Deck 7: Long-Term Assets

Question 1

A copyright is an exclusive right of protection given to the creator of a published work such as a song,film,painting,photograph,book,or computer software.

Answer 1

True

Question 2

The CEO,as head of the company,is ultimately responsible for the firm's accounting.

Answer 2

True

Question 3

We record goodwill as an intangible asset in the balance sheet only when we purchase it as part of the acquisition of another company.

Answer 3

True

Question 4

Most of the costs associated with internally developed intangible assets are recorded as intangible assets on the balance sheet.

Question 5

The franchisee's initial fee is recorded as an expense on the income statement.

Question 6

A patent is an exclusive right to a published work such as a song,film,or painting.

Question 7

We expense internally generated intangible assets,such as research and development and advertising costs,as we incur them.

Question 8

We record purchased intangible assets at their original cost plus all other costs necessary to get the asset ready for use.

Question 9

A trademark is a word,slogan,or symbol that distinctively identifies a company,product,or service.

Question 10

A basket purchase is the purchase of more than one asset at the same time for one purchase price.

Question 11

Many intangible assets are not recorded on the balance sheet at their estimated market values.

Question 12

Research and development costs incurred in developing a patent internally are not recorded as an intangible asset in the balance sheet,but rather are expensed directly in the income statement.

Question 13

We record a long-term asset at its cost less all expenditures necessary to get the asset ready for use.

Question 14

We allocate natural resources to expense through a process known as "depletion."

Question 15

Cash received from the sale of salvaged materials increases the total cost of land.

Question 16

Land improvements are recorded separately from the land itself because,unlike land,these assets are subject to depreciation.

Question 17

When a firm develops a trademark internally through advertising,it does not record the advertising costs as an intangible asset,but rather expenses them in the income statement.

Question 18

International accounting standards allow firms to record development costs that benefit future periods as an intangible asset.

Question 19

Advertising costs that increase the value of trademarks are recorded to the asset account entitled Trademarks.

Question 20

We use the term capitalize to describe recording an expenditure as an expense.

Question 21

If a firm successfully defends an intangible right,it should expense the litigation costs as incurred.

Question 22

Accumulated Depreciation is a liability account that is increased by credits.

Question 23

Straight-line depreciation assumes that the benefits we derive from the use of an asset are the same each year.

Question 24

Straight-line,declining-balance,and activity-based depreciation all are acceptable depreciation methods for both financial reporting and tax reporting.

Question 25

Declining-balance depreciation will be lower than straight-line depreciation in earlier years,but higher in later years.

Question 26

Most companies use straight-line amortization for intangibles and credit the amount of amortization to the intangible asset account itself rather than to Accumulated Amortization.

Question 27

With the straight-line depreciation method,we allocate an equal amount of the depreciable cost to each year of the asset's service life.

Question 28

Depreciation in accounting records the decrease in value of an asset.

Question 29

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.

Question 30

If the defense of an intangible right is unsuccessful,then the firm should expense the litigation costs as incurred because they provide no future benefit.

Question 31

Straight-line produces a lower net income than accelerated methods in the earlier years of an asset's life.

Question 32

We capitalize repairs and maintenance expenditures because they maintain a given level of benefits.

Question 33

Book value is equal to the original cost of the asset minus the current balance in Accumulated Depreciation.

Question 34

Residual value,also referred to as salvage value,is the amount the company expects to receive from selling the asset at the end of its service life.

Question 35

Goodwill is amortized over its estimated useful life.

Question 36

Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.

Question 37

The acquiring company records goodwill equal to the purchase price less the book value of the net assets acquired.

Question 38

When a change in estimate is required,the company changes depreciation in prior,current and future years.

Question 39

In an activity-based depreciation method,we allocate an asset's cost based on its use.

Question 40

The service life of an asset is always equal to the full life of the asset.

Question 41

A more comparable measure of profitability than income is return on assets,which equals net income divided by average total assets.

Question 42

Management must review long-term assets for impairment when events or changes in circumstances indicate that book value might not be recoverable.

Question 43

The exclusive right to benefit from a creative work,such as a film,is a:

A)Patent.
B)Copyright.
C)Trademark.
D)Franchise.

Question 44

Asset turnover is net sales divided by ending total assets.

Question 45

Profit margin is net income divided by net sales.

Question 46

An impairment loss is equal to the amount by which book value exceeds the fair value of a long-term asset.

Question 47

Impairment occurs when the future cash flows generated for a long-term asset fall below its fair value.

Question 48

Which of the following would be recorded as land improvements?

A)Property taxes.
B)Title insurance.
C)Real estate commissions.
D)Adding a parking lot.

Question 49

Capital Construction purchased a 3-acre tract of land for a building site for $350,000.The company demolished the old building at a cost of $12,000,but was able to sell scrap from the building for $1,500.The cost of title insurance was $900 and attorney fees for reviewing the contract was $500.Property taxes paid were $3,000,of which $250 covered the period after the purchase date.The capitalized cost of the land is:

A)$366,400.
B)$366,150.
C)$364,650.
D)$231,150.

Question 50

Fruitasia purchased land,a building,and equipment for $800,000.The estimated fair values of the land,building,and equipment are $100,000,$700,000,and $200,000,respectively.At what amount would the company record the land?

A)$80,000.
B)$90,000.
C)$100,000.
D)$800,000.

Question 51

We record a gain if we sell an asset for less than book value.

Question 52

Taking a "big bath" is recording all losses in one year to make a bad year even worse.

Question 53

Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

Question 54

Productive assets that are physically used up,or depleted are:

A)Equipment.
B)Land.
C)Land improvements.
D)Natural resources.

Question 55

A word,slogan,or symbol that distinctively identifies a company,product,or service is a:

A)Patent.
B)Copyright.
C)Trademark.
D)Franchise.

Question 56

Landon Co.purchased a $500,000 tract of land that is intended to be the site of a new office complex.Landon incurred additional costs and realized salvage proceeds as follows:
What would be the capitalized cost of the land?

A)$500,000.
B)$575,000.
C)$580,000.
D)$590,000.

Question 57

The legal life of a patent is:

A)Forty years.
B)Twenty years.
C)Life of the inventor plus fifty years.
D)Indefinite.

Question 58

An exclusive 20-year right to manufacture a product or to use a process is a:

A)Patent.
B)Copyright.
C)Trademark.
D)Franchise.

Question 59

Real Angus Steakhouse purchased land for $75,000 cash.They also incurred commissions of $4,500,property taxes of $5,000,and title insurance of $800.The $5,000 in property taxes includes $4,000 in back taxes paid by Real Angus on behalf of the seller and $1,000 due for the current year after the purchase date.For what amount should Real Angus Steakhouse record the land?

Question 60

We record a loss if we sell an asset for less than book value.

Question 61

Research and development costs should be:

A)Expensed in the period incurred.
B)Expensed in the period they are determined to be unsuccessful.
C)Deferred pending determination of success.
D)Expensed if unsuccessful,capitalized if successful.

Question 62

Goodwill is:

A)Amortized over the greater of its estimated life or forty years.
B)Only recorded by the seller of a business.
C)The value of a business as a whole,over and above the value of its net identifiable assets.
D)Recorded when created internally through advertising expense.

Question 63

The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour.The expenditure for the replacement component should be debited to:

A)Repairs Expense.
B)Maintenance Expense.
C)Equipment.
D)Gain from Repairs.

Question 64

Using the double-declining balance method,depreciation expense for 2015 would be:

A)$24,000.
B)$22,000.
C)$19,000.
D)$20,000.

Question 65

Using the double-declining balance method,the book value at December 31,2016 would be:

A)$21,600.
B)$24,800.
C)$36,000.
D)$45,600.

Question 66

Using the straight-line method,depreciation expense for 2016 and the book value at December 31,2016 would be:

A)$12,000 and $36,000.
B)$12,000 and $31,000.
C)$11,000 and $33,000.
D)$11,000 and $38,000.

Question 67

Return on assets is equal to:

A)Profit margin plus asset turnover.
B)Profit margin minus asset turnover.
C)Profit margin times asset turnover.
D)Profit margin divided by asset turnover.

Question 68

Bricker Enterprises purchased a machine for $100,000 on October 1,2015.The estimated service life is ten years with a $10,000 residual value.Bricker records partial-year depreciation based on the number of months in service.Depreciation expense for the year ended December 31,2015,using straight-line depreciation,is:

A)$1,500.
B)$7,500.
C)$ 2,250.
D)$ 2,500.

Question 69

Using the straight-line method,the book value at December 31,2015 would be:

A)$44,000.
B)$49,000.
C)$55,000.
D)$60,000.

Question 70

Using the straight-line method,depreciation expense for 2015 would be:

A)$12,000.
B)$11,000.
C)$60,000.
D)None of the other answers are correct.

Question 71

The depreciable cost used in calculating depreciation expense is:

A)Its service life.
B)The amount allowable under tax depreciation methods.
C)The difference between its replacement value and cost.
D)The asset's cost minus its estimated residual value.

Question 72

Recognition of impairment for long-term assets is required if book value exceeds:

A)Original cost.
B)Fair value.
C)Future cash flows.
D)Accumulated depreciation.

Question 73

Using the double-declining balance method,depreciation expense for 2016 would be:

A)$22,000.
B)$13,200.
C)$14,400.
D)$24,000.

Question 74

The amount of impairment loss is the excess of book value over:

A)Carrying value.
B)Future cash flows.
C)Fair value.
D)Future revenues.

Question 75

Which of the following statements is true regarding the amortization of intangible assets?

A)The expected residual value of most intangible assets is zero.
B)The service life of an intangible asset is always equal to its legal life.
C)Intangible assets with a limited useful life are not amortized.
D)In recording amortization,an accumulated amortization account is always used.

Question 76

Which of the following intangible assets is not amortized?

A)Patents.
B)Copyrights.
C)Franchises.
D)Goodwill.

Question 77

Nanki Corporation purchased equipment at the beginning of 2015 for $650,000.In 2015 and 2016,Nanki depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a $10,000 residual value.In 2017,due to changes in technology,Nanki revised the useful life to a total of six years (four more years)with zero residual value.What depreciation expense would Nanki record for the year 2017 on this equipment?

A)$108,333.
B)$106,667.
C)$122,500.
D)$81,667.

Question 78

Gains on the sale of fixed assets for cash:

A)Are the excess of the book value over the cash received.
B)Are recorded as a debit.
C)Are reported on a net-of-tax basis if material.
D)Are the excess of the cash received over the book value.

Question 79

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $850,000 cash.Lake assumed all of the liabilities.Book values and fair values of acquired assets and liabilities were:
Lake would record goodwill of:

A)$ 0.
B)$150,000.
C)$345,000.
D)$850,000.

Question 80

Return on assets is calculated as:

A)Net Income divided by total assets.
B)Net Income divided by average total assets.
C)Net Income divided by ending total assets.
D)Ending total assets divided by net income.