Question 1

Interest included as part of the acquisition cost of the asset is referred to as___________ of interest.

Accepted Answer

capitalization

Question 2

Depreciation is a process by which

Accepted Answer

A)   replacement funds are accumulated for plant and equipment.
B)   the decline in market value of plant and equipment is determined and recorded.
C)   the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.
D)   the difference between current market value and historical cost of plant and equipment. C

Question 3

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for

Accepted Answer

A)   financial reporting purposes and a different method for tax purposes.
B)   financial reporting purposes because depreciation is not allowed for tax purposes.
C)   tax purposes because it results in a larger net income in the early years of a plant asset's life
D)   tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes. D

Question 4

All of the following are intangible assets except

Accepted Answer

A)   patents
B)   goodwill
C)   franchises
D)   accounts receivable

Question 5

Boalsburg Co.purchased a truck on January 1, 2014, for $30,000.The truck had an estimated life of 5 years and an estimated residual value of $5,000.Lightning Delivery used the straight-line method to depreciate the asset.On July 1, 2016, the truck was sold for $17,000 cash.The journal entry to record the sale of the truck in 2016?

Accepted Answer

A)   increases net income
B)   increases total assets
C)   decreases total expenses
D)   decreases stockholders' equity

Question 6

Tasty Catering purchased a van on January 1, 2014 for $48,000.The company decided to depreciate the van over a 5-year period using the straight-line method.The company estimated its residual value at $3,000.Show how the costs should be presented on Tasty's balance sheet and income statement for the full year ended June 30, 2016.Label the statements properly.

Accepted Answer

The answer of Tasty Catering purchased a van on January...

Question 7

GAAP require that research and development costs to develop a new product be

Accepted Answer

A)   capitalized in the patents account.
B)   expensed in the period incurred.
C)   capitalized in the research and development costs account.
D)   amortized over the expected economic life of the new product.

Question 8

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

Accepted Answer

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

Question 9

Given below is a list of items that may be reported on a statement of cash flows.Identify each as one of the following using the indirect method:
-Payment of research and development costs

Accepted Answer

A)  Operating
B)  Investing
C)  Financing
D)  Not separately reported on a statement of cash flows

Question 10

At the end of 2016, Clock Products, Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for 5 years of its estimated 15-year legal life.Which of the following statements is correct?

Accepted Answer

A)   Clock Products must continue to amortize the patent over its remaining 10 years of life.
B)   The patent must be reduced to 5/15, or 33.3% of its original cost and amortized over the remaining 10 years.
C)   The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.
D)   Clock Products must correct its financial statements for the past five years, so that the entire cost is allocated to that five-year period.

Question 11

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given.Some answers may be used more than once, while others may not be used at all.
-Early in the life of the asset, this method maximizes net income.

Accepted Answer

A)  Straight-line
B)  Units-of-productionc.
C)  Double-declining-balance
D)  MACRS

Question 12

All operating assets, except land, are subject to depreciation, amortization, or depletion.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following below is an example of a capital expenditure?

Accepted Answer

A)   cleaning the carpet in the front room
B)   tune-up for a company truck
C)   replacing an engine in a company car
D)   replacing all burned-out light bulbs in the factory

Question 14

What was the book value of the ship for Grove City Corp.at the end of the useful life?

Accepted Answer

A)   $ -0-
B)   $ 50,000
C)   $214,400
D)   Need more information to determine this answer.

Question 15

Greer Company purchased land for $256,000.Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500.What is the cost of the land?

Accepted Answer

A)   $256,000
B)   $282,200
C)   $284,600
D)   $281,000

Question 16

​Imperial Corp.purchased land and a building for $425,000.The appraised values of the land and the building were $150,000 and $450,000, respectively.In addition, the attorney was paid $10,000 for handling the closing on the property. A. What amounts will be recorded as the costs of the land and building?
B. What is the accounting justification against increasing the land and building accounts for their appraised values?

Accepted Answer

The answer of ​Imperial Corp.purchased land and a building for...

Question 17

A company uses the same depreciation method as other firms in the same industry.Because of this, investors will have enhanced comparability of the financial reporting results.

Accepted Answer

A) True 
 B)False

Question 18

If a company chooses to treat small plant asset expenditures as expenses, GAAP are being violated.

Accepted Answer

A) True 
 B)False

Question 19

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000.What amount of cash was received from the sale?

Accepted Answer

A)   $26,000
B)   $14,000.
C)   $20,000.
D)   $94,000.

Question 20

Select the financial statement on which the user would most likely find the answer to the question given.
-What amount of cash was used for to purchase property, plant, and equipment during the year?

Accepted Answer

A)  Income statement
B)  Balance sheet
C)  Statement of cash flows
D)  Statement of retained earnings

Exam 8: Operating Assets: Property, Plant and Equipment, and Intangibles

Interest included as part of the acquisition cost of the asset is referred to as___________ of interest.

Depreciation is a process by which

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for

All of the following are intangible assets except

GAAP require that research and development costs to develop a new product be

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

Given below is a list of items that may be reported on a statement of cash flows.Identify each as one of the following using the indirect method: -Payment of research and development costs

At the end of 2016, Clock Products, Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for 5 years of its estimated 15-year legal life.Which of the following statements is correct?

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given.Some answers may be used more than once, while others may not be used at all. -Early in the life of the asset, this method maximizes net income.

All operating assets, except land, are subject to depreciation, amortization, or depletion.

Which of the following below is an example of a capital expenditure?

What was the book value of the ship for Grove City Corp.at the end of the useful life?

Greer Company purchased land for $256,000.Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500.What is the cost of the land?

A company uses the same depreciation method as other firms in the same industry.Because of this, investors will have enhanced comparability of the financial reporting results.

If a company chooses to treat small plant asset expenditures as expenses, GAAP are being violated.

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000.What amount of cash was received from the sale?

Select the financial statement on which the user would most likely find the answer to the question given. -What amount of cash was used for to purchase property, plant, and equipment during the year?