Question 1

Dividends representing a return of capital to shareholders 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 answer choices are correct. 
A)  use accelerated depreciation methods. 
B)  use straight-line depreciation methods. 
C)  recognize both functional and physical factors in depreciation. 
D)  None of these answer choices are correct. D

Question 2

The asset turnover 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. D

Question 3

All of the following are true of the recoverable amount used in the impairment test of a long-lived asset except:

Accepted Answer

A)  An asset's recoverable amount is the lower of its value-in-use and its fair value less cost to sell. 
B)  An asset's recoverable amount is the higher of its fair value less cost to sell and its value-in-use. 
C)  The recoverable amount is calculated as the asset's value in use less costs to sell. 
D)  If an asset's recoverable amount is higher than the carrying amount, no impairment loss will be reported on the period's income statement. 
A)  An asset's recoverable amount is the lower of its value-in-use and its fair value less cost to sell. 
B)  An asset's recoverable amount is the higher of its fair value less cost to sell and its value-in-use. 
C)  The recoverable amount is calculated as the asset's value in use less costs to sell. 
D)  If an asset's recoverable amount is higher than the carrying amount, no impairment loss will be reported on the period's income statement. A

Question 4

Revaluation surplus is a temporary account which is closed to Retained Earnings at the end of an accounting period.

Accepted Answer

A) True 
 B)False

Question 5

Unrealized gains from revaluations do not increase net income but are instead reported as components of other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 6

A recovery of impairment for a tangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred.

Accepted Answer

A) True 
 B)False

Question 7

The asset turnover is computed by dividing net sales by ending total assets.

Accepted Answer

A) True 
 B)False

Question 8

Lynch Printing Company determines that a printing press used in its operations has suffered an impairment in value because of technological changes. An entry to record the impairment should

Accepted Answer

A)  recognize extra depreciation expense for the period. 
B)  include a credit to the equipment accumulated depreciation account. 
C)  include a credit to the equipment account. 
D)  not be made if the equipment is still being used. 
A)  recognize extra depreciation expense for the period. 
B)  include a credit to the equipment accumulated depreciation account. 
C)  include a credit to the equipment account. 
D)  not be made if the equipment is still being used.

Question 9

The return on total assets is computed by dividing

Accepted Answer

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

Question 10

Depreciation is based on the decline in the fair value of the asset.

Accepted Answer

A) True 
 B)False

Question 11

The Accumulated Other Comprehensive Income account related to revaluations cannot have a negative balance.

Accepted Answer

A) True 
 B)False

Question 12

IFRS and U.S. GAAP differ with regard to accounting for impairment on property, plant and equipment in all of the following ways except

Accepted Answer

A)  U.S. GAAP requires the recoverability test to determine whether impairment has occurred but IFRS does not. 
B)  Under IFRS, impairment testing is performed at each reporting date. Under U.S. GAAP impairment testing is done only when management has reason to believe that the asset may be impaired. 
C)  IFRS but not U.S. GAAP, allows for recovery of impairment in assets held for use. 
D)  U.S. GAAP requires assets held for sale or disposal to be reported at the lower-of-cost or net realizable value. IFRS requires that these assets be reported at the higher of fair value less cost to sell and value-in-use. 
A)  U.S. GAAP requires the recoverability test to determine whether impairment has occurred but IFRS does not. 
B)  Under IFRS, impairment testing is performed at each reporting date. Under U.S. GAAP impairment testing is done only when management has reason to believe that the asset may be impaired. 
C)  IFRS but not U.S. GAAP, allows for recovery of impairment in assets held for use. 
D)  U.S. GAAP requires assets held for sale or disposal to be reported at the lower-of-cost or net realizable value. IFRS requires that these assets be reported at the higher of fair value less cost to sell and value-in-use.

Question 13

The profit margin on sales is a measure for analyzing the use of property, plant, and equipment.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

All of the following are true with regard to impairment testing of long-lived assets except:

Accepted Answer

A)  If impairment indicators are present, the company must conduct an impairment test. 
B)  The impairment test compares the asset's carrying value with the lower of its fair value less cost to sell and its value-in-use. 
C)  If the recoverable amount is lower than the carrying value, an impairment loss will be reported on the period's income statement. 
D)  If either the fair value less cost to sell or the value-in-use is higher than the carrying amount, no impairment loss will be recorded. 
A)  If impairment indicators are present, the company must conduct an impairment test. 
B)  The impairment test compares the asset's carrying value with the lower of its fair value less cost to sell and its value-in-use. 
C)  If the recoverable amount is lower than the carrying value, an impairment loss will be reported on the period's income statement. 
D)  If either the fair value less cost to sell or the value-in-use is higher than the carrying amount, no impairment loss will be recorded.

Question 16

Use of the sum-of-the-years'-digits method

Accepted Answer

A)  results in residual value being ignored. 
B)  means the denominator is the years remaining at the beginning of the year. 
C)  means the book value should not be reduced below residual value. 
D)  All of these answer choices are correct. 
A)  results in residual value being ignored. 
B)  means the denominator is the years remaining at the beginning of the year. 
C)  means the book value should not be reduced below residual value. 
D)  All of these answer choices are correct.

Question 17

Depreciation is a means of cost allocation, not a matter of valuation.

Accepted Answer

A) True 
 B)False

Question 18

Use of the double-declining balance method

Accepted Answer

A)  results in a decreasing charge to depreciation expense. 
B)  means residual value is not deducted in computing the depreciation base. 
C)  means the book value should not be reduced below residual value. 
D)  All of these answer choices are correct. 
A)  results in a decreasing charge to depreciation expense. 
B)  means residual value is not deducted in computing the depreciation base. 
C)  means the book value should not be reduced below residual value. 
D)  All of these answer choices are correct.

Question 19

Component depreciation must be calculated using the straight-line method.

Accepted Answer

A) True 
 B)False

Question 20

Assets held for disposal should be reported at the lower of cost or net realizable value.

Accepted Answer

A) True 
 B)False

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

The asset turnover is computed by dividing

All of the following are true of the recoverable amount used in the impairment test of a long-lived asset except:

Revaluation surplus is a temporary account which is closed to Retained Earnings at the end of an accounting period.

Unrealized gains from revaluations do not increase net income but are instead reported as components of other comprehensive income.

A recovery of impairment for a tangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred.

The asset turnover is computed by dividing net sales by ending total assets.

Lynch Printing Company determines that a printing press used in its operations has suffered an impairment in value because of technological changes. An entry to record the impairment should

The return on total assets is computed by dividing

Depreciation is based on the decline in the fair value of the asset.

The Accumulated Other Comprehensive Income account related to revaluations cannot have a negative balance.

IFRS and U.S. GAAP differ with regard to accounting for impairment on property, plant and equipment in all of the following ways except

The profit margin on sales is a measure for analyzing the use of property, plant, and equipment.

Depreciation is normally computed on the basis of the nearest

All of the following are true with regard to impairment testing of long-lived assets except:

Use of the sum-of-the-years'-digits method

Depreciation is a means of cost allocation, not a matter of valuation.

Use of the double-declining balance method

Component depreciation must be calculated using the straight-line method.

Assets held for disposal should be reported at the lower of cost or net realizable value.

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position 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

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Exam 11: Depreciation, Impairments, and Depletion

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

The asset turnover is computed by dividing

All of the following are true of the recoverable amount used in the impairment test of a long-lived asset except:

Revaluation surplus is a temporary account which is closed to Retained Earnings at the end of an accounting period.

Unrealized gains from revaluations do not increase net income but are instead reported as components of other comprehensive income.

A recovery of impairment for a tangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred.

The asset turnover is computed by dividing net sales by ending total assets.

Lynch Printing Company determines that a printing press used in its operations has suffered an impairment in value because of technological changes. An entry to record the impairment should

The return on total assets is computed by dividing

Depreciation is based on the decline in the fair value of the asset.

The Accumulated Other Comprehensive Income account related to revaluations cannot have a negative balance.

IFRS and U.S. GAAP differ with regard to accounting for impairment on property, plant and equipment in all of the following ways except

The profit margin on sales is a measure for analyzing the use of property, plant, and equipment.

Depreciation is normally computed on the basis of the nearest

All of the following are true with regard to impairment testing of long-lived assets except:

Use of the sum-of-the-years'-digits method

Depreciation is a means of cost allocation, not a matter of valuation.

Use of the double-declining balance method

Component depreciation must be calculated using the straight-line method.

Assets held for disposal should be reported at the lower of cost or net realizable value.

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position 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

Filters