Question 1

Match the terms with the definitions.
-Long-term assets that have no physical substance.

Accepted Answer

A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method 
A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method

Question 2

Which of the following is an example of a wasting asset?

Accepted Answer

A)  timber 
B)  land 
C)  equipment 
D)  building 
A)  timber 
B)  land 
C)  equipment 
D)  building

Question 3

Under the accrual basis of accounting, net income is determined by matching the revenues earned during a period with the expenses incurred as a result of the efforts made to produce the revenue.

Accepted Answer

A) True 
 B)False

Question 4

Some improvements extend the useful life of an asset but do not increase its usefulness or efficiency.

Accepted Answer

A) True 
 B)False

Question 5

Use the following data: $$\begin{array} { l r } 
\text { Asset cost } & \$ 120,000 \
\text { Expected life } & 3 \text { years } \
\text { Estimated salvage value } & \$ 15,000
\end{array}$$ ? Using the straight-line method, the amount of depreciation each year would be

Accepted Answer

A)  $35,000. 
B)  $40,000. 
C)  $45,000. 
D)  $15,000. 
A)  $35,000. 
B)  $40,000. 
C)  $45,000. 
D)  $15,000.

Question 6

Salvage value is not considered directly in the determination of the deprecation amount with the

Accepted Answer

A)  straight-line method. 
B)  declining-balance method. 
C)  sum-of-the-years'-digit method. 
D)  units-of-production method. 
A)  straight-line method. 
B)  declining-balance method. 
C)  sum-of-the-years'-digit method. 
D)  units-of-production method.

Question 7

A company purchased a van at a cost of $42,000 and expects it can be sold for $6,000 after 120,000 miles of service. Assuming the units-of-production method is used and the van is driven for 24,000 miles during the first year, the depreciation at the end of the first year would be

Accepted Answer

A)  $4,200. 
B)  $1,200. 
C)  $7,200. 
D)  $12,000. 
A)  $4,200. 
B)  $1,200. 
C)  $7,200. 
D)  $12,000.

Question 8

A plant asset is fully depreciated when the book value is

Accepted Answer

A)  equal to the market value. 
B)  equal to the salvage value. 
C)  greater than the market value. 
D)  greater than the salvage value. 
A)  equal to the market value. 
B)  equal to the salvage value. 
C)  greater than the market value. 
D)  greater than the salvage value.

Question 9

The difference between the cost of an asset and its accumulated depreciation is its book value.

Accepted Answer

A) True 
 B)False

Question 10

If money is borrowed for the purpose of constructing a building or other facility, the interest incurred during the period of construction should be added to the cost of such building or facility.

Accepted Answer

A) True 
 B)False

Question 11

A business is not allowed to deduct depreciation expenses in calculating taxable income.

Accepted Answer

A) True 
 B)False

Question 12

A copyright is a federal grant of the exclusive right to the reproduction and sale of a literary, artistic, or musical composition for life plus 70 years after the death of the holder.

Accepted Answer

A) True 
 B)False

Question 13

Match the terms with the definitions.
-A depreciation method in which depreciation is based on the extent to which the asset was used during the year.

Accepted Answer

A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method 
A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method

Question 14

The write-off of the cost of an intangible long-term asset is called depreciation.

Accepted Answer

A) True 
 B)False

Question 15

Match the terms with the definitions.
-The portion of an intangible asset's cost that is recognized as expense.

Accepted Answer

A) Accelerated Cost Recovery System (ACRS) 
B) accelerated depreciation methods 
C) amortization 
D) trademark 
E) cash equivalent price
F)long-term assets
G)copyright
H)cost
I)patent
J)depreciable cost (base)
K)depreciation
L)physical depreciation
M)tangible assets
N)sum-of-the-years'-digits method
O)salvage value
P)property, plant, and equipment 
A) Accelerated Cost Recovery System (ACRS) 
B) accelerated depreciation methods 
C) amortization 
D) trademark 
E) cash equivalent price
F)long-term assets
G)copyright
H)cost
I)patent
J)depreciable cost (base)
K)depreciation
L)physical depreciation
M)tangible assets
N)sum-of-the-years'-digits method
O)salvage value
P)property, plant, and equipment

Question 16

Match the terms with the definitions.
-A method of depreciation used for federal income tax purposes for plant assets acquired after 1986.

Accepted Answer

A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method 
A) Accelerated Cost Recovery System (ACRS) 
B) intangible assets 
C) Modified Accelerated Cost Recovery System (MACRS) 
D) book value 
E) cash equivalent price
F)conservatism
G)straight-line method
H)tangible assets
I)depletion
J)depreciable cost (base)
K)trade-in allowance (trade value)
L)double-declining-balance method
M)functional depreciation
N)units-of-production method

Question 17

A printer that cost $600 and has been owned for 2 years is traded in for a new one. Depreciation in the amount of $120 had been taken each year. The new printer has a fair market value of $1,250. A trade-in allowance of $400 is granted, and the balance is paid in cash. The transaction to enter the exchanges of these two assets would result in the recognition of

Accepted Answer

A)  a gain of $40. 
B)  a loss of $40. 
C)  a gain of $200. 
D)  neither a gain nor a loss. 
A)  a gain of $40. 
B)  a loss of $40. 
C)  a gain of $200. 
D)  neither a gain nor a loss.

Question 18

Furniture and equipment are examples of tangible assets.

Accepted Answer

A) True 
 B)False

Question 19

All additions and some improvements increase the usefulness of buildings or equipment and will provide benefits in future periods.

Accepted Answer

A) True 
 B)False

Question 20

Transactions involving the purchase of long-term assets are entered by crediting the proper asset account and debiting the cash account or proper liability account.

Accepted Answer

A) True 
 B)False

Exam 18: Accounting for Long-Term Assets

Match the terms with the definitions. -Long-term assets that have no physical substance.

Which of the following is an example of a wasting asset?

Under the accrual basis of accounting, net income is determined by matching the revenues earned during a period with the expenses incurred as a result of the efforts made to produce the revenue.

Some improvements extend the useful life of an asset but do not increase its usefulness or efficiency.

Use the following data: Asset cost \ 120,000 Expected life 3 years Estimated salvage value \ 15,000 ? Using the straight-line method, the amount of depreciation each year would be

Salvage value is not considered directly in the determination of the deprecation amount with the

A company purchased a van at a cost of $42,000 and expects it can be sold for $6,000 after 120,000 miles of service. Assuming the units-of-production method is used and the van is driven for 24,000 miles during the first year, the depreciation at the end of the first year would be

A plant asset is fully depreciated when the book value is

The difference between the cost of an asset and its accumulated depreciation is its book value.

If money is borrowed for the purpose of constructing a building or other facility, the interest incurred during the period of construction should be added to the cost of such building or facility.

A business is not allowed to deduct depreciation expenses in calculating taxable income.

A copyright is a federal grant of the exclusive right to the reproduction and sale of a literary, artistic, or musical composition for life plus 70 years after the death of the holder.

Match the terms with the definitions. -A depreciation method in which depreciation is based on the extent to which the asset was used during the year.

The write-off of the cost of an intangible long-term asset is called depreciation.

Match the terms with the definitions. -The portion of an intangible asset's cost that is recognized as expense.

Match the terms with the definitions. -A method of depreciation used for federal income tax purposes for plant assets acquired after 1986.

Furniture and equipment are examples of tangible assets.

All additions and some improvements increase the usefulness of buildings or equipment and will provide benefits in future periods.

Transactions involving the purchase of long-term assets are entered by crediting the proper asset account and debiting the cash account or proper liability account.

Introduction to Accounting

Analyzing Transactions: the Accounting Equation

The Double-Entry Framework

Journalizing and Posting Transactions

Adjusting Entries and the Work Sheet

Financial Statements and the Closing Process

Accounting for Cash

Payroll Accounting: Employee Earnings and Deductions

Payroll Accounting: Employer Taxes and Reports

Accounting for Sales and Cash Receipts

Accounting for Purchases and Cash Payments

Special Journals

Accounting for Merchandise Inventory

Adjustments and the Work Sheet for a Merchandising Business

Financial Statements and Year-End Accounting for a Merchandising Business

Accounting for Accounts Receivable

Accounting for Notes and Interest

Accounting for Partnerships

Corporations: Organization and Capital Stocks

Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

Corporations: Bonds

Statement of Cash Flows

Analysis of Financial Statements

Departmental Accounting

Manufacturing Accounting: The Job Order Cost System

Manufacturing Accounting: The Work Sheet and Financial Statements

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