Question 1

Use the information above to answer the following question.If the company sells the machine at the end of 5 years and receives $11,500,the journal entry to record the sale will include which of the following?

Accepted Answer

A)  Debit to Accumulated Depreciation for $138,000 
B)  Credit to Machine for $138,000 
C)  Debit to Loss on Sale for $500 
D)  Credit to Residual Value for $12,000

Question 2

The company has net sales revenue of $3.6 million during 2016.The company's records also included the following information:

What is the company's fixed asset turnover ratio for 2016?

Accepted Answer

A)  18.00 
B)  1.33 
C)  1.00 
D)  1.50

Question 3

Under the cost principle,a company capitalizes:

Accepted Answer

A)  all ordinary repair expenditures incurred in the use of an asset. 
B)  any interest incurred in borrowing money to help pay for asset acquisitions. 
C)  all reasonable and necessary costs of acquiring an asset and preparing it for use. 
D)  the total market value of individual assets acquired in a 'basket purchase.'

Question 4

Accumulated Depreciation is classified as an expense.

Accepted Answer

A) True 
 B)False

Question 5

A company sells a piece of equipment half-way through the accounting period.The straight-line rate of depreciation on the equipment is $40,000 per year.Before preparing the entry to record the sale of the equipment,the company should first debit:

Accepted Answer

A)  Depreciation Expense for $40,000 and credit Accumulated Depreciation for $40,000. 
B)  Accumulated Depreciation for $40,000 and credit Cash for $40,000. 
C)  Depreciation Expense for $20,000 and credit Accumulated Depreciation for $20,000. 
D)  Cash for $20,000 and credit Depreciation Expense for $20,000.

Question 6

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

Accepted Answer

A) True 
 B)False

Question 7

Sierra Nevada Corp.reported Sales Revenue of $500,000,000 and Sales Discounts of $4,000,000 for the year.The beginning balance of Net Plant and Equipment was $23,000,000,and the ending balance was $27,000,000.What is the fixed asset turnover ratio?

Accepted Answer

A)  18.37 
B)  18.52 
C)  20.00 
D)  19.84

Question 8

Goodwill:

Accepted Answer

A)  should be treated like most other intangible assets and amortized over a useful life of not more than 40 years. 
B)  is an accounting measurement of how well a company's employees behave towards the company's customers. 
C)  should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets. 
D)  is recorded when the purchasers of a business pay more than the fair value of the assets purchased.

Question 9

A declining fixed asset turnover ratio suggests that a:

Accepted Answer

A)  company is not as efficient in using its fixed assets as it was in previous periods. 
B)  company's net sales must be increasing. 
C)  company must have purchased some intangible assets. 
D)  company's beginning fixed asset balance must be greater than its ending fixed asset balance.

Question 10

The MegaHit Film Studio owns a production lot and related equipment.How would MegaHit Company categorize these assets?

Accepted Answer

A)  Tangible assets 
B)  Natural resources 
C)  Intangible assets 
D)  Goodwill

Question 11

The Doodad Company purchases a machine for $400,000.The machine has an estimated residual value of $20,000.The company expects the machine to produce two million units.The machine is used to make 400,000 units during the current period.
-Use the information above to answer the following question.If the units-of-production method is used,the depreciation expense for this period is:

Accepted Answer

A)  $80,000. 
B)  $400,000. 
C)  $76,000. 
D)  $380,000.

Question 12

Assume that,prior to preparing adjusting entries at the end of the year,Caterpillar Corporation has a fixed asset turnover ratio of 3.4 based on average net fixed assets of $500,000,000.Which of the following year-end adjustments would cause Caterpillar's fixed asset turnover ratio to increase?

Accepted Answer

A)  Caterpillar accrues and capitalizes $50,000 for self-constructed assets. 
B)  Caterpillar accrues a liability for ordinary repair costs in the amount of $50,000. 
C)  Caterpillar writes down an impaired piece of equipment by $50,000. 
D)  Caterpillar increases the sales returns & allowances by $50,000.

Question 13

Which of the following does not lead to a revision of an estimate of a company's depreciation expense?

Accepted Answer

A)  A change in the estimated useful life 
B)  A change in the estimated residual value 
C)  Extraordinary repairs that significantly extend the asset's usefulness 
D)  A change in the estimated maintenance costs

Question 14

Martinez,Inc.acquired a patent on January 1,2016 for $40,000 cash.The patent was estimated to have a useful life of 10 years with no residual value.On December 31,2017,before any adjustments were recorded for the year,management determined that the remaining useful life was 6 years (with that new estimate being effective as of January 1,2017).On June 30,2018,the patent was sold for $25,000.
Required:
Part a.Prepare the journal entry to record the acquisition of the patent on January 1,2016.
Part b.Prepare the journal entry to record the annual amortization for 2016.
Part c.Compute the amount of amortization that would be recorded in 2017.
Part d.Determine the gain (loss)on sale on June 30,2018.
Part e.Prepare the journal entry to record the sale of the patent on June 30,2018.

Accepted Answer

The answer of Martinez,Inc.acquired a patent on January 1,2016 for...

Question 15

Use the following information for the next questions 104 and 105.
A corporation using the double-declining-balance method of depreciation purchased a new machine on January 1, 2016.The machine cost $200,000, had an estimated useful life of 8 years and $25,000 residual value at the end of its useful life.
-A piece of equipment was acquired on January 1,2015,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2016?

Accepted Answer

A)  $5,500 
B)  $10,000 
C)  $11,000 
D)  $12,000

Question 16

Tidy Limited purchased a new van on January 1, 2016.The van cost $20,000.It has an estimated life of five years and the estimated residual value is $5,000.Tidy uses the double-declining-balance method to compute depreciation.
-Use the information above to answer the following question.What is the depreciation expense for 2016?

Accepted Answer

A)  $4,000 
B)  $3,000 
C)  $6,000 
D)  $8,000

Question 17

The net amount shown on a balance sheet for an intangible asset with an unlimited life should be:

Accepted Answer

A)  the price for which it could be sold. 
B)  its book value or impaired fair value, whichever is lower. 
C)  its purchase price minus accumulated amortization. 
D)  its purchase price adjusted for inflation.

Question 18

The journal entry to record the amortization of an intangible asset includes a:

Accepted Answer

A)  debit to Depreciation Expense. 
B)  debit to Amortization Expense. 
C)  credit to Equipment. 
D)  debit to Goodwill.

Question 19

If a company produces the same number of units per period over an asset's useful life,each period's depreciation expense using the straight-line method will be the same as that recorded using the units-of-production method.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following depreciation methods is used by most corporations to calculate depreciation expense for their tax returns?

Accepted Answer

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

Exam 9: Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Use the information above to answer the following question.If the company sells the machine at the end of 5 years and receives $11,500,the journal entry to record the sale will include which of the following?

The company has net sales revenue of $3.6 million during 2016.The company's records also included the following information: What is the company's fixed asset turnover ratio for 2016?

Under the cost principle,a company capitalizes:

Accumulated Depreciation is classified as an expense.

A company sells a piece of equipment half-way through the accounting period.The straight-line rate of depreciation on the equipment is $40,000 per year.Before preparing the entry to record the sale of the equipment,the company should first debit:

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

Sierra Nevada Corp.reported Sales Revenue of $500,000,000 and Sales Discounts of $4,000,000 for the year.The beginning balance of Net Plant and Equipment was $23,000,000,and the ending balance was $27,000,000.What is the fixed asset turnover ratio?

Goodwill:

A declining fixed asset turnover ratio suggests that a:

The MegaHit Film Studio owns a production lot and related equipment.How would MegaHit Company categorize these assets?

Assume that,prior to preparing adjusting entries at the end of the year,Caterpillar Corporation has a fixed asset turnover ratio of 3.4 based on average net fixed assets of $500,000,000.Which of the following year-end adjustments would cause Caterpillar's fixed asset turnover ratio to increase?

Which of the following does not lead to a revision of an estimate of a company's depreciation expense?

The net amount shown on a balance sheet for an intangible asset with an unlimited life should be:

The journal entry to record the amortization of an intangible asset includes a:

If a company produces the same number of units per period over an asset's useful life,each period's depreciation expense using the straight-line method will be the same as that recorded using the units-of-production method.

Which of the following depreciation methods is used by most corporations to calculate depreciation expense for their tax returns?