Question 1

Which of the following types of subsequent expenditures is normally capitalized:

Accepted Answer

A) Additions. 
B) Improvements. 
C) Rearrangements. 
D) All of these are normally capitalized. 
A) Additions. 
B) Improvements. 
C) Rearrangements. 
D) All of these are normally capitalized.

Question 2

In January of 2009, Vega Corporation purchased a patent at a cost of $200,000. Legal and filing fees of $50,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In 2012, Vega spent $40,000 in legal fees for an unsuccessful defense of the patent. The amount charged to income (expense and loss) in 2012 related to the patent should be:

Accepted Answer

A) $ 40,000. 
B) $ 65,000. 
C) $215,000. 
D) $ 25,000. 
A) $ 40,000. 
B) $ 65,000. 
C) $215,000. 
D) $ 25,000.

Question 3

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

Accepted Answer

A) $18,000 and $27,000. 
B) $16,000 and $29,000. 
C) $16,000 and $24,000. 
D) $18,000 and $22,000.Depreciation in 2009 = ($45,000 5,000) 4/10 = $16,000 Book value, 12/31/09 = $45,000 16,000 = $29,000 
A) $18,000 and $27,000. 
B) $16,000 and $29,000. 
C) $16,000 and $24,000. 
D) $18,000 and $22,000.Depreciation in 2009 = ($45,000 5,000) 4/10 = $16,000 Book value, 12/31/09 = $45,000 16,000 = $29,000

Question 4

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Accepted Answer

A) Repairs. 
B) Accumulated depreciation. 
C) Major repairs. 
D) None of these. 
A) Repairs. 
B) Accumulated depreciation. 
C) Major repairs. 
D) None of these.

Question 5

Murgatroyd Co. purchased equipment on 1/1/07 for $500,000, estimating a four-year useful life and no residual value. In 2007 and 2008, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2009, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2009 on this equipment?

Accepted Answer

A) $ 75,000. 
B) $125,000. 
C) $150,000. 
D) None of these is correct.The depreciation for 2007 was: $500,000 4/10 = $200,000.The depreciation for 2008 was: $500,000 3/10 = $150,000.This leaves a book value of $150,000 ($500,000 350,000), so that the new depreciation would be $75,000 ($150,000 2). 
A) $ 75,000. 
B) $125,000. 
C) $150,000. 
D) None of these is correct.The depreciation for 2007 was: $500,000 4/10 = $200,000.The depreciation for 2008 was: $500,000 3/10 = $150,000.This leaves a book value of $150,000 ($500,000 350,000), so that the new depreciation would be $75,000 ($150,000 2).

Question 6

Belotti would record depletion in 2010 of:

Accepted Answer

A) $54,667. 
B) $65,600. 
C) $52,480. 
D) $55,760.Depletion in 2010 = [($164,000 32,800) (8,000 + 12,000)] = $6.56 per ton 8,000 = $52,480 
A) $54,667. 
B) $65,600. 
C) $52,480. 
D) $55,760.Depletion in 2010 = [($164,000 32,800) (8,000 + 12,000)] = $6.56 per ton 8,000 = $52,480

Question 7

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Accepted Answer

Periodic depreciation is not a

Question 8

Depreciation, depletion, and amortization:

Accepted Answer

A) All refer to the process of allocating the cost of operational assets over future periods. 
B) All generally utilize the same methods of cost allocation. 
C) Are all handled the same in arriving at taxable income. 
D) All of these are correct. 
A) All refer to the process of allocating the cost of operational assets over future periods. 
B) All generally utilize the same methods of cost allocation. 
C) Are all handled the same in arriving at taxable income. 
D) All of these are correct.

Question 9

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

Accepted Answer

Straight-line rate =

Question 10

In the first year of an asset's life, which of the following methods has the smallest depreciation?

Accepted Answer

A) Straight-line. 
B) Declining balance. 
C) Sum-of-the-years' digits. 
D) Composite or group. 
A) Straight-line. 
B) Declining balance. 
C) Sum-of-the-years' digits. 
D) Composite or group.

Question 11

Weaver Textiles Inc. has used the straight-line method to depreciate its equipment since it started business in 2005. At the beginning of 2009, the company decided to change to the double-declining-balance (DDB). method. Depreciation as reported and as it would have been reported if the company had always used DDB is listed below:
Required:
What journal entry, if any, should Weaver make to record the effect of the accounting change (ignore income taxes)? Explain.
 $\begin{array}{rrr}\text { Year }& \text { Straight-Line } & \text { DDB } \
2005 & \$ 22,000 & \$ 45,000 \
2006 & 25,000 & 40,000 \
2007 & 28,000 & 38,000 \
2008 & 28,000 & 32,000
\end{array}$

Accepted Answer

The change in depreciation method is tre

Question 12

Broadway Ltd. purchased equipment on 1/1/07 for $800,000, estimating a five-year useful life and no residual value. In 2007 and 2008, Broadway depreciated the asset using the straight-line method. In 2009, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2009 on this equipment?

Accepted Answer

A) $120,000. 
B) $160,000. 
C) $200,000. 
D) $240,000.The depreciation for 2007 and 2008 was: $800,000 5 = $160,000 per year.This leaves a book value of $480,000 ($800,000 320,000) and three years remain in the asset's life.Under SYD, the remaining depreciable base would be multiplied by 3 (1 + 2 + 3) for 2010, or 3/6 $480,000 = $240,000 in depreciation. 
A) $120,000. 
B) $160,000. 
C) $200,000. 
D) $240,000.The depreciation for 2007 and 2008 was: $800,000 5 = $160,000 per year.This leaves a book value of $480,000 ($800,000 320,000) and three years remain in the asset's life.Under SYD, the remaining depreciable base would be multiplied by 3 (1 + 2 + 3) for 2010, or 3/6 $480,000 = $240,000 in depreciation.

Question 13

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Accepted Answer

A) A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along. 
B) A prospective change from the current year through the remainder of its useful life, using the new estimates. 
C) A cumulative adjustment to income in the current year for the difference in depreciation under the new vs.old estimates. 
D) None of these is correct. 
A) A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along. 
B) A prospective change from the current year through the remainder of its useful life, using the new estimates. 
C) A cumulative adjustment to income in the current year for the difference in depreciation under the new vs.old estimates. 
D) None of these is correct.

Question 14

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

Accepted Answer

A) $10,000 and $30,000. 
B) $11,250 and $28,750. 
C) $10,000 and $35,000. 
D) $11,250 and $33,750.Depreciation in 2009 = ($45,000 5,000) 4 = $10,000 Book value, 12/31/09 = $45,000 10,000 = $35,000 
A) $10,000 and $30,000. 
B) $11,250 and $28,750. 
C) $10,000 and $35,000. 
D) $11,250 and $33,750.Depreciation in 2009 = ($45,000 5,000) 4 = $10,000 Book value, 12/31/09 = $45,000 10,000 = $35,000

Question 15

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Accepted Answer

A) True 
 B)False

Question 16

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Accepted Answer

The terms refer to different t

Question 17

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Accepted Answer

A) $ 4.5 million. 
B) $8.25 million. 
C) $ 12 million. 
D) None of these is correct.$16.5 million [(10 + 9 + 8 + 7 + 6)/55] = $12 million 
A) $ 4.5 million. 
B) $8.25 million. 
C) $ 12 million. 
D) None of these is correct.$16.5 million [(10 + 9 + 8 + 7 + 6)/55] = $12 million

Question 18

Accounting for a change in the estimated service life of equipment:

Accepted Answer

A) Is handled prospectively. 
B) Requires retroactive restatement of prior year's financial statements. 
C) Requires a prior period adjustment. 
D) Is handled currently as a change in accounting principle. 
A) Is handled prospectively. 
B) Requires retroactive restatement of prior year's financial statements. 
C) Requires a prior period adjustment. 
D) Is handled currently as a change in accounting principle.

Question 19

Briefly discuss why straight-line is most common depreciation method used in practice.

Accepted Answer

Straight-line depreciation is

Question 20

The depreciable base for an asset is:

Accepted Answer

A) Its service life. 
B) The excess of its cost over residual value. 
C) The difference between its replacement value and cost. 
D) The amount allowable under MACRS 
A) Its service life. 
B) The excess of its cost over residual value. 
C) The difference between its replacement value and cost. 
D) The amount allowable under MACRS

Which of the following types of subsequent expenditures is normally capitalized:

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Belotti would record depletion in 2010 of:

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Depreciation, depletion, and amortization:

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

In the first year of an asset's life, which of the following methods has the smallest depreciation?

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Accounting for a change in the estimated service life of equipment:

Briefly discuss why straight-line is most common depreciation method used in practice.

The depreciable base for an asset is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters

Exam 11: Operational Assets: Utilization and Impairment

Which of the following types of subsequent expenditures is normally capitalized:

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Belotti would record depletion in 2010 of:

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Depreciation, depletion, and amortization:

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

In the first year of an asset's life, which of the following methods has the smallest depreciation?

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Accounting for a change in the estimated service life of equipment:

Briefly discuss why straight-line is most common depreciation method used in practice.

The depreciable base for an asset is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters