Question 1

Depreciation is the systematic and rational allocation of the cost of a finite-life intangible asset to expense.

Accepted Answer

A) True 
 B)False

Question 2

Firms capitalize interest costs from the time of the initial expenditure until the asset is actually put into service.

Accepted Answer

A) True 
 B)False

Question 3

The fixed asset turnover ratio is computed as average net fixed assets divided by total revenues.

Accepted Answer

A) True 
 B)False

Question 4

A franchise grants a franchisor the right to conduct business under the name of the franchisee.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following intangible assets is not subject to amortization?

Accepted Answer

A)  franchise 
B)  goodwill 
C)  copyright 
D)  customer list 
A)  franchise 
B)  goodwill 
C)  copyright 
D)  customer list

Question 6

Capitalization is the process of recording an expenditure as an asset.

Accepted Answer

A) True 
 B)False

Question 7

A company sells one of its delivery trucks that had been used in the business for $25,000 cash. At the time of the sale, the accumulated depreciation on the truck was brought up to date and had a balance of $10,000. The original cost of the truck was $32,000. What would be the journal entry to record the disposal of the delivery truck?

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 8

Dice Manufacturing Inc. exchanged a forklift for a truck acquired from Lima Equipment and Logistics Ltd. Dice also received a cash consideration of $13,000. Dice expects the future cash flows to change as a result of this transaction and, therefore, the exchange has commercial substance.
The carrying value and fair value of the forklift and truck at the date of the exchange are as follows:
 $$\begin{array} { | l | r | r | r | r | } 
\hline \text { Asset } & { \text { Cost } } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Carrying Value } &  { \text { Fair Value } } \
\hline \text { Forklift (asset given up) } & \$ 66,000 & \$ 10,000 & \$ 56,000 & \$ 53,000 \
\hline \text { Truck (asset received) } & \$ 52,000 & \$ 5,000 & \$ 47,000 & \$ 60,000 \
\hline
\end{array}$$ 
Prepare the journal entry for Dice to record the transaction.

Accepted Answer

The truck (the new asset) is valued at t

Question 9

Which of the following is not a characteristic of intangible assets?

Accepted Answer

A)  economic value 
B)  long-term benefits 
C)  not used in operations 
D)  lack physical existence 
A)  economic value 
B)  long-term benefits 
C)  not used in operations 
D)  lack physical existence

Question 10

Both U.S. GAAP and IFRS require disclosure of the gross value of goodwill and related accumulated amortization.

Accepted Answer

A) True 
 B)False

Question 11

Intangible assets are assets without physical substance or economic value.

Accepted Answer

A) True 
 B)False

Question 12

On December 31, 2018, Franz Company sold a piece of machinery it purchased on January 1, 2011, with an original cost of $450,000. The asset had a useful life of 15 years and a scrap value of $50,000. It sold the asset for $200,000 in cash. Franz recorded depreciation through December 31, 2017, using the straight-line method. What was the carrying value of the asset on the date of sale? What is the gain or loss on disposal?

Accepted Answer

To properly calculate the gain or loss o

Question 13

Presented below are the components related to an office building that Lorny Manufacturing Company purchased for $10,000,000 on January, 1, 2018.
$\begin{array}{lcr}
\text { Component } & \text { Useful Life } &\text { Value } \
\hline \text { Building structure } & 50 \text { years } & \$ 6,400,000 \
\text { Building systems } & \text { 25 years } & 2,800,000 \
\text { Building interior } & 25 \text { years } & 800,000
\end{array}$ 
a. Compute depreciation expense for 2018, assuming that Lorny uses component depreciation, uses the straight-line method of depreciation, and ignores scrap values.
b. Assume that the building systems (heating, plumbing, electrical) were replaced after 20 years at a cost of $2,500,000. The company paid cash. Prepare the journal entry to record the replacement of the old component with the new component.

Accepted Answer

a.
Component Depreciation Expense
Buildi

Question 14

A firm does not recognize internally generated intangible assets because their value cannot be measured reliably.

Accepted Answer

A) True 
 B)False

Question 15

Briefly describe the accounting for the acquisition and use of equipment and indicate which accounts are involved in accounting for equipment and what types of accounts are these?

Accepted Answer

Initially, the most objective informatio

Question 16

Average remaining life of a company's long-term operating assets is computed as ________.

Accepted Answer

A)  the amount of depreciation expense divided by accumulated depreciation 
B)  the amount of accumulated depreciation divided by depreciation expense 
C)  the amount of depreciation expense divided by the balance of ending net fixed assets 
D)  the ending balance of net fixed assets divided by depreciation expense 
A)  the amount of depreciation expense divided by accumulated depreciation 
B)  the amount of accumulated depreciation divided by depreciation expense 
C)  the amount of depreciation expense divided by the balance of ending net fixed assets 
D)  the ending balance of net fixed assets divided by depreciation expense

Question 17

Following U.S. GAAP, which of the following costs should be capitalized in the year incurred?

Accepted Answer

A)  costs to successfully defend a patent 
B)  research and development costs for a new product to be introduced later this year 
C)  cost to internally generate goodwill 
D)  development costs for a new product 
A)  costs to successfully defend a patent 
B)  research and development costs for a new product to be introduced later this year 
C)  cost to internally generate goodwill 
D)  development costs for a new product

Question 18

If an exchange lacks commercial substance and no cash is received, any gain must be deferred by adjusting the carrying value of the new asset. However, any loss must be recognized immediately.

Accepted Answer

A) True 
 B)False

Question 19

An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2009, for $540,000. On January 1, 2019, a review was made of intangible assets and their expected service lives. It was determined that this asset had an estimated useful life of 30 more years from the date of the review. What is the amount of amortization for this intangible in 2019?

Accepted Answer

The total life, per revised facts, is 40

Question 20

All intangible assets with economic values are recognized on a company's balance sheet.

Accepted Answer

A) True 
 B)False

Depreciation is the systematic and rational allocation of the cost of a finite-life intangible asset to expense.

Firms capitalize interest costs from the time of the initial expenditure until the asset is actually put into service.

The fixed asset turnover ratio is computed as average net fixed assets divided by total revenues.

A franchise grants a franchisor the right to conduct business under the name of the franchisee.

Which of the following intangible assets is not subject to amortization?

Capitalization is the process of recording an expenditure as an asset.

Which of the following is not a characteristic of intangible assets?

Both U.S. GAAP and IFRS require disclosure of the gross value of goodwill and related accumulated amortization.

Intangible assets are assets without physical substance or economic value.

A firm does not recognize internally generated intangible assets because their value cannot be measured reliably.

Briefly describe the accounting for the acquisition and use of equipment and indicate which accounts are involved in accounting for equipment and what types of accounts are these?

Average remaining life of a company's long-term operating assets is computed as ________.

Following U.S. GAAP, which of the following costs should be capitalized in the year incurred?

If an exchange lacks commercial substance and no cash is received, any gain must be deferred by adjusting the carrying value of the new asset. However, any loss must be recognized immediately.

All intangible assets with economic values are recognized on a company's balance sheet.

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

Filters

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

Depreciation is the systematic and rational allocation of the cost of a finite-life intangible asset to expense.

Firms capitalize interest costs from the time of the initial expenditure until the asset is actually put into service.

The fixed asset turnover ratio is computed as average net fixed assets divided by total revenues.

A franchise grants a franchisor the right to conduct business under the name of the franchisee.

Which of the following intangible assets is not subject to amortization?

Capitalization is the process of recording an expenditure as an asset.

Which of the following is not a characteristic of intangible assets?

Both U.S. GAAP and IFRS require disclosure of the gross value of goodwill and related accumulated amortization.

Intangible assets are assets without physical substance or economic value.

A firm does not recognize internally generated intangible assets because their value cannot be measured reliably.

Briefly describe the accounting for the acquisition and use of equipment and indicate which accounts are involved in accounting for equipment and what types of accounts are these?

Average remaining life of a company's long-term operating assets is computed as ________.

Following U.S. GAAP, which of the following costs should be capitalized in the year incurred?

If an exchange lacks commercial substance and no cash is received, any gain must be deferred by adjusting the carrying value of the new asset. However, any loss must be recognized immediately.

All intangible assets with economic values are recognized on a company's balance sheet.

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

Filters