Question 1

Reserve recognition accounting

Accepted Answer

A)  is presently the generally accepted accounting method for financial reporting of oil and gas reserves. 
B)  is a historical cost method similar to the full cost approach and the successful efforts approach. 
C)  is used for reporting of oil and gas reserves for federal income tax purposes. 
D)  requires estimates of future production costs, the appropriate discount rate, and the expected selling price of oil and gas reserves. 
A)  is presently the generally accepted accounting method for financial reporting of oil and gas reserves. 
B)  is a historical cost method similar to the full cost approach and the successful efforts approach. 
C)  is used for reporting of oil and gas reserves for federal income tax purposes. 
D)  requires estimates of future production costs, the appropriate discount rate, and the expected selling price of oil and gas reserves.

Question 2

Rock Company purchased a depreciable asset for $500,000 on April 1, 2012. The estimated salvage value is $50,000, and the estimated total useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2015 when the asset is sold?

Accepted Answer

A)  $196,667 
B)  $210,000 
C)  $247,500 
D)  $277,500 
A)  $196,667 
B)  $210,000 
C)  $247,500 
D)  $277,500

Question 3

In 2006, Jarrett Company purchased a tract of land as a possible future plant site. In January, 2014, valuable sulphur deposits were discovered on adjoining property and Jarrett Company immediately began explorations on its property. In December, 2014, after incurring $800,000 in exploration costs, which were accumulated in an expense account, Jarrett discovered sulphur deposits appraised at $4,500,000 more than the value of the land. To record the discovery of the deposits, Jarrett should

Accepted Answer

A)  make no entry. 
B)  debit $800,000 to an asset account. 
C)  debit $4,500,000 to an asset account. 
D)  debit $5,300,000 to an asset account. 
A)  make no entry. 
B)  debit $800,000 to an asset account. 
C)  debit $4,500,000 to an asset account. 
D)  debit $5,300,000 to an asset account.

Question 4

Torque Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

Accepted Answer

A)  No impairment should be reported. 
B)  $240,000 
C)  $30,000 
D)  $270,000 
A)  No impairment should be reported. 
B)  $240,000 
C)  $30,000 
D)  $270,000

Question 5

Piazza Co. purchased a machine on July 1, 2014, for $800,000. The machine has an estimated useful life of five years and a salvage value of $160,000. The machine is being depreciated from the date of acquisition by the 150% declining-balance method. For the year ended December 31, 2014, Piazza should record depreciation expense on this machine of

Accepted Answer

A)  $240,000. 
B)  $160,000. 
C)  $120,000. 
D)  $96,000. 
A)  $240,000. 
B)  $160,000. 
C)  $120,000. 
D)  $96,000.

Question 6

A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2013. The depreciation expense for 2015 using the double-declining balance method would be original cost multiplied by

Accepted Answer

A)  90% × 40% × 40%. 
B)  60% × 60% × 40%. 
C)  90% × 60% × 40%. 
D)  40% × 40%. 
A)  90% × 40% × 40%. 
B)  60% × 60% × 40%. 
C)  90% × 60% × 40%. 
D)  40% × 40%.

Question 7

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Adjustment of Depreciable Base.A truck was acquired on July 1, 2012, at a cost of $162,000. The truck had a six-year useful life and an estimated salvage value of $18,000. The straight-line method of depreciation was used. On January 1, 2015, the truck was overhauled at a cost of $15,000, which extended the useful life of the truck for an additional two years beyond that originally estimated (salvage value is still estimated at $18,000). In computing depreciation for annual adjustment purposes, expense is calculated for each month the asset is owned.
InstructionsPrepare the appropriate entries for January 1, 2015 and December 31, 2015.

Accepted Answer

The answer of Adjustment of Depreciable Base.A truck was acquired...

Question 10

Of the following costs related to the develop?ment of natural resources, which one is not a part of depletion cost?

Accepted Answer

A)  Acquisition cost of the natural resource deposit 
B)  Exploration costs 
C)  Tangible equipment costs associated with machinery used to extract the natural resource 
D)  Intangible development costs such as drilling costs, tunnels, and shafts 
A)  Acquisition cost of the natural resource deposit 
B)  Exploration costs 
C)  Tangible equipment costs associated with machinery used to extract the natural resource 
D)  Intangible development costs such as drilling costs, tunnels, and shafts

Question 11

In general, IFRS adheres to very different principles than U.S. GAAP.

Accepted Answer

A) True 
 B)False

Question 12

In January 2014, Fritz Mining Corporation purchased a mineral mine for $6,300,000 with removable ore estimated by geological surveys at 2,500,000 tons. The property has an estimated value of $600,000 after the ore has been extracted. Fritz incurred $1,725,000 of development costs preparing the property for the extraction of ore. During 2014, 390,000 tons were removed and 350,000 tons were sold. For the year ended December 31, 2014, Fritz should include what amount of depletion in its cost of goods sold?

Accepted Answer

A)  $798,000 
B)  $889,200 
C)  $1,039,500 
D)  $1,158,000 
A)  $798,000 
B)  $889,200 
C)  $1,039,500 
D)  $1,158,000

Question 13

Frank Company reported the following data:   What is Frank's asset turnover for 2015?

Accepted Answer

A)  1.68 
B)  1.72 
C)  1.95 
D)  2.33 
A)  1.68 
B)  1.72 
C)  1.95 
D)  2.33

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

Under MACRS, which one of the following is not considered in determining depreciation for tax purposes?

Accepted Answer

A)  Cost of asset 
B)  Property recovery class 
C)  Half-year convention 
D)  Salvage value 
A)  Cost of asset 
B)  Property recovery class 
C)  Half-year convention 
D)  Salvage value

Question 16

King Corporation owns machinery with a book value of $380,000. It is estimated that the machinery will generate future cash flows of $350,000. The machinery has a fair value of $280,000. King should recognize a loss on impairment of

Accepted Answer

A)  $ -0-. 
B)  $ 30,000. 
C)  $100,000. 
D)  $ 70,000. 
A)  $ -0-. 
B)  $ 30,000. 
C)  $100,000. 
D)  $ 70,000.

Question 17

Hart Corporation owns machinery with a book value of $285,000. It is estimated that the machinery will generate future cash flows of $300,000. The machinery has a fair value of $210,000. Hart should recognize a loss on impairment of

Accepted Answer

A)  $ -0-. 
B)  $15,000. 
C)  $75,000. 
D)  $90,000. 
A)  $ -0-. 
B)  $15,000. 
C)  $75,000. 
D)  $90,000.

Question 18

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

Accepted Answer

A)  Associating cause and effect 
B)  Systematic and rational allocation 
C)  Immediate recognition 
D)  Partial recognition 
A)  Associating cause and effect 
B)  Systematic and rational allocation 
C)  Immediate recognition 
D)  Partial recognition

Question 19

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2015?

Accepted Answer

A)  $23,490 
B)  $6,000 
C)  $21,750 
D)  $37,500 
A)  $23,490 
B)  $6,000 
C)  $21,750 
D)  $37,500

Question 20

When depreciation is computed for partial periods under a decreasing charge depreciation method, it is necessary to

Accepted Answer

A)  charge a full year's depreciation to the year of acquisition. 
B)  determine depreciation expense for the full year and then prorate the expense between the two periods involved. 
C)  use the straight-line method for the year in which the asset is sold or otherwise disposed of. 
D)  use a salvage value equal to the first year's partial depreciation charge. 
A)  charge a full year's depreciation to the year of acquisition. 
B)  determine depreciation expense for the full year and then prorate the expense between the two periods involved. 
C)  use the straight-line method for the year in which the asset is sold or otherwise disposed of. 
D)  use a salvage value equal to the first year's partial depreciation charge.

Reserve recognition accounting

Rock Company purchased a depreciable asset for $500,000 on April 1, 2012. The estimated salvage value is $50,000, and the estimated total useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2015 when the asset is sold?

A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2013. The depreciation expense for 2015 using the double-declining balance method would be original cost multiplied by

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

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

Of the following costs related to the develop?ment of natural resources, which one is not a part of depletion cost?

In general, IFRS adheres to very different principles than U.S. GAAP.

Frank Company reported the following data: What is Frank's asset turnover for 2015?

Depreciation is normally computed on the basis of the nearest

Under MACRS, which one of the following is not considered in determining depreciation for tax purposes?

King Corporation owns machinery with a book value of $380,000. It is estimated that the machinery will generate future cash flows of $350,000. The machinery has a fair value of $280,000. King should recognize a loss on impairment of

Hart Corporation owns machinery with a book value of $285,000. It is estimated that the machinery will generate future cash flows of $300,000. The machinery has a fair value of $210,000. Hart should recognize a loss on impairment of

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2015?

When depreciation is computed for partial periods under a decreasing charge depreciation method, it is necessary to

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters

Exam 11: Depreciation, Impairments, and Depletion

Reserve recognition accounting

Rock Company purchased a depreciable asset for $500,000 on April 1, 2012. The estimated salvage value is $50,000, and the estimated total useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2015 when the asset is sold?

A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2013. The depreciation expense for 2015 using the double-declining balance method would be original cost multiplied by

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

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

Of the following costs related to the develop?ment of natural resources, which one is not a part of depletion cost?

In general, IFRS adheres to very different principles than U.S. GAAP.

Frank Company reported the following data: What is Frank's asset turnover for 2015?

Depreciation is normally computed on the basis of the nearest

Under MACRS, which one of the following is not considered in determining depreciation for tax purposes?

King Corporation owns machinery with a book value of $380,000. It is estimated that the machinery will generate future cash flows of $350,000. The machinery has a fair value of $280,000. King should recognize a loss on impairment of

Hart Corporation owns machinery with a book value of $285,000. It is estimated that the machinery will generate future cash flows of $300,000. The machinery has a fair value of $210,000. Hart should recognize a loss on impairment of

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2015?

When depreciation is computed for partial periods under a decreasing charge depreciation method, it is necessary to

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters