Question 1

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?

Accepted Answer

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

Question 2

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?

Accepted Answer

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

Question 3

Explain why goodwill is not amortized and what is required as a result.

Accepted Answer

The answer of Explain why goodwill is not amortized and...

Question 4

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 financial statements?

Accepted Answer

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

Question 5

Pioneer Corporation purchased for $450,000 land and a building that will be used in farming operations. The appraised value of the land is $100,000 and the appraised value of the building is $400,000.
Required: 1)What amount of the purchase price will be allocated to the land?2)What amount of the purchase price will be allocated to the building?

Accepted Answer

The answer of Pioneer Corporation purchased for $450,000 land and...

Question 6

What is the name of the provision in the tax code that requires one-half year's depreciation to be charged in the year in which an asset is acquired and one-half year's depreciation in the final year of depreciation?

Accepted Answer

The answer of What is the name of the provision...

Question 7

The acronym MACRS stands for

Accepted Answer

A) Modified Accelerated Cost Recovery System 
B) Management Accounting Cost and Revenue Streams 
C) Management Assurance Cost and Revenue System 
D) Modified Accounting of Cost and Revenue Streams

Question 8

Describe what is meant by the term "goodwill."

Accepted Answer

The answer of Describe what is meant by the term...

Question 9

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 financial statements?

Accepted Answer

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

Question 10

In choosing a depreciation method for financial reporting, a company should use the method that most closely approximates the amount of depreciation on the tax return.

Accepted Answer

A) True 
 B)False

Question 11

Intangible assets include patents, copyrights, and franchises.

Accepted Answer

A) True 
 B)False

Question 12

On January 6, Year 1, Mount Jackson Corporation purchased a tract of land for a factory site for $770,000. 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?

Accepted Answer

A) $842,400 and $985,000 
B) $780,500 and $1,046,900 
C) $849,900 and $977,500 
D) $770,000 and $1,057,400

Question 13

The depreciable cost of a long-term asset is the difference between the amount paid for the asset and its salvage value.

Accepted Answer

A) True 
 B)False

Question 14

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?

Accepted Answer

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

Question 15

Farmer Company purchased machine on January 1, Year 1 for $82,000. The machine is 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?

Accepted Answer

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

Question 16

On January 1, Year 1, Friedman Company purchased a truck that cost $43,000. 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?

Accepted Answer

A) $24,250 
B) $34,250 
C) $26,250 
D) $32,250

Question 17

On January 1, Year 1, Marino Moving Company paid $64,000 cash to purchase a truck. The truck was expected to have a four year useful life and a $4,000 salvage value. If Marino uses the straight-line method, the amount of book value shown on the Year 2 balance sheet is

Accepted Answer

A) $32,000 
B) $34,000 
C) $28,000 
D) $30,000

Question 18

Why do some say that the GAAP treatment of research and development puts the US at a competitive disadvantage compared to businesses in other countries?

Accepted Answer

The answer of Why do some say that the GAAP...

Question 19

Indicate whether each of the following statements is true or false.a)A patent with a useful life of 5 years and a legal life of 10 years is amortized over 5 years.b)Intangible assets with indefinite useful lives must be tested each year for impairment.c)If it is determined that the original value recorded for goodwill is too high, then the income statement account, impairment loss, will be increased.d)To recognize an impairment loss on goodwill, Amortization Expense will be increased, and the Goodwill account will be decreased.e)The recognition of an impairment loss involves a cash outflow classified as a financing activity.

Accepted Answer

A) True 
 B)False

Question 20

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.

Accepted Answer

A) True 
 B)False

Exam 8: Accounting for Long-Term Operational Assets

Explain why goodwill is not amortized and what is required as a result.

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 financial statements?

What is the name of the provision in the tax code that requires one-half year's depreciation to be charged in the year in which an asset is acquired and one-half year's depreciation in the final year of depreciation?

The acronym MACRS stands for

Describe what is meant by the term "goodwill."

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 financial statements?

In choosing a depreciation method for financial reporting, a company should use the method that most closely approximates the amount of depreciation on the tax return.

Intangible assets include patents, copyrights, and franchises.

The depreciable cost of a long-term asset is the difference between the amount paid for the asset and its salvage value.

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?

On January 1, Year 1, Friedman Company purchased a truck that cost $43,000. 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?

On January 1, Year 1, Marino Moving Company paid $64,000 cash to purchase a truck. The truck was expected to have a four year useful life and a $4,000 salvage value. If Marino uses the straight-line method, the amount of book value shown on the Year 2 balance sheet is

Why do some say that the GAAP treatment of research and development puts the US at a competitive disadvantage compared to businesses in other countries?

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.