Question 1

Salvage value is:

Accepted Answer

A) Not a factor relevant to determining depletion. 
B) A factor relevant to amortizing an intangible asset with an indefinite life. 
C) An estimate of the asset's value at the end of its benefit period. 
D) A factor relevant to determining depreciation under MACRS. 
E) A factor relevant to determining depreciation that cannot be revised during an asset's useful life. 
A) Not a factor relevant to determining depletion. 
B) A factor relevant to amortizing an intangible asset with an indefinite life. 
C) An estimate of the asset's value at the end of its benefit period. 
D) A factor relevant to determining depreciation under MACRS. 
E) A factor relevant to determining depreciation that cannot be revised during an asset's useful life.

Question 2

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Accepted Answer

A) Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800. 
B) Debit Depletion Expense $29,025; credit Accumulated Depletion $29,025. 
C) Debit Depreciation Expense $29,025; credit Accumulated Depreciation $29,025. 
D) Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800. 
E) Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000. 
A) Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800. 
B) Debit Depletion Expense $29,025; credit Accumulated Depletion $29,025. 
C) Debit Depreciation Expense $29,025; credit Accumulated Depreciation $29,025. 
D) Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800. 
E) Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000.

Question 3

A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The equipment was disposed of on July 1 of the fourth year. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to July 1 in the fourth year.
2. Prepare the general journal entry to record the disposal if the equipment was sold for $22,000 cash.

Accepted Answer

The answer of A company purchased and installed equipment on...

Question 4

A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons. Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of Year 2.

Accepted Answer

$4,875,000/15,000,000 tons = $

Question 5

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A) Accelerated depreciation. 
B) Declining-balance depreciation. 
C) Straight-line depreciation. 
D) Units-of-production depreciation. 
E) Modified accelerated cost recovery system (MACRS) depreciation. 
A) Accelerated depreciation. 
B) Declining-balance depreciation. 
C) Straight-line depreciation. 
D) Units-of-production depreciation. 
E) Modified accelerated cost recovery system (MACRS) depreciation.

Question 6

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Accepted Answer

A) True 
 B)False

Question 7

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Accepted Answer

A) True 
 B)False

Question 8

A ____________________________ results from revising estimates of the useful life or salvage value of a plant asset.

Accepted Answer

change in

Question 9

An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Accepted Answer

A) Neither a gain or loss is recognized on this type of transaction. 
B) A gain on sale of $2,000. 
C) A loss on sale of $1,000. 
D) A gain on sale of $1,000. 
E) A loss on sale of $2,000. 
A) Neither a gain or loss is recognized on this type of transaction. 
B) A gain on sale of $2,000. 
C) A loss on sale of $1,000. 
D) A gain on sale of $1,000. 
E) A loss on sale of $2,000.

Question 10

In Year one, McClintock Co. acquired a truck that cost $75,500 with an estimated $14,000 salvage value and 4 year estimated useful life. Depreciation in the first year was $15,375. McClintock had the following transactions involving plant assets during Year 2. Unless otherwise indicated, all transactions were for cash.   Prepare the general journal entries to record these transactions.

Accepted Answer

The answer of In Year one, McClintock Co. acquired a...

Question 11

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

Accepted Answer

A) True 
 B)False

Question 12

The Oberon Company purchased a delivery truck for $95,000 on January 2. The truck was estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the straight-line method. At the beginning of the third year, it was obvious that the truck's total useful life would be 6 years rather than 4, and the salvage at the end of the 6th year would be $1,500. Determine the depreciation expense for the truck for the 6 years of its life.

Accepted Answer

@#IMG-DLM& Calculations:
Year 1-Year 2 depreciatio

Question 13

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

Accepted Answer

A) True 
 B)False

Question 14

On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The following information is available regarding the plant asset:   Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to record depreciation for each year under the straight-line depreciation method.

Accepted Answer

@#IMG-DLM& [($130,000 - $15,00

Question 15

The federal income tax rules for depreciating assets are known as ___________________________.

Accepted Answer

MACRS (Mod

Question 16

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Accepted Answer

A) True 
 B)False

Question 17

Holding a copyright:

Accepted Answer

A) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
B) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years. 
C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years. 
A) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
B) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years. 
C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.

Question 18

A company's property records revealed the following information about one of its plant assets:   Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31.
Year 1 ______________________ Year 2 _______________________

Accepted Answer

Year 1: $154,000 × 20% = $30,8

Question 19

A change in an accounting estimate is:

Accepted Answer

A) Reflected in past financial statements. 
B) Reflected in future financial statements and also requires modification of past statements. 
C) Reflected in current and future years' financial statements, not in prior statements. 
D) Not allowed under current accounting rules. 
E) Considered an error in the financial statements. 
A) Reflected in past financial statements. 
B) Reflected in future financial statements and also requires modification of past statements. 
C) Reflected in current and future years' financial statements, not in prior statements. 
D) Not allowed under current accounting rules. 
E) Considered an error in the financial statements.

Question 20

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Accepted Answer

A) True 
 B)False

Salvage value is:

A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons. Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of Year 2.

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

A ____________________________ results from revising estimates of the useful life or salvage value of a plant asset.

An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

The federal income tax rules for depreciating assets are known as ___________________________.

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Holding a copyright:

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31. Year 1 Year 2 _

A change in an accounting estimate is:

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 8: Reporting and Analyzing Long-Term Assets

Salvage value is:

A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons. Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of Year 2.

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

A ____________________________ results from revising estimates of the useful life or salvage value of a plant asset.

An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

The federal income tax rules for depreciating assets are known as ___________________________.

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Holding a copyright:

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31. Year 1 ______________________ Year 2 _______________________

A change in an accounting estimate is:

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31. Year 1 Year 2 _