Question 1

The right to exclude others from making or using an invention is a:

Accepted Answer

A) patent. 
B) copyright. 
C) franchise. 
D) licensing right. 
A) patent. 
B) copyright. 
C) franchise. 
D) licensing right.

Question 2

EBITDA is equal to which of the following?

Accepted Answer

A) Net income − Interest expense − Income tax expense − Depreciation expense − Amortization expense 
B) Net income + Interest expense + Income tax expense + Depreciation expense + Amortization Expense 
C) Operating income − Interest expense − Income tax expense 
D) Operating income + Depreciation expense + Amortization expense 
A) Net income − Interest expense − Income tax expense − Depreciation expense − Amortization expense 
B) Net income + Interest expense + Income tax expense + Depreciation expense + Amortization Expense 
C) Operating income − Interest expense − Income tax expense 
D) Operating income + Depreciation expense + Amortization expense

Question 3

A company should depreciate a long-lived tangible asset to:

Accepted Answer

A) match part of the cost of the asset with the revenues generated by the asset. 
B) record the decrease in the market value of the asset as it gets older. 
C) report less income and pay less income tax. 
D) decrease the total value of its assets,so that it can justify buying new ones. 
A) match part of the cost of the asset with the revenues generated by the asset. 
B) record the decrease in the market value of the asset as it gets older. 
C) report less income and pay less income tax. 
D) decrease the total value of its assets,so that it can justify buying new ones.

Question 4

Tolleson Enterprises buys a computer system for $2,400,000 and pays the vendor $160,000 to install the computer system.Tolleson should record:

Accepted Answer

A) $2,400,000 as equipment and $160,000 as expenses. 
B) $2,560,000 as expenses. 
C) $2,240,000 as equipment and the rest as expenses. 
D) $2,560,000 as equipment. 
A) $2,400,000 as equipment and $160,000 as expenses. 
B) $2,560,000 as expenses. 
C) $2,240,000 as equipment and the rest as expenses. 
D) $2,560,000 as equipment.

Question 5

A company purchased a computer system on January 2,2018 for $1,600,000.The company used the straight-line depreciation method with an estimated useful life of 6 years and a residual value of $130,000.The company prepares financial statements at December 31. Assume the company decides to sell the computer system on July 1,2020 for $1,000,000.Which of the following statements about the journal entry (or entries)required on July 1 is not correct?

Accepted Answer

A) The depreciation expense must be recorded for 6 months,January 1 to July 1. 
B) The Equipment asset account must be credited for $1,600,000 to record the sale. 
C) Accumulated Depreciation is debited for $612,500 in the entry to record the sale. 
D) The loss on the sale is $12,500. 
A) The depreciation expense must be recorded for 6 months,January 1 to July 1. 
B) The Equipment asset account must be credited for $1,600,000 to record the sale. 
C) Accumulated Depreciation is debited for $612,500 in the entry to record the sale. 
D) The loss on the sale is $12,500.

Question 6

During 2018,Ambiance Company reported net revenue of $3,600,000.The company reported net fixed assets of $710,000 on January 1,2018 and net fixed assets of $890,000 on December 31,2018.
Required:
Part a.Calculate the fixed asset turnover ratio.
Part b.Assume the 2018 fixed asset turnover ratio was lower than the 2017 ratio.Explain how an analyst might interpret this change.
Part c.Describe at least one circumstance that might have caused the fixed asset turnover ratio to decline and be consistent with bad news.
Part d.Describe at least one circumstance that might have caused the fixed asset turnover ratio to decline and yet be consistent with good news.

Accepted Answer

Part a
Fixed asset turnover ratio = Net

Question 7

The formula for calculating depreciation expense using the double declining-balance method involves which of the following?

Accepted Answer

A) Multiplying a declining percentage by a constant book value. 
B) Multiplying a constant percentage by the previous year's depreciation expense. 
C) An increasing amount of depreciation expense each period. 
D) Not utilizing the residual value in calculating each year's depreciation expense. 
A) Multiplying a declining percentage by a constant book value. 
B) Multiplying a constant percentage by the previous year's depreciation expense. 
C) An increasing amount of depreciation expense each period. 
D) Not utilizing the residual value in calculating each year's depreciation expense.

Question 8

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed.This fraud had many effects on WorldCom's balance sheet.Which of the following does not describe one of the misstatements that resulted on the company's balance sheet?

Accepted Answer

A) Total assets were too high. 
B) Retained earnings were too high. 
C) The balance sheet was in balance. 
D) Total liabilities were too low. 
A) Total assets were too high. 
B) Retained earnings were too high. 
C) The balance sheet was in balance. 
D) Total liabilities were too low.

Question 9

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

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 10

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

Accepted Answer

A) When a company expenses the entire cost of a long-lived asset in the first year of use. 
B) When a company receives free publicity in return for charitable contributions. 
C) A tax law dealing with how companies can depreciate their assets. 
D) The acquisition cost of an asset minus its accumulated depreciation. 
E) When a company expenses the cost of a long-lived asset by a constant annual amount.
F)The exclusive right to sell or use a product or process that is granted to encourage innovation.
G)Net income plus interest,taxes,depreciation and amortization expenses.
H)Tangible long-lived assets.
I)An intangible asset that represents the value of unidentifiable assets acquired.
J)Names or images that appear with a ® or TM.
K)What a company expects to receive when an asset is disposed of at the end of its useful life.
L)Assets whose values do not change over time.
M)When a company allocates the cost of a long-lived asset at a higher rate in the first years of use.
N)The estimated total use a company expects to receive from an asset. 
A) When a company expenses the entire cost of a long-lived asset in the first year of use. 
B) When a company receives free publicity in return for charitable contributions. 
C) A tax law dealing with how companies can depreciate their assets. 
D) The acquisition cost of an asset minus its accumulated depreciation. 
E) When a company expenses the cost of a long-lived asset by a constant annual amount.
F)The exclusive right to sell or use a product or process that is granted to encourage innovation.
G)Net income plus interest,taxes,depreciation and amortization expenses.
H)Tangible long-lived assets.
I)An intangible asset that represents the value of unidentifiable assets acquired.
J)Names or images that appear with a ® or TM.
K)What a company expects to receive when an asset is disposed of at the end of its useful life.
L)Assets whose values do not change over time.
M)When a company allocates the cost of a long-lived asset at a higher rate in the first years of use.
N)The estimated total use a company expects to receive from an asset.

Question 11

The calculation for depletion of natural resources is similar to the calculation for depreciation when the units-of-production method is used.

Accepted Answer

A) True 
 B)False

Question 12

Augusta Hayward Co.purchased a building for $800,000.At the end of the current year,the book value of the building is $440,000 and its fair value is $360,000.Assuming the building is rented to a tenant,the sum of future cash flows from the rental of the building is expected to be $320,000.What is the amount of impairment loss?

Accepted Answer

A) $360,000 
B) $40,000 
C) $80,000 
D) $240,000 
A) $360,000 
B) $40,000 
C) $80,000 
D) $240,000

Question 13

Which of the following statements about depreciation methods is not correct?

Accepted Answer

A) The amount of depreciation expense recorded in each year of an asset's life depends on the method that is used. 
B) Different depreciation methods can be used for different classes of assets provided the methods are used consistently over time so that financial statement users can compare results across periods. 
C) At the end of an asset's life,after it has been fully depreciated,the total amount of depreciation will equal the asset's depreciable cost. 
D) The amount of net income reported each year will be the same regardless of the depreciation method used. 
A) The amount of depreciation expense recorded in each year of an asset's life depends on the method that is used. 
B) Different depreciation methods can be used for different classes of assets provided the methods are used consistently over time so that financial statement users can compare results across periods. 
C) At the end of an asset's life,after it has been fully depreciated,the total amount of depreciation will equal the asset's depreciable cost. 
D) The amount of net income reported each year will be the same regardless of the depreciation method used.

Question 14

Match each asset with the appropriate category.
-Office computer

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 15

A trucking company sold its fleet of trucks for $55,000.The trucks originally cost $1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date of disposal.What gain or loss did the trucking company record when it sold the fleet of trucks?

Accepted Answer

A) Gain of $86,000. 
B) Gain of $55,000. 
C) Loss of $55,000. 
D) Loss of $86,000. 
A) Gain of $86,000. 
B) Gain of $55,000. 
C) Loss of $55,000. 
D) Loss of $86,000.

Question 16

Which of the following does not lead to a revision of an estimate of a company's depreciation expense?

Accepted Answer

A) A change in the estimated useful life. 
B) A change in the estimated residual value. 
C) Extraordinary repairs that significantly extend the asset's usefulness. 
D) A change in the estimated maintenance costs. 
A) A change in the estimated useful life. 
B) A change in the estimated residual value. 
C) Extraordinary repairs that significantly extend the asset's usefulness. 
D) A change in the estimated maintenance costs.

Question 17

Why can depreciation expense be a different amount each year using the units-of-production method?

Accepted Answer

A) The method calculates expense based on the relationship between each year's output and total estimated output. 
B) The method calculates expense based on cost divided by the expected useful life. 
C) The units-of-production method is an accelerated depreciation method. 
D) The units-of-production method is based on the difference in the appraisal value of the asset from one year to the next. 
A) The method calculates expense based on the relationship between each year's output and total estimated output. 
B) The method calculates expense based on cost divided by the expected useful life. 
C) The units-of-production method is an accelerated depreciation method. 
D) The units-of-production method is based on the difference in the appraisal value of the asset from one year to the next.

Question 18

Accumulated Depreciation is classified as a(n):

Accepted Answer

A) expense account. 
B) contra-asset account. 
C) liability account. 
D) stockholders' equity account. 
A) expense account. 
B) contra-asset account. 
C) liability account. 
D) stockholders' equity account.

Question 19

When a company records depreciation it debits:

Accepted Answer

A) a liability account and credits Depreciation Expense. 
B) Depreciation Expense and credits Cash. 
C) Depreciation Expense and credits a contra-asset account. 
D) a long-lived tangible asset account and credits Depreciation Expense. 
A) a liability account and credits Depreciation Expense. 
B) Depreciation Expense and credits Cash. 
C) Depreciation Expense and credits a contra-asset account. 
D) a long-lived tangible asset account and credits Depreciation Expense.

Question 20

Transport Inc.has a fleet of 10 large trucks that cost a total of $1,410,000.The fleet is expected to be driven a total of 1,000,000 miles during its estimated 10-year life and be sold for $141,000 at the end of its useful life.If the fleet was driven 125,000 miles during the current year,what is the amount of depreciation that would be calculated using the straight-line and units-of-production methods,respectively?

Accepted Answer

A) $158,625 and $141,000 
B) $141,000 and $158,625 
C) $126,900 and $176,250 
D) $126,900 and $158,625 
A) $158,625 and $141,000 
B) $141,000 and $158,625 
C) $126,900 and $176,250 
D) $126,900 and $158,625

The right to exclude others from making or using an invention is a:

EBITDA is equal to which of the following?

A company should depreciate a long-lived tangible asset to:

Tolleson Enterprises buys a computer system for $2,400,000 and pays the vendor $160,000 to install the computer system.Tolleson should record:

The formula for calculating depreciation expense using the double declining-balance method involves which of the following?

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed.This fraud had many effects on WorldCom's balance sheet.Which of the following does not describe one of the misstatements that resulted on the company's balance sheet?

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

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

The calculation for depletion of natural resources is similar to the calculation for depreciation when the units-of-production method is used.

Which of the following statements about depreciation methods is not correct?

Match each asset with the appropriate category. -Office computer

A trucking company sold its fleet of trucks for $55,000.The trucks originally cost $1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date of disposal.What gain or loss did the trucking company record when it sold the fleet of trucks?

Which of the following does not lead to a revision of an estimate of a company's depreciation expense?

Why can depreciation expense be a different amount each year using the units-of-production method?

Accumulated Depreciation is classified as a(n):

When a company records depreciation it debits:

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

The right to exclude others from making or using an invention is a:

EBITDA is equal to which of the following?

A company should depreciate a long-lived tangible asset to:

Tolleson Enterprises buys a computer system for $2,400,000 and pays the vendor $160,000 to install the computer system.Tolleson should record:

The formula for calculating depreciation expense using the double declining-balance method involves which of the following?

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed.This fraud had many effects on WorldCom's balance sheet.Which of the following does not describe one of the misstatements that resulted on the company's balance sheet?

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

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

The calculation for depletion of natural resources is similar to the calculation for depreciation when the units-of-production method is used.

Which of the following statements about depreciation methods is not correct?

Match each asset with the appropriate category. -Office computer

A trucking company sold its fleet of trucks for $55,000.The trucks originally cost $1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date of disposal.What gain or loss did the trucking company record when it sold the fleet of trucks?

Which of the following does not lead to a revision of an estimate of a company's depreciation expense?

Why can depreciation expense be a different amount each year using the units-of-production method?

Accumulated Depreciation is classified as a(n):

When a company records depreciation it debits:

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