Question 1

Generally accepted accounting principles (GAAP)require that research and development costs to develop a new product be

Accepted Answer

A) capitalized in the patents account. 
B) expensed in the period incurred. 
C) capitalized in the research and development costs account. 
D) amortized over the expected economic life of the new product. 
A) capitalized in the patents account. 
B) expensed in the period incurred. 
C) capitalized in the research and development costs account. 
D) amortized over the expected economic life of the new product.

Question 2

Fields of Green,a turf farm,purchased equipment at the beginning of 2012 for $175,000.In addition,the company paid $6,000 for delivery of the equipment and $4,000 for set up charges.The equipment has an estimated residual value of $5,000 and an estimated life of 10 years or 50,000 hours of operation.The equipment was operated for 5,200 hours in 2012 and 5,000 hours in 2013.
 A) Compute the depreciation expense for 2012 using the:
- straight line method;
- units-of-production method;
- double-de clining-balance method

B) Compute the book value of the equipment on December 31,2013 , assuming the use of:
- straight line method;
- units-of-production method; and
- double-de clining-balance method

C) Whichmethod of depreciation prochuces the greatest total amount of depreciation?

D) Wrichmethod of depreciation is considered accelerated?

E) What are the advantages of using an accelerated depreciation method as compared to the straight-line method?

Accepted Answer

A) @#LAT-DLM& Straight-line: @#LAT-DLM&
Units-of-production:

Question 3

Distinguish between tangible and intangible operating assets.

Accepted Answer

Tangible operating assets have physical

Question 4

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 at the end of its useful life?

Accepted Answer

A) $ -0- 
B) $100,000 
C) $200,000 
D) Need more information to determine this answer. 
A) $ -0- 
B) $100,000 
C) $200,000 
D) Need more information to determine this answer.

Question 5

On January 1,2012,a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000.On July 1,2014,the machine was sold for $7,000 cash.The journal entry to record the sale

Accepted Answer

A) decreases stockholder's equity 
B) increases total assets 
C) decreases total expenses 
D) increases net income 
A) decreases stockholder's equity 
B) increases total assets 
C) decreases total expenses 
D) increases net income

Question 6

If a company uses the same depreciation method as other firms in the same industry,investors will have enhanced comparability of the financial reporting results.

Accepted Answer

A) True 
 B)False

Question 7

Floors 4 U uses straight-line depreciation for its equipment.The company purchased equipment for $250,000 and estimated its useful life at 8 years.The bookkeeper failed to consider the residual value of $25,000.What is the impact on earnings per share and operating income of failing to consider the residual value?

Accepted Answer

A) Earnings per share will be overstated and operating income will be understated. 
B) Earnings per share will be understated and operating income will be overstated. 
C) Both earnings per share and operating income will be overstated. 
D) Both earnings per share and operating income will be understated. 
A) Earnings per share will be overstated and operating income will be understated. 
B) Earnings per share will be understated and operating income will be overstated. 
C) Both earnings per share and operating income will be overstated. 
D) Both earnings per share and operating income will be understated.

Question 8

Fleet Rentals purchased equipment with a cost of $200,000 at the beginning of 2012.The equipment has an estimated life of 10 years or 100,000 units of product.The estimated residual value is $20,000.During 2012,11,000 units of product were produced with this machinery.Determine the following:
 A) Amount of total accumulated depreciation at December 31, 2012, using units-of-prochiction depreciation
B) Book value at the end of 2012 using straight-line depreciation
C) Whywould the company choose units-of-prochuction depreciation instead of straight-line?

Accepted Answer

A) @#LAT-DLM&
B) @#LAT-DLM&
@#LAT-DLM&
C) A company may use units-of-p

Question 9

An accumulated ________ account is used when writing off natural resources.

Accepted Answer

The answer of An accumulated ________ account is used when...

Question 10

Depreciation is a process by which

Accepted Answer

A) replacement funds are accumulated for plant and equipment. 
B) the decline in market value of plant and equipment is determined and recorded. 
C) the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. 
D) the difference between current market value and historical cost of plant and equipment. 
A) replacement funds are accumulated for plant and equipment. 
B) the decline in market value of plant and equipment is determined and recorded. 
C) the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. 
D) the difference between current market value and historical cost of plant and equipment.

Question 11

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure?

Accepted Answer

A) Installation costs for equipment 
B) Purchase price of the equipment less the cash discount 
C) Repair and maintenance costs during the equipment's first year of service 
D) Transportation charges for getting the equipment delivered to the business 
A) Installation costs for equipment 
B) Purchase price of the equipment less the cash discount 
C) Repair and maintenance costs during the equipment's first year of service 
D) Transportation charges for getting the equipment delivered to the business

Question 12

A contra account called ____________________ is used to depreciate property,plant,and equipment.

Accepted Answer

Accumulate

Question 13

The effect of recording depreciation for the year is a(n)

Accepted Answer

A) decrease in assets and a decrease in net income. 
B) decrease in assets but no change in owners' equity. 
C) increase in assets and an increase in net income. 
D) decrease in net income and no change in assets. 
A) decrease in assets and a decrease in net income. 
B) decrease in assets but no change in owners' equity. 
C) increase in assets and an increase in net income. 
D) decrease in net income and no change in assets.

Question 14

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.Using the data for 2012,determine the average age of the company's property,plant,and equipment.

Accepted Answer

A) 1.60 years 
B) 2.50 years 
C) 4.00 years 
D) 10.00 years 
A) 1.60 years 
B) 2.50 years 
C) 4.00 years 
D) 10.00 years

Question 15

A company purchased land and incurred the following costs: $\begin{array}{l}
\begin{array}{lll}
\text { Purchase Price }\
\text { Excavation Costs }\
\text { Razing Old Building }\
\text { Broker Fees }\
\text { Cost of a Parking Lot  }\
\end{array}
\begin{array}{lll}
\$ 500,000 \
50,000 \
12,500 \
10,000 \
25,000
\end{array}
\end{array}$ 
What is the cost of the land?

Accepted Answer

A) $550,000 
B) $597,500 
C) $572,500 
D) $562,500 
A) $550,000 
B) $597,500 
C) $572,500 
D) $562,500

Question 16

Flying High Air acquires a new aircraft.It has an estimated life of 10 years and should last for at least 20,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

Accepted Answer

A) Double-declining-balance 
B) Revenue expenditure method 
C) Straight-line 
D) Units-of-production 
A) Double-declining-balance 
B) Revenue expenditure method 
C) Straight-line 
D) Units-of-production

Question 17

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000.Assuming the use of the straight-line depreciation method,the journal entry to record depreciation expense for 2012 will have a debit to

Accepted Answer

A) Depreciation Expense and a credit to Accumulated Depreciation for $50,000. 
B) Accumulated Depreciation and a credit to Equipment for $50,000. 
C) Depreciation Expense and a credit to Equipment for $45,000. 
D) Depreciation Expense and a credit to Accumulated Depreciation for $45,000. 
A) Depreciation Expense and a credit to Accumulated Depreciation for $50,000. 
B) Accumulated Depreciation and a credit to Equipment for $50,000. 
C) Depreciation Expense and a credit to Equipment for $45,000. 
D) Depreciation Expense and a credit to Accumulated Depreciation for $45,000.

Question 18

Explain the meaning or significance of the following ratios:
 A) Fixed asset turnover ratio
B) Average age of property, plant, and equipment

Accepted Answer

A) Measures how efficiently a

Question 19

Operating assets with no physical properties are called

Accepted Answer

A) current assets 
B) intangible assets 
C) plant assets 
D) property,plant,and equipment 
A) current assets 
B) intangible assets 
C) plant assets 
D) property,plant,and equipment

Question 20

FASB allows companies to use different depreciation methods so they can capture declining service potential of an operating asset.

Accepted Answer

A) True 
 B)False

Generally accepted accounting principles (GAAP)require that research and development costs to develop a new product be

Distinguish between tangible and intangible operating assets.

On January 1,2012,a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000.On July 1,2014,the machine was sold for $7,000 cash.The journal entry to record the sale

If a company uses the same depreciation method as other firms in the same industry,investors will have enhanced comparability of the financial reporting results.

An accumulated ________ account is used when writing off natural resources.

Depreciation is a process by which

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure?

A contra account called ____________________ is used to depreciate property,plant,and equipment.

The effect of recording depreciation for the year is a(n)

A company purchased land and incurred the following costs: Purchase Price Excavation Costs Razing Old Building Broker Fees Cost of a Parking Lot \ 500,000 50,000 12,500 10,000 25,000 What is the cost of the land?

Flying High Air acquires a new aircraft.It has an estimated life of 10 years and should last for at least 20,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000.Assuming the use of the straight-line depreciation method,the journal entry to record depreciation expense for 2012 will have a debit to

Explain the meaning or significance of the following ratios: A) Fixed asset turnover ratio B) Average age of property, plant, and equipment

Operating assets with no physical properties are called

FASB allows companies to use different depreciation methods so they can capture declining service potential of an operating asset.

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

Generally accepted accounting principles (GAAP)require that research and development costs to develop a new product be

Distinguish between tangible and intangible operating assets.

On January 1,2012,a machine with an estimated life of 5 years and an estimated residual value of $5,000 was acquired for $40,000.On July 1,2014,the machine was sold for $7,000 cash.The journal entry to record the sale

If a company uses the same depreciation method as other firms in the same industry,investors will have enhanced comparability of the financial reporting results.

An accumulated ________ account is used when writing off natural resources.

Depreciation is a process by which

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure?

A contra account called ____________________ is used to depreciate property,plant,and equipment.

The effect of recording depreciation for the year is a(n)

A company purchased land and incurred the following costs: Purchase Price Excavation Costs Razing Old Building Broker Fees Cost of a Parking Lot \ 500,000 50,000 12,500 10,000 25,000 What is the cost of the land?

Flying High Air acquires a new aircraft.It has an estimated life of 10 years and should last for at least 20,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000.Assuming the use of the straight-line depreciation method,the journal entry to record depreciation expense for 2012 will have a debit to

Explain the meaning or significance of the following ratios: A) Fixed asset turnover ratio B) Average age of property, plant, and equipment

Operating assets with no physical properties are called

FASB allows companies to use different depreciation methods so they can capture declining service potential of an operating asset.

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