Question 1

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Accepted Answer

A) Accumulated Depreciation-Buildings 
B) Buildings 
C) Depreciation Expense-Buildings 
D) Land 
A) Accumulated Depreciation-Buildings 
B) Buildings 
C) Depreciation Expense-Buildings 
D) Land

Question 2

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

Accepted Answer

A) True 
 B)False

Question 3

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Accepted Answer

A) True 
 B)False

Question 4

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Accepted Answer

A) True 
 B)False

Question 5

Recently, companies have been ordered by governmental agencies to clean up environmental damages caused by business operations.How should costs incurred in these situations be treated?

Accepted Answer

A) If a legal obligation exists, the cost of restoring the property must be added to the asset account. 
B) As an expense entirely in one accounting period. 
C) As an amortized expense in the period the cost is incurred. 
D) Added to the asset, and then depreciated over 15 years. 
A) If a legal obligation exists, the cost of restoring the property must be added to the asset account. 
B) As an expense entirely in one accounting period. 
C) As an amortized expense in the period the cost is incurred. 
D) Added to the asset, and then depreciated over 15 years.

Question 6

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Accepted Answer

A) not allowed since the amount can only be calculated one way or the other, not both. 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code, and as such, against the law. 
A) not allowed since the amount can only be calculated one way or the other, not both. 
B) the direct result of the differing goals of financial and tax accounting. 
C) contrary to GAAP. 
D) against the Internal Revenue Code, and as such, against the law.

Question 7

Newco Publishing Company purchased equipment at the beginning of 2014 for $200,000.The company decided to depreciate the equipment over an 8-year period using the straight-line method.The company estimated the equipment's residual value at $20,000.The journal entry to record depreciation expense for 2014 will

Accepted Answer

A) increase Depreciation Expense and increase Accumulated Depreciation for $25,000. 
B) increase Accumulated Depreciation and decrease Equipment for $25,000. 
C) increase Depreciation Expense and decrease Equipment for $22,500. 
D) increase Depreciation Expense and increase Accumulated Depreciation for $22,500. 
A) increase Depreciation Expense and increase Accumulated Depreciation for $25,000. 
B) increase Accumulated Depreciation and decrease Equipment for $25,000. 
C) increase Depreciation Expense and decrease Equipment for $22,500. 
D) increase Depreciation Expense and increase Accumulated Depreciation for $22,500.

Question 8

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

Accepted Answer

A) True 
 B)False

Question 9

Bing's Export Co.
Bing's Export Co.purchased a new delivery truck at the beginning of 2015.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2015.The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016.The number of expected miles over five years is 100,000.
-Refer to information for Bing's Export Co.
Bing's is comparing the straight­line and double­declining­balance depreciation methods.Of these two methods, which method creates the larger expense and larger tax savings in 2015?

Accepted Answer

A) Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. 
B) Straight-line depreciation creates both the larger expense and the larger tax savings. 
C) Double-declining-balance depreciation creates both the larger expense and the larger tax savings. 
D) Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings. 
A) Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. 
B) Straight-line depreciation creates both the larger expense and the larger tax savings. 
C) Double-declining-balance depreciation creates both the larger expense and the larger tax savings. 
D) Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

Question 10

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Accepted Answer

A) True 
 B)False

Question 11

Capitalizing interest increases the recorded cost of a plant asset.

Accepted Answer

A) True 
 B)False

Question 12

The Property, Plant, and Equipment category includes long-term investments.

Accepted Answer

A) True 
 B)False

Question 13

On January 1, 2013, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Accepted Answer

A) Assets and Stockholders' Equity increase $1,000. 
B) Assets decrease and Stockholders' Equity increases $3,000. 
C) Assets and Stockholders' Equity decrease $1,000. 
D) Assets and Stockholders' Equity decrease $3,000. 
A) Assets and Stockholders' Equity increase $1,000. 
B) Assets decrease and Stockholders' Equity increases $3,000. 
C) Assets and Stockholders' Equity decrease $1,000. 
D) Assets and Stockholders' Equity decrease $3,000.

Question 14

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

Accepted Answer

A) True 
 B)False

Question 15

Lightning Delivery, Inc.purchased a truck on January 1, 2013, for $30,000.The truck had an estimated life of 5 years and an estimated residual value of $5,000.Lightning Delivery used the straight-line method to depreciate the asset.On July 1, 2015, the truck was sold for $17,000 cash.The journal entry to record the sale of the truck in 2015

Accepted Answer

A) decreases stockholder's equity 
B) increases total assets 
C) decreases total expenses 
D) increases net income 
A) decreases stockholder's equity 
B) increases total assets 
C) decreases total expenses 
D) increases net income

Question 16

How should intangible assets be disclosed on the balance sheet?

Accepted Answer

A) As a reduction of stockholders' equity 
B) At cost in the current assets section 
C) at the estimated market value at the balance sheet date 
D) Net of the costs already amortized 
A) As a reduction of stockholders' equity 
B) At cost in the current assets section 
C) at the estimated market value at the balance sheet date 
D) Net of the costs already amortized

Question 17

Bing's Export Co.
Bing's Export Co.purchased a new delivery truck at the beginning of 2015.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2015.The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016.The number of expected miles over five years is 100,000.
-Refer to information about Bing's Export Co.
Bing's Export Co.wants to use the depreciation method that will result in the highest depreciation expense for 2015.Which method should be used?

Accepted Answer

A) straight-line 
B) units-of-production 
C) double-declining-balance 
D) all methods create the same income in 2015 
A) straight-line 
B) units-of-production 
C) double-declining-balance 
D) all methods create the same income in 2015

Question 18

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 19

Wyoming Real Estate purchased a building for $600,000 in 2002.At the end of 2014, when it had a book value of $450,000, it was appraised for $1,000,000.A potential buyer offered $900,000.Wyoming rejected the offer.What amount should is recorded on Wyoming's records at the end of 2014 in the account called Buildings?

Accepted Answer

A) $1,000,000 
B) $900,000 
C) $600,000 
D) $450,000 
A) $1,000,000 
B) $900,000 
C) $600,000 
D) $450,000

Question 20

Bing's Export Co.
Bing's Export Co.purchased a new delivery truck at the beginning of 2015.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2015.The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016.The number of expected miles over five years is 100,000.
-Refer to information for Bing's Export Co.
By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the truck?

Accepted Answer

A) The salvage value of $7,000. 
B) Cost less total depreciation. 
C) Cost plus total depreciation. 
D) Total depreciation expenses under double-declining-balance and straight-line depreciation are equal. 
A) The salvage value of $7,000. 
B) Cost less total depreciation. 
C) Cost plus total depreciation. 
D) Total depreciation expenses under double-declining-balance and straight-line depreciation are equal.

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Recently, companies have been ordered by governmental agencies to clean up environmental damages caused by business operations.How should costs incurred in these situations be treated?

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Capitalizing interest increases the recorded cost of a plant asset.

The Property, Plant, and Equipment category includes long-term investments.

On January 1, 2013, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

How should intangible assets be disclosed on the balance sheet?

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Recently, companies have been ordered by governmental agencies to clean up environmental damages caused by business operations.How should costs incurred in these situations be treated?

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Capitalizing interest increases the recorded cost of a plant asset.

The Property, Plant, and Equipment category includes long-term investments.

On January 1, 2013, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

How should intangible assets be disclosed on the balance sheet?

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters