Deck 7: Long-Term Producing Assets and Investments in Equity Securities

Question 1

Equipment with a cost of $22,000 and accumulated depreciation of $15,000 was retired with a gain of $1,000.The cash received from the disposition of equipment is

A) $7,000.
B) $8,000.
C) $6,000.
D) $14,000.

Answer 1

$8,000.

Question 2

The balance in accumulated depreciation on January 1 and December 31 is $15,000 and $18,000, respectively, during a year in which no assets were disposed.Depreciation expense during the year is

A) $18,000.
B) $15,000.
C) $3,000.
D) $33,000.

Answer 2

$3,000.

Question 3

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000.Data from the comparative balance sheets are: Equipment purchased during 2009 cost

A) $120,000.
B) $110,000.
C) $145,000.
D) $10,000.

Answer 3

$120,000.

Question 4

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.

-Using the equity method the market price of the investment increases above its cost.

A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Question 5

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.

-Using the cost method the market price of the investment increases above its cost.

A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Question 6

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.

-Using the equity method, the investee company recognizes a net loss for the year.

A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Question 7

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.

-An investment in a 40%-owned subsidiary is sold for more than its carrying value.

A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Question 8

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Depreciation expense

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 9

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Betterments

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 10

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Oil reserve

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 11

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Land

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 12

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Organizational costs

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 13

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Amortization expense

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 14

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Gain on sale of patent

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 15

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Copyright

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 16

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Patents

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 17

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.

-Goodwill

A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Question 18

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Freight costs on production equipment in transit

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 19

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Sales tax on equipment purchase

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 20

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Damaged during installation and repair costs

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 21

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Interest paid on construction loan during the building period

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 22

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Survey costs by contractor

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 23

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.

-Construction insurance to cover theft or vandalism during building construction

A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Question 24

On May 6, 2009, Galen Company purchased equity securities.At December 31, 2009, three investments were still owned by Galen.The names, cost, and fair values at December 31, 2009, are indicated below.
The investments have clearly determinable fair values.Galen cannot exercise significant influence on any of these investments.Galen has determined that the Guy stock will be held until 2011.Galen intends to sell the Vernon stock by January 2, 2010, for short-term profits.Galen has no idea how long it will hold the Nordic stock.Show how these investments and any related yearend adjustments will be reported by completing the balance sheet below at December 31, 2009.

Question 25

On December 1, Breeze Corp.purchased a tract of land for $320,000 to be used as a factory site.An old unusable building on the land was razed (torn down), and the salvaged materials from the demolition were sold.These cash expenditures and receipts and other costs incurred during December are as follows:

Calculate the balance in Breeze's Land account on its December 31 balance sheet.

Question 26

On January 1, Durango Co.paid $80,000 for a new truck.Calculate the book value of the truck using straight-line depreciation at the end of the second year.

Question 27

On January 1, Tanker Company paid $80,000 for a copy machine.Calculate accumulated depreciation using the double-declining-balance method at the end of year two.

Question 28

On January 1, the balance in accumulated depreciation is $28,000.During the current year depreciation expense is $10,000 and equipment with a cost of $9,000 was sold for $3,000 at a loss of $1,000.Calculate the December 31 balance in accumulated depreciation.

Question 29

Dorman Company purchased a new web server on January 1.The following information and expenditures related to this acquisition were made:

Specify and justify which of the preceding expenditures should be added to the cost of the web server and disclose that cost.Indicate how the expenditures excluded from the cost of the web server would be classified.