Question 1

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated depreciation account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The residual value of the facility is:

Accepted Answer

A) $117,000. 
B) $151,000. 
C) $268,000. 
D) $107,000

Question 2

A piece of equipment was acquired on January 1,2018,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 31,2019?

Accepted Answer

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

Question 3

When the straight-line method is used to compute depreciation,an asset's carrying value remains constant over the life of the asset.

Accepted Answer

A) True 
 B)False

Question 4

When a company records an asset impairment loss,it will reduce net income for that period.

Accepted Answer

A) True 
 B)False

Question 5

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report depreciation for the equipment of:

Accepted Answer

A) $4,200 per year. 
B) $8,400 per year. 
C) $4,800 per year. 
D) $9,600 per year.

Question 6

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Accepted Answer

A) takes book value below residual value. 
B) does not consider the useful life of the asset in the calculation of depreciation. 
C) cannot be used for tax purposes. 
D) uses book value instead of depreciable cost in the calculation of depreciation.

Question 7

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Other things being equal,which of the following is true?

Accepted Answer

A) Company A will have higher net income in the early years but Company B will have higher net income towards the end of the asset's useful life. 
B) Company A will consistently have the larger net income until residual value is reached. 
C) Company B will have higher net income in the early years but Company A will have higher net income towards the end of the asset's useful life. 
D) Company B will consistently have the larger net income until residual value is reached.

Question 8

Assuming no additions,replacements,or extraordinary repairs,the book value of any long-lived asset with a limited life is always less than or equal to its acquisition cost.

Accepted Answer

A) True 
 B)False

Question 9

Deciding whether a cost is reasonable and necessary to acquire or prepare tangible assets for use can involve a great deal of judgment.

Accepted Answer

A) True 
 B)False

Question 10

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's depreciation expense in the first year would be:

Accepted Answer

A) $9,600. 
B) $12,000. 
C) $4,800. 
D) $24,000.

Question 11

If a company builds its own facility,only the cost of materials is capitalized.

Accepted Answer

A) True 
 B)False

Question 12

Match between columns
                        Premises: Least and latest rule
Copyright
Voluntary disposal
Depreciation schedule
Depreciation
Licensing right
Capitalized interest
Fixed asset turnover ratio
Involuntary disposal

Accepted Answer

The Answer of Generally accepted accounting principle that a company is...

Question 13

Decorama Corp.bought a delivery van for $65,000 with a estimated residual value of $6,000.The van is expected to be used for the next 10 years.The company estimates it will be used to drive a total of 225,000,000 km (30,000 km in the first year,25,000 in the second,third and fourth years and 20,000 in the next six years. What would be the amount of depreciation expense in year 2 using the units-of-production method?

Accepted Answer

A) $6,500.00 
B) $5,900.00 
C) $10,400.00 
D) $6,555.55

Question 14

Intangibles with unlimited or indefinite lives (trademarks and goodwill)are amortized using straight line depreciation method.

Accepted Answer

A) True 
 B)False

Question 15

Recall that the Fixed Asset Turnover Ratio equals Net Sales Revenue divided by Average Net Fixed 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?

Accepted Answer

A) Caterpillar accrues and capitalizes $50,000 of interest 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) None of the answers are acceptable.

Question 16

Your company buys a computer server,which it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:

Accepted Answer

A) 8 years; the total length of time the server is used to produce output for your company. 
B) eleven years. 
C) the total length of time until the server can no longer function. 
D) three years.

Question 17

Some analysts compare companies by focusing on earnings before interest,taxes,and amortization (EBITDA).

Accepted Answer

A) True 
 B)False

Question 18

If net sales revenue $\bold{rises}$ 5% while the average book value of fixed assets falls 5%:

Accepted Answer

A) the fixed asset turnover ratio will rise. 
B) the fixed asset turnover ratio will fall. 
C) the fixed asset turnover ratio will stay the same. 
D) the impact on the fixed asset turnover ratio cannot be determined since the beginning values are unknown.

Question 19

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is true?

Accepted Answer

A) Company A will have higher depreciation expense in the early years but Company B will have the higher expense towards the end of the asset's useful life. 
B) Company A will consistently have higher depreciation expense until residual value is reached. 
C) Company B will have higher depreciation expense in the early years but Company A will have the higher expense towards the end of the asset's useful life. 
D) Company B will consistently have higher depreciation expense until residual value is reached.

Question 20

Your company has net sales revenue of $36 million during the year.At the beginning of the year,fixed assets are $8 million.At the end of the year,fixed assets are $10 million.What is the fixed asset turnover ratio?

Accepted Answer

A) 4.5 
B) 4.0 
C) 2.0 
D) 3.6

Exam 9: Long-Lived Tangible and Intangible Assets

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated depreciation account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The residual value of the facility is:

A piece of equipment was acquired on January 1,2018,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 31,2019?

When the straight-line method is used to compute depreciation,an asset's carrying value remains constant over the life of the asset.

When a company records an asset impairment loss,it will reduce net income for that period.

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report depreciation for the equipment of:

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Other things being equal,which of the following is true?

Assuming no additions,replacements,or extraordinary repairs,the book value of any long-lived asset with a limited life is always less than or equal to its acquisition cost.

Deciding whether a cost is reasonable and necessary to acquire or prepare tangible assets for use can involve a great deal of judgment.

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's depreciation expense in the first year would be:

If a company builds its own facility,only the cost of materials is capitalized.

Match the term and the definition.Not all definitions will be used.

Intangibles with unlimited or indefinite lives (trademarks and goodwill)are amortized using straight line depreciation method.

Your company buys a computer server,which it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:

Some analysts compare companies by focusing on earnings before interest,taxes,and amortization (EBITDA).

If net sales revenue $\bold{rises}$ 5% while the average book value of fixed assets falls 5%:

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is true?

Your company has net sales revenue of $36 million during the year.At the beginning of the year,fixed assets are $8 million.At the end of the year,fixed assets are $10 million.What is the fixed asset turnover ratio?

Exam 9: Long-Lived Tangible and Intangible Assets

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated depreciation account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The residual value of the facility is:

A piece of equipment was acquired on January 1,2018,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 31,2019?

When the straight-line method is used to compute depreciation,an asset's carrying value remains constant over the life of the asset.

When a company records an asset impairment loss,it will reduce net income for that period.

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report depreciation for the equipment of:

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Other things being equal,which of the following is true?

Assuming no additions,replacements,or extraordinary repairs,the book value of any long-lived asset with a limited life is always less than or equal to its acquisition cost.

Deciding whether a cost is reasonable and necessary to acquire or prepare tangible assets for use can involve a great deal of judgment.

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's depreciation expense in the first year would be:

If a company builds its own facility,only the cost of materials is capitalized.

Match the term and the definition.Not all definitions will be used.

Intangibles with unlimited or indefinite lives (trademarks and goodwill)are amortized using straight line depreciation method.

Your company buys a computer server,which it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:

Some analysts compare companies by focusing on earnings before interest,taxes,and amortization (EBITDA).

If net sales revenue rises\bold{rises}rises 5% while the average book value of fixed assets falls 5%:

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is true?

Your company has net sales revenue of $36 million during the year.At the beginning of the year,fixed assets are $8 million.At the end of the year,fixed assets are $10 million.What is the fixed asset turnover ratio?

If net sales revenue $\bold{rises}$ 5% while the average book value of fixed assets falls 5%: