Question 1

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Accepted Answer

A) True 
 B)False  False

Question 2

Depreciation is the process of allocating the cost of a plant asset over its service life in

Accepted Answer

A)  an equal and equitable manner. 
B)  an accelerated and accurate manner. 
C)  a systematic and rational manner. 
D)  a conservative market-based manner. 
A)  an equal and equitable manner. 
B)  an accelerated and accurate manner. 
C)  a systematic and rational manner. 
D)  a conservative market-based manner. C

Question 3

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

Accepted Answer

A)  Sales tax 
B)  Truck license 
C)  Freight charges 
D)  Cost of lettering on side of truck 
A)  Sales tax 
B)  Truck license 
C)  Freight charges 
D)  Cost of lettering on side of truck B

Question 4

The book value of an asset will equal its fair market value at the date of sale if

Accepted Answer

A)  a gain on disposal is recorded. 
B)  no gain or loss on disposal is recorded. 
C)  the plant asset is fully depreciated. 
D)  a loss on disposal is recorded. 
A)  a gain on disposal is recorded. 
B)  no gain or loss on disposal is recorded. 
C)  the plant asset is fully depreciated. 
D)  a loss on disposal is recorded.

Question 5

During the current year Marin Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset indicate the number of years over which the asset should be amortized. Explain your answer.
(a) Spent $30000 in legal costs in a patent defense suit. The patent was unsuccessfully defended.
(b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Marin Company expects the trademark to contribute to revenue indefinitely.
(c) Marin Company acquires a patent for $2000000. The company selling the patent has spent $1000000 on the research and development of it. The patent has a remaining life of 15 years.
(d) Marin Company is spending considerable time and money in developing a different patent for another product. So far $3000000 has been spent this year on research and development. Marin Company is very confident they will obtain this patent in the next few years.

Accepted Answer

(a) Operating Expense. Only successful p

Question 6

Equipment was purchased for $300000. Freight charges amounted to $14000 and there was a cost of $40000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $60000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Accepted Answer

A)  $70800. 
B)  $58800. 
C)  $49200. 
D)  $48000. 
A)  $70800. 
B)  $58800. 
C)  $49200. 
D)  $48000.

Question 7

Carey Enterprises sold equipment on January 1 2016 for $10000. The equipment had cost $48000. The balance in Accumulated Depreciation at January 1 is $40000. What entry would Carey make to record the sale of the equipment?

Accepted Answer

Calculate

Question 8

A computer company has $2800000 in research and development costs. Before accounting for these costs the net income of the company is $2000000. What is the amount of net income or loss after these R & D costs are accounted for?

Accepted Answer

A)  $800000 loss 
B)  $2000000 net income 
C)  $0 
D)  Cannot be determined from the information provided. 
A)  $800000 loss 
B)  $2000000 net income 
C)  $0 
D)  Cannot be determined from the information provided.

Question 9

A company sells a plant asset which originally cost $360000 for $120000 on December 31 2017. The Accumulated Depreciation account had a balance of $144000 after the current year's depreciation of $36000 had been recorded. The company should recognize a

Accepted Answer

A)  $240000 loss on disposal. 
B)  $96000 gain on disposal. 
C)  $96000 loss on disposal. 
D)  $60000 loss on disposal. 
A)  $240000 loss on disposal. 
B)  $96000 gain on disposal. 
C)  $96000 loss on disposal. 
D)  $60000 loss on disposal.

Question 10

A gain or loss on disposal of a plant asset is determined by comparing the

Accepted Answer

A)  replacement cost of the asset with the asset's original cost. 
B)  book value of the asset with the asset's original cost. 
C)  original cost of the asset with the proceeds received from its sale. 
D)  book value of the asset with the proceeds received from its sale. 
A)  replacement cost of the asset with the asset's original cost. 
B)  book value of the asset with the asset's original cost. 
C)  original cost of the asset with the proceeds received from its sale. 
D)  book value of the asset with the proceeds received from its sale.

Question 11

Brown Company purchased equipment in 2010 for $150000 and estimated a $10000 salvage value at the end of the equipment's 10-year useful life. At December 31 2016 there was $98000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31 2017 the equipment was sold for $40000.
Prepare the appropriate journal entries to remove the equipment from the books of Brown Company on March 31 2017.
(b) Finney Company sold a machine for $15000. The machine originally cost $35000 in 2014 and $8000 was spent on a major overhaul in 2017 (charged to the Equipment account). Accumulated Depreciation on the machine to the date of disposal was $28000.
Prepare the appropriate journal entry to record the disposition of the machine.
(c) Stanley Company sold office equipment that had a book value of $12000 for $16000. The office equipment originally cost $40000 and it is estimated that it would cost $50000 to replace the office equipment.
Prepare the appropriate journal entry to record the disposition of the office equipment.

Accepted Answer

None

Question 12

If fully depreciated equipment that cost $10000 with no salvage value is retired the entry to record the retirement requires a debit to the ___________________________ account and a credit to the _____________________ account.

Accepted Answer

Accumulate

Question 13

On July 1 2017 Hale Kennels sells equipment for $220000. The equipment originally cost $600000 had an estimated 5-year life and an expected salvage value of $100000. The accumulated depreciation account had a balance of $350000 on January 1 2017 using the straight-line method. The gain or loss on disposal is

Accepted Answer

A)  $30000 gain. 
B)  $20000 loss. 
C)  $30000 loss. 
D)  $20000 gain. 
A)  $30000 gain. 
B)  $20000 loss. 
C)  $30000 loss. 
D)  $20000 gain.

Question 14

Research and development costs can be classified as a property plant and equipment item or as an intangible asset.

Accepted Answer

A) True 
 B)False

Question 15

Prepare the journal entries to record the following transactions for Ogleby Company which has a calendar year end and uses the straight-line method of depreciation.
a) On September 30 2017 the company exchanged old delivery equipment and $36000 for new delivery equipment. The old delivery equipment was purchased on January 1 2015 for $126000 and was estimated to have a $18000 salvage value at the end of its 5-year life. Depreciation on the delivery equipment has been recorded through December 31 2016. It is estimated that the fair value of the old delivery equipment is $54000 on September 30 2017.
(b) On June 30 2017 the company exchanged old office equipment and $40000 for new office equipment. The old office equipment originally cost $80000 and had accumulated depreciation to the date of disposal of $35000. It is estimated that the fair market value of the old office equipment on June 30 was $60000. The transaction has commercial substance.

Accepted Answer

(a)  
 of 2017. $108

Question 16

The December 31 2016 balance sheet of Jensen Company showed Equipment of $76000 and Accumulated Depreciation of $18000. On January 1 2017 the company decided that the equipment has a remaining useful life of 6 years with a $4000 salvage value.
Instructions
Compute the (a) depreciable cost of the equipment and (b) revised annual depreciation.

Accepted Answer

(a)
  (b) Revised an

Question 17

Nicholson Company purchased equipment on January 1 2015 for $80000 with an estimated salvage value of $20000 and estimated useful life of 8 years. On January 1 2017 Nicholson decided the equipment will last 12 years from the date of purchase. The salvage value is still estimated at $20000. Using the straight-line method the new annual depreciation will be:

Accepted Answer

A)  $4500. 
B)  $5000. 
C)  $6000. 
D)  $6667. 
A)  $4500. 
B)  $5000. 
C)  $6000. 
D)  $6667.

Question 18

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

Accepted Answer

A)  book value of the old asset. 
B)  fair value of the old asset. 
C)  book value of the asset acquired. 
D)  fair value of the new asset. 
A)  book value of the old asset. 
B)  fair value of the old asset. 
C)  book value of the asset acquired. 
D)  fair value of the new asset.

Question 19

The units-of-activity method is generally not suitable for

Accepted Answer

A)  airplanes. 
B)  buildings. 
C)  delivery equipment. 
D)  factory machinery. 
A)  airplanes. 
B)  buildings. 
C)  delivery equipment. 
D)  factory machinery.

Question 20

On July 4 2017 Wyoming Mining Company purchased the mineral rights to a granite deposit for $1600000. It is estimated that the recoverable granite will be 400000 tons. During 2017 100000 tons of granite was extracted and 60000 tons were sold. The amount of depletion recognized for 2017 would be

Accepted Answer

A)  $200000. 
B)  $120000. 
C)  $240000. 
D)  $400000. 
A)  $200000. 
B)  $120000. 
C)  $240000. 
D)  $400000.

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Depreciation is the process of allocating the cost of a plant asset over its service life in

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

The book value of an asset will equal its fair market value at the date of sale if

Carey Enterprises sold equipment on January 1 2016 for $10000. The equipment had cost $48000. The balance in Accumulated Depreciation at January 1 is $40000. What entry would Carey make to record the sale of the equipment?

A computer company has $2800000 in research and development costs. Before accounting for these costs the net income of the company is $2000000. What is the amount of net income or loss after these R & D costs are accounted for?

A company sells a plant asset which originally cost $360000 for $120000 on December 31 2017. The Accumulated Depreciation account had a balance of $144000 after the current year's depreciation of $36000 had been recorded. The company should recognize a

A gain or loss on disposal of a plant asset is determined by comparing the

If fully depreciated equipment that cost $10000 with no salvage value is retired the entry to record the retirement requires a debit to the _______ account and a credit to the _ account.

Research and development costs can be classified as a property plant and equipment item or as an intangible asset.

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

The units-of-activity method is generally not suitable for

On July 4 2017 Wyoming Mining Company purchased the mineral rights to a granite deposit for $1600000. It is estimated that the recoverable granite will be 400000 tons. During 2017 100000 tons of granite was extracted and 60000 tons were sold. The amount of depletion recognized for 2017 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

Exam 10: Plant Assets, Natural Resources, and Intangible Assets

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

Depreciation is the process of allocating the cost of a plant asset over its service life in

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

The book value of an asset will equal its fair market value at the date of sale if

Carey Enterprises sold equipment on January 1 2016 for $10000. The equipment had cost $48000. The balance in Accumulated Depreciation at January 1 is $40000. What entry would Carey make to record the sale of the equipment?

A computer company has $2800000 in research and development costs. Before accounting for these costs the net income of the company is $2000000. What is the amount of net income or loss after these R & D costs are accounted for?

A company sells a plant asset which originally cost $360000 for $120000 on December 31 2017. The Accumulated Depreciation account had a balance of $144000 after the current year's depreciation of $36000 had been recorded. The company should recognize a

A gain or loss on disposal of a plant asset is determined by comparing the

If fully depreciated equipment that cost $10000 with no salvage value is retired the entry to record the retirement requires a debit to the ___________________________ account and a credit to the _____________________ account.

Research and development costs can be classified as a property plant and equipment item or as an intangible asset.

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

The units-of-activity method is generally not suitable for

On July 4 2017 Wyoming Mining Company purchased the mineral rights to a granite deposit for $1600000. It is estimated that the recoverable granite will be 400000 tons. During 2017 100000 tons of granite was extracted and 60000 tons were sold. The amount of depletion recognized for 2017 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters

If fully depreciated equipment that cost $10000 with no salvage value is retired the entry to record the retirement requires a debit to the _______ account and a credit to the _ account.