Question 1

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

Accepted Answer

A) True 
 B)False

Question 2

The cost of a patent should be amortized :

Accepted Answer

A)  over 10 years. 
B)  over its economic life. 
C)  over 20 years or its economic life, whichever is shorter. 
D)  only if an impairment occurs. 
A)  over 10 years. 
B)  over its economic life. 
C)  over 20 years or its economic life, whichever is shorter. 
D)  only if an impairment occurs.

Question 3

Which of the following is true of asset turnover?

Accepted Answer

A)  It measures the efficiency with which a company uses its operating assets to generate sales. 
B)  It measures the proportion of operating assets to total assets. 
C)  It uses net purchases as a denominator in its calculation. 
D)  It measures the profits generated by the fixed and current assets of the company. 
A)  It measures the efficiency with which a company uses its operating assets to generate sales. 
B)  It measures the proportion of operating assets to total assets. 
C)  It uses net purchases as a denominator in its calculation. 
D)  It measures the profits generated by the fixed and current assets of the company.

Question 4

Capital expenditure is reported on the:

Accepted Answer

A)  income statement under operating expenses. 
B)  balance sheet under fixed assets. 
C)  statement of retained earnings under contributed capital. 
D)  cash flow statement under cash flow from financing activities. 
A)  income statement under operating expenses. 
B)  balance sheet under fixed assets. 
C)  statement of retained earnings under contributed capital. 
D)  cash flow statement under cash flow from financing activities.

Question 5

Cook Co.incurred the following costs related to the office building used in operating its sports supply company:
(a)Replaced a broken window.
(b)Replaced the roof that had been on the building for 23 years.
(c)Serviced all the air conditioners before summer started.
(d)Replaced the air conditioners with refrigerated air conditioners in the customer service areas.
(e)Added a warehouse to the back of the building.
(f)Repainted the interior walls.
(g)Installed window shutters on all windows.
Classify each of the costs as a capital expenditure or a revenue expenditure.

Accepted Answer

(a)Revenue expenditure
(b)Capi

Question 6

A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000.Compute the annual depreciation expense using the straight-line method.

Accepted Answer

A)  $3,550 
B)  $4,150 
C)  $5,800 
D)  $2,950 
A)  $3,550 
B)  $4,150 
C)  $5,800 
D)  $2,950

Question 7

The effect of recording a capital expenditure as a revenue expenditure is that:

Accepted Answer

A)  expenses are overstated, and owners' equity is understated. 
B)  net profit is understated, and owners' equity is overstated. 
C)  expenses are understated, and accumulated depreciation is overstated.. 
D)  assets are overstated, and expenses are understated. 
A)  expenses are overstated, and owners' equity is understated. 
B)  net profit is understated, and owners' equity is overstated. 
C)  expenses are understated, and accumulated depreciation is overstated.. 
D)  assets are overstated, and expenses are understated.

Question 8

Which of the following should be included in the acquisition cost of a piece of equipment?

Accepted Answer

A)  Uninsured theft 
B)  Mistakes in installation 
C)  Vandalism 
D)  Installation costs 
A)  Uninsured theft 
B)  Mistakes in installation 
C)  Vandalism 
D)  Installation costs

Question 9

A company sold a delivery truck for $22,000 cash.The truck costs $45,800 and had accumulated depreciation of $32,000 as of the date of sale.The entry to record the sale would include:

Accepted Answer

A)  an increase in accumulated depreciation for $32,000. 
B)  a total decrease in delivery truck for $13,800. 
C)  a gain for $8,200. 
D)  a loss for $10,000. 
A)  an increase in accumulated depreciation for $32,000. 
B)  a total decrease in delivery truck for $13,800. 
C)  a gain for $8,200. 
D)  a loss for $10,000.

Question 10

The accounting term depreciation measures:

Accepted Answer

A)  the decline in an asset's market value. 
B)  the amount of cash a company sets aside for asset replacement. 
C)  the amount of asset cost allocated to expense over periods benefited. 
D)  the anticipated loss if asset is sold in the used-asset market. 
A)  the decline in an asset's market value. 
B)  the amount of cash a company sets aside for asset replacement. 
C)  the amount of asset cost allocated to expense over periods benefited. 
D)  the anticipated loss if asset is sold in the used-asset market.

Question 11

Which of the following is a characteristic of fixed assets?

Accepted Answer

A)  Fixed assets are offered for sale as part of normal operations. 
B)  Fixed assets do not exist physically. 
C)  Fixed assets are long-term or relatively permanent assets. 
D)  Fixed assets that are no longer used in operations are still classified as fixed assets. 
A)  Fixed assets are offered for sale as part of normal operations. 
B)  Fixed assets do not exist physically. 
C)  Fixed assets are long-term or relatively permanent assets. 
D)  Fixed assets that are no longer used in operations are still classified as fixed assets.

Question 12

A fully depreciated asset must be:

Accepted Answer

A)  removed from the books. 
B)  kept on the books until sold or discarded. 
C)  disclosed only in the notes to the financial statements. 
D)  recognized on the income statement as a loss. 
A)  removed from the books. 
B)  kept on the books until sold or discarded. 
C)  disclosed only in the notes to the financial statements. 
D)  recognized on the income statement as a loss.

Question 13

A gain is recorded on the sale of fixed assets when:

Accepted Answer

A)  the asset is sold for a price less than its book value. 
B)  the asset is sold for a price more than its book value. 
C)  accumulated depreciation on asset is less than its selling price. 
D)  accumulated depreciation on asset is more than its selling price. 
A)  the asset is sold for a price less than its book value. 
B)  the asset is sold for a price more than its book value. 
C)  accumulated depreciation on asset is less than its selling price. 
D)  accumulated depreciation on asset is more than its selling price.

Question 14

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

Accepted Answer

A) True 
 B)False

Question 15

The Modified Accelerated Cost Recovery System is used to:

Accepted Answer

A)  compute income for audit reporting. 
B)  compute depreciation for tax purposes. 
C)  report liabilities. 
D)  ascertain break-even point. 
A)  compute income for audit reporting. 
B)  compute depreciation for tax purposes. 
C)  report liabilities. 
D)  ascertain break-even point.

Question 16

An equipment was purchased for $15,000.It has a useful life of 5 years and a residual value of $4,000.Determine the depreciation expense for the first year using the double-declining-balance method?

Accepted Answer

A)  $5,400 
B)  $6,000 
C)  $2,200 
D)  $2,600 
A)  $5,400 
B)  $6,000 
C)  $2,200 
D)  $2,600

Question 17

An equipment was purchased for $30,000.It has a useful life of 5 years, and a residual value of $4,000.Compute the depreciation expense for the second year using the double-declining-balance method.

Accepted Answer

A)  $5,200 
B)  $6,000 
C)  $6,240 
D)  $7,200 
A)  $5,200 
B)  $6,000 
C)  $6,240 
D)  $7,200

Question 18

Depletion is the process of transferring the cost of intangible assets to an expense account.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following expenditures would be included in the cost of a fixed asset?

Accepted Answer

A)  Uninsured theft 
B)  Vandalism 
C)  Sales taxes 
D)  Mistakes in installation 
A)  Uninsured theft 
B)  Vandalism 
C)  Sales taxes 
D)  Mistakes in installation

Question 20

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

Accepted Answer

A) True 
 B)False

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

The cost of a patent should be amortized :

Which of the following is true of asset turnover?

Capital expenditure is reported on the:

A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000.Compute the annual depreciation expense using the straight-line method.

The effect of recording a capital expenditure as a revenue expenditure is that:

Which of the following should be included in the acquisition cost of a piece of equipment?

A company sold a delivery truck for $22,000 cash.The truck costs $45,800 and had accumulated depreciation of $32,000 as of the date of sale.The entry to record the sale would include:

The accounting term depreciation measures:

Which of the following is a characteristic of fixed assets?

A fully depreciated asset must be:

A gain is recorded on the sale of fixed assets when:

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

The Modified Accelerated Cost Recovery System is used to:

An equipment was purchased for $15,000.It has a useful life of 5 years and a residual value of $4,000.Determine the depreciation expense for the first year using the double-declining-balance method?

An equipment was purchased for $30,000.It has a useful life of 5 years, and a residual value of $4,000.Compute the depreciation expense for the second year using the double-declining-balance method.

Depletion is the process of transferring the cost of intangible assets to an expense account.

Which of the following expenditures would be included in the cost of a fixed asset?

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 7: Fixed Assets, Natural Resources, and Intangible Assets

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

The cost of a patent should be amortized :

Which of the following is true of asset turnover?

Capital expenditure is reported on the:

A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000.Compute the annual depreciation expense using the straight-line method.

The effect of recording a capital expenditure as a revenue expenditure is that:

Which of the following should be included in the acquisition cost of a piece of equipment?

A company sold a delivery truck for $22,000 cash.The truck costs $45,800 and had accumulated depreciation of $32,000 as of the date of sale.The entry to record the sale would include:

The accounting term depreciation measures:

Which of the following is a characteristic of fixed assets?

A fully depreciated asset must be:

A gain is recorded on the sale of fixed assets when:

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

The Modified Accelerated Cost Recovery System is used to:

An equipment was purchased for $15,000.It has a useful life of 5 years and a residual value of $4,000.Determine the depreciation expense for the first year using the double-declining-balance method?

An equipment was purchased for $30,000.It has a useful life of 5 years, and a residual value of $4,000.Compute the depreciation expense for the second year using the double-declining-balance method.

Depletion is the process of transferring the cost of intangible assets to an expense account.

Which of the following expenditures would be included in the cost of a fixed asset?

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters