Question 1

Which of the following statements about asset impairment is false?

Accepted Answer

A) Asset impairment loss is the difference between an asset's net book value and its estimated future cash flows. 
B) If an asset is impaired, a loss would be recognized in the period it can be estimated. 
C) Impairment will lead to writing down the asset's net book value. 
D) Asset impairment occurs when the estimated future cash flows are less than the asset's net book value. 
A) Asset impairment loss is the difference between an asset's net book value and its estimated future cash flows. 
B) If an asset is impaired, a loss would be recognized in the period it can be estimated. 
C) Impairment will lead to writing down the asset's net book value. 
D) Asset impairment occurs when the estimated future cash flows are less than the asset's net book value.

Question 2

Which of the following statements is incorrect with respect to the sale of a depreciable asset?

Accepted Answer

A) A gain occurs when the selling price exceeds book value. 
B) A sale for a gain results in an increase in total assets. 
C) A sale for a loss results in an increase in total assets. 
D) A loss occurs when the selling price is less than book value. 
A) A gain occurs when the selling price exceeds book value. 
B) A sale for a gain results in an increase in total assets. 
C) A sale for a loss results in an increase in total assets. 
D) A loss occurs when the selling price is less than book value.

Question 3

When determining cash flow from operations using the direct method,depreciation and amortization expense are deducted from net income.

Accepted Answer

A) True 
 B)False

Question 4

Bennett Corporation sold a piece of equipment on June 30,2012 for $50,000 cash.The equipment had been purchased on January 1,2008 for $150,000.It had an estimated useful life of 6 years and a $30,000 residual value.Bennett Corp.has been using the straight-line method of depreciation and has a year-end of December 31st.Prepare any necessary journal entries on June 30,2012 assuming that 2012 depreciation expense has not been recorded.

Accepted Answer

To prepare the necessary journal entries

Question 5

Lue Company sold used equipment for $450,000 cash.The equipment was purchased 5 years ago for a cost of $800,000.It has been depreciated using the straight-line method over an estimated useful life of 10 years with an estimated residual value of $50,000.Record the journal entry at the end of year five for the asset's disposal assuming the fifth year's depreciation had been recorded.

Accepted Answer

To record the journal entry for the disp

Question 6

On August 1,Red Company purchased computer equipment for $10,000 cash and also gave 100 shares of White common stock held by Red Company as an investment.The White common stock cost Red Company $5,000 and on August 1 had a market value of $4,200.Installation costs were $700 and shipping costs were $500.What amount should be the total amount debited to the computer equipment account?

Accepted Answer

A) $14,200 
B) $15,000 
C) $15,400 
D) $16,200 
A) $14,200 
B) $15,000 
C) $15,400 
D) $16,200

Question 7

On January 1,2010 equipment was purchased for $80,000; the equipment's estimated residual value is $15,000 and its estimated useful life is 8 years.During 2010,the depreciation expense under the double-declining balance method is $16,250.

Accepted Answer

A) True 
 B)False

Question 8

Waterloo Corporation purchased factory equipment for a cost of $1,800,000.It cost $100,000 for its delivery,$220,000 for its installation and modifications to the production building,and $60,000 in interest costs on borrowed funds used to acquire the equipment.What is the acquisition cost of the new equipment?

Accepted Answer

The acquisition cost of the new equipmen

Question 9

Ordinary repairs and maintenance costs are incurred to maintain a long-lived asset and are expensed as incurred.

Accepted Answer

A) True 
 B)False

Question 10

Amanda Company purchased a computer that cost $10,000.It had an estimated useful life of five years and a residual value of $1,000.The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,000 cash.Which of the following statements correctly describes the computer sale?

Accepted Answer

A) Assets and stockholders' equity both increase by $5,000. 
B) Assets decrease $5,000 and stockholders' equity is not affected. 
C) Assets and stockholders' equity both decrease by $400. 
D) Assets and stockholders' equity both increase by $400. 
A) Assets and stockholders' equity both increase by $5,000. 
B) Assets decrease $5,000 and stockholders' equity is not affected. 
C) Assets and stockholders' equity both decrease by $400. 
D) Assets and stockholders' equity both increase by $400.

Question 11

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

Accepted Answer

A) True 
 B)False

Question 12

The cash-equivalent cost of an asset received is measured as any cash paid plus the current market value of the non-cash consideration given up.If this value is not determinable,the current market value of what is received should be used instead.

Accepted Answer

A) True 
 B)False

Question 13

Allison Company purchased a machine for $1,200,000 at the beginning of 2009.Allison was using the double-declining-balance (200%)method to depreciate the asset and its useful life was estimated to be 5 years with a residual value of $200,000.At the end of 2010,Allison Co.estimates the future cash flows from the asset to be equal to $500,000 and the fair value to be $450,000.What is the amount of the impairment loss?

Accepted Answer

To calculate the impairment loss, we nee

Question 14

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure,instead of as a revenue expenditure,which of the following statements is true?

Accepted Answer

A) The current year's net income will be lower and future depreciation expense will be higher. 
B) The current year's net income will be higher and future depreciation expense will be lower. 
C) The current year's net income will be higher and future depreciation expense will be higher. 
D) The current year's net income will be lower and future depreciation expense will be lower. 
A) The current year's net income will be lower and future depreciation expense will be higher. 
B) The current year's net income will be higher and future depreciation expense will be lower. 
C) The current year's net income will be higher and future depreciation expense will be higher. 
D) The current year's net income will be lower and future depreciation expense will be lower.

Question 15

Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $200,000.

Accepted Answer

A) Total assets increase $350,000. 
B) Stockholders' equity increases $200,000. 
C) Stockholders' equity increases $330,000. 
D) Total assets increase $330,000. 
A) Total assets increase $350,000. 
B) Stockholders' equity increases $200,000. 
C) Stockholders' equity increases $330,000. 
D) Total assets increase $330,000.

Question 16

Hubbard Company purchased a truck on January 1,2009,at a cost of $34,000.The company estimated that the truck would have a useful life of 4 years and a residual value of $4,000.
Requirements:
A.Calculate depreciation expense under straight line and double declining balance for 2009-2012.
B.Which of the two methods would result in lower net income in 2010 and 2012?

Accepted Answer

To calculate the depreciation expense un

Question 17

Which of the following statements is incorrect with respect to the sale of a depreciable asset for a loss?

Accepted Answer

A) Net income deceases and total assets decrease. 
B) Net income and stockholders' equity both decrease. 
C) Total assets and stockholders' equity both decrease. 
D) Total assets increase and stockholders' equity decreases. 
A) Net income deceases and total assets decrease. 
B) Net income and stockholders' equity both decrease. 
C) Total assets and stockholders' equity both decrease. 
D) Total assets increase and stockholders' equity decreases.

Question 18

Which of the following is most likely to be an intangible asset with an indefinite life?

Accepted Answer

A) Leasehold 
B) Franchise 
C) Patent 
D) Goodwill 
A) Leasehold 
B) Franchise 
C) Patent 
D) Goodwill

Question 19

The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded to date.

Accepted Answer

A) True 
 B)False

Question 20

Hi-Crest Company purchased a machine on January 1,2010,for $300,000.The machine has an estimated useful life of 5 years and a $10,000 residual value.Calculate depreciation expense and the year-end book value for 2010 and 2011 using the double declining-balance method of depreciation.

Accepted Answer

To calculate depreciation expense and th

Which of the following statements about asset impairment is false?

Which of the following statements is incorrect with respect to the sale of a depreciable asset?

When determining cash flow from operations using the direct method,depreciation and amortization expense are deducted from net income.

On January 1,2010 equipment was purchased for $80,000; the equipment's estimated residual value is $15,000 and its estimated useful life is 8 years.During 2010,the depreciation expense under the double-declining balance method is $16,250.

Ordinary repairs and maintenance costs are incurred to maintain a long-lived asset and are expensed as incurred.

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

The cash-equivalent cost of an asset received is measured as any cash paid plus the current market value of the non-cash consideration given up.If this value is not determinable,the current market value of what is received should be used instead.

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure,instead of as a revenue expenditure,which of the following statements is true?

Which of the following statements is incorrect with respect to the sale of a depreciable asset for a loss?

Which of the following is most likely to be an intangible asset with an indefinite life?

The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded to date.

Hi-Crest Company purchased a machine on January 1,2010,for $300,000.The machine has an estimated useful life of 5 years and a $10,000 residual value.Calculate depreciation expense and the year-end book value for 2010 and 2011 using the double declining-balance method of depreciation.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

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Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Which of the following statements about asset impairment is false?

Which of the following statements is incorrect with respect to the sale of a depreciable asset?

When determining cash flow from operations using the direct method,depreciation and amortization expense are deducted from net income.

On January 1,2010 equipment was purchased for $80,000; the equipment's estimated residual value is $15,000 and its estimated useful life is 8 years.During 2010,the depreciation expense under the double-declining balance method is $16,250.

Ordinary repairs and maintenance costs are incurred to maintain a long-lived asset and are expensed as incurred.

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

The cash-equivalent cost of an asset received is measured as any cash paid plus the current market value of the non-cash consideration given up.If this value is not determinable,the current market value of what is received should be used instead.

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure,instead of as a revenue expenditure,which of the following statements is true?

Which of the following statements is incorrect with respect to the sale of a depreciable asset for a loss?

Which of the following is most likely to be an intangible asset with an indefinite life?

The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded to date.

Hi-Crest Company purchased a machine on January 1,2010,for $300,000.The machine has an estimated useful life of 5 years and a $10,000 residual value.Calculate depreciation expense and the year-end book value for 2010 and 2011 using the double declining-balance method of depreciation.

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Operating Decisions and the Income Statement

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

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