Question 1

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

Accepted Answer

A)  $17,500 
B)  $37,500 
C)  $18,750 
D)  $16,667

Question 2

Residual value is also known as all of the following except

Accepted Answer

A)  scrap value 
B)  trade in value 
C)  salvage value 
D)  net book value

Question 3

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

Accepted Answer

A) True 
 B)False

Question 4

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.

Accepted Answer

A) True 
 B)False

Question 5

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 6

To a major resort, timeshare properties would be classified as property, plant and equipment.

Accepted Answer

A) True 
 B)False

Question 7

Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3,800 and an estimated useful life of 8 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

Accepted Answer

The answer of Computer equipment was acquired at the beginning...

Question 8

During construction of a building, the cost of interest on a construction loan should be charged to an expense account.

Accepted Answer

A) True 
 B)False

Question 9

Assets may be grouped according to common traits and depreciated by using a single composite rate.

Accepted Answer

A) True 
 B)False

Question 10

On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $50,000. What is the amount of the gain or loss on this transaction?

Accepted Answer

A)  Gain of $50,000 
B)  Loss of $50,000 
C)  No gain or loss 
D)  Cannot be determined

Question 11

Which of the following is included in the cost of constructing a building?

Accepted Answer

A)  insurance costs during construction 
B)  cost of paving parking lot 
C)  cost of repairing vandalism damage during construction 
D)  cost of removing the demolished building existing on the land when it was purchased

Question 12

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

Accepted Answer

A)  amortization 
B)  depletion 
C)  depreciation 
D)  allocation

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

On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the last year.

Accepted Answer

A)  $17,500 
B)  $30,000 
C)  $12,500 
D)  $40,000

Question 15

Financial Statement data for the years ended December 31 for Parker Corporation is as follows:
2012 2011
Net Sales $2,595,600 $2,409,498
Fixed Assets:
Beginning of the year $ 901,070 $820,000
End of the year 829,330 901,070
a) Determine the Fixed Asset Turnover for 2012 and 2011.
b) Does the change in Fixed Asset Turnover from 2011 to 2012 indicate a favorable or unfavorable trend.?

Accepted Answer

The answer of Financial Statement data for the years ended...

Question 16

XYZ Co. incurred the following costs related to the office building used in operating its sports supply company:
 
Classify each of the costs as a capital expenditure or a revenue expenditure. For those costs identified as capital expenditures, classify each as an additional or replacement component.

Accepted Answer

The answer of XYZ Co. incurred the following costs related...

Question 17

Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

Accepted Answer

A) True 
 B)False

Question 18

Fixed assets are ordinarily presented in the balance sheet

Accepted Answer

A)  at current market values 
B)  at replacement costs 
C)  at cost less accumulated depreciation 
D)  in a separate section along with intangible assets

Question 19

Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same.

Accepted Answer

A) True 
 B)False

Question 20

A gain can be realized when a fixed asset is discarded.

Accepted Answer

A) True 
 B)False

Exam 9: Fixed Assets and Intangible Assets

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

Residual value is also known as all of the following except

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.

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.

To a major resort, timeshare properties would be classified as property, plant and equipment.

Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3,800 and an estimated useful life of 8 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

During construction of a building, the cost of interest on a construction loan should be charged to an expense account.

Assets may be grouped according to common traits and depreciated by using a single composite rate.

Which of the following is included in the cost of constructing a building?

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

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

On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the last year.

XYZ Co. incurred the following costs related to the office building used in operating its sports supply company: Classify each of the costs as a capital expenditure or a revenue expenditure. For those costs identified as capital expenditures, classify each as an additional or replacement component.

Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

Fixed assets are ordinarily presented in the balance sheet

Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same.

A gain can be realized when a fixed asset is discarded.