Question 1

Fabulous Creations
The assets section of the company's balance sheets for the years ended December 31, 2020 and 2019, is provided below. 
-Refer to Fabulous Creations. In the notes to the financial statements, the company indicates that it uses different depreciation methods for different types of plant and equipment assets. Explain why the company might follow this policy.

Accepted Answer

The answer of Fabulous Creations
The assets section of the company's...

Question 2

What impact does materiality have on the determination of how a cost related to a plant asset is reported on the financial statements?

Accepted Answer

The answer of What impact does materiality have on the...

Question 3

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Accepted Answer

A) True 
 B)False

Question 4

When making lending decisions, lenders generally are not interested in the company's operating assets.

Accepted Answer

A) True 
 B)False

Question 5

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

Accepted Answer

A) more 
B) less 
C) equal 
D) This cannot be determined from the information given.

Question 6

Falling Leaves Lawn Care
​
This company purchased new excavating equipment at the beginning of 2019. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2019. The equipment was used 20,000 hours during 2019 and 24,000 hours during 2020. The number of expected hours over 5 years is 100,000.
-Refer to Falling Leaves Lawn Care. What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation over the 5-year life of the equipment?

Accepted Answer

A) $ -0- 
B) $ 7,000 
C) $37,000 
D) $ 6,000

Question 7

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ____________________ and ____________________.

Accepted Answer

The answer of The two items that must be estimated...

Question 8

Fabian Woodworks
​
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
-Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment?

Accepted Answer

A) $1.00 
B) $1.10 
C) $0.10 
D) $0.12

Question 9

A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-$3,000 freight costs were paid to ship the equipment from the manufacturer,

Accepted Answer

A) This item should be included as part of the cost of the equipment. 
B) This item should be considered a revenue expenditure.

Question 10

The effect of recording depreciation for the year is a(n)

Accepted Answer

A) decrease in assets and a decrease in net income. 
B) decrease in assets but no change in owners' equity. 
C) increase in assets and an increase in net income. 
D) decrease in net income and no change in assets.

Question 11

Land is not depreciated because it

Accepted Answer

A) appreciates in value. 
B) does not have an established depreciable life. 
C) has a useful life that is limited to the period of time a company is in business 
D) will provide future benefits for a company for an unlimited period of time.

Question 12

Explain the meaning or significance of the following ratios:
A)Fixed asset turnover ratio
B)Average age of property, plant, and equipment

Accepted Answer

The answer of Explain the meaning or significance of the...

Question 13

Match these terms with their correct definition.
-Represent future economic benefit to the company but they lack physical substance

Accepted Answer

A) Franchise 
B) Intangible operating assets 
C) Natural resources 
D) Operating assets 
E) Organizational costs
F)Property, plant, and equipment
G)Trademark
H)Voluntary disposal

Question 14

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

Accepted Answer

A) accumulated amortization. 
B) accumulated depreciation. 
C) amortization expense. 
D) depreciation expense.

Question 15

Match these terms with their correct definition.
-The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

Accepted Answer

A) Book value 
B) Cost 
C) Depletion 
D) Depreciable cost 
E) Depreciation
F)Impairment
G)Involuntary disposal
H)Residual value

Question 16

A company determined that it had incorrectly estimated the useful life of equipment that it had purchased two years ago. It must now depreciate the asset's remaining book value over the current and future accounting periods.

Accepted Answer

A) True 
 B)False

Question 17

Fabulous Creations
The assets section of the company's balance sheets for the years ended December 31, 2020 and 2019, is provided below. 
-Refer to Fabulous Creations. Which items on the company's balance sheet could be considered intangible assets? Explain the nature of each of these.

Accepted Answer

The answer of Fabulous Creations
The assets section of the company's...

Question 18

For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
-Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment.

Accepted Answer

A) capital expenditure 
B) revenue expenditure

Question 19

Match these terms with their correct definition.
-A permanent decline in the future benefit or service potential of an asset

Accepted Answer

A) Book value 
B) Cost 
C) Depletion 
D) Depreciable cost 
E) Depreciation
F)Impairment
G)Involuntary disposal
H)Residual value

Question 20

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land, $900,000; cost to clear the land, $40,000; cost of paving, $35,000; and cost of lighting for the parking lot, $20,000. How much should be recorded in the Land Improvements account?

Accepted Answer

A) $20,000 
B) $35,000 
C) $55,000 
D) $40,000

Exam 7: Operating Assets

What impact does materiality have on the determination of how a cost related to a plant asset is reported on the financial statements?

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

When making lending decisions, lenders generally are not interested in the company's operating assets.

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are and .

The effect of recording depreciation for the year is a(n)

Land is not depreciated because it

Explain the meaning or significance of the following ratios: A)Fixed asset turnover ratio B)Average age of property, plant, and equipment

Match these terms with their correct definition. -Represent future economic benefit to the company but they lack physical substance

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

Match these terms with their correct definition. -The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

A company determined that it had incorrectly estimated the useful life of equipment that it had purchased two years ago. It must now depreciate the asset's remaining book value over the current and future accounting periods.

Fabulous Creations The assets section of the company's balance sheets for the years ended December 31, 2020 and 2019, is provided below. -Refer to Fabulous Creations. Which items on the company's balance sheet could be considered intangible assets? Explain the nature of each of these.

For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.) -Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment.

Match these terms with their correct definition. -A permanent decline in the future benefit or service potential of an asset

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land, $900,000; cost to clear the land, $40,000; cost of paving, $35,000; and cost of lighting for the parking lot, $20,000. How much should be recorded in the Land Improvements account?