Question 1

Research and development costs are

Accepted Answer

A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development. 
A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development.

Question 2

Fantasy Cruise Lines On January 1,2012,the company purchased a ship for $1,000,000.It has a ten-year useful life and a residual value of $100,000.The company uses the double-declining-balance method.
-Refer to Fantasy Cruise Lines.What will be the book value of the ship after ten years?

Accepted Answer

A) $200,000 
B) $400,000 
C) $ 0 
D) $100,000 
A) $200,000 
B) $400,000 
C) $ 0 
D) $100,000

Question 3

Fantasy Cruise Lines On January 1,2012,the company purchased a ship for $1,000,000.It has a ten-year useful life and a residual value of $100,000.The company uses the double-declining-balance method.
-Refer to Fantasy Cruise Lines.What is the depreciation expense for the year ended December 31,2013?

Accepted Answer

A) $ -0- 
B) $180,000 
C) $160,000 
D) $200,000 
A) $ -0- 
B) $180,000 
C) $160,000 
D) $200,000

Question 4

How does goodwill arise? How is it accounted for and reported on the financial statements?

Accepted Answer

Goodwill arises when a company purchases

Question 5

Describe the process that allocates the costs of the tangible and intangible operating assets to expense.

Accepted Answer

There are three categories of operating

Question 6

Research and Development costs should be added to the cost of patents.

Accepted Answer

A) True 
 B)False

Question 7

"You Decide" Essay
You are Chief Financial Officer for Five Star Resorts,Inc.You are reviewing the following transactions:
1.Adding a new patio deck to the resort's upscale restaurant,$180,000
2.Painting the ocean side beach houses,$75,000
3.Purchasing additional golf carts,$25,000
4.Rebuilding the engine in the resort's airport shuttle bus,$10,000
5.Replacing the old air conditioning unit in the golf shop with a more efficient one,$20,000
Your accountant has capitalized all of these items and intends to depreciate them over the appropriate asset's remaining useful life as originally estimated.
Indicate whether you agree or disagree with your accountant's treatment of each item.In those cases where you disagree,state the proper treatment of that expenditure.Use the following table:
 $\begin{array}{|l|l|l|}
\hline & \underline {\text { Agree or } } \
\underline {\text { Expenditure }} & \underline {\text { Disagree? } } & \underline {\text { Proper Treatment, if Disagree } }\
 \hline \text { 1. Adding a new patio deck to the resort's ocean side bar, } \$ 180,000 & & \
\hline \text { 2. P ainting ten ocean front beach houses, } \$ 75,000 & & \
\hline \text { 3. Purchasing additional golf carts for the club house, } \$ 25,000 & & \
\hline \text { 4. Rebuilding the engine in the re sort's cirport shuttle bus, } \$ 10,000 & & \
\hline \begin{array}{l}
\text {5. Replacing the pro shop's old air conditioning unit with a more } \
\text { efficient one, } \$ 20,000
\end{array} & & \
\hline
\end{array}$

Accepted Answer

None

Question 8

A research consortium has a large portion of its plant assets concentrated in an area where technology is rapidly changing.The organization wants to minimize taxable income and maximize net income reported to shareholders.Recommend a course of action for accomplishing this objective and provide support for your recommendation.

Accepted Answer

When technology is changing rapidly,more

Question 9

Fireworks City Information for 2012 and 2011 is presented below for this company which uses the straight-line depreciation method.
$\begin{array}{l}
\begin{array}{lll}
\
\text { Property, plant and equipment  }\
\text { Accumulated depreciation   }\
\text {Depreciation expense }\
\text {Net sales }\
\text { Total assets }\
\end{array}
\begin{array}{lll}
 \underline{ 2012 }&  \underline{ 2011 } \ 
 { \$750,000 } & { \$ 190,000 } \
100,000 & 85,000 \ 
62,500 & 47,500 \ 
1,000,000 & 900,000 \ 
625,000 & 475,000
\end{array}
\end{array}$ 
-Refer to Fireworks City.During the year,the company sold some equipment that had an original cost of $60,000.Which statement is true concerning transactions that must have occurred during the period?

Accepted Answer

A) The company purchased additional equipment during the year. 
B) The selling price of the equipment sold was reported with net sales. 
C) The company did not purchase additional equipment during the year. 
D) The equipment sold had not been reported with the company's property,plant and equipment. 
A) The company purchased additional equipment during the year. 
B) The selling price of the equipment sold was reported with net sales. 
C) The company did not purchase additional equipment during the year. 
D) The equipment sold had not been reported with the company's property,plant and equipment.

Question 10

If a company is concerned about minimizing its income tax burden,it would use the straight-line depreciation method to accomplish this objective.

Accepted Answer

A) True 
 B)False

Question 11

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Accepted Answer

A) True 
 B)False

Question 12

Falling Leaves Lawn Care This company purchased new excavating equipment at the beginning of 2012.The equipment has a cost of $37,000,an estimated life of 5 years,and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2012.The equipment was used 20,000 hours during 2012 and 24,000 hours during 2013.The number of expected hours over five years is 100,000.
-Refer to Falling Leaves Lawn Care.What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation over the 5-year life of the equipment?

Accepted Answer

A) $ -0- 
B) $ 7,000 
C) $37,000 
D) $ 6,000 
A) $ -0- 
B) $ 7,000 
C) $37,000 
D) $ 6,000

Question 13

Capitalizing an expenditure rather than recording it as a revenue expenditure

Accepted Answer

A) impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. 
B) impacts the total book value of plant assets on the balance sheet,but has no effect on the amount of net income reported during an accounting period. 
C) impacts the amount of net income reported during an accounting period,but has no effect on the total book value of plant assets on the balance sheet. 
D) has no impact on the book value of plant assets on the balance sheet or the amount of income reported on the income statement. 
A) impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. 
B) impacts the total book value of plant assets on the balance sheet,but has no effect on the amount of net income reported during an accounting period. 
C) impacts the amount of net income reported during an accounting period,but has no effect on the total book value of plant assets on the balance sheet. 
D) has no impact on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.

Question 14

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.What amount will be reported as depreciation expense over the 5-year life of the equipment?

Accepted Answer

A) $12,000 
B) $ 8,000 
C) $10,000 
D) $ 4,000 
A) $12,000 
B) $ 8,000 
C) $10,000 
D) $ 4,000

Question 15

Fiona's Italian Market purchased a delivery truck for deliveries for $25,000 at the beginning of 2012.The truck has an estimated life of 5 years,and an estimated residual value of $5,000.The company plans to use the straight-line depreciation method.At the beginning of 2013,the company spent $4000 to replace the truck's transmission.This resulted in a 2-year extension of useful life,but no change in residual value.
 A) What type of cost is the $ \$ 4,000 $ ? Explain.
B) Calculate the asset's book value at the end of 2012.
C) Calculate depreciation expense for 2013.

Accepted Answer

A)@#LAT-DLM&@#LAT-DLM& The @#LAT-DLM& cost is a
@#LAT-DLM&@#LAT-DLM&@#LAT-DLM&capital expe

Question 16

Falling Leaves Lawn Care This company purchased new excavating equipment at the beginning of 2012.The equipment has a cost of $37,000,an estimated life of 5 years,and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2012.The equipment was used 20,000 hours during 2012 and 24,000 hours during 2013.The number of expected hours over five years is 100,000.
-Refer to Falling Leaves Lawn Care.The company wants to use the depreciation method that will result in the highest depreciation expense for 2012.Which method should be used?

Accepted Answer

A) Straight-line 
B) units-of-production 
C) double-declining-balance 
D) all methods create the same income in 2012 
A) Straight-line 
B) units-of-production 
C) double-declining-balance 
D) all methods create the same income in 2012

Question 17

The ______________ depreciation method is the GAAP depreciation method used most frequently.

Accepted Answer

The answer of The ______________ depreciation method is the GAAP...

Question 18

A company should choose a depreciation method that

Accepted Answer

A) best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B) saves the most taxes. 
C) minimizes net income 
D) shows the highest amount of net income. 
A) best allocates the original cost of the asset to the periods benefited by the use of the asset. 
B) saves the most taxes. 
C) minimizes net income 
D) shows the highest amount of net income.

Question 19

Why do many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for tax purposes?

Accepted Answer

If a company uses MACRS for depreciation

Question 20

Many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for

Accepted Answer

A) financial reporting purposes and a different method for tax purposes. 
B) financial reporting purposes because depreciation is not allowed for tax purposes. 
C) tax purposes because it results in a larger net income in the early years of a plant asset's life 
D) tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes. 
A) financial reporting purposes and a different method for tax purposes. 
B) financial reporting purposes because depreciation is not allowed for tax purposes. 
C) tax purposes because it results in a larger net income in the early years of a plant asset's life 
D) tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes.

Research and development costs are

Fantasy Cruise Lines On January 1,2012,the company purchased a ship for $1,000,000.It has a ten-year useful life and a residual value of $100,000.The company uses the double-declining-balance method. -Refer to Fantasy Cruise Lines.What will be the book value of the ship after ten years?

Fantasy Cruise Lines On January 1,2012,the company purchased a ship for $1,000,000.It has a ten-year useful life and a residual value of $100,000.The company uses the double-declining-balance method. -Refer to Fantasy Cruise Lines.What is the depreciation expense for the year ended December 31,2013?

How does goodwill arise? How is it accounted for and reported on the financial statements?

Describe the process that allocates the costs of the tangible and intangible operating assets to expense.

Research and Development costs should be added to the cost of patents.

If a company is concerned about minimizing its income tax burden,it would use the straight-line depreciation method to accomplish this objective.

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Capitalizing an expenditure rather than recording it as a revenue expenditure

The ______________ depreciation method is the GAAP depreciation method used most frequently.

A company should choose a depreciation method that

Why do many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for tax purposes?

Many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for

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

Exam 7: Operating Assets

Research and development costs are

Fantasy Cruise Lines On January 1,2012,the company purchased a ship for $1,000,000.It has a ten-year useful life and a residual value of $100,000.The company uses the double-declining-balance method. -Refer to Fantasy Cruise Lines.What will be the book value of the ship after ten years?

How does goodwill arise? How is it accounted for and reported on the financial statements?

Describe the process that allocates the costs of the tangible and intangible operating assets to expense.

Research and Development costs should be added to the cost of patents.

If a company is concerned about minimizing its income tax burden,it would use the straight-line depreciation method to accomplish this objective.

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

Capitalizing an expenditure rather than recording it as a revenue expenditure

The ______________ depreciation method is the GAAP depreciation method used most frequently.

A company should choose a depreciation method that

Why do many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for tax purposes?

Many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for

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