Question 1

A patent was purchased for $670,000 with a legal life of 20 years.Management estimates that the patent has an 12-year economic life.The entry to record amortization would include

Accepted Answer

A) an increase in amortization expense for $33,500. 
B) an increase in research and development expense for $670,000. 
C) a decrease in patent for $55,833. 
D) an increase in accumulated amortization for $670,000.

Question 2

If a capital expenditure is treated as a revenue expenditure,then

Accepted Answer

A) expenses are overstated and owners' equity is understated. 
B) expenses are overstated and assets are overstated. 
C) expenses are understated and owners' equity is overstated. 
D) net income is overstated and owners' equity is understated.

Question 3

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT an intangible asset?

Accepted Answer

A) Goodwill 
B) Trademark 
C) Copyrights 
D) Long-term receivable

Question 5

When selling a piece of equipment for cash,a loss will result when the proceeds of the sale are greater than the book value of the asset.

Accepted Answer

A) True 
 B)False

Question 6

Which method of depreciation considers residual value in computing the normal periodic depreciation?

Accepted Answer

A) Straight-line 
B) MACRS 
C) Double-declining-balance 
D) All of these

Question 7

Intangible assets are used in operations but

Accepted Answer

A) cannot be specifically identified. 
B) cannot be sold. 
C) lack physical substance. 
D) cannot be long-lived.

Question 8

To measure depreciation,all of the following must be known EXCEPT

Accepted Answer

A) market value. 
B) residual value. 
C) historical cost. 
D) estimated life.

Question 9

Recording depreciation

Accepted Answer

A) decreases net income and cash flows. 
B) decreases net income and has no effect on cash flows. 
C) decreases net income,assets,and cash flows. 
D) decreases net income and has no effect on assets and cash flows.

Question 10

For each of the following items indicate whether the transactions listed below increased (+),decreased (-)or had no effect (o)by inserting the appropriate symbol.

Accepted Answer

The answer of For each of the following items indicate...

Question 11

A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900.It has a useful life of 4 years and a residual value of $300.Determine depreciation expense for the first two years,assuming a fiscal year end of December 31 and using (a)the straight-line method and (b)the double-declining-balance method.

Accepted Answer

The answer of A pressurized spray painter was purchased on...

Question 12

The Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

If a revenue expenditure is treated as a capital expenditure,then

Accepted Answer

A) expenses are overstated and owners' equity is understated. 
B) expenses are overstated and assets are overstated. 
C) expenses are understated and owners' equity is overstated. 
D) net income is overstated and owners' equity is understated.

Question 14

A company sold a delivery truck for $18,000 cash.The truck cost $47,500 and had accumulated depreciation of $36,000 as of the date of sale.The entry to record the sale would include

Accepted Answer

A) an increase in accumulated depreciation for $36,000. 
B) a decrease in delivery truck for $11,500. 
C) a loss for $6,500. 
D) a gain for $6,500.

Question 15

Expenditures for research and development are generally recorded as

Accepted Answer

A) current operating expenses. 
B) assets and amortized over their estimated useful life. 
C) assets and amortized over 40 years. 
D) current assets.

Question 16

Which of the following 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 17

The removal of an old building to make the land ready for its intended use is charged to

Accepted Answer

A) land. 
B) land improvements. 
C) buildings. 
D) operating expenses.

Question 18

A company acquired mineral rights for $7,500,000.The mineral deposit is estimated at 600,000 tons and during the year 100,000 tons were extracted and sold.

Accepted Answer

The answer of A company acquired mineral rights for $7,500,000.The...

Question 19

Other descriptive titles for fixed assets would include

Accepted Answer

A) plant assets. 
B) property,plant,and equipment. 
C) other long-term assets 
D) both plant assets and property,plant,and equipment.

Question 20

Depreciable cost equals

Accepted Answer

A) cost less accumulated depreciation. 
B) book value less residual value. 
C) cost less residual value. 
D) market value less residual value.

Exam 7: Fixed Assets and Intangible Assets

A patent was purchased for $670,000 with a legal life of 20 years.Management estimates that the patent has an 12-year economic life.The entry to record amortization would include

If a capital expenditure is treated as a revenue expenditure,then

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Which of the following is NOT an intangible asset?

When selling a piece of equipment for cash,a loss will result when the proceeds of the sale are greater than the book value of the asset.

Which method of depreciation considers residual value in computing the normal periodic depreciation?

Intangible assets are used in operations but

To measure depreciation,all of the following must be known EXCEPT

Recording depreciation

For each of the following items indicate whether the transactions listed below increased (+),decreased (-)or had no effect (o)by inserting the appropriate symbol.

The Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

If a revenue expenditure is treated as a capital expenditure,then

A company sold a delivery truck for $18,000 cash.The truck cost $47,500 and had accumulated depreciation of $36,000 as of the date of sale.The entry to record the sale would include

Expenditures for research and development are generally recorded as

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

The removal of an old building to make the land ready for its intended use is charged to

A company acquired mineral rights for $7,500,000.The mineral deposit is estimated at 600,000 tons and during the year 100,000 tons were extracted and sold.

Other descriptive titles for fixed assets would include

Depreciable cost equals