Question 1

A company acquired a truck for $79,000 at the beginning of the fiscal year. It has a useful life of 5 years and a residual value of $9,000. The company uses the straight-line method of depreciation. After owning the truck for two years, the company sold it for $34,000. (a) Determine depreciation expense for each of the first two years, and (b) determine the gain or loss resulting from the sale.

Accepted Answer

The answer of A company acquired a truck for $79,000...

Question 2

Depletion is the process of transferring the cost of intangible assets to an expense account.

Accepted Answer

A) True 
 B)False

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

Under the straight-line method, the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000, and a useful life of 5 years, will be $18,000.

Accepted Answer

A) True 
 B)False

Question 5

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method.

Accepted Answer

A) True 
 B)False

Question 6

A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Determine the annual depreciation expense using the straight-line method?

Accepted Answer

A)  $13,200 
B)  $12,000 
C)  $11,000 
D)  $10,800

Question 7

A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of gain or loss on disposal of the fixed asset?

Accepted Answer

A)  $2,500 loss 
B)  $1,500 loss 
C)  $2,500 gain 
D)  $1,500 gain

Question 8

Intangible assets do not exist physically.

Accepted Answer

A) True 
 B)False

Question 9

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

Accepted Answer

A) True 
 B)False

Question 10

During 2009, Lexie, Inc. acquired Lena, Inc. for $10,000,000. The fair market value of the net assets of Lena, Inc. was $8,500,000 on the date of purchase. During 2012, Lexie, Inc. determined the goodwill resulting from the Lena acquisition was impaired and had a value of $1,000,000.
 (a) Determine the amount of goodwill implied during 2009.
(b) IIIustrate the effects on the accounts and the finencial statements of the December 31,2012, adjustment for the goodwill impairment.

Accepted Answer

The answer of During 2009, Lexie, Inc. acquired Lena, Inc....

Question 11

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)  Accelerated

Question 12

A capital expenditure would appear on the:

Accepted Answer

A)  income statement under operating expenses. 
B)  balance sheet under fixed assets. 
C)  balance sheet under investments. 
D)  income statement under other expenses.

Question 13

A current asset account must be increased for revenue expenditures since they benefit only the current period.

Accepted Answer

A) True 
 B)False

Question 14

An equipment was purchased for $30,000. It has a useful life of 5 years, and a residual value of $4,000. Compute the depreciation expense for the second year using the double-declining-balance method.

Accepted Answer

A)  $5,200 
B)  $6,000 
C)  $6,240 
D)  $7,200

Question 15

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an intangible asset?

Accepted Answer

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

Question 17

For each of the following items indicate whether the transactions listed below increased (+), decreased (-) or had no effect (o) by inserting the appropriate symbol.
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline&&&&&\text { Ownters' }&\text { Cash }\
&&\text { Net Income}& \text { Assets }&\text { Liab. }&\text { Equity}&\text { Flows }\ 
\hline\text { (a) }& \text { Sold ecuipment for cash at a gain } &  \
\hline\text { (b) } & \text { Recorded amortization expense on patents } & \
\hline\text { (c) }& \text { Paid cash for minor repairs to an asset } &  \
\hline  \text { (d) }&\text { Recorded a revenue expenditure incured on account } & \
\hline \text { (e) } & \text { Paid cash to remove old building from land being prepared } &\
\hline
\end{array}$

Accepted Answer

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

Question 18

A machine was purchased for $30,000, having a useful life of 10 years, and a residual value of $4,000. Compute the annual depreciation expense using the straight-line method.

Accepted Answer

A)  $3,000 
B)  $3,400 
C)  $2,600 
D)  $5,200

Question 19

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale, a loss is recorded.

Accepted Answer

A) True 
 B)False

Question 20

The cost of 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.

Exam 7: Fixed Assets and Intangible Assets

Depletion is the process of transferring the cost of intangible assets to an expense account.

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.

Under the straight-line method, the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000, and a useful life of 5 years, will be $18,000.

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method.

A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Determine the annual depreciation expense using the straight-line method?

A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of gain or loss on disposal of the fixed asset?

Intangible assets do not exist physically.

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

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

A capital expenditure would appear on the:

A current asset account must be increased for revenue expenditures since they benefit only the current period.

An equipment was purchased for $30,000. It has a useful life of 5 years, and a residual value of $4,000. Compute the depreciation expense for the second year using the double-declining-balance method.

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

Which of the following is not an intangible asset?

A machine was purchased for $30,000, having a useful life of 10 years, and a residual value of $4,000. Compute the annual depreciation expense using the straight-line method.

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale, a loss is recorded.

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