Question 1

Firms treat expenditures as assets when they:

Accepted Answer

A) have acquired rights to the future use of a resource as a result of a past transaction or event. 
B) can reliably measure the cost of the expected benefits at the time of initial recognition. 
C) can exercise the entity's right to, or control of, the benefit. 
D) can obtain the future service potential and control others' access to it. 
E) all of the above 
A) have acquired rights to the future use of a resource as a result of a past transaction or event. 
B) can reliably measure the cost of the expected benefits at the time of initial recognition. 
C) can exercise the entity's right to, or control of, the benefit. 
D) can obtain the future service potential and control others' access to it. 
E) all of the above

Question 2

Regarding a firm that abandons an asset,

Accepted Answer

A) there is usually no market for the asset. 
B) the book value of an abandoned asset is eliminated from the balance sheet. 
C) the firm recognizes a loss in an amount equal to the book value of the abandoned asset in the period that the asset is abandoned. 
D) all of the above 
E) none of the above 
A) there is usually no market for the asset. 
B) the book value of an abandoned asset is eliminated from the balance sheet. 
C) the firm recognizes a loss in an amount equal to the book value of the abandoned asset in the period that the asset is abandoned. 
D) all of the above 
E) none of the above

Question 3

Alpha Corporation acquired a patent for $60,000 which has an expected service life of five years and zero salvage value. The annual amortization is

Accepted Answer

A) $5,000. 
B) $6,000. 
C) $12,000. 
D) $24,000. 
E) $30,000. 
A) $5,000. 
B) $6,000. 
C) $12,000. 
D) $24,000. 
E) $30,000.

Question 4

Which of the following is/are true about holding gains on assets?

Accepted Answer

A) U.S.GAAP recognizes the holding gain on the assets for the increase in values. 
B) IFRS permits recognition of the holding gains under certain circumstances. 
C) Under IFRS, if in a given period, an asset increases in value, the firm does not record depreciation and amortization during that period. 
D) Under U.S.GAAP, if in a given period, an asset increases in value, the firm does not record depreciation and amortization during that period. 
E) all of the above 
A) U.S.GAAP recognizes the holding gain on the assets for the increase in values. 
B) IFRS permits recognition of the holding gains under certain circumstances. 
C) Under IFRS, if in a given period, an asset increases in value, the firm does not record depreciation and amortization during that period. 
D) Under U.S.GAAP, if in a given period, an asset increases in value, the firm does not record depreciation and amortization during that period. 
E) all of the above

Question 5

The _____ method divides the acquisition cost of an asset (including the cost to dismantle and retire) less its estimated salvage value by the estimated service life to calculate depreciation or amortization.

Accepted Answer

A) straight-line 
B) sum-of-the-years'-digits 
C) double declining balance method 
D) accelerated depreciation 
E) decelerated depreciation 
A) straight-line 
B) sum-of-the-years'-digits 
C) double declining balance method 
D) accelerated depreciation 
E) decelerated depreciation

Question 6

Firms with tangible long-term assets and predictable cash flows, such as electric utilities, tend to have balance sheets with a

Accepted Answer

A) high proportion of long-term debt (80% or more). 
B) low proportion of long-term debt (20% or less). 
C) high proportion of shareholders' equity (80% or more). 
D) high proportion of cash (80% or more). 
E) high proportion of retained earnings (80% or more). 
A) high proportion of long-term debt (80% or more). 
B) low proportion of long-term debt (20% or less). 
C) high proportion of shareholders' equity (80% or more). 
D) high proportion of cash (80% or more). 
E) high proportion of retained earnings (80% or more).

Question 7

A firm purchased an office machine for $18,400, estimated that it will use the machine for 15 years, and estimated a salvage value of $400.On December 31 of the sixth year, before closing the books for the year, the firm analyzed its estimates of useful life and salvage value.In light of new information, the firm estimated that the machine will have a total useful life of only 10 years, and the salvage estimate of $400 remains reasonable. The new estimate of the remaining life is five years (the year just ended plus the next four).The depreciation entry on December 31 of the sixth year and each year thereafter is:

Accepted Answer

A) Depreciation Expense..................... 1,200 
Accumulated Depreciation .....................1,200 
B) Depreciation Expense.................... 2,400 
Accumulated Depreciation .......................2,400 
C) Accumulated Depreciation .................1,200 
Depreciation Expense........................ 1,200 
D) Accumulated Depreciation ....................2,400 
Depreciation Expense.......................... 2,400 
E) none of the above 
A) Depreciation Expense..................... 1,200 
Accumulated Depreciation .....................1,200 
B) Depreciation Expense.................... 2,400 
Accumulated Depreciation .......................2,400 
C) Accumulated Depreciation .................1,200 
Depreciation Expense........................ 1,200 
D) Accumulated Depreciation ....................2,400 
Depreciation Expense.......................... 2,400 
E) none of the above

Question 8

Firms often incur costs to maintain, repair, and improve their tangible assets.U.S.GAAP and IFRS require firms to treat expenditures for _____ as _____ as incurred but _____ treat as _____.

Accepted Answer

A) maintenance and repairs; expenses of the period; expenditures for improvements; assets 
B) maintenance and repairs; assets; expenditures for improvements; expenses of the period 
C) maintenance and repairs; expenses of the period; expenditures for improvements; liabilities 
D) maintenance and repairs; liabilities; expenditures for improvements; expenses of the period 
E) maintenance and repairs; assets; expenditures for improvements; liabilities 
A) maintenance and repairs; expenses of the period; expenditures for improvements; assets 
B) maintenance and repairs; assets; expenditures for improvements; expenses of the period 
C) maintenance and repairs; expenses of the period; expenditures for improvements; liabilities 
D) maintenance and repairs; liabilities; expenditures for improvements; expenses of the period 
E) maintenance and repairs; assets; expenditures for improvements; liabilities

Question 9

In Year 1, a firm purchased a truck for $12,000.The estimated salvage value was $2,000 and the estimated useful life was 10 years.In Year 4, it was determined that the salvage value would only be $1,000 and that the truck would have a total estimated useful life of 7 years rather than 10.Assuming the straight-line method is used, what is the depreciation expense for Year 4 of the truck?

Accepted Answer

A) $1,000 
B) $1,750 
C) $1,950 
D) $2,000 
E) $2,250 
A) $1,000 
B) $1,750 
C) $1,950 
D) $2,000 
E) $2,250

Question 10

Assume a firm has acquired an asset for $100,000 on January 1, Year 1.The asset has a 6-year life and a salvage value of $10,000.The firm calculates the depreciation expense using the straight-line depreciation. What was the depreciation for Year 4?

Accepted Answer

A)  $10,000 
B)  $15,000 
C)  $20,000 
D)  $25,000 
E)  $30,000 
A)  $10,000 
B)  $15,000 
C)  $20,000 
D)  $25,000 
E)  $30,000

Question 11

During Year 3, Carrington Company made the following expenditures relating to plant machinery and equipment: 
·	Continuing, frequent, and low cost repairs	$46,000
·	Special long-term protection devices were attached to ten machines	11,000
·	A broken gear on a machine was replaced	5,000
 
How much should be charged to repairs and maintenance in Year 3?

Accepted Answer

A) $46,000 
B) $51,000 
C) $57,000 
D) $41,000 
E) none of the above 
A) $46,000 
B) $51,000 
C) $57,000 
D) $41,000 
E) none of the above

Question 12

Tangible long-lived assets include

Accepted Answer

A) land. 
B) buildings. 
C) equipment. 
D) factories. 
E) all of the above 
A) land. 
B) buildings. 
C) equipment. 
D) factories. 
E) all of the above

Question 13

Discuss the treatment of expenditures as assets versus immediate expenses.

Accepted Answer

TREATMENT OF EXPENDITURES AS ASSETS VERS

Question 14

How are periodic depreciation and amortization accounted for?

Accepted Answer

ACCOUNTING FOR PERIODIC DEPRECIATION AND

Question 15

Estimating _____ presents the most difficult task in the depreciation and amortization calculation.A change in this estimate will change the depreciation and amortization amounts going forward.

Accepted Answer

A) disposal costs 
B) salvage value 
C) acquisition costs 
D) service lives 
E) ordinary wear and tear from use 
A) disposal costs 
B) salvage value 
C) acquisition costs 
D) service lives 
E) ordinary wear and tear from use

Question 16

Focus Company decided to construct its own manufacturing building.Focus Company should capitalize which of the following interest costs?

Accepted Answer

A) Building interest costs incurred prior to construction while occupying another building. 
B) Building interest costs incurred during construction. 
C) Building interest costs incurred after construction. 
D) All interest costs incurred. 
E) No interest costs incurred. 
A) Building interest costs incurred prior to construction while occupying another building. 
B) Building interest costs incurred during construction. 
C) Building interest costs incurred after construction. 
D) All interest costs incurred. 
E) No interest costs incurred.

Question 17

An impairment loss on a trademark arises when

Accepted Answer

A) the book value of the trademark exceeds the undiscounted cash flows. 
B) the book value of the trademark exceeds the market value. 
C) the market value of the trademark exceeds the undiscounted cash flows. 
D) the book value of the trademark exceeds the discounted cash flows. 
E) the book value of the trademark exceeds the net realizable value. 
A) the book value of the trademark exceeds the undiscounted cash flows. 
B) the book value of the trademark exceeds the market value. 
C) the market value of the trademark exceeds the undiscounted cash flows. 
D) the book value of the trademark exceeds the discounted cash flows. 
E) the book value of the trademark exceeds the net realizable value.

Question 18

Tangible long-lived assets typically appear under the title Property, Plant, and Equipment, among the current assets.

Accepted Answer

A) True 
 B)False

Question 19

If permitted a choice of depreciation methods for tax reporting, a firm should try to maximize the amount of the

Accepted Answer

A) reductions in tax payments from claiming depreciation. 
B) present value of the reductions in tax payments from claiming depreciation. 
C) future value of the reductions in tax payments from claiming depreciation. 
D) present value of the increase in tax payments from claiming depreciation. 
E) amount of the increase in tax payments from claiming depreciation. 
A) reductions in tax payments from claiming depreciation. 
B) present value of the reductions in tax payments from claiming depreciation. 
C) future value of the reductions in tax payments from claiming depreciation. 
D) present value of the increase in tax payments from claiming depreciation. 
E) amount of the increase in tax payments from claiming depreciation.

Question 20

Firms almost always report asset impairment charges or restructuring charges in _____.

Accepted Answer

A) income from continuing operations 
B) income, gains, and losses from discontinued operations 
C) extraordinary gains and losses 
D) retained earnings 
E) paid-in-capital 
A) income from continuing operations 
B) income, gains, and losses from discontinued operations 
C) extraordinary gains and losses 
D) retained earnings 
E) paid-in-capital

Firms treat expenditures as assets when they:

Regarding a firm that abandons an asset,

Alpha Corporation acquired a patent for $60,000 which has an expected service life of five years and zero salvage value. The annual amortization is

Which of the following is/are true about holding gains on assets?

The _____ method divides the acquisition cost of an asset (including the cost to dismantle and retire) less its estimated salvage value by the estimated service life to calculate depreciation or amortization.

Firms with tangible long-term assets and predictable cash flows, such as electric utilities, tend to have balance sheets with a

Firms often incur costs to maintain, repair, and improve their tangible assets.U.S.GAAP and IFRS require firms to treat expenditures for ___ as _ as incurred but _ treat as ___.

Assume a firm has acquired an asset for $100,000 on January 1, Year 1.The asset has a 6-year life and a salvage value of $10,000.The firm calculates the depreciation expense using the straight-line depreciation. What was the depreciation for Year 4?

Tangible long-lived assets include

Discuss the treatment of expenditures as assets versus immediate expenses.

How are periodic depreciation and amortization accounted for?

Estimating _____ presents the most difficult task in the depreciation and amortization calculation.A change in this estimate will change the depreciation and amortization amounts going forward.

Focus Company decided to construct its own manufacturing building.Focus Company should capitalize which of the following interest costs?

An impairment loss on a trademark arises when

Tangible long-lived assets typically appear under the title Property, Plant, and Equipment, among the current assets.

If permitted a choice of depreciation methods for tax reporting, a firm should try to maximize the amount of the

Firms almost always report asset impairment charges or restructuring charges in _____.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 10: Long-Lived Tangible and Intangible Assets

Firms treat expenditures as assets when they:

Regarding a firm that abandons an asset,

Alpha Corporation acquired a patent for $60,000 which has an expected service life of five years and zero salvage value. The annual amortization is

Which of the following is/are true about holding gains on assets?

The _____ method divides the acquisition cost of an asset (including the cost to dismantle and retire) less its estimated salvage value by the estimated service life to calculate depreciation or amortization.

Firms with tangible long-term assets and predictable cash flows, such as electric utilities, tend to have balance sheets with a

Firms often incur costs to maintain, repair, and improve their tangible assets.U.S.GAAP and IFRS require firms to treat expenditures for _____ as _____ as incurred but _____ treat as _____.

Assume a firm has acquired an asset for $100,000 on January 1, Year 1.The asset has a 6-year life and a salvage value of $10,000.The firm calculates the depreciation expense using the straight-line depreciation. What was the depreciation for Year 4?

Tangible long-lived assets include

Discuss the treatment of expenditures as assets versus immediate expenses.

How are periodic depreciation and amortization accounted for?

Estimating _____ presents the most difficult task in the depreciation and amortization calculation.A change in this estimate will change the depreciation and amortization amounts going forward.

Focus Company decided to construct its own manufacturing building.Focus Company should capitalize which of the following interest costs?

An impairment loss on a trademark arises when

Tangible long-lived assets typically appear under the title Property, Plant, and Equipment, among the current assets.

If permitted a choice of depreciation methods for tax reporting, a firm should try to maximize the amount of the

Firms almost always report asset impairment charges or restructuring charges in _____.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Firms often incur costs to maintain, repair, and improve their tangible assets.U.S.GAAP and IFRS require firms to treat expenditures for ___ as _ as incurred but _ treat as ___.