Deck 10: Long -Term Assets

Question 1

A tractor held by a farm equipment company for sale to farmers is classified as a long-term asset.

Answer 1

False

Question 2

A capital expenditure will result in an immediate increase in long-term assets.

Answer 2

True

Question 3

Land held for speculative purposes should be classified as a short-term investment.

Answer 3

False

Question 4

Extraordinary repairs are recorded with a debit to Accumulated Depreciation.

Question 5

Mineral deposits are subject to a process called depletion.

Question 6

Inventory is classified as a long-term asset.

Question 7

A reduction in carrying value as a result of impairment is recorded as a loss.

Question 8

Additions and betterments are examples of capital expenditures.

Question 9

Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account.

Question 10

A revenue expenditure results in the immediate recognition of an expense.

Question 11

The replacement of tires on a truck is considered an ordinary repair.

Question 12

Intangible assets are subject to a process called depreciation.

Question 13

Overhauling a company's cooling system is an example of an extraordinary repair.

Question 14

A debit to Accumulated Depreciation will increase the carrying value of an asset.

Question 15

Depreciation refers to the periodic allocation of the cost of a tangible long-lived asset over its estimated useful life.

Question 16

Book value is another term for carrying value.

Question 17

A building not currently used because economic conditions have limited a company's expansion is classified as an investment.

Question 18

Asset impairment occurs when the fair value of a long-term asset exceeds its carrying value.

Question 19

Fair value is the amount for which an asset could be bought or sold in a current transaction.

Question 20

Small expenditures for what ordinarily are considered capital expenditures frequently are treated as revenue expenditures.

Question 21

Accelerated methods of depreciation result in lower net income in the last years of an asset's life compared to the straight-line method.

Question 22

Computation of a partial year's depreciation is often required for the proper determination of net income.

Question 23

The cost of assets acquired for a lump sum should be allocated equally among the acquired assets.

Question 24

A capital expenditure is an expenditure that benefits only the current accounting period.

Question 25

A revenue expenditure results in the recognition of an asset.

Question 26

Residual value is relevant when calculating double-declining-balance depreciation.

Question 27

When depreciation rates are revised,an adjustment for previous years' depreciation must be recorded.

Question 28

Group depreciation is an appropriate method for a large company calculating depreciation on office equipment.

Question 29

The cost of repairing a machine damaged during installation should be charged as an operating expense.

Question 30

The cost of a sewage system should be included in the Land Improvements account.

Question 31

One argument in favor of accelerated depreciation is that the asset's benefit is greater in the earlier years.

Question 32

The cost of equipment would include the cost of test runs to see that the equipment is operating properly.

Question 33

The cost of land should not include accrued property taxes paid by the purchaser.

Question 34

Driveways and parking lots are properly included in the Land account because they are not subject to depreciation.

Question 35

Leasehold improvements are not subject to any form of cost allocation.

Question 36

The cost of land would include the cost of a building purchased with the land and torn down because it was not needed.

Question 37

The production method is an accelerated method of depreciation.

Question 38

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

Question 39

Leasehold improvements become the property of the lessor at the end of the lease.

Question 40

Improvements to real estate are never subject to depreciation.

Question 41

Whether exchanging similar or dissimilar assets,accounting for the transaction is the same.

Question 42

Gain on Sale of Machinery is recorded as a debit.

Question 43

Federal tax law does not allow the rapid write-off of plant assets.

Question 44

Depreciation should not be recorded for an asset that is increasing in value.

Question 45

In accounting,depreciation means the decline in value of an asset.

Question 46

Partial-year depreciation may be rounded to the nearest whole month or the half-year convention may be used.

Question 47

A $750 gain on the sale of an asset means that $750 in cash was received.

Question 48

In calculating the depletion of a natural resource,its useful life in years is irrelevant.

Question 49

Under tax depreciation,estimated useful life and residual value must be strictly adhered to.

Question 50

When an asset lasts longer than its estimated useful life,depreciation no longer should be recorded.

Question 51

For tax purposes,small businesses may expense the first $250,000 of equipment expenditures,rather than having to allocate their costs over a number of years.

Question 52

A natural resource is expensed in the year it is extracted rather than when it is sold.

Question 53

When disposing of equipment,Accumulated Depreciation is debited for the existing carrying value.

Question 54

When the trade-in allowance exceeds the carrying value of an asset exchanged,a gain is realized.

Question 55

Obsolescence is not a reason for an asset's limited useful life.

Question 56

When discarding equipment,depreciation need not by updated.

Question 57

Depreciation is a process of allocation,not of valuation.

Question 58

Prior to the sale of an asset,depreciation should be updated and recorded.

Question 59

Depreciation for tax purposes is identical to depreciation for financial reporting purposes.

Question 60

Normally,depreciation calculations are based on the exact number of days the asset is held during the period.

Question 61

The copyright granting the exclusive rights to sell artistic materials and computer programs ends with the author's life.

Question 62

A patent has a legal life of 20 years.

Question 63

The entire cost of developing computer software should be capitalized and amortized over the software's useful life.

Question 64

Licenses are properly classified as intangible assets.

Question 65

Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed.

Question 66

According to generally accepted accounting principles,most expenditures for intangible assets acquired from others should be treated as revenue expenditures when incurred.

Question 67

The exclusive right to use an identifying symbol is called a patent.

Question 68

A copyright should be amortized over its legal life regardless of its expected useful life.

Question 69

Drilling equipment with a ten-year useful life is used solely in conjunction with an oil well that has an eight-year life.The equipment should be depreciated over eight years using the production method.

Question 70

If the carrying value of goodwill is more than its fair value,an impairment loss must be recorded.

Question 71

The cost to defend a patent successfully should be expensed in the period incurred.

Question 72

Using the full-costing method,the cost of dry wells is capitalized with the cost of producing wells.

Question 73

Natural resources are classified as intangible assets on the balance sheet.

Question 74

Intangible assets are also called wasting assets.

Question 75

Estimated useful life and legal life are synonymous terms when dealing with intangible assets.

Question 76

When a company can prove it is worth more than its balance sheet indicates,it may record some goodwill.

Question 77

An intangible asset with a determinable useful life should be amortized over that useful life.

Question 78

Goodwill reflects all the factors that allow a company to earn a higher-than-market rate of return on its assets.

Question 79

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

Question 80

Goodwill represents the excess paid for a business over the fair value of its net assets.