Question 1

For each of the following sentences , select the word or group of words that best completes the statement.
-______________________________ is an account that can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.

Accepted Answer

A) Patent 
B) Copyright 
C) Goodwill 
D) Revenue expenditure 
E) Natural resources
F)Research and development costs
G)Trademark
H)Capital expenditure

Question 2

A revenue expenditure is deducted from the cost of the asset.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Accepted Answer

A)  Accumulated Depreciation-Buildings 
B)  Buildings 
C)  Depreciation Expense-Buildings 
D)  Land

Question 4

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:
-Depreciation expense

Accepted Answer

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

Question 5

Crouch Apartments purchased an apartment building to rent to university students on December 15, 2015.The tenants moved in on January 1, 2016.On Super Bowl Sunday, a student punched a hole in the wall when his favorite team fumbled the ball.It cost the landlord $400 to repair the hole.How should this cost be recorded?

Accepted Answer

A)  It should be recorded as part of the asset account. 
B)  It should be recorded as repair and maintenance expense. 
C)  It should not be recorded as the tenants will be charged for the damage. 
D)  It should not be recorded since this is an immaterial amount to the landlord.

Question 6

Blanton Company bought equipment on January 1, 2012, with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years.Due to obsolescence, it was determined at the beginning of 2016 that the useful life should be shortened by 3 years and the residual value changed to zero.What is the accumulated depreciation at the end of 2015?

Accepted Answer

A)  $42,667 
B)  $32,000 
C)  $40,000 
D)  $8,000

Question 7

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.
-This method minimizes taxable income (early in the asset's life).

Accepted Answer

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

Question 8

If technology changes rapidly, a firm should

Accepted Answer

A)  expense plant asset immediately because of the uncertainty of future benefits. 
B)  depreciate plant assets over long periods of time. 
C)  consider an accelerated rate of depreciation. 
D)  use the straight-line method of depreciation as it is the easiest.

Question 9

Depreciation does not describe the increase or decrease in the market value of the asset.

Accepted Answer

A) True 
 B)False

Question 10

For each of the following items, indicate whether each would be treated as a
-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 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.
-This method is the best for management bonus plans.

Accepted Answer

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

Question 12

How are the cash flow effects from the purchase and sale of intangible assets reported on a statement of cash flows?

Accepted Answer

A)  As operating activities 
B)  As investing activities 
C)  As financing activities 
D)  They are not reported on a statement of cash flows.

Question 13

All of the following statements are true except:

Accepted Answer

A)  IFRS requires that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. 
B)  The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually. 
C)  IFRS does not have a specific rule that requires residual value and asset life to be reviewed annually. 
D)  The FASB generally requires operating assets to be recorded at acquisition cost, less depreciation, and the assets' values are not changed to reflect their fair market values or selling prices.

Question 14

Wexford Co.purchased a new delivery truck at the beginning of 2016.The truck 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 2016.The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017.The number of expected miles over five years is 100,000.
​
-Refer to information for Wexford Co. ​
Wexford's is comparing the straight-line and double-declining-balance depreciation methods.Of these two methods, which method creates the larger expense and larger tax savings in 2016?

Accepted Answer

A)  Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. 
B)  Straight-line depreciation creates both the larger expense and the larger tax savings. 
C)  Double-declining-balance depreciation creates both the larger expense and the larger tax savings. 
D)  Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

Question 15

Identify where each of the following accounts would be reported on Coca-Cola's financial statements.
-Accumulated depreciation

Accepted Answer

A) Balance Sheet-Property, Plant, and Equipment 
B) Balance Sheet-Intangible Assets 
C) Balance Sheet-Current Assets 
D) Balance Sheet-Other Assets 
E) Income Statement-Operating Section
F)Income Statement-Other Revenue and Expense Section
G)Statement of Cash Flows

Question 16

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2018.The amounts below are related to the equipment purchase.Match the items below and explain why each revenue expenditure is not capitalized.
-Terms of the purchase were 2/10, net 30.Edison paid for the purchase on March 8.

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 17

The accounting life of intangible assets is determined by

Accepted Answer

A)  their legal lives. 
B)  their useful lives. 
C)  their legal lives or useful lives, whichever is shorter. 
D)  the tax life mandated by the IRS.

Question 18

A change in estimate should be recorded_________________.

Accepted Answer

The answer of A change in estimate should be recorded_________________....

Question 19

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are __________________________________ and __________________________________.

Accepted Answer

The answer of With respect to operating assets, the two...

Question 20

Select the account that would be increased to show each of the following costs.
-The interest costs incurred during the construction period of a new building built by a company for its own use

Accepted Answer

A) Land 
B) Land Improvements 
C) Buildings 
D) Machinery and Equipment 
E) An Expense Account

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

A revenue expenditure is deducted from the cost of the asset.

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

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: -Depreciation expense

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. -This method minimizes taxable income (early in the asset's life) .

If technology changes rapidly, a firm should

Depreciation does not describe the increase or decrease in the market value of the asset.

For each of the following items, indicate whether each would be treated as a -Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment

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. -This method is the best for management bonus plans.

How are the cash flow effects from the purchase and sale of intangible assets reported on a statement of cash flows?

All of the following statements are true except:

Identify where each of the following accounts would be reported on Coca-Cola's financial statements. -Accumulated depreciation

The accounting life of intangible assets is determined by

A change in estimate should be recorded_________________.

With respect to operating assets, the two different transactions that would appear in the investing activities category of the statement of cash flows are and .

Select the account that would be increased to show each of the following costs. -The interest costs incurred during the construction period of a new building built by a company for its own use