U.S.companies except for Lego,which is a Danish company)would most likely capitalize the costs of developing a prototype?

Accepted Answer

A) Lego 
B) Southwest Airlines 
C) Walmart 
D) Cedar Fair 
A) Lego 
B) Southwest Airlines 
C) Walmart 
D) Cedar Fair

Question 13

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Accepted Answer

A) assets to be understated. 
B) cash to be overstated. 
C) retained earnings to be overstated. 
D) liabilities to be understated. 
A) assets to be understated. 
B) cash to be overstated. 
C) retained earnings to be overstated. 
D) liabilities to be understated.

Question 14

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

Accepted Answer

A) The carrying value of long-lived assets is $240,000. 
B) The market value of long-lived assets is $350,000. 
C) The carrying value of long-lived assets is $350,000. 
D) The market value of long-lived assets is $460,000. 
A) The carrying value of long-lived assets is $240,000. 
B) The market value of long-lived assets is $350,000. 
C) The carrying value of long-lived assets is $350,000. 
D) The market value of long-lived assets is $460,000.

Question 15

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Accepted Answer

A) November 1,2018. 
B) October 1,2018. 
C) October 21,2018. 
D) January 1,2019. 
A) November 1,2018. 
B) October 1,2018. 
C) October 21,2018. 
D) January 1,2019.

Question 16

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

Accepted Answer

A) expensed. 
B) capitalized. 
C) a liability. 
D) an addition to contributed capital. 
A) expensed. 
B) capitalized. 
C) a liability. 
D) an addition to contributed capital.

Question 17

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

Accepted Answer

A) 2 years. 
B) 5 years. 
C) 7 years. 
D) 10 years. 
A) 2 years. 
B) 5 years. 
C) 7 years. 
D) 10 years.

Question 18

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

Accepted Answer

A) 6 
B) 7 
C) 12 
D) 0 
A) 6 
B) 7 
C) 12 
D) 0

Question 19

On January 1,2018,Manzanita Manufacturing purchased a machine for $345,000 with an expected life of 5 years and a residual value of $37,500.In addition,the company paid delivery costs of $3,000 and $12,000 to have the machine installed.Manzanita uses the double-declining-balance method of depreciation. What is the depreciation expense for the first year using the double-declining-balance method?

Accepted Answer

A) $132,000 
B) $144,000 
C) $132,500 
D) $138,000 
A) $132,000 
B) $144,000 
C) $132,500 
D) $138,000

Question 20

The balance sheet category "Intangible Assets" includes:

Accepted Answer

A) patents,trademarks,and franchises. 
B) equipment,land,and buildings. 
C) investments,receivables,and cash. 
D) goodwill,inventory,and vehicles. 
A) patents,trademarks,and franchises. 
B) equipment,land,and buildings. 
C) investments,receivables,and cash. 
D) goodwill,inventory,and vehicles.

Many companies use accelerated depreciation in computing taxable income because:

Which of the following characteristics is not associated with intangible assets?

The book value of a depreciable asset can never be less than its:

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Which of the following is the depreciation formula for the revision of an estimate?

Which account is credited in a journal entry to record depreciation on machinery?

If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

If net sales revenue and the average book value of fixed assets both rise 5%:

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Which of the following companies (all U.S.companies except for Lego,which is a Danish company)would most likely capitalize the costs of developing a prototype?

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

The balance sheet category "Intangible Assets" includes:

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

Many companies use accelerated depreciation in computing taxable income because:

Which of the following characteristics is not associated with intangible assets?

The book value of a depreciable asset can never be less than its:

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Which of the following is the depreciation formula for the revision of an estimate?

Which account is credited in a journal entry to record depreciation on machinery?

If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

If net sales revenue and the average book value of fixed assets both rise 5%:

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Which of the following companies (all U.S.companies except for Lego,which is a Danish company)would most likely capitalize the costs of developing a prototype?

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

The balance sheet category "Intangible Assets" includes:

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