Deck 8: Accounting for Long-Term Operational Assets

Question 1

[The following information applies to the questions displayed below.]

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.


-What journal entry would be used to record the purchase of the above assets?

A)
B)
C)
D)

Answer 1

Question 2

On January 1,Year 1,Phillips Company made a basket purchase including land,a building and equipment for $380,000.The appraised values of the assets are $20,000 for the land,$340,000 for the building and $40,000 for equipment.Phillips uses the double-declining-balance method for the equipment which is estimated to have a useful life of four years and a salvage value of $5,000.What is the depreciation expense for the equipment for Year 1?

A)$17,000
B)$20,000
C)$9,500
D)$19,000

Answer 2

$19,000

Question 3

Which of the following terms is used to describe the process of expense recognition for property,plant and equipment?

A)Amortization
B)Depreciation
C)Depletion
D)Revision

Answer 3

Depreciation

Question 4

Which of the following is considered an accelerated depreciation method?

A)Double-declining balance
B)Units-of-production
C)MACRS
D)Both double-declining-balance and MACRS

Question 5

Which of the following intangible assets does not convey a specific legal right or privilege?

A)Copyrights
B)Franchises
C)Goodwill
D)Trademarks

Question 6

Which method of depreciation is used by most U.S.companies for financial reporting purposes?

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

Question 7

Laramie Co.paid $800,000 for a purchase that included land,building,and office furniture.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land,$100,000,Building,$740,000,and Office Furniture,$160,000.What is the cost that should be allocated to the land?

A)$80,000
B)$70,000
C)$100,000
D)$107,000

Question 8

Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler uses the double-declining-balance method.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 9

On January 1,Year 1 Missouri Co.purchased a truck that cost $57,000.The truck had an expected useful life of 10 years and a $6,000 salvage value.Missouri uses the double declining-balance method.What is the amount of depreciation expense recognized in Year 2?

A)$9,120
B)$11,400
C)$10,200
D)$8,160

Question 10

On January 6,Year 1,Mount Jackson Corporation purchased a tract of land for a factory site for $1,500,000.An existing building on the site was demolished and the new factory was completed on October 11,Year 1.Additional cost data are shown below:

Which of the following are the capitalized costs of the land and the new building,respectively?

A)$1,637,600 and $1,898,000
B)$1,515,400 and $2,020,200
C)$1,648,600 and $1,887,000
D)$1,500,000 and $2,035,600

Question 11

On March 1,Bartholomew Company purchased a new stamping machine with a list price of $34,000.The company paid cash for the machine;therefore,it was allowed a 5% discount.Other costs associated with the machine were: transportation costs,$550;sales tax paid,$1,360;installation costs,$450;routine maintenance during the first month of operation,$500.What is the cost of the machine?

A)$34,210
B)$32,300
C)$35,160
D)$34,660

Question 12

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase.The machine was delivered under terms FOB shipping point,and transportation costs amounted to $2,400.Anchor paid $3,000 to have the machine installed and tested.Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations.What is the cost of the machine?

A)$156,800
B)$159,200
C)$165,800
D)$162,200

Question 13

Which of the following would not be classified as property,plant and equipment?

A)Computers
B)Buildings
C)Land
D)Office furniture

Question 14

Which of the following would not be classified as a tangible long-term asset?

A)Delivery truck
B)Timber reserve
C)Land
D)Copyright

Question 15

Chico Company paid $950,000 for a basket purchase that included office furniture,a building and land.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture,$190,000;Building,$740,000;and Land,$132,000.Based on this information,what is the cost that should be allocated to the office furniture? (Round allocation percentage to two decimal places. )

A)$171,000
B)$190,000
C)$316,667
D)$105,000

Question 16

Which of the following would be classified as a long-term operational asset?

A)Notes receivable
B)Trademark
C)Inventory
D)Accounts receivable

Question 17

[The following information applies to the questions displayed below.]

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.


-Assume that Harding uses the units-of-production method when depreciating its equipment.Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has a salvage value of $34,000.Harding produced 265,000 units with the equipment by the end of the first year of purchase.Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year?

A)$193,450
B)$125,200
C)$157,145
D)$165,890

Question 18

Which of the following would be classified as a tangible asset?

A)Land
B)Goodwill
C)Copyright
D)Trademark

Question 19

[The following information applies to the questions displayed below.]

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.


-What value will be recorded for the building?

A)$175,000
B)$950,000
C)$800,000
D)$1,100,000

Question 20

On January 1,Year 1,Milton Manufacturing Company purchased equipment with a list price of $88,000.A total of $4,000 was paid for installation and testing.During the first year,Milton paid $6,000 for insurance on the equipment and another $2,200 for routine maintenance and repairs.Milton uses the units-of-production method of depreciation.Useful life is estimated at 100,000 units,and estimated salvage value is $8,000.During Year 1,the equipment produced 13,000 units.What is the amount of depreciation for Year 1?

A)$10,920
B)$11,960
C)$11,700
D)$12,740

Question 21

Farmer Company sold a piece of equipment for $6,000.The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale.Which of the following correctly shows the effect of the sale on the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 22

Which of the following statements is true concerning the modified accelerated cost recovery system (MACRS)for the recognition of depreciation expense,for tax purposes?

A)7-year property will be depreciated more rapidly than 10-year property under the MACRS depreciation method.
B)Under MACRS more depreciation will be recorded in the second accounting period than in the first accounting period because of the half-year convention.
C)MACRS is used for the determination of depreciation expense that is reported on an income tax return.
D)All of these answer choices are true.

Question 23

A machine with a book value of $38,000 is sold for $32,000.Which of the following answers would accurately represent the effects of the sale on the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 24

[The following information applies to the questions displayed below.]

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.



-At the beginning of Year 4,Farmer revised the expected life to eight years.What is the annual amount of depreciation expense for each of the remaining years in the machine's life?

A)$6,240
B)$4,400
C)$7,040
D)$3,900

Question 25

Gillock,Inc.uses MACRS for its income tax return and the straight-line method for its financial statements.On January 1,Year 1,the company purchased a long-term asset that cost $130,000 and has a $10,000 salvage value and an expected 8-year useful life.MACRS specifies a 5-year life for that asset and a depreciation rate of 20% for the first year of its life.Which of the following would the company show on its financial records?

A)Less depreciation expense on the tax return than on the income statement
B)The same amount of depreciation expense for financial reporting as for income tax preparation
C)Depreciation expense of $26,000 on the income statement and $15,000 on the tax return
D)A deferred tax liability will be reported on the balance sheet

Question 26

[The following information applies to the questions displayed below.]

On January 1, Year 1, Jing Company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.



-Assuming the company uses the double-declining-balance depreciation method,what are the amounts of depreciation expense and accumulated depreciation,respectively,that would be reported in the financial statements prepared as of December 31,Year 3?

A)$0 and $24,000
B)$960 and $12,000
C)$8,640 and $23,040
D)$5,184 and $28,224

Question 27

On January 1,Year 1,the City Taxi Company purchased a new taxi cab for $36,000.The cab has an expected salvage value of $2,000.The company estimates that the cab will be driven 200,000 miles over its life.It uses the units-of-production method to determine depreciation expense.The cab was driven 45,000 miles the first year and 48,000 the second year.What is the amount of depreciation expense reported on the Year 2 income statement and the book value of the taxi at the end of Year 2,respectively?

A)$8,640 and $19,260
B)$8,640 and $17,260
C)$8,160 and $20,190
D)$8,160 and $18,190

Question 28

Dinkins Company purchased a truck that cost $46,000.The company expected to drive the truck 100,000 miles over its 5-year useful life,and the truck had an estimated salvage value of $8,000.If the truck is driven 26,000 miles in the current accounting period,what would be the amount of depreciation expense for the year?

A)$11,960
B)$9,880
C)$9,200
D)$7,600

Question 29

Which of the following statements is true regarding depreciation expense?

A)Different companies in the same industry always depreciate similar assets by the same methods.
B)A company using the straight-line method will show a smaller book value for assets than if the same company uses the double-declining-balance method.
C)Choosing the double-declining balance method over the straight-line method will produce a greater total depreciation expense over the asset's life.
D)A company should use the depreciation method that best matches expense recognition with the use of the asset.

Question 30

Emir Company purchased equipment that cost $110,000 cash on January 1,Year 1.The equipment had an expected useful life of six years and an estimated salvage value of $8,000.Emir depreciates its assets under the straight-line method.What are the amounts of depreciation expense during Year 3 and the accumulated depreciation at December 31,Year 3,respectively?

A)$17,000 and $17,000
B)$17,000 and $68,000
C)$68,000 and $17,000
D)$17,000 and $51,000

Question 31

On January 1,Year 1,Li Company purchased an asset that cost $80,000.The asset had an expected useful life of five years and an estimated salvage value of $16,000.Li uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year,the company revised its estimated salvage value to $8,000.What is the amount of depreciation expense to be recognized during Year 4?

A)$12,800
B)$16,800
C)$33,600
D)$20,800

Question 32

[The following information applies to the questions displayed below.]

On January 1, Year 1, Jing Company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.



-Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in Year 3.The company uses the straight-line method.The office equipment was sold on December 31,Year 3 for $16,000.What is the company's net income (loss)for Year 3?

A)($6,600)
B)$6,600
C)$600
D)$5,400

Question 33

For Year 1,the Oscar Company records depreciation expense of $12,000 on its income statement and $9,000 of MACRS depreciation on its tax return.Which of the following answers is correct regarding the difference between the two figures?

A)Net income is understated by $3,000 on the Year 1 income statement.
B)Deferred taxes of $3,000 are subtracted from taxable income of Year 1.
C)The difference in depreciation expense is caused by differences between GAAP and the tax code.
D)The amount of depreciation recorded on the income tax return must be incorrect.

Question 34

On January 1,Year 1,Dinwiddie Company purchased a car that cost $45,000.The car has an expected useful life of 5 years and a $10,000 salvage value.Which of the following statements is true?

A)The total amount of depreciation expense recognized over the six-year useful life will be greater under the double-declining-balance method than the straight-line method.
B)The amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used.
C)At the end of Year 2,the amount in accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used.
D)None of these statements is true.

Question 35

At the end of Year 5,the equipment was still owned by Jing Company.What is the book value of the office equipment using the straight-line method and double-declining-balance method,respectively?

A)$12,000 and $1,680.
B)$12,000 and $12,000.
C)$0 and $0.
D)None of these answer choices are correct.

Question 36

Madison Company owned an asset that had cost $44,000.The company sold the asset for $16,000.Accumulated depreciation on the day of sale amounted to $32,000.Which of the following statements is true?

A)A $16,000 cash inflow in the investing activities section of the cash flow statement.
B)A $16,000 increase in total assets.
C)A $4,000 gain in the investing activities section of the statement of cash flows.
D)A $4,000 cash inflow in the financing activities section of the cash flow statement.

Question 37

Chubb Company paid cash to purchase equipment on January 1,Year 1.Select the answer that shows how the recognition of depreciation expense in Year 2 would affect assets,liabilities,equity,net income,and cash flows.

A)option A
B)option B
C)option C
D)option D

Question 38

At the end of the current accounting period,Ringgold Co.recorded depreciation of $15,000 on its equipment.What is the effect of this entry on the company's balance sheet?

A)Decrease assets and increase liabilities
B)Decrease stockholders' equity and decrease assets
C)Decrease assets and increase stockholders' equity
D)Decrease stockholders' equity and increase liabilities

Question 39

On January 1,Year 1,Friedman Company purchased a truck that cost $48,000.The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value.During Year 2,Friedman drove the truck 18,500 miles.Friedman uses the units-of-production method.What is depreciation expense in Year 2?

A)$8,880
B)$7,400
C)$6,000
D)$5,000

Question 40

On January 1,Year 1,Friedman Company purchased a truck that cost $48,000.The truck had an expected useful life of 8 years and an $8,000 salvage value.Friedman uses the double-declining-balance method.What is the book value of the truck at the end of Year 1?

A)$43,000
B)$38,000
C)$40,000
D)$36,000

Question 41

Which of the following would most likely not be expensed using the straight-line method?

A)A copyright
B)A building
C)A timber reserve
D)A patent

Question 42

Which of the following is an asset that has an identifiable useful life?

A)Goodwill
B)Patents
C)Renewable franchises
D)Trademarks

Question 43

[The following information applies to the questions displayed below.]

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.



-If the original expected life remained the same (i.e. ,5-years),but at the beginning of Year 4,the salvage value was revised to $8,000,what is the annual depreciation expense for each of the remaining years?

A)$5,440
B)$27,200
C)$13,600
D)$14,800

Question 44

On April 1,Year 1,Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000.It is estimated that the oil well contains 600,000 barrels of oil,of which only 500,000 can be profitably extracted.By December 31,Year 1,25,000 barrels of oil were produced and sold.What is depletion expense for Year 1 on this well?

A)$800,000
B)$600,000
C)$480,000
D)$500,000

Question 45

[The following information applies to the questions displayed below.]

On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years.


-Which of the following correctly shows the effect of the first year's amortization of Vanguard's copyright?

A)Option A
B)Option B
C)Option C
D)Option D

Question 46

Which of the following general journal entries shows the proper recording of an impairment loss of $15,000 relating to goodwill?

A)
B)
C)
D)

Question 47

How does the recognition of depletion expense affect the elements of the financial statements?

A)Decreases assets and stockholders' equity and decreases cash flow from investing expenses under the direct approach.
B)Decreases cash flow from operating activities,and does not affect the amount of total assets.
C)Increases assets,equity,and cash flow from operating activities.
D)Decreases assets and equity,and does not affect cash flow.

Question 48

On January 1,Year 1,Monroe Minerals Company purchased a copper mine for $120,000,000.The mine was expected to produce 50,000 tons of copper over its useful life.During Year 1,the company extracted 6,000 tons of copper.The copper was sold for $4,500 per ton.Assume that the company incurred $8,040,000 in operating expenses during Year 1.What is the amount of net income for Year 1?

A)$12,600,000
B)$4,560,000
C)$6,360,000
D)$14,400,000

Question 49

Which of the following terms is used to describe long-term assets that have no physical substance and provide rights,privileges and special opportunities to businesses?

A)Tangible assets
B)Intangible assets
C)Natural resources
D)Property,plant and equipment

Question 50

Which of the following statements is correct regarding accounting treatment of goodwill?

A)Goodwill is recorded as an asset and is not written off as an expense unless its value decreases.
B)Goodwill is recorded as an asset and amortized over 5 years regardless of any change in value.
C)Goodwill is recorded as an asset and amortized over 40 years unless its value decreases.
D)Goodwill is expensed immediately in the year acquired.

Question 51

Anton Company paid cash to extend the life of one of its assets.Which of the following choices accurately reflects how this event would affect the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 52

What term is used to describe the situation where the value of an intangible asset may be significantly diminished?

A)Amortization
B)Impairment
C)Depletion
D)Depreciation

Question 53

[The following information applies to the questions displayed below.]

On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years.


-Which of the following correctly shows the effect of Vanguard's purchase of the copyright on the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 54

On January 1,Year 2 Boothe Company paid $12,000 cash to extend the useful life of a machine.Which of the following general journal entries would be required to recognize this expenditure?

A)
B)
C)
D)

Question 55

On January 1,Year 2,Ruiz Company spent $850 on a plant asset to improve its quality.Which of the following correctly shows the effects of the Year 2 expenditure on the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 56

Goodwill may be recorded in which of the following circumstances?

A)When the property,plant and equipment of a business increase in value
B)When a business earns a very high net income
C)When a business sells property for more than its book value
D)When one business acquires another business

Question 57

Glick Company purchased oil rights on July 1,Year 1 for $2,400,000.A total of 200,000 barrels of oil are expected to be extracted over the assets life,and 30,000 barrels are extracted and sold in Year 1.Which of the following correctly summarizes the effect of the Year 1 depletion expense on the elements of the financial statements?

A)A decrease in stockholders' equity of $200,000
B)A decrease in assets of $360,000
C)A decrease in assets of $300,000
D)An increase in stockholders' equity of $400,000

Question 58

Good Company paid cash to purchase mineral rights on a large parcel of land.Which of the following choices accurately reflects how this event would affect the elements of the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 59

On January 1,Year 1,Eller Company purchased an asset that had cost $24,000.The asset had an 8-year useful life and an estimated salvage value of $1,000.Eller depreciates its assets on the straight-line basis.On January 1,Year 5,the company spent $6,000 to improve the quality of the asset.How does the Year 5 depreciation expense impact the elements of the financial statements?

A)Increase total assets by $4,375
B)Decrease stockholders' equity by $4,375
C)Decrease total assets by $4,625
D)Increase stockholders' equity by $4,625

Question 60

On January 1,Year 1,Ballard company purchased a machine for $52,000.On January 1,Year 2,the company spent $12,000 to improve its quality.The machine had a $4,000 salvage value and a 6-year life,which are unchanged.Ballard uses the straight-line method.What is the book value of the machine on December 31,Year 4?

A)$24,800
B)$20,800
C)$10,400
D)$24,000

Question 61

Byrd Company experienced an accounting event that affected the elements of its financial statements as indicated below:

Which of the following accounting events could have caused these effects?

A)Recognized depletion expense under the units-of-production method.
B)Recognized depreciation expense under the double-declining-balance method.
C)Amortized patent cost under the straight-line method.
D)All of these answer choices are correct.

Question 62

On January 1,Year 1,Dalen Company purchased office equipment that cost $3,500.The equipment had an estimated five-year useful life and an estimated salvage value of $750.The company uses the straight-line method.What is the depreciation expense shown on the income statement and the related cash flow from operating activities shown on the statement of cash flows,respectively,for Year 1?

A)$3,500 and $3,500
B)$550 and $3,500
C)$550 and $0
D)$0 and $550

Question 63

Which of the following industries would most likely have the highest value for the ratio of sales to property,plant,and equipment?

A)Airline
B)Consumer product manufacturing company
C)Electric utility
D)Stock brokerage

Question 64

Tyler Company purchased equipment that cost $260,000 cash on January 1,Year 1.The equipment had an expected useful life of five years and an estimated salvage value of $10,000.Tyler depreciates its assets under the straight-line method.What is the amount of depreciation expense appearing on the Year 1 income statement?

A)$26,000
B)$50,000
C)$52,000
D)$100,000

Question 65

Hoover Company acquired Burgess Company for $1,200,000 cash.The fair value of Burgess's assets was $1,040,000,and the company had liabilities of $60,000.Which of the following journal entries would be used to record the purchase of Burgess Company?

A)
B)
C)
D)

Question 66

Z Company purchased an asset for $24,000 on January 1,Year 1.The asset was expected to have a four-year life and a $4,000 salvage value.What is the amount of depreciation expense for Year 1 using the double-declining-balance method?

A)$2,000
B)$3,000
C)$6,000
D)$12,000

Question 67

On January 1,Year 1,XYZ Company paid $60,000 cash to purchase a truck.The truck has a $5,000 salvage value and a 4-year useful life.XYZ uses the double-declining-balance method.How much depreciation expense would XYZ report on its Year 2 income statement?

A)$13,750
B)$15,000
C)$20,000
D)$30,000

Question 68

The balance sheet of Flo's Restaurant showed total assets of $600,000,liabilities of $160,000 and stockholders' equity of $540,000.An appraiser estimated the fair value of the restaurant assets at $680,000.If Alice Company pays $770,000 cash for the restaurant,what is the amount of goodwill?

A)$90,000
B)$170,000
C)$250,000
D)$230,000

Question 69

On January 1,Year 1,Stiller Company paid $80,000 to obtain a patent.Stiller expected to use the patent for 5 years before it became technologically obsolete.The remaining legal life of the patent was 8 years.Based on this information,what is the amount of amortization expense during Year 3 and the book value of the patent as of December 31,Year 3,respectively?

A)$10,000 and $30,000
B)$16,000 and $48,000
C)$10,000 and $50,000
D)$16,000 and $32,000

Question 70

Which of the following terms is used to identify the expense recognition associated with intangible assets?

A)Allocation
B)Depletion
C)Depreciation
D)Amortization

Question 71

On January 1,Year 1,Woolly Company purchased a truck that cost $64,000.The truck had an expected useful life of 120,000 miles over 8 years and a $4,000 salvage value.During Year 2,Woolly drove the truck 20,000 miles.Woolly uses the units-of-production method.What is the amount of depreciation expense recognized in Year 2?

A)$8,000
B)$10,000
C)$11,000
D)$20,000

Question 72

On January 1,Year 1,Zach Company purchased equipment that cost $50,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Zach Company used the double-declining-balance method to depreciate its assets.What is the accumulated depreciation at the end of Year 2?

A)$10,000
B)$12,000
C)$20,000
D)$32,000

Question 73

Grant Company acquired Lee Company for $600,000 cash.The fair value of Lee's assets was $520,000,and the company had $40,000 in liabilities.Which of the following choices would reflect the acquisition on elements of Grant's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 74

Pierce Corporation,a U.S.business,is a direct competitor of Zeiss Company,a German firm.The two firms not only compete for customers,but also for investment capital.In Year 1,each company spent about $35,000 U.S.dollars or the equivalent on research and development.U.S.GAAP requires the entire amount to be expensed,while Germany requires its businesses to record R&D expenditures as an asset and then to expense it over its useful life.Assuming the treatment of R&D is the only difference between the two firms,which of the following is correct?

A)Pierce will have higher total assets than Zeiss in Year 1.
B)Pierce will have a higher debt-to-assets ratio than Zeiss in Year 1.
C)Zeiss will have a lower net income for Year 1.
D)This difference in accounting principles does not affect the total amount of assets reported by the two companies.

Question 75

Which of the following measurements would not be affected by the choice of depreciation methods?

A)Debt-to-assets ratio
B)Total assets
C)Total cash flow from investing activities
D)Return-on-equity ratio

Question 76

On January 1,Year 1,Parker Company purchased an asset costing $20,000.The asset had an expected five-year life and a $2,000 salvage value.The company uses the straight-line method.What are the amounts of depreciation expense and accumulated depreciation,respectively,that will be reported in the Year 2 financial statements?

A)$3,600 and $3,600
B)$3,600 and $7,200
C)$4,000 and $12,800
D)$4,000 and $7,200

Question 77

Which financial statement reports the amount of accumulated depreciation?

A)Income statement
B)Balance sheet
C)Statement of cash flows
D)Statement of stockholder's equity

Question 78

Which of the following should be the main determinant for selection of the allocation method for long-term operational assets?

A)The method that is most convenient to compute.
B)The method that best matches the pattern of asset use.
C)The method that provides the greatest return to the stockholders.
D)The method that provides the best tax advantage.

Question 79

Hardwick Company purchased a truck that cost $53,000.The company expected to drive the truck 200,000 miles over its 5-year useful life,and the truck had an estimated salvage value of $3,000.If the truck is driven 30,000 miles in the current accounting period,what would be the amount of depreciation expense for the year?

A)$7,500
B)$10,000
C)$10,600
D)$12,000

Question 80

Jackson Incorporate purchased a truck for $36,000.The truck had a useful life of 150,000 miles over 4 years and a $6,000 salvage value.Jackson drove the truck 40,000 miles in Year 1 and 24,000 miles in Year 2.If Jackson uses the units-of-production method,what is the accumulated depreciation at the end of Year 2?

A)$4,800
B)$8,000
C)$12,800
D)$16,000