Question 1

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Accepted Answer

A) True 
 B)False

Question 2

Waxman Company purchased a patent for $170,000 at the beginning of 2013,and estimated that its expected useful life was 10 years.The patent has a legal life of 17 years.What amount should be recorded as amortization expense for the patent in 2013?

Accepted Answer

A) $ -0- 
B) $ 7,000 
C) $10,000 
D) $17,000 
A) $ -0- 
B) $ 7,000 
C) $10,000 
D) $17,000

Question 3

You have just received an email from the new staff person,Jennifer Lark.She has just started working in the Fixed Assets Department of your company.She would like to know under what circumstances should she capitalize interest as part of the cost of an asset.In a brief memo,explain the issues to Ms.Lark.

Accepted Answer

INTERNAL MEMORANDUM
TO: Ms.Jennifer Lark

Question 4

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

Accepted Answer

A) True 
 B)False

Question 5

Capitalizing interest increases the recorded cost of a plant asset.

Accepted Answer

A) True 
 B)False

Question 6

Interest is capitalized when incurred in connection with the construction of plant assets because

Accepted Answer

A) interest is considered a part of the acquisition cost of the related plant asset. 
B) the decision to purchase a plant asset is a business decision separate from the financing decision. 
C) many plant assets last longer than 20 years. 
D) interest is considered an expense of the period. 
A) interest is considered a part of the acquisition cost of the related plant asset. 
B) the decision to purchase a plant asset is a business decision separate from the financing decision. 
C) many plant assets last longer than 20 years. 
D) interest is considered an expense of the period.

Question 7

River Company wants to minimize the amount of time and effort its bookkeepers spend on calculating depreciation.Since River has not been profitable,taxes are not an issue,but maximizing the profit and minimizing reported losses are major concerns.Recommend a course of action for River.Support your recommendation.

Accepted Answer

River should use the straight-line metho

Question 8

Wen's Export Co. Wen's Export Co.purchased a new delivery truck at the beginning of 2013.The truck has a cost of $37,000,an estimated life of 5 years,and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2013.The truck was driven 20,000 miles during 2013 and 24,000 miles during 2014.The number of expected miles over five years is 100,000.
Refer to information for Wen's Export Co.
By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the truck?

Accepted Answer

A) The salvage value of $7,000. 
B) Cost less total depreciation. 
C) Cost plus total depreciation. 
D) Total depreciation expenses under double-declining-balance and straight-line depreciation are equal. 
A) The salvage value of $7,000. 
B) Cost less total depreciation. 
C) Cost plus total depreciation. 
D) Total depreciation expenses under double-declining-balance and straight-line depreciation are equal.

Question 9

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Accepted Answer

A) not allowed since the amount can only be calculated one way or the other,not both 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code,and as such,against the law. 
A) not allowed since the amount can only be calculated one way or the other,not both 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code,and as such,against the law.

Question 10

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Accepted Answer

A) True 
 B)False

Question 11

Wind Chime and Fire Hut Companies purchased identical equipment having an estimated useful life of ten years.Wind Chime uses the straight-line depreciation method and Fire Hut 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?

Accepted Answer

A) Wind Chime's depreciation expense will be greater in the second year than Fire Hut's depreciation expense. 
B) Fire Hut's book value will be greater than Wind Chime's book value at the end of year one. 
C) Wind Chime's net income will be greater than Fire Hut's net income in year nine. 
D) Fire Hut's book value will be less than Wind Chime's book value at the end of year two. 
A) Wind Chime's depreciation expense will be greater in the second year than Fire Hut's depreciation expense. 
B) Fire Hut's book value will be greater than Wind Chime's book value at the end of year one. 
C) Wind Chime's net income will be greater than Fire Hut's net income in year nine. 
D) Fire Hut's book value will be less than Wind Chime's book value at the end of year two.

Question 12

Research and development costs are

Accepted Answer

A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development. 
A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development.

Question 13

Capitalizing an expenditure rather than recording it as a revenue expenditure

Accepted Answer

A) affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. 
B) affects the total book value of plant assets on the balance sheet,but has no effect on the amount of net income reported during an accounting period. 
C) affects the amount of net income reported during an accounting period,but has no effect on the total book value of plant assets on the balance sheet. 
D) has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement. 
A) affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period. 
B) affects the total book value of plant assets on the balance sheet,but has no effect on the amount of net income reported during an accounting period. 
C) affects the amount of net income reported during an accounting period,but has no effect on the total book value of plant assets on the balance sheet. 
D) has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.

Question 14

Cripple Creek Inc. Use the information presented below for Cripple Creek,Inc.for 2013 and 2012 to answer the questions that follow.Cripple Creek uses the straight-line depreciation method.
  Refer to the information for Cripple Creek,Inc.
Between 2012 and 2013,Cripple Creek sold some equipment that had an original cost of $57,500.Which statement is most likely true concerning transactions that must have occurred during the period?

Accepted Answer

A) Cripple Creek also purchased additional equipment during the year. 
B) The selling price of the equipment sold was reported with net sales. 
C) The equipment that was sold had a book value of $12,500. 
D) The equipment sold had not been reported with Cripple Creek's property,plant and equipment. 
A) Cripple Creek also purchased additional equipment during the year. 
B) The selling price of the equipment sold was reported with net sales. 
C) The equipment that was sold had a book value of $12,500. 
D) The equipment sold had not been reported with Cripple Creek's property,plant and equipment.

Question 15

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

Accepted Answer

A) True 
 B)False

Question 16

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

Accepted Answer

A) True 
 B)False

Question 17

Focus,Inc.determined that it had incorrectly estimated both the estimated life and the estimated residual value of equipment that it purchased two years ago.When Focus accounts for the change in accounting estimates,it must depreciate the remaining book value of the asset over the current and future accounting periods.

Accepted Answer

A) True 
 B)False

Question 18

The Property,Plant,and Equipment category includes long-term investments.

Accepted Answer

A) True 
 B)False

Question 19

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

Accepted Answer

The answer of Land is not a depreciable asset,but the...

Question 20

For each of the following sentences 11-14,select the word or group of words that best completes the statement.
   ______________________________ is (are)the right to produce or sell a published work.

Accepted Answer

The answer of For each of the following sentences 11-14,select...

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Waxman Company purchased a patent for $170,000 at the beginning of 2013,and estimated that its expected useful life was 10 years.The patent has a legal life of 17 years.What amount should be recorded as amortization expense for the patent in 2013?

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

Capitalizing interest increases the recorded cost of a plant asset.

Interest is capitalized when incurred in connection with the construction of plant assets because

Using different depreciation methods for book purposes versus tax purposes for the same asset is

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Research and development costs are

Capitalizing an expenditure rather than recording it as a revenue expenditure

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

The Property,Plant,and Equipment category includes long-term investments.

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

For each of the following sentences 11-14,select the word or group of words that best completes the statement. ______________________________ is (are)the right to produce or sell a published work.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 8: Operating Assets: Property, plant, and Equipment, and Intangibles

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Waxman Company purchased a patent for $170,000 at the beginning of 2013,and estimated that its expected useful life was 10 years.The patent has a legal life of 17 years.What amount should be recorded as amortization expense for the patent in 2013?

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

Capitalizing interest increases the recorded cost of a plant asset.

Interest is capitalized when incurred in connection with the construction of plant assets because

Using different depreciation methods for book purposes versus tax purposes for the same asset is

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Research and development costs are

Capitalizing an expenditure rather than recording it as a revenue expenditure

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

The Property,Plant,and Equipment category includes long-term investments.

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

For each of the following sentences 11-14,select the word or group of words that best completes the statement. ______________________________ is (are)the right to produce or sell a published work.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters