Question 1

When plant assets are purchased in a group,each asset is debited to the respective plant asset account for its fair market value at the time of acquisition.

Accepted Answer

A) True 
 B)False

Question 2

A company bought machinery on January 1,2010,for $200,000.On January 2,2012,the machinery had a book value of $100,000.It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is $60,000.How much impairment loss should be recorded?

Accepted Answer

A) $0 
B) $30,000 
C) $40,000 
D) $100,000 
A) $0 
B) $30,000 
C) $40,000 
D) $100,000

Question 3

To revise depreciation expense,the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

Accepted Answer

A) True 
 B)False

Question 4

Furniture Barn and Furniture World purchased identical equipment having an estimated useful life of five years.Furniture Barn uses the straight-line depreciation method whereas Furniture World uses the double-declining-balance method of depreciation.Assuming the two entities are similar in all other respects,which of the following statements is correct concerning the equipment? Hint: Without worrying about amounts,graph depreciation expense over the five years.

Accepted Answer

A) Furniture Barn's depreciation expense will be greater in the second year. 
B) Furniture World's equipment book value will be greater at the end of year one. 
C) Furniture Barn's net income will be greater in year nine. 
D) Furniture World's equipment book value will be less at the end of year two. 
A) Furniture Barn's depreciation expense will be greater in the second year. 
B) Furniture World's equipment book value will be greater at the end of year one. 
C) Furniture Barn's net income will be greater in year nine. 
D) Furniture World's equipment book value will be less at the end of year two.

Question 5

The reason some major intangible assets are not in the financial statements is because they cannot be measured.

Accepted Answer

A) True 
 B)False

Question 6

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31,2012,for $20,000 cash.The following data were available at the time of sale: $\begin{array}{llcc}
  \text { Acquisition cost } & \$ 100,000 \
 \text {Accumulated depreciation on December 31, 2012, after adjustment } &85,000
\end{array}$
 
When this transaction is recorded,it should include a

Accepted Answer

A) debit of $80,000 to the Loss on Disposal account 
B) credit of $20,000 to the Equipment account 
C) credit of $5,000 to the Gain on Disposal account 
D) debit of $20,000 to the Accumulated Depreciation account 
A) debit of $80,000 to the Loss on Disposal account 
B) credit of $20,000 to the Equipment account 
C) credit of $5,000 to the Gain on Disposal account 
D) debit of $20,000 to the Accumulated Depreciation account

Question 7

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 8

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

Accepted Answer

A) More 
B) Less 
C) Equal 
D) This cannot be determined from the information given. 
A) More 
B) Less 
C) Equal 
D) This cannot be determined from the information given.

Question 9

A company purchased a patent for $100,000 at the beginning of 2012 which it believes has an expected useful life of 5 years.Fortunately,the patent has a legal life of 20 years.How much amortization expense should be recorded in 2012?

Accepted Answer

A) $0 
B) $5,000 
C) $20,000 
D) $100,000 
A) $0 
B) $5,000 
C) $20,000 
D) $100,000

Question 10

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price for land,cost to clear the land,cost of paving,cost of lighting for the parking lot,and cost of landscaping for the parking lot.How should the company determine which costs should be recorded as Land Improvements and which costs should be recorded as Land?

Accepted Answer

A) The costs with an unlimited life are debited to Land,and the costs with a limited useful life are debited to Land Improvements. 
B) The costs with a limited life are debited to Land,and the costs with an unlimited useful life are debited to Land Improvements. 
C) The costs to be depreciated are debited to Land,and the costs that will not be depreciated are debited to Land Improvements 
D) Costs that are depreciable are debited to Land Improvements,while other costs are expensed immediately because of a lack of definite life. 
A) The costs with an unlimited life are debited to Land,and the costs with a limited useful life are debited to Land Improvements. 
B) The costs with a limited life are debited to Land,and the costs with an unlimited useful life are debited to Land Improvements. 
C) The costs to be depreciated are debited to Land,and the costs that will not be depreciated are debited to Land Improvements 
D) Costs that are depreciable are debited to Land Improvements,while other costs are expensed immediately because of a lack of definite life.

Question 11

Fresh n' Fit Cuisine purchased land and a building for $320,000 so that it could open a new restaurant.The building's fair market value at the time of purchase was $220,000.In addition,the following costs were incurred prior to the restaurant's opening: $\begin{array}{l}
\begin{array}{lll}
 \text { Tranafer taxes } \
 \text {  Interest incurred on the mortgage loan taken out to make the purchase   } \
 \text {  Attomey and real estate agent'sfees   } \
 \text {  Repave the parkinglot  } \
\end{array}
\begin{array}{lll}
\$ 10,000 \
4,000 \
15,000 \
6,000
\end{array}
\end{array}$ How much will be recorded as land improvements?

Accepted Answer

A) $25,000 
B) $6,000 
C) $106,000 
D) $125,000 
A) $25,000 
B) $6,000 
C) $106,000 
D) $125,000

Question 12

Fitness Depot purchased a building on a tract of land and allocated the entire cost of the purchase to building.Normally the company depreciates buildings over 40 years using the straight-line method with zero residual value and does not depreciate land.Because of the improper accounting treatment of the purchase,the company's income for the next 20 years will be

Accepted Answer

A) overstated. 
B) understated. 
C) unaffected. 
D) cannot be determined from the information provided. 
A) overstated. 
B) understated. 
C) unaffected. 
D) cannot be determined from the information provided.

Question 13

All intangible assets are subject to amortization.

Accepted Answer

A) True 
 B)False

Question 14

A company uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration.Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of this company's assets?

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 15

Fuzziwig's Candles has two intangible assets.Information concerning each is provided in the following table:
 $\begin{array}{lll}
& \underline { \text { Goodwill } }& \underline {\text { Trademak } }\
\text { Date of purchase } & \text { June 30, 2012 } & \text { Jamuary 1, 2012 } \
\text { Cost } & \$ 500,000 & \$ 250,000 \
\text { Legal life } & \text { None } & 10 \text { years }\
\text { Useful life } & 40 \text { years } & 5\text { years }\
\end{array}$ Calculate the amount of amortization expense that should be reported for 2012.

Accepted Answer

None

Question 16

Focal Point Engineering purchased a trademark at the beginning of 2012 for $200,000.Although the trademark's legal life is 20 years,economic benefits were expected for only 10 years.Also,during 2012,the company incurred research and development costs of $200,000.The book value of the trademarks at December 31,2012,is

Accepted Answer

A) $200,000 
B) $180,000 
C) $175,000 
D) $280,000 
A) $200,000 
B) $180,000 
C) $175,000 
D) $280,000

Question 17

Explain what costs are included in the acquisition cost of operating assets.

Accepted Answer

Acquisition costs should include all of

Question 18

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 2012?

Accepted Answer

A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2012. 
A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2012.

Question 19

How are research and development costs reported in the financial statements? Why is this treatment required?

Accepted Answer

Research and development costs should be

Question 20

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

Accepted Answer

A) The asset's acquisition cost,replacement cost,and its estimated residual value 
B) The estimated residual value of the asset,its replacement cost,and its market value 
C) The asset's replacement cost,its estimated life,and its estimated residual value 
D) The estimated life of the asset,its acquisition cost,and its estimated residual value 
A) The asset's acquisition cost,replacement cost,and its estimated residual value 
B) The estimated residual value of the asset,its replacement cost,and its market value 
C) The asset's replacement cost,its estimated life,and its estimated residual value 
D) The estimated life of the asset,its acquisition cost,and its estimated residual value

When plant assets are purchased in a group,each asset is debited to the respective plant asset account for its fair market value at the time of acquisition.

A company bought machinery on January 1,2010,for $200,000.On January 2,2012,the machinery had a book value of $100,000.It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is $60,000.How much impairment loss should be recorded?

To revise depreciation expense,the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

The reason some major intangible assets are not in the financial statements is because they cannot be measured.

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures.

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

A company purchased a patent for $100,000 at the beginning of 2012 which it believes has an expected useful life of 5 years.Fortunately,the patent has a legal life of 20 years.How much amortization expense should be recorded in 2012?

All intangible assets are subject to amortization.

A company uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration.Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of this company's assets?

Explain what costs are included in the acquisition cost of operating assets.

How are research and development costs reported in the financial statements? Why is this treatment required?

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

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

When plant assets are purchased in a group,each asset is debited to the respective plant asset account for its fair market value at the time of acquisition.

A company bought machinery on January 1,2010,for $200,000.On January 2,2012,the machinery had a book value of $100,000.It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is $60,000.How much impairment loss should be recorded?

To revise depreciation expense,the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

The reason some major intangible assets are not in the financial statements is because they cannot be measured.

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures.

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

A company purchased a patent for $100,000 at the beginning of 2012 which it believes has an expected useful life of 5 years.Fortunately,the patent has a legal life of 20 years.How much amortization expense should be recorded in 2012?

All intangible assets are subject to amortization.

A company uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration.Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of this company's assets?

Explain what costs are included in the acquisition cost of operating assets.

How are research and development costs reported in the financial statements? Why is this treatment required?

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

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