Question 1

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 versus old estimates. 
D) None of the above 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 versus old estimates. 
D) None of the above is correct.

Question 2

Gains on the cash sales of fixed assets:

Accepted Answer

A) Are the excess of the book value over the cash proceeds. 
B) Are part of cash flows from operations. 
C) Are reported on a net-of-tax basis if material. 
D) Are the excess of the cash proceeds over the book value of the assets sold. 
A) Are the excess of the book value over the cash proceeds. 
B) Are part of cash flows from operations. 
C) Are reported on a net-of-tax basis if material. 
D) Are the excess of the cash proceeds over the book value of the assets sold.

Question 3

Compute depreciation for 2013 and 2014 and the book value of the machinery at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

Accepted Answer

Denominator = n(n + 1) ÷ 2 = (10 x 11) ÷

Question 4

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

Accepted Answer

Straight-line depreciation is

Question 5

Using the sum-of-the-years'-digits method, depreciation for 2014 and book value at December 31, 2014, would be:

Accepted Answer

A) $19,200 and $30,800. 
B) $17,600 and $26,400. 
C) $19,200 and $28,800. 
D) $17,600 and $32,400. 
A) $19,200 and $30,800. 
B) $17,600 and $26,400. 
C) $19,200 and $28,800. 
D) $17,600 and $32,400.

Question 6

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

Question 7

Atlas Trucking incurred the following costs during 2013:
1. Spent $15,000 on a major overhaul for a tractor-trailer rig. The overhaul is expected to increase the service life of the rig by three years.
2. Repaired the air-conditioning system for $3,000.
3. Rearranged and reconfigured the maintenance, loading, and unloading facilities at a cost of $75,000. The rearrangement is expected to result in substantial cost savings and increased efficiency over the next several years.
Required:
Prepare journal entries to record the above costs.

Accepted Answer

The answer of Atlas Trucking incurred the following costs during...

Question 8

Required:
Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

Accepted Answer

Denominator = n(n + 1) ÷ 2 = (

Question 9

Comet Cleaning Co. reported the following on its December 31, 2013, balance sheet:
Equipment (at cost)…..$3,000,000
In a disclosure note, Comet indicates that it uses straight-line depreciation over six years and estimates salvage value as 10% of cost. Comet's equipment averages 4.5 years at December 31, 2013.
Required:
What is the book value of Comet's equipment at December 31, 2013?

Accepted Answer

Annual depreciation is ($3,000

Question 10

Assume the same facts as above, except that the fair value of Oxford (the reporting unit) is $225 million.
Required:
Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets.

Accepted Answer

An impairment loss must be recognized if

Question 11

Jung Inc. owns a patent for which it paid $66 million. At the end of 2013, it had accumulated amortization on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $43 million, and the patent's fair value at that point is $35 million. Under these circumstances, Lester:

Accepted Answer

A) Would record no impairment loss on the patent. 
B) Would record a $7 million impairment loss on the patent. 
C) Would record a $15 million impairment loss on the patent. 
D) Would record a $31 million impairment loss on the patent. 
A) Would record no impairment loss on the patent. 
B) Would record a $7 million impairment loss on the patent. 
C) Would record a $15 million impairment loss on the patent. 
D) Would record a $31 million impairment loss on the patent.

Question 12

According to International Financial Reporting Standards, the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount.

Accepted Answer

A) True 
 B)False

Question 13

The overriding principle for all depreciation methods is that the method must be:

Accepted Answer

A) Conservative and economic. 
B) Systematic and rational. 
C) Consistent and conservative. 
D) Significant and material. 
A) Conservative and economic. 
B) Systematic and rational. 
C) Consistent and conservative. 
D) Significant and material.

Question 14

Notsofast Inc. acquired land for $500,000 on July 1, 2012. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2013.

Accepted Answer

If material, the $500,000 should have be

Question 15

On September 30, 2013, Sternberg Company sold office equipment for $12,000. The equipment was purchased on March 31, 2010, for $24,000. The asset was being depreciated over a five-year life using the straight-line method, with depreciation based on months in service. No residual value was anticipated.
Required:
Prepare the journal entries to record 2013 depreciation and the sale of the equipment.

Accepted Answer

The answer of On September 30, 2013, Sternberg Company sold...

Question 16

Ellen's Antiques reported the following in its December 31, 2013, balance sheet:   In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost.
Required:
Compute the average age of Ellen's equipment at 12/31/2012.

Accepted Answer

Annual depreciation is ($4,000

Question 17

Eckland Manufacturing Co. purchased equipment on January 1, 2011, at a cost of $90,000. Straight-line depreciation for 2011 and 2012 was based on an estimated eight-year life and $2,000 estimated residual value. In 2013, Eckland revised its estimate and now believes the equipment will have a total service life of only six years, while the residual value remains the same.
Required:
Compute depreciation for 2013 and 2014.

Accepted Answer

The answer of Eckland Manufacturing Co. purchased equipment on January...

Question 18

Fellingham Corporation purchased equipment on January 1, 2011, for $200,000. The company estimated the equipment would have a useful life of 10 years with a $20,000 residual value. Fellingham uses the straight-line depreciation method. Early in 2013, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2013?

Accepted Answer

A) $24,000. 
B) $27,333. 
C) $36,000. 
D) $41,000. 
A) $24,000. 
B) $27,333. 
C) $36,000. 
D) $41,000.

Question 19

Required:
Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.

Accepted Answer

An impairment loss must be recognized be

Question 20

Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.

Accepted Answer

A) True 
 B)False

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

Gains on the cash sales of fixed assets:

Compute depreciation for 2013 and 2014 and the book value of the machinery at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

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

Using the sum-of-the-years'-digits method, depreciation for 2014 and book value at December 31, 2014, would be:

The depreciable base for an asset is:

Required: Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

Assume the same facts as above, except that the fair value of Oxford (the reporting unit) is $225 million. Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets.

According to International Financial Reporting Standards, the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount.

The overriding principle for all depreciation methods is that the method must be:

Notsofast Inc. acquired land for $500,000 on July 1, 2012. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2013.

Ellen's Antiques reported the following in its December 31, 2013, balance sheet: In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost. Required: Compute the average age of Ellen's equipment at 12/31/2012.

Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.

Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible 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 Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment

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

Gains on the cash sales of fixed assets:

Compute depreciation for 2013 and 2014 and the book value of the machinery at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

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

Using the sum-of-the-years'-digits method, depreciation for 2014 and book value at December 31, 2014, would be:

The depreciable base for an asset is:

Required: Compute depreciation for 2013 and 2014 and the book value of the drill press at December 31, 2013 and 2014, assuming the sum-of-the-years'-digits method is used.

Assume the same facts as above, except that the fair value of Oxford (the reporting unit) is $225 million. Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets.

According to International Financial Reporting Standards, the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount.

The overriding principle for all depreciation methods is that the method must be:

Notsofast Inc. acquired land for $500,000 on July 1, 2012. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2013.

Ellen's Antiques reported the following in its December 31, 2013, balance sheet: In a disclosure note, Ellen's indicates that it uses straight-line depreciation over eight years and estimates salvage value at 10% of cost. Required: Compute the average age of Ellen's equipment at 12/31/2012.

Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.

Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible 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 Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters