Exam 9: Reporting and Interpreting Liabilities

Use of an accelerated depreciation method would lead to a higher reported expense and lower profit in the first year of an asset's life in comparison to a non-accelerated method.

Which of the following statements is false?

Most companies do not estimate a residual value for intangible assets since the legal benefits they provide are completely used up at the end of their useful or legal lives,whichever is shorter.

The estimate of residual value made at the beginning of the useful life has no relationship to the book value at the end of the asset's useful life.

Johnson Company acquires land and building for $4,000,000 including all fees related to acquisition.The land is appraised at $2,700,000 and the building at $2,100,000.The building is then renovated at a cost of $750,000.What amount is capitalized to the building account?

Barnes Company purchased a machine on April 4,2011,for $210,000.The machine had an estimated useful life of five years and a salvage value of $30,000.The machine is being depreciated using the double declining balance method.Barnes depreciates its assets from the first day of the month nearest the date of purchase.The asset balance,net of accumulated depreciation,at December 31,2012,should be:

The cost of a major addition to an operational asset should be recorded as an asset and depreciated over its useful life.

Extraordinary repairs on operational assets are classified as capital expenditures if they extend the life of the asset.

Which method of depreciation results in periodic depreciation expense that fluctuates from one period to the next,not necessarily in a steadily upward or downward direction?

Because of depreciation,the net carrying amount of an asset declines over time and profit is reduced by the amount of the expense.

Depletion is recorded for which of the following?

Which of the following is true of a failure to record amortization on a patent during the current year?

In 2011,DAL Co.reported a fixed asset turnover ratio of 1.83 and in 2012,1.63.What was the most likely cause of this drop?

Recording depreciation expense does which of the following?

Which of the following would most likely not be a revenue expenditure?

The apportionment of the acquisition cost of an operational asset to future periods in which the benefits contribute to earning revenue must be which of the following?

Since the Capital Cost Allowance is used by most corporations for tax reporting,the majority of corporations no longer use accelerated methods for financial reporting since there is no tax advantage to be gained by using those methods.

Behren Company purchased a building and the parcel of land on which the building was located for a total purchase price of $810,000.To record the acquisition,the account,Building,should be debited for $810,000.

Bethany Company plans to depreciate a new building using declining-balance depreciation with a 200 percent acceleration rate.The building cost $400,000.The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years.Assuming the first year's depreciation expense was recorded properly,what would be the amount of depreciation expense for the second year?

Sutter Company purchased a machine on January 1,20A,for $16,000.The machine has an estimated useful life of 5 years and a $1,000 residual value.It is now December 31,20B,and Sutter is in the process of preparing financial statements.Complete the following schedule assuming declining-balance method of depreciation with a 150% acceleration rate.