Question 1

A company purchased equipment for $800,000 and has depreciated it for the past 5 years when its original life was estimated to be 10 years with a $200,000 residual value. The equipment's utility to the company has declined because they expect it to generate a net cash flow over the remaining years of $200,000 from its operation. If the asset has been impaired, how much will be recorded as a loss in the current year?

Accepted Answer

The answer of A company purchased equipment for $800,000 and...

Question 2

All of the following are examples of intangible assets except:

Accepted Answer

A)  trademarks. 
B)  research costs. 
C)  copyrights. 
D)  franchises.

Question 3

When using the declining-balance method of depreciation, a declining percentage is applied to a constant book value.

Accepted Answer

A) True 
 B)False

Question 4

The cost allocation method utilized affects the amount of net property, plant, and equipment that is used in the computation of the fixed asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 5

When assets are disposed of through sale or abandonment, we record additional depreciation since the last adjustment was made.

Accepted Answer

A) True 
 B)False

Question 6

When may a company include interest costs as part of the cost of the asset?

Accepted Answer

A)  When they are self-constructing a piece of equipment they will use to manufacture their products, but only during the period of construction. 
B)  Interest is never allowed to be capitalized. 
C)  When they must borrow money to finance the manufacture of their inventory items. 
D)  When they buy a piece of equipment and finance its acquisition by a bank loan.

Question 7

Which of the following would not be included in the acquisition cost of a building?

Accepted Answer

A)  An apportioned amount of the purchase cost when both the land and building are acquired in a basket purchase. 
B)  The cost of paving the parking lot and outdoor lighting in the lot. 
C)  The cost of putting new windows and doors in the building before it opens for operations. 
D)  The cost of paying an architect to design the remodelling modifications of the building before the store opens.

Question 8

Jeffers Inc. purchased a warehouse and the land upon which it was located. The total price was $450,000. The land was appraised for $180,000 while the warehouse was appraised for $360,000. What account balances should Jeffers show in its general ledger?

Accepted Answer

A)  Land $180,000; Warehouse $360,000 
B)  Land $150,000; Warehouse $350,000 
C)  Land $166,667; Warehouse $333,333 
D)  Land $150,000; Warehouse $300,000

Question 9

Ordinary repairs and maintenance of operational assets should be capitalized and depreciated over the remaining useful life of the related asset.

Accepted Answer

A) True 
 B)False

Question 10

A loss on disposal of an asset is reported in the financial statements

Accepted Answer

A)  in the non-operating section of the income statement. 
B)  as part of Cost of Goods Sold. 
C)  as part of Other Comprehensive Income. 
D)  in the operating section of the income statement.

Question 11

Bangor Industries purchased a car for $22,000 on January 1, 20A. The car had an estimated useful life of 80,000 kilometres and an estimated residual value of $4,000. In the second year of ownership (20B), the car was driven 25,000 kilometres. Using the units-of-production method, what was the amount of depreciation expense for 20B?

Accepted Answer

A)  $5,000 
B)  $6,875 
C)  $4,500 
D)  $5,625

Question 12

All research costs should be capitalized when incurred.

Accepted Answer

A) True 
 B)False

Question 13

Behren Company purchased a building and the parcel of land on which the building was located for a total purchase price of $810,000. To record the acquisition, the account, Building, should be debited for $810,000.

Accepted Answer

A) True 
 B)False

Question 14

The cost of a finite life intangible asset is not amortized, but the asset is tested for impairment.

Accepted Answer

A) True 
 B)False

Question 15

The straight-line depreciation method assumes an approximately equal decline in the economic usefulness of the asset each period and provides greater tax benefits early in the useful life of the asset.

Accepted Answer

A) True 
 B)False

Question 16

If a building is sold at a gain, the gain on disposal should be reported in the non-operating section of the cash flow statement.

Accepted Answer

A) True 
 B)False

Question 17

With respect to depreciation policies, the principle of consistency means:

Accepted Answer

A)  a company should use the same depreciation methods as other companies in the same industry. 
B)  a company should disclose on the financial statements the depreciation method for all its capital assets. 
C)  a company should use the same depreciation method in computing depreciation expense on all its assets. 
D)  a company should use the same depreciation method from year to year for a given capital asset.

Exam 9: Reporting and Interpreting Liabilities

All of the following are examples of intangible assets except:

When using the declining-balance method of depreciation, a declining percentage is applied to a constant book value.

The cost allocation method utilized affects the amount of net property, plant, and equipment that is used in the computation of the fixed asset turnover ratio.

When assets are disposed of through sale or abandonment, we record additional depreciation since the last adjustment was made.

When may a company include interest costs as part of the cost of the asset?

Which of the following would not be included in the acquisition cost of a building?

Jeffers Inc. purchased a warehouse and the land upon which it was located. The total price was $450,000. The land was appraised for $180,000 while the warehouse was appraised for $360,000. What account balances should Jeffers show in its general ledger?

Ordinary repairs and maintenance of operational assets should be capitalized and depreciated over the remaining useful life of the related asset.

A loss on disposal of an asset is reported in the financial statements

All research costs should be capitalized when incurred.

Behren Company purchased a building and the parcel of land on which the building was located for a total purchase price of $810,000. To record the acquisition, the account, Building, should be debited for $810,000.

The cost of a finite life intangible asset is not amortized, but the asset is tested for impairment.

The straight-line depreciation method assumes an approximately equal decline in the economic usefulness of the asset each period and provides greater tax benefits early in the useful life of the asset.

If a building is sold at a gain, the gain on disposal should be reported in the non-operating section of the cash flow statement.

With respect to depreciation policies, the principle of consistency means: