Question 1

The cost of land includes the purchase price and land improvement costs.

Accepted Answer

A) True 
 B)False

Question 2

Finite-life assets include patents and trademarks.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a way that IFRS disclosure requirements of property, plant, and equipment differ from U.S. GAAP disclosure requirements?

Accepted Answer

A)  Companies disclose the accumulated depreciation at the end of the fiscal year by major class or in total. 
B)  Companies provide a general description of the method(s) used in computing depreciation with respect to major classes of depreciable assets. 
C)  Companies provide a reconciliation of the carrying values at the beginning of the year to the end of the year. 
D)  Companies report the carrying value of property, plant, and equipment in total or by major class of long-term assets on the balance sheet. 
A)  Companies disclose the accumulated depreciation at the end of the fiscal year by major class or in total. 
B)  Companies provide a general description of the method(s) used in computing depreciation with respect to major classes of depreciable assets. 
C)  Companies provide a reconciliation of the carrying values at the beginning of the year to the end of the year. 
D)  Companies report the carrying value of property, plant, and equipment in total or by major class of long-term assets on the balance sheet.

Question 4

Kaven Corporation purchased a truck at the beginning of 2018 for $85,000 which will be depreciated using the units-of-output method. The truck is estimated to have a residual value of $4,000 and a useful life of 4 years and 120,000 miles. It was driven 18,000 miles in 2018 and 32,000 miles in 2019. What is the depreciation expense for 2019? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A)  $21,250 
B)  $21,760 
C)  $22,720 
D)  $32,000 
A)  $21,250 
B)  $21,760 
C)  $22,720 
D)  $32,000

Question 5

The two classes of intangible assets are finite-life assets and infinite-life assets.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a required disclosure for property, plant, and equipment under U.S. GAAP?

Accepted Answer

A)  the amount of depreciation expense for the period 
B)  the accumulated depreciation at the end of the fiscal year by major class or in total 
C)  the balances of depreciable assets by major classes at the end of the fiscal year 
D)  the acquisition cost of each material asset acquired during the fiscal year 
A)  the amount of depreciation expense for the period 
B)  the accumulated depreciation at the end of the fiscal year by major class or in total 
C)  the balances of depreciable assets by major classes at the end of the fiscal year 
D)  the acquisition cost of each material asset acquired during the fiscal year

Question 7

What is meant by a bargain purchase and how is it recorded?

Accepted Answer

A company makes a bargain purchase when

Question 8

Which of the following is a realistic assumption of the straight-line method of depreciation?

Accepted Answer

A)  Depreciation is a function of usage. 
B)  The rate of return analysis is enhanced using the straight-line method. 
C)  The repair and maintenance expense is higher at the end of the asset's life. 
D)  The asset's economic usefulness is the same each year. 
A)  Depreciation is a function of usage. 
B)  The rate of return analysis is enhanced using the straight-line method. 
C)  The repair and maintenance expense is higher at the end of the asset's life. 
D)  The asset's economic usefulness is the same each year.

Question 9

Over what period of time should a patent be amortized?

Accepted Answer

A)  twenty years 
B)  its useful life 
C)  twenty years or its useful life, whichever is shorter 
D)  twenty years or its useful life, whichever is longer 
A)  twenty years 
B)  its useful life 
C)  twenty years or its useful life, whichever is shorter 
D)  twenty years or its useful life, whichever is longer

Question 10

Ballyhigh Company purchased equipment for $20,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $300, repairs of $350 for damage during installation, and installation costs of $450. What is the capitalized cost of the equipment?

Accepted Answer

A)  $21,500 
B)  $21,850 
C)  $22,250 
D)  $22,600 
A)  $21,500 
B)  $21,850 
C)  $22,250 
D)  $22,600

Question 11

A company will never recognize a gain on the abandonment of a fixed asset.

Accepted Answer

A) True 
 B)False

Question 12

The purchase of a building would involve a number of different components, such as the foundation and frame, heating and air conditioning systems, and other non-weight-bearing parts. Which of the following statements concerning the components-based approach for determining depreciation is true?

Accepted Answer

A)  Both U.S. GAAP and IFRS require the components-based approach. 
B)  Both U.S. GAAP and IFRS allow the components-based approach but do not require it. 
C)  IFRS allows the components-based approach but does not require it; U.S. GAAP requires the components-based approach. 
D)  U.S. GAAP allows the components-based approach but does not require it; IFRS requires the components-based approach. 
A)  Both U.S. GAAP and IFRS require the components-based approach. 
B)  Both U.S. GAAP and IFRS allow the components-based approach but do not require it. 
C)  IFRS allows the components-based approach but does not require it; U.S. GAAP requires the components-based approach. 
D)  U.S. GAAP allows the components-based approach but does not require it; IFRS requires the components-based approach.

Question 13

When land is purchased and landscaping improvements are made, the total purchase price plus the improvement cost is the total capitalized value of the land.

Accepted Answer

A) True 
 B)False

Question 14

Companies should evaluate indefinite life intangible assets at least annually for ________.

Accepted Answer

A)  amortization 
B)  impairment 
C)  useful life 
D)  gains or losses 
A)  amortization 
B)  impairment 
C)  useful life 
D)  gains or losses

Question 15

Factors considered in determining an intangible asset's useful life include all of the following except ________.

Accepted Answer

A)  legal provisions 
B)  effects of technological advances 
C)  contractual factors 
D)  the amortization method 
A)  legal provisions 
B)  effects of technological advances 
C)  contractual factors 
D)  the amortization method

Question 16

Kow-Pow Company purchased a limited-life intangible asset for $180,000 on May 1, 2017. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2019? (Round any calculations to the nearest cent, and your final answer to the nearest dollar.)

Accepted Answer

A)  $0 
B)  $36,000 
C)  $48,000 
D)  $54,000 
A)  $0 
B)  $36,000 
C)  $48,000 
D)  $54,000

Question 17

Over what period of time should a copyright be amortized?

Accepted Answer

A)  life of the creator plus 70 years 
B)  its useful economic life 
C)  life of the creator plus 70 years or its useful life, whichever is shorter 
D)  Copyrights are never amortized. 
A)  life of the creator plus 70 years 
B)  its useful economic life 
C)  life of the creator plus 70 years or its useful life, whichever is shorter 
D)  Copyrights are never amortized.

Question 18

In the context of constructing a plant asset, the interest that the company would not have paid if it had not borrowed funds to construct the asset is referred to as ________.

Accepted Answer

A)  avoidable interest 
B)  marginal interest 
C)  capital interest 
D)  financing interest 
A)  avoidable interest 
B)  marginal interest 
C)  capital interest 
D)  financing interest

Question 19

Rinky-Dink Inc. leased manufacturing space for a 25-year period. Prior to using the space, Rinky-Dink needed to make renovations costing $80,000 with an expected useful life of 10 years. If the company uses the straight-line method, what amount should Rink-Dink record as amortization expense in the first year?

Accepted Answer

A)  $8,000 
B)  $3,200 
C)  $4,800 
D)  The answer cannot be determined with the information provided. 
A)  $8,000 
B)  $3,200 
C)  $4,800 
D)  The answer cannot be determined with the information provided.

Question 20

Net book value is equal to the original cost of a plant asset minus accumulated depreciation for that asset.

Accepted Answer

A) True 
 B)False

Exam 11: Long-Term Operating Assets: Acquisition, Cost Allocation

The cost of land includes the purchase price and land improvement costs.

Finite-life assets include patents and trademarks.

Which of the following is a way that IFRS disclosure requirements of property, plant, and equipment differ from U.S. GAAP disclosure requirements?

The two classes of intangible assets are finite-life assets and infinite-life assets.

Which of the following is not a required disclosure for property, plant, and equipment under U.S. GAAP?

What is meant by a bargain purchase and how is it recorded?

Which of the following is a realistic assumption of the straight-line method of depreciation?

Over what period of time should a patent be amortized?

Ballyhigh Company purchased equipment for $20,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $300, repairs of $350 for damage during installation, and installation costs of $450. What is the capitalized cost of the equipment?

A company will never recognize a gain on the abandonment of a fixed asset.

The purchase of a building would involve a number of different components, such as the foundation and frame, heating and air conditioning systems, and other non-weight-bearing parts. Which of the following statements concerning the components-based approach for determining depreciation is true?

When land is purchased and landscaping improvements are made, the total purchase price plus the improvement cost is the total capitalized value of the land.

Companies should evaluate indefinite life intangible assets at least annually for ________.

Factors considered in determining an intangible asset's useful life include all of the following except ________.

Over what period of time should a copyright be amortized?

In the context of constructing a plant asset, the interest that the company would not have paid if it had not borrowed funds to construct the asset is referred to as ________.

Net book value is equal to the original cost of a plant asset minus accumulated depreciation for that asset.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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