Question 1

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following is not a reason to revise the amount of depreciation expense?

Accepted Answer

A) Change in estimated useful life 
B) Permanent decline of an asset's fair market value below book value 
C) Change in estimated residual value 
D) incurrence of a capital expenditure associated with a plant asset 
A) Change in estimated useful life 
B) Permanent decline of an asset's fair market value below book value 
C) Change in estimated residual value 
D) incurrence of a capital expenditure associated with a plant asset B

Question 3

An oil company purchased 10,000 acres of land on January 1,2011,for $5,000,000,on which it developed an underground oil site.The company spent $11,000,000 to prepare the site for operation but believes that 500,000 barrels of oil can be extracted from the site over five years after drilling begins.The land has a residual value of $250,000.Assuming 50,000 barrels of oil were extracted from the land in 2012,how much depletion would be recorded?

Accepted Answer

A) $1,600,000 
B) $1,575,000 
C) $160,000 
D) $157,500 
A) $1,600,000 
B) $1,575,000 
C) $160,000 
D) $157,500 B

Question 4

Explain how the costs associated with operating assets are reported on the balance sheet.

Accepted Answer

Tangible plant assets and natural resour

Question 5

Plant assets are depreciated because

Accepted Answer

A) the accrual basis of accounting requires matching of costs to revenues. 
B) cash basis of accounting requires depreciation. 
C) the book values equal market values. 
D) the replacement cost of plant assets may fluctuate over time. 
A) the accrual basis of accounting requires matching of costs to revenues. 
B) cash basis of accounting requires depreciation. 
C) the book values equal market values. 
D) the replacement cost of plant assets may fluctuate over time.

Question 6

If new equipment purchased in 2012 is reported on the balance sheet at December 31,2012 as a long-term asset,there will be no related item on the 2012 income statement.

Accepted Answer

A) True 
 B)False

Question 7

On the balance sheet,a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Accepted Answer

A) True 
 B)False

Question 8

Fabian Woodworks This company purchased a truck at a cost of $12,000.The truck has an estimated residual value of $2,000 and an estimated life of 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013.
-Refer to Fabian Woodworks.Based on the information presented above,what method of depreciation will maximize depreciation expense in 2013?

Accepted Answer

A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2013. 
A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2013.

Question 9

On January 1,2012,a company sold a piece of equipment for $30,000 which it had used for several years.The equipment had cost $45,000,and its accumulated depreciation amounted to $20,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Accepted Answer

A) Assets and Shareholders' Equity increase $30,000 
B) Assets decrease and Shareholders' Equity increases $5,000. 
C) Assets and Shareholders' Equity increase $5,000. 
D) Assets and Shareholders' Equity decrease $5,000. 
A) Assets and Shareholders' Equity increase $30,000 
B) Assets decrease and Shareholders' Equity increases $5,000. 
C) Assets and Shareholders' Equity increase $5,000. 
D) Assets and Shareholders' Equity decrease $5,000.

Question 10

Which of the following accounts would not be reported in the Property,Plant,and Equipment section of a balance sheet?

Accepted Answer

A) Accumulated Depreciation--Buildings 
B) Buildings 
C) Depreciation Expense--Buildings 
D) Land 
A) Accumulated Depreciation--Buildings 
B) Buildings 
C) Depreciation Expense--Buildings 
D) Land

Question 11

Distinguish between capital and revenue expenditures.

Accepted Answer

Capital expenditures are added to the ac

Question 12

Fernbank Farms This company purchased a semi truck at the beginning of 2011 at a cost of $100,000.The truck had an estimated life of 5 years,an estimated residual value of $20,000,and will be depreciated using the straight-line method.On January 1,2013,the company made major repairs of $30,000 to the truck that extended the life 3 years.Thus,starting with 2013,the truck has a remaining life of 5 years and a new salvage value of $8,000.
-Refer to Fernbank Farms.What amount should be recorded as depreciation expense each year starting in 2013?

Accepted Answer

A) $16,000 
B) $18,000 
C) $13,600 
D) $12,400 
A) $16,000 
B) $18,000 
C) $13,600 
D) $12,400

Question 13

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Accepted Answer

A) not allowed since the amount can only be calculated one way or the other,not both 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code,and as such,against the law. 
A) not allowed since the amount can only be calculated one way or the other,not both 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code,and as such,against the law.

Question 14

On the balance sheet,the cumulative amount of plant and equipment already expensed is reported in an account called

Accepted Answer

A) Accumulated Amortization 
B) Accumulated Depreciation 
C) Amortization Expense 
D) Depreciation Expense 
A) Accumulated Amortization 
B) Accumulated Depreciation 
C) Amortization Expense 
D) Depreciation Expense

Question 15

"You Decide" Essay
You are an entrepreneur with a great idea for a new business.In order to obtain financing,the loan officer at First Second Third National Bank has requested a budgeted set of financial statements.An accountant friend of yours has mentioned that there are several options associated with plant assets that are available to help you improve your budgeted income.
Describe several decisions concerning property,plant,and equipment that have an impact on reported net income.Are there any ethical concerns in this area?

Accepted Answer

Estimates are used when computing deprec

Question 16

Current accounting standards indicate that the costs of intangible assets with an indefinite life,such as goodwill,should

Accepted Answer

A) not be amortized,but should be reviewed annually for impairment. 
B) be reported on the statement of retained earnings in the year in which acquired. 
C) be amortized over a reasonable period of time not to exceed 40 years. 
D) be debited to an expense account entirely in the year in which acquired. 
A) not be amortized,but should be reviewed annually for impairment. 
B) be reported on the statement of retained earnings in the year in which acquired. 
C) be amortized over a reasonable period of time not to exceed 40 years. 
D) be debited to an expense account entirely in the year in which acquired.

Question 17

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets,and therefore does not need to be considered in selecting an appropriate depreciation method?

Accepted Answer

A) Physical deterioration 
B) Obsolescence 
C) Repair and maintenance policies 
D) Current replacement cost 
A) Physical deterioration 
B) Obsolescence 
C) Repair and maintenance policies 
D) Current replacement cost

Question 18

A company purchased equipment at the beginning of 2012 for $21,000 and decided to depreciate it over a 5-year period using the straight-line method.The equipment's residual value was estimated at $1,000.The estimated fair market value at the end of 2012 was $20,000.Which of the following statements is correct at December 31,2012?

Accepted Answer

A) The balance in the Equipment account is $17,000. 
B) The book value of the equipment is $17,000. 
C) The total accumulated depreciation is $4,200. 
D) The equipment will be reported on the balance sheet at it fair market value of $20,000. 
A) The balance in the Equipment account is $17,000. 
B) The book value of the equipment is $17,000. 
C) The total accumulated depreciation is $4,200. 
D) The equipment will be reported on the balance sheet at it fair market value of $20,000.

Question 19

Fabian Woodworks This company purchased a truck at a cost of $12,000.The truck has an estimated residual value of $2,000 and an estimated life of 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013.
-Refer to Fabian Woodworks.If the company uses the double-declining-balance depreciation method,what amount is the depreciation expense for 2013?

Accepted Answer

A) $4,800 
B) $2,880 
C) $1,728 
D) $2,000 
A) $4,800 
B) $2,880 
C) $1,728 
D) $2,000

Question 20

Flag Financial uses straight-line depreciation for its equipment with an estimated useful life of 10 years and zero residual value.The CEO points out that the equipment will last much shorter than 10 years,perhaps 5 years.What is the impact on earnings per share and net income of depreciating equipment over 5 years rather than 10 years?

Accepted Answer

A) Both earnings per share and net income will decrease. 
B) Both earnings per share and net income will increase. 
C) Earnings per share will decrease and net income will increase. 
D) Earnings per share will increase and net income will decrease. 
A) Both earnings per share and net income will decrease. 
B) Both earnings per share and net income will increase. 
C) Earnings per share will decrease and net income will increase. 
D) Earnings per share will increase and net income will decrease.

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

Which of the following is not a reason to revise the amount of depreciation expense?

Explain how the costs associated with operating assets are reported on the balance sheet.

Plant assets are depreciated because

If new equipment purchased in 2012 is reported on the balance sheet at December 31,2012 as a long-term asset,there will be no related item on the 2012 income statement.

On the balance sheet,a company reports plant assets by subtracting residual value from the original cost of the plant asset.

On January 1,2012,a company sold a piece of equipment for $30,000 which it had used for several years.The equipment had cost $45,000,and its accumulated depreciation amounted to $20,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Which of the following accounts would not be reported in the Property,Plant,and Equipment section of a balance sheet?

Distinguish between capital and revenue expenditures.

Using different depreciation methods for book purposes versus tax purposes for the same asset is

On the balance sheet,the cumulative amount of plant and equipment already expensed is reported in an account called

Current accounting standards indicate that the costs of intangible assets with an indefinite life,such as goodwill,should

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets,and therefore does not need to be considered in selecting an appropriate depreciation method?

Accounting and the Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control and Cash

Sales and Receivables

Cost of Goods Sold and Inventory

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

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Exam 7: Operating Assets

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

Which of the following is not a reason to revise the amount of depreciation expense?

Explain how the costs associated with operating assets are reported on the balance sheet.

Plant assets are depreciated because

If new equipment purchased in 2012 is reported on the balance sheet at December 31,2012 as a long-term asset,there will be no related item on the 2012 income statement.

On the balance sheet,a company reports plant assets by subtracting residual value from the original cost of the plant asset.

On January 1,2012,a company sold a piece of equipment for $30,000 which it had used for several years.The equipment had cost $45,000,and its accumulated depreciation amounted to $20,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Which of the following accounts would not be reported in the Property,Plant,and Equipment section of a balance sheet?

Distinguish between capital and revenue expenditures.

Using different depreciation methods for book purposes versus tax purposes for the same asset is

On the balance sheet,the cumulative amount of plant and equipment already expensed is reported in an account called

Current accounting standards indicate that the costs of intangible assets with an indefinite life,such as goodwill,should

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets,and therefore does not need to be considered in selecting an appropriate depreciation method?

Accounting and the Financial Statements

The Accounting Information System

Accrual Accounting

Internal Control and Cash

Sales and Receivables

Cost of Goods Sold and Inventory

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters