Question 1

If an asset is discarded, a loss is recognized equal to its salvage value.

Accepted Answer

A) True 
 B)False

Question 2

A company acquired mineral rights for $7,500,000. The mineral deposit is estimated at 600,000 tons and during the year 100,000 tons were extracted and sold.
 Calculate depletion expense for the year.$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$(a)
Show the effects of (a) on the accounts and the financial statements of the company.$\quad$$\quad$(b)
What is the book value of the mineral rights at the end of the current year?$\quad$$\quad$$\quad$$\quad$$\quad$(c)

Accepted Answer

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

Question 3

The accounting term depreciation measures:

Accepted Answer

A)  the decline in an asset's market value. 
B)  the amount of cash a company sets aside for asset replacement. 
C)  the amount of asset cost allocated to expense over periods benefited. 
D)  the anticipated loss if asset is sold in the used-asset market.

Question 4

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 5

Land improvements include:

Accepted Answer

A)  freight. 
B)  surveying fees. 
C)  sales tax. 
D)  outdoor lighting.

Question 6

If a fixed asset is sold and the book value of the asset is less than its selling price, the company must:

Accepted Answer

A)  recognize a loss on the income statement under other expenses. 
B)  recognize a loss on the income statement under operating expenses. 
C)  recognize a gain on the income statement under other revenues. 
D)  recognize a gain on the income statement under revenues.

Question 7

Identify the following as a Fixed Asset (FA), Intangible Asset (IA), Natural Resource (NR), or None of these (N).
 $\begin{array}{lr}
\text {Computer }&(a)\
\text {Patent }&(b)\
\text {Oil reserve }&(c)\
\text {Goodwill }&(d)\
\text {U.S. Treasury note }&(e)\
\text {Land used for employee parking }&(f)\
\text {Gold mine }&(g)\
\end{array}$

Accepted Answer

The answer of Identify the following as a Fixed Asset...

Question 8

For each of the following items indicate whether the transactions listed below increased (+), decreased (-) or had no effect (o) by inserting the appropriate symbol.
 $\begin{array}{|l|l|l|l|l|l|}
\hline&&&&&\text { Ownters' }&\text { Cash }\
&&\text { Net Income}& \text { Assets }&\text { Liab. }&\text { Equity}&\text { Flows }\ 
\hline \text { (a) } &\text { Record depreciation expense } & \
\hline  \text { (b) }&\text { Sold equipment for cash at a loss } & \
\hline \text { (c) }& \text { Recorded loss on impaired goodwill } & \
\hline\text { (d) }& \text { Recorded depletion expense } &  \
\hline \text { (e) }&\text { Recorded a capital expenditure and issued a note } &  \
&\text { payable } & \
\hline
\end{array}$

Accepted Answer

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

Question 9

A drilling company purchased a mining site for $500,000 on July 1, 2012. The company expects to mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. During 2012 the company extracted 6,500 tons of ore. The depletion expense for the year 2012 is:

Accepted Answer

A)  $37,700. 
B)  $42,000. 
C)  $32,500. 
D)  $27,300.

Question 10

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 11

Goodwill is:

Accepted Answer

A)  amortized in a manner similar to other intangibles. 
B)  written down only if an impairment in value occurs. 
C)  charged to expense immediately. 
D)  amortized over 40 years or its economic life, whichever is shorter.

Question 12

Which of the following is not considered under the double-declining-balance method?

Accepted Answer

A)  The asset's book value 
B)  The asset's initial cost 
C)  The asset's expected useful life 
D)  The asset's residual value

Question 13

Fixed assets are ordinarily presented in the balance sheet:

Accepted Answer

A)  at its current market value. 
B)  at its replacement cost. 
C)  at its cost less accumulated depreciation. 
D)  under intangible assets.

Question 14

Identify each of the following expenditures as chargeable to (a) Land, (b) Land Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) Other accounts.
 (1)Cost of paving parking are a for employees and customers.
(2)Insurance duing constuction of buitding:
(3)Interest incured on money borrowed for construction of building.
(4)Fee paid for installation of equipment.
(5)Special foundation for new equipment acquired.
(6)Transit insurance on new equipment.
(7)Freight charges on new equipment.
(8)Cost of repairing vandalism damage to equipment during installation.
(9)Sales tax on new equipment.
(10)Cost incure din repairing danage resulting from installation of new equipment.
(11)Cost of landfill for building site.
(12)Cost of lubricating oil purchased for periodic oil changes for equipment.
(13)Parking lot lighting.
(14)Installing a fence around the parking lot.
(15)Repainting the trim on a building
(16)Special assessment paid to city for extension of water main to the property.
(17)Cost of razing and removing the old building on property accuired for a building site.
(18)Délinquent real est ate taxes assumed by purchaser on property accuired for a building site.
(19)Attomey's fee for title search.
(20)Architects fee for building plans and supervision of construction.

Accepted Answer

The answer of Identify each of the following expenditures as...

Question 15

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

Accepted Answer

A) True 
 B)False

Question 16

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 total decrease in delivery truck for $11,500. 
C)  a loss for $6,500. 
D)  a gain for $6,500.

Question 17

A gain is recorded on the sale of fixed assets when:

Accepted Answer

A)  the asset is sold for a price less than its book value. 
B)  the asset is sold for a price more than its book value. 
C)  accumulated depreciation on asset is less than its selling price. 
D)  accumulated depreciation on asset is more than its selling price.

Question 18

Which of the following is not a characteristic of accumulated depreciation account?

Accepted Answer

A)  Accumulated depreciation represents cash reserved for asset replacement. 
B)  Accumulated depreciation account is a contra-asset account. 
C)  Accumulated depreciation may be disclosed in the notes to the financial statements. 
D)  Accumulated depreciation is reported on the balance sheet as a deduction from the cost of the asset.

Question 19

A fully depreciated asset must be:

Accepted Answer

A)  removed from the books. 
B)  kept on the books until sold or discarded. 
C)  disclosed only in the notes to the financial statements. 
D)  recognized on the income statement as a loss.

Question 20

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:

Accepted Answer