Question 1

Depreciation is normally computed on the basis of the nearest

Accepted Answer

A) full month and to the nearest cent. 
B) full month and to the nearest dollar. 
C) day and to the nearest cent. 
D) day and to the nearest dollar. 
A) full month and to the nearest cent. 
B) full month and to the nearest dollar. 
C) day and to the nearest cent. 
D) day and to the nearest dollar. B

Question 2

A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis.Assuming linear relationships, how would the graphs for straight-line and sum-of-the-years'-digits depreciation, respectively, be drawn?

Accepted Answer

A) Vertically and sloping down to the right 
B) Vertically and sloping up to the right 
C) Horizontally and sloping down to the right 
D) Horizontally and sloping up to the right 
A) Vertically and sloping down to the right 
B) Vertically and sloping up to the right 
C) Horizontally and sloping down to the right 
D) Horizontally and sloping up to the right C

Question 3

Dillman Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $175,000.The machinery has a fair value of $140,000.Dillman should recognize a loss on impairment of

Accepted Answer

A) $ -0-. 
B) $15,000. 
C) $50,000. 
D) $35,000. 
A) $ -0-. 
B) $15,000. 
C) $50,000. 
D) $35,000. C

Question 4

A depreciable asset has an estimated 15% salvage value.At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods? $\begin{array}{lll}&\text { Straight-line } & \text { Productive Output }\
\text { a. } & \text { Yes } & \text { No } \
\text { b. } & \text { Yes } & \text { Yes } \
\text { c. } & \text { No } & \text { Yes } \
\text { d. } & \text { No }& \text { No }
\end{array}$

Accepted Answer

The answer of A depreciable asset has an estimated 15%...

Question 5

Weston Company purchased a tooling machine on January 3, 2000 for $500,000.The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with no salvage value.At the beginning of 2007, the company paid $125,000 to overhaul the machine.As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years (15 years total).What should be the depreciation expense recorded for the machine in 2007?

Accepted Answer

A) $34,375 
B) $41,667 
C) $50,000 
D) $55,000 
A) $34,375 
B) $41,667 
C) $50,000 
D) $55,000

Question 6

Depreciation accounting

Accepted Answer

A) provides funds. 
B) funds replacements. 
C) retains funds. 
D) all of these. 
A) provides funds. 
B) funds replacements. 
C) retains funds. 
D) all of these.

Question 7

On September 19, 2006, Rosen Co.purchased machinery for $190,000.Salvage value was estimated to be $10,000.The machinery will be depreciated over eight years using the sum-of-the-years'-digits method.If depreciation is computed on the basis of the nearest full month, Rosen should record depreciation expense for 2007 on this machinery of

Accepted Answer

A) $40,903. 
B) $38,845. 
C) $38,750. 
D) $35,000. 
A) $40,903. 
B) $38,845. 
C) $38,750. 
D) $35,000.

Question 8

The asset turnover ratio is computed by dividing

Accepted Answer

A) net income by ending total assets. 
B) net income by average total assets. 
C) net sales by ending total assets. 
D) net sales by average total assets. 
A) net income by ending total assets. 
B) net income by average total assets. 
C) net sales by ending total assets. 
D) net sales by average total assets.

Question 9

Gains or losses on disposals of assets do not distort periodic income when the group or composite method is used to compute depreciation.

Accepted Answer

A) True 
 B)False

Question 10

Sloane, Inc.purchased equipment in 2005 at a cost of $600,000.Two years later it became apparent to Sloane, Inc.that this equipment had suffered an impairment of value.In early 2007, the book value of the asset is $360,000 and it is estimated that the fair value is now only $240,000.The entry to record the impairment is $\begin{array} { l  }
 \text {a. No entry is necessary as a write-off violates the historical cost principle. }\
 \text {b. Retained Earnings }&120,000\
 \text {Accumulated Depreciation-Equipment }&&120,000\
 \text { c. Loss on Impairment of Equipment }&120,000\
 \text {Accumulated Depreciation-Equipment }&&120,000\
 \text {d. Retained Earnings }&120,000\
 \text { Reserve for Loss on Impairment of Equipment.. }&&120,000\
\end{array}$

Accepted Answer

The answer of Sloane, Inc.purchased equipment in 2005 at a...

Question 11

The following is true of depreciation accounting.

Accepted Answer

A) It is not a matter of valuation. 
B) It is part of the matching of revenues and expenses. 
C) It retains funds by reducing income taxes and dividends. 
D) All of these. 
A) It is not a matter of valuation. 
B) It is part of the matching of revenues and expenses. 
C) It retains funds by reducing income taxes and dividends. 
D) All of these.

Question 12

Dividends representing a return of capital to stockholders are not uncommon among companies which

Accepted Answer

A) use accelerated depreciation methods. 
B) use straight-line depreciation methods. 
C) recognize both functional and physical factors in depreciation. 
D) none of these. 
A) use accelerated depreciation methods. 
B) use straight-line depreciation methods. 
C) recognize both functional and physical factors in depreciation. 
D) none of these.

Question 13

Tolan Resources Company acquired a tract of land containing an extractable natural resource.Tolan is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource.Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration.Relevant cost information follows: $\begin{array}{lr}
\text { Land } & \$ 9,000,000 \
\text { Estimated restoration costs } & 1,800,000
\end{array}$ If Tolan maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

Accepted Answer

A) $3.90 
B) $4.50 
C) $4.80 
D) $5.40 
A) $3.90 
B) $4.50 
C) $4.80 
D) $5.40

Question 14

A principal objection to the straight-line method of depreciation is that it

Accepted Answer

A) provides for the declining productivity of an aging asset. 
B) ignores variations in the rate of asset use. 
C) tends to result in a constant rate of return on a diminishing investment base. 
D) gives smaller periodic write-offs than decreasing charge methods. 
A) provides for the declining productivity of an aging asset. 
B) ignores variations in the rate of asset use. 
C) tends to result in a constant rate of return on a diminishing investment base. 
D) gives smaller periodic write-offs than decreasing charge methods.

Question 15

Lennon Company purchased a depreciable asset for $200,000.The estimated salvage value is $10,000, and the estimated useful life is 10,000 hours.Lennon used the asset for 1,100 hours in the current year.The activity method will be used for depreciation.What is the depreciation expense on this asset?

Accepted Answer

A) $19,000 
B) $20,900 
C) $22,000 
D) $190,000 
A) $19,000 
B) $20,900 
C) $22,000 
D) $190,000

Question 16

Inadequacy is the replacement of one asset with another more efficient and economical asset.

Accepted Answer

A) True 
 B)False

Question 17

On January 2, 2005, Payne Company acquired equipment to be used in its manufacturing operations.The equipment has an estimated useful life of 10 years and an estimated salvage value of $15,000.The depreciation applicable to this equipment was $70,000 for 2008, computed under the sum-of-the-years'-digits method.What was the acquisition cost of the equipment?

Accepted Answer

A) $535,000 
B) $565,000 
C) $550,000 
D) $541,667 
A) $535,000 
B) $565,000 
C) $550,000 
D) $541,667

Question 18

Peppers Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $200,000.The machinery has a fair value of $140,000.Peppers should recognize a loss on impairment of

Accepted Answer

A) $ -0-. 
B) $10,000. 
C) $50,000. 
D) $60,000. 
A) $ -0-. 
B) $10,000. 
C) $50,000. 
D) $60,000.

Question 19

For the composite method, the composite

Accepted Answer

A) rate is the total cost divided by the total annual depreciation. 
B) rate is the total annual depreciation divided by the total depreciable cost. 
C) life is the total cost divided by the total annual depreciation. 
D) life is the total depreciable cost divided by the total annual depreciation. 
A) rate is the total cost divided by the total annual depreciation. 
B) rate is the total annual depreciation divided by the total depreciable cost. 
C) life is the total cost divided by the total annual depreciation. 
D) life is the total depreciable cost divided by the total annual depreciation.

Question 20

On January 1, 2007, the Accumulated Depreciation-Machinery account of a particular company showed a balance of $370,000.At the end of 2007, after the adjusting entries were posted, it showed a balance of $395,000.During 2007, one of the machines which cost $125,000 was sold for $60,500 cash.This resulted in a loss of $4,000.Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2007?

Accepted Answer

A) $85,500 
B) $93,500 
C) $25,000 
D) $60,500 
A) $85,500 
B) $93,500 
C) $25,000 
D) $60,500

Depreciation is normally computed on the basis of the nearest

A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis.Assuming linear relationships, how would the graphs for straight-line and sum-of-the-years'-digits depreciation, respectively, be drawn?

Dillman Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $175,000.The machinery has a fair value of $140,000.Dillman should recognize a loss on impairment of

A depreciable asset has an estimated 15% salvage value.At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods? Straight-line Productive Output a. Yes No b. Yes Yes c. No Yes d. No No

Depreciation accounting

The asset turnover ratio is computed by dividing

Gains or losses on disposals of assets do not distort periodic income when the group or composite method is used to compute depreciation.

The following is true of depreciation accounting.

Dividends representing a return of capital to stockholders are not uncommon among companies which

A principal objection to the straight-line method of depreciation is that it

Lennon Company purchased a depreciable asset for $200,000.The estimated salvage value is $10,000, and the estimated useful life is 10,000 hours.Lennon used the asset for 1,100 hours in the current year.The activity method will be used for depreciation.What is the depreciation expense on this asset?

Inadequacy is the replacement of one asset with another more efficient and economical asset.

Peppers Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $200,000.The machinery has a fair value of $140,000.Peppers should recognize a loss on impairment of

For the composite method, the composite

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Intangible Assets

Current Liabilities and Contingencies

Filters

Exam 11: Depreciation, Impairments, and Depletion

Depreciation is normally computed on the basis of the nearest

A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis.Assuming linear relationships, how would the graphs for straight-line and sum-of-the-years'-digits depreciation, respectively, be drawn?

Dillman Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $175,000.The machinery has a fair value of $140,000.Dillman should recognize a loss on impairment of

A depreciable asset has an estimated 15% salvage value.At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods? Straight-line Productive Output a. Yes No b. Yes Yes c. No Yes d. No No

Depreciation accounting

The asset turnover ratio is computed by dividing

Gains or losses on disposals of assets do not distort periodic income when the group or composite method is used to compute depreciation.

The following is true of depreciation accounting.

Dividends representing a return of capital to stockholders are not uncommon among companies which

A principal objection to the straight-line method of depreciation is that it

Lennon Company purchased a depreciable asset for $200,000.The estimated salvage value is $10,000, and the estimated useful life is 10,000 hours.Lennon used the asset for 1,100 hours in the current year.The activity method will be used for depreciation.What is the depreciation expense on this asset?

Inadequacy is the replacement of one asset with another more efficient and economical asset.

Peppers Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $200,000.The machinery has a fair value of $140,000.Peppers should recognize a loss on impairment of

For the composite method, the composite

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Intangible Assets

Current Liabilities and Contingencies

Filters