Deck 9: Plant Assets and Intangibles

Question 1

A company's accountant capitalizes a payment that should be recorded as an expense.Which of the following is TRUE?

A) Net income is overstated.
B) Revenues are understated
C) Assets are understated.
D) Liabilities are overstated.

Answer 1

A

Question 2

Treating a capital expenditure as an expense causes an understatement of net income.

Answer 2

True

Question 3

Which of the following is included in the cost of a plant asset?

A) Amounts paid to ready the asset for its intended use
B) Regular maintenance cost
C) Normal repair cost
D) Wages of workers who use the asset

Answer 3

A

Question 4

The cost of land includes the cost of removing unwanted buildings.

Question 5

Which of the following would be expensed,rather than capitalized?

A) Oil change and lubrication
B) Major engine overhaul
C) Modification for new use
D) Addition to storage capacity

Question 6

Which of the following is included in the cost of land?

A) The cost of fencing
B) The cost of paving
C) The cost of clearing the land
D) The cost of outdoor lighting

Question 7

Which of the following is NOT a characteristic of a plant asset?

A) The asset is used in the production of income for the business.
B) The asset is available for sale to customers in the ordinary course of business.
C) The asset has physical form.
D) The asset has future usefulness and value.

Question 8

Which of the following costs related to a company car would NOT be expensed?

A) The cost to install an engine with higher horsepower
B) The cost to change car's oil
C) The cost to replace a broken windshield
D) The cost of new tires

Question 9

The cost of razing a building on a parcel of land to build a new building is added to the cost of the land.

Question 10

A company's accountant capitalizes a payment that should be recorded as an expense.Which of the following is TRUE?

A) Revenue is overstated.
B) Expenses are overstated.
C) Assets are overstated.
D) Liabilities are overstated.

Question 11

The cost of excavating a basement for a new building is added to the price of the land.

Question 12

Which of the following would be capitalized and depreciated,rather than expensed?

A) Modification for new use
B) Paint job
C) Replacement of tires
D) Normal repair of engine

Question 13

Expenditures which extend the life of an asset or increase its productive capacity should be expensed.

Question 14

A company's accountant expenses a payment that should be capitalized.Which of the following is TRUE?

A) Net income is understated.
B) Liabilities are overstated.
C) Revenue is overstated.
D) Assets are overstated.

Question 15

Treating a cost which should be an expense as a capital expenditure will make a company's net income higher.

Question 16

The cost of fencing around a building is included in the cost of the building.

Question 17

Which of the following asset categories would include fencing?

A) Machinery and equipment
B) Land improvements
C) Buildings
D) Land

Question 18

Which of the following asset categories would include the cost of clearing land and removing unwanted buildings?

A) Land
B) Buildings
C) Land improvements
D) Machinery and equipment

Question 19

Hastings Company has purchased a group of assets for $350,000.The assets and their market values are listed as follows: $$\begin{array} { | l | r | } \hline \text { Land } & \$ 125,000 \\\hline \text { Equipment } & 75,000 \\\hline \text { Building } & 200,000 \\\hline\end{array}$$ Which of the following amounts would be debited to the Land account?

A) $125,000
B) $109,375
C) $65,625
D) $175,000

Question 20

Normal expenditures for repairs and maintenance should be capitalized.

Question 21

Acme purchased a property that included both land and a building for $200,000.Acme hired an appraiser who determined that the market value of the land was $140,000 and the market value of the building was $50,000.

-At what amount should Acme record the land cost?

A) $147,368
B) $52,632
C) $200,000
D) $140,000

Question 22

Tangible assets must be tested for impairment at least once a year.

Question 23

Which of the following should be included in the cost of land?

A) Cost to build sidewalks on the land
B) Cost to clear the land of old buildings
C) Cost of installing signage
D) Cost of installing fences

Question 24

An asset impairment will be reflected by an increase in the book value of an asset,as shown on the balance sheet.

Question 25

Once an asset is fully depreciated,it may not be used any more,but must be sold or disposed of.

Question 26

When an asset is fully depreciated,the salvage value must be written off.

Question 27

Which of the following items should be depreciated?

A) Tangible property, plant, and equipment, other than land
B) Intangible property
C) Land
D) Natural resources

Question 28

When an asset is fully depreciated,no further depreciation expense is recorded.

Question 29

Which of the following items should NOT be depreciated,depleted,or amortized?

A) Natural resources
B) Land
C) Tangible property, plant, and equipment, other than land
D) Intangible property

Question 30

Estimated residual value is the expected cash value of an asset at the end of its useful life.

Question 31

A company purchased a used machine for $80,000.The machine required installation costs of $8,000 and insurance while in transit of $500.At which of the following amounts would the equipment be recorded?

A) $80,500
B) $88,500
C) $88,000
D) $80,000

Question 32

Accelerated depreciation differs from straight-line depreciation in that depreciation expense is greater in the first year and less in the later years.

Question 33

Acme Investments plans to develop a shopping center.In the first quarter,they spent the following amounts: $$\begin{array} { l r } \text { Purchase land } & \$ 100,000 \\\text { Surveys and legal fees } & 1,200 \\\text { Land clearing } & 5,000 \\\text { Install fences around the property } & 4,600 \\\text { Install lighting and signage } & 2,600\end{array}$$

-0 What amount should be recorded as the land improvements cost?

A) $7,200
B) $101,200
C) $46,200
D) $106,200

Question 34

If an asset is fully depreciated,but it can continue to be used,the asset account and accumulated depreciation balance remain on the books,and no further depreciation is recorded.

Question 35

Which of the following accounting principles requires depreciation?

A) The revenue recognition principle
B) The matching principle
C) The reliability principle
D) The entity concept

Question 36

Acme purchased a property that included both land and a building for $200,000.Acme hired an appraiser who determined that the market value of the land was $140,000 and the market value of the building was $50,000.

-At what amount should Acme record the building cost?

A) $147,368
B) $52,632
C) $200,000
D) $140,000

Question 37

Roberts Construction Company paid $40,000 for equipment with a market value of $45,000.At which of the following amounts should the equipment be recorded?

A) $45,000
B) $40,000
C) $42,500
D) $5,000

Question 38

Asset impairments occur when the asset's value has a significant decline,outside of normal depreciation.

Question 39

The straight-line method of depreciation assigns a fixed amount of depreciation to each unit of output produced by an asset.

Question 40

Acme Investments plans to develop a shopping center.In the first quarter,they spent the following amounts: $$\begin{array} { l r } \text { Purchase land } & \$ 100,000 \\\text { Surveys and legal fees } & 1,200 \\\text { Land clearing } & 5,000 \\\text { Install fences around the property } & 4,600 \\\text { Install lighting and signage } & 2,600\end{array}$$

-What amount should be recorded as the land cost?

A) $7,200
B) $101,200
C) $46,200
D) $106,200

Question 41

Which of the following is the expected cash value of an asset at the end of its useful life?

A) Book value
B) Residual value
C) Carrying value
D) Market value

Question 42

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

-What is depreciation expense for 2014 if the company uses double-declining-balance depreciation?

A) $13,333
B) $8,889
C) $6,000
D) $10,000

Question 43

The depreciation method in which salvage value is ignored until the end of the life of the asset is:

A) straight-line.
B) First-In, First-Out.
C) double-declining-balance.
D) units-of-output.

Question 44

An asset has a life of 3 years.It cost $90,000 and has an expected salvage value of $15,000.Using straight-line depreciation,what is the depreciation expense each of the three years?

A) $30,000
B) $35,000
C) $25,000
D) $45,000

Question 45

Which of the following properly describes accumulated depreciation?

A) Accumulated depreciation is a contra liability account.
B) Accumulated depreciation is an expense account.
C) Accumulated depreciation is a contra equity account.
D) Accumulated depreciation is a contra asset account.

Question 46

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

-What is the book value of the machine at the end of 2014 if the company uses double-declining-balance depreciation?

A) $20,000
B) $17,778
C) $13,333
D) $28,000

Question 47

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

- What is depreciation expense for 2014 if the company uses units-of-production depreciation?

A) $6,000
B) $18,000
C) $10,000
D) $9,000

Question 48

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

-What is the book value of the machine at the end of 2014 if the company uses straight-line depreciation?

A) $10,000
B) $28,000
C) $17,778
D) $20,000

Question 49

Which of the following depreciation methods allocates a fixed amount of depreciation to miles driven,hours used,or some other measure of the asset's utilization?

A) Straight-line
B) Declining-balance
C) Units-of-production
D) Double-declining-balance

Question 50

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

- What is depreciation expense for 2013 if the company uses double-declining-balance depreciation?

A) $6,667
B) $6,000
C) $13,333
D) $12,000

Question 51

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

-What is depreciation expense for 2013 if the company uses units-of-production depreciation?

A) $6,000
B) $13,333
C) $6,667
D) $12,000

Question 52

An asset costs $80,000 and has a salvage value of $7,000.It has a four-year life.Using double-declining-balance depreciation,Year 1 depreciation would be:

A) $20,000.
B) $40,000.
C) $18,250.
D) $36,500.

Question 53

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

- What is the book value of the machine at the end of 2014 if the company uses units-of-production depreciation?

A) $20,000
B) $10,000
C) $17,778
D) $28,000

Question 54

Which of the following depreciation methods allocates an equal amount of depreciation to each year?

A) Units-of-production
B) Straight-line
C) Declining-balance
D) Double-declining-balance

Question 55

Which of the following depreciation methods writes off more depreciation near the start of an asset's life than in later years?

A) Units-of-production
B) Straight-line
C) Double-declining-balance
D) First-In, First-Out

Question 56

Which of the following is TRUE when the estimate of an asset's useful life is increased?

A) The new estimate is ignored until the last year of the asset's life.
B) Annual depreciation expense is increased for the remaining years of the asset's life.
C) Prior years' financial statements must be restated.
D) Annual depreciation expense is decreased for the remaining years of the asset's life.

Question 57

Lexis Company purchased equipment on January 1,2012 for $35,500.The estimated useful life of the equipment was 7 years and the estimated residual value was $4,000.After using the straight-line method of depreciation for 3 years,the estimated useful life was revised to 9 years on January 1,2015.How much is depreciation expense for 2015?

A) $2,444
B) $3,000
C) $2,000
D) $3,667

Question 58

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

- What is depreciation expense for 2013 if the company uses straight-line depreciation?

A) $6,667
B) $13,333
C) $12,000
D) $6,000

Question 59

On January 1,2013,Zane Manufacturing Company purchased a machine for $40,000.The company expects to use the machine a total of 24,000 hours over the next 6 years.The estimated sales price of the machine at the end of 6 years is $4,000.The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

-What is depreciation expense for 2014 if the company uses straight-line depreciation?

A) $6,000
B) $9,000
C) $13,333
D) $10,000

Question 60

Which of the following depreciation methods does NOT use a residual value in the depreciation formula?

A) Units-of-production
B) Double-declining-balance
C) Straight-line
D) First-In, First-Out

Question 61

On January 1,2012,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 8 years,or 200,000 miles.If the company uses straight-line depreciation,please show the journal entry for the first year depreciation.

Question 62

Charterhouse Services purchased a van on January 1,2012,for $56,000.It has an estimated life of 5 years,and an estimated salvage value of $6,000.Charterhouse uses straight-line depreciation.At the end of 2013,what was the book value of the asset?

A) $36,000
B) $30,000
C) $36,000.
D) $12,000

Question 63

Avery Sales purchased telecom equipment for $12,000 on October 1,2013.It has estimated residual value of $1,800,and an estimated life of 8 years.If Avery uses double-declining-balance depreciation,how much expense will be recorded in 2013?

A) $312
B) $375
C) $250
D) $750

Question 64

On January 1,2014,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 8 years,or 200,000 miles.Please provide the journal entry for the purchase of the truck.

Question 65

On January 1,2012,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 4 years,or 200,000 miles.Assume the company uses straight-line depreciation.Please complete the depreciation schedule below. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Depreciation for the Year }$
$\begin{array}{|c|c|c|c|c|c|c}\hline \text { Date } & \text { Asset Cost } & \begin{array}{c}\text { Depreciable } \\\text { Cost }\end{array} & \begin{array}{c}\text { Depreciation } \\\text { Rate }\end{array} & \begin{array}{c}\text { Depreciation } \\\text { Expense }\end{array} & \begin{array}{c}\text { Accumulated } \\\text { Depreciation }\end{array} & \begin{array}{c}\text { Book } \\\text { Value }\end{array} \\\hline 1-1-2012 \\\hline 12-31-2012 \\\hline 12-31-2013 \\\hline 12-31-2014 \\\hline 12-31-2015 \\\hline\end{array}$

Question 66

On January 1,2013,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 4 years,or 200,000 miles.Assume the company uses units-of-production depreciation.The truck drove 40,000 miles in 2013,60,000 miles in 2014,80,000 miles in 2015,and 20,000 miles in 2016.What is the depreciation rate?

A) $4.00/mile
B) $0.21/mile
C) $0.20/mile
D) $0.25/mile

Question 67

Avery Sales purchased telecom equipment for $5,000 on July 1,2013.It has estimated residual value of $200,and an estimated life of 8 years.If Avery uses straight-line depreciation,how much expense will be recorded in 2013?

A) $312
B) $300
C) $600
D) $625

Question 68

An asset has a life of 3 years.It cost $90,000 and has an expected salvage value of $15,000.Using double-declining-balance depreciation,what is the depreciation for Year 1?

A) $29,700
B) $60,000
C) $15,000
D) $50,000

Question 69

Pallmall Company has a truck that was purchased in prior years for $60,000.At the end of 2014,there is $30,000 of accumulated depreciation.The value of the truck has been impaired,and its remaining value is now estimated at $18,000.When Pallmall adjusts for the loss of value,how much will the loss on impairment be?

A) $6,000
B) $12,000
C) $18,000
D) $42,000

Question 70

Charterhouse Services purchased a van on January 1,2012,for $56,000.It has an estimated life of 5 years,and an estimated salvage value of $6,000.Charterhouse uses straight-line depreciation.At the end of 2013,Charterhouse revised the estimated life of the asset from 5 years to 6 years.How much was the depreciation expense in the year 2014?

A) $12,000
B) $6,000
C) $9,000
D) $7,500

Question 71

A factory has a machine costing $76,000.It has a 5-year life and an estimated capacity of 160,000 parts.The salvage value of the machine is zero.Assume 35,000 parts are machined in the first year of operation.Using the units-of-production method,what is the depreciation expense in Year 1?

A) $16,625
B) $14,187
C) $15,200
D) $12,160

Question 72

A company purchased a computer on July 1,2012.The computer has an estimated useful life of 5 years and will have no salvage value.It was purchased for $10,000.It is estimated that the computer can be used for 5,000 hours.The computer was used for 450 hours during 2012.If the goal is to record higher depreciation expense in the earlier years,which method should be used?

A) Units-of-production
B) Straight-line
C) Double-declining-balance
D) First-In, First-Out

Question 73

Charterhouse Services purchased a van on January 1,2012,for $56,000.It has an estimated life of 5 years,and an estimated salvage value of $6,000.Dawson uses straight-line depreciation.At the end of 2014,Charterhouse revised the estimated life of the asset from 5 years to 8 years.How much was the depreciation expense in the year 2015?

A) $5,000
B) $4,000
C) $6,000
D) $5,600

Question 74

On January 1,2012,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 4 years,or 200,000 miles.Assume the company uses units-of-production depreciation.The truck drove 40,000 miles in 2012,60,000 miles in 2013,80,000 miles in 2014,and 20,000 miles in 2015.Please complete the depreciation schedule below. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Depreciation for the Year }$
$$\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Date } & \text { Asset Cost } & \begin{array} { c } \text { Depreciable } \\\text { Cost }\end{array} & \begin{array} { c } \text { Depreciation } \\\text { Rate }\end{array} & \begin{array} { c } \text { Depreciation } \\\text { Expense }\end{array} & \begin{array} { c } \text { Accumulated } \\\text { Depreciation }\end{array} & \begin{array} { c } \text { Book } \\\text { Value }\end{array} \\\hline 1 - 1 - 2012 & & & & & & \\\hline 12 - 31 - 2012 & & & & & & \\\hline 12 - 31 - 2013 & & & & & & \\\hline 12 - 31 - 2014 & & & & & & \\\hline 12 - 31 - 2015 & & & & & & \\\hline\end{array}$$

Question 75

On January 1,2012,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 8 years,or 200,000 miles.

-If the company uses double-declining-balance depreciation,please show the journal entry for the first year depreciation.

Question 76

On January 1,2012,a company buys equipment for $10,000.It has estimated residual value of $1,000,and an estimated life of 5 years.Assume the company uses double-declining-balance depreciation.Please complete the depreciation schedule below. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Depreciation for the Year }$$$\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Date } & \text { Asset Cost } & \begin{array} { c } \text { Depreciable } \\\text { Cost }\end{array} & \begin{array} { c } \text { Depreciation } \\\text { Rate }\end{array} & \begin{array} { c } \text { Depreciation } \\\text { Expense }\end{array} & \begin{array} { c } \text { Accumulated } \\\text { Depreciation }\end{array} & \begin{array} { c } \text { Book } \\\text { Value }\end{array} \\\hline 1 - 1 - 2012 & & & & & & \\\hline 12 - 31 - 2012 & & & & & & \\\hline 12 - 31 - 2013 & & & & & & \\\hline 12 - 31 - 2014 & & & & & & \\\hline 12 - 31 - 2015 & & & & & & \\\hline 12 - 31 - 2016 & & & & & & \\\hline\end{array}$$

Question 77

Avery Sales purchased telecom equipment for $5,000 on November 1,2013.It has estimated residual value of $200,and an estimated life of 8 years.If Avery uses straight-line depreciation,how much expense will be recorded in 2013?

A) $312
B) $120
C) $100
D) $225

Question 78

If an asset's physical condition deteriorates more rapidly than would be reflected by normal depreciation,that is referred to as:

A) accelerated depreciation.
B) asset impairment.
C) asset disposal.
D) shrinkage.

Question 79

An asset costs $80,000 and has a salvage value of $7,000.It has a four-year life.Using double-declining-balance depreciation,Year 2 depreciation would be:

A) $15,000.00.
B) $15,437.50.
C) $20,000.00.
D) $18,250.00.

Question 80

On January 1,2012,a company buys a truck for $42,000 cash.It has estimated residual value of $2,000,and an estimated life of 8 years,or 200,000 miles.

-At the end of 2012,the truck had driven 30,000 miles.If the company uses units-of-production depreciation,please show the journal entry for the first year depreciation.