Question 1

An expenditure for which of the following items would be considered a revenue expenditure?

Accepted Answer

A)  Plant asset. 
B)  Ordinary repair. 
C)  Addition. 
D)  Improvements. 
A)  Plant asset. 
B)  Ordinary repair. 
C)  Addition. 
D)  Improvements. B

Question 2

All of the following statements are true regarding the declining-balance method of depreciation except

Accepted Answer

A)  the declining-balance method ignores salvage value when calculating depreciation. 
B)  the declining-balance method produces lower depreciation expense in the early years as opposed to the later years. 
C)  the declining-balance method is compatible with the matching principle. 
D)  the declining-balance method is appropriate when assets lose their usefulness rapidly. 
A)  the declining-balance method ignores salvage value when calculating depreciation. 
B)  the declining-balance method produces lower depreciation expense in the early years as opposed to the later years. 
C)  the declining-balance method is compatible with the matching principle. 
D)  the declining-balance method is appropriate when assets lose their usefulness rapidly. B

Question 3

In 2014, Blanchard Corporation has plant equipment that originally cost $90,000 and has accumulated depreciation of $36,000. A new processing technique has rendered the equipment obsolete, so it is retired. Which of the following entries should Blanchard use to record the retirement of the equipment?

Accepted Answer

B

Question 4

Dobler Company purchased factory equipment with an invoice price of $78,000. Other costs incurred were freight costs, $1,300; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,500. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life.
Instructions
(a) Compute the acquisition cost of the equipment. Clearly identify each element of cost.
(b) If the straight-line method of depreciation was used, the annual rate applied to the depreciable cost would be __________.

Accepted Answer

@#IMG-DLM& (b) If the straight-line meth

Question 5

Under the double-declining-balance method, the depreciation rate used each year remains constant.

Accepted Answer

A) True 
 B)False

Question 6

A machine was purchased for $54,000 and it was estimated to have a $9,000 salvage value at the end of its useful life. Monthly depreciation expense of $750 was recorded using the straight-line method. The annual depreciation rate is

Accepted Answer

A)  25%. 
B)  2%. 
C)  16%. 
D)  20%. 
A)  25%. 
B)  2%. 
C)  16%. 
D)  20%.

Question 7

The return on assets ratio indicates how efficiently a company uses its assets.

Accepted Answer

A) True 
 B)False

Question 8

Aber Company buys land for $145,000 on 12/31/13. As of 3/31/14, the land has appreciated in value to $152,000. On 12/31/14, the land has an appraised value of $155,400. By what amount should the Land account be increased in 2014?

Accepted Answer

A)  $0. 
B)  $7,000. 
C)  $3,400. 
D)  $10,400. 
A)  $0. 
B)  $7,000. 
C)  $3,400. 
D)  $10,400.

Question 9

Interest may be included in the acquisition cost of a plant asset

Accepted Answer

A)  during the construction period of a self-constructed asset. 
B)  if the asset is purchased on credit. 
C)  if the asset acquisition is financed by a long-term note payable. 
D)  if it is a part of a lump-sum purchase. 
A)  during the construction period of a self-constructed asset. 
B)  if the asset is purchased on credit. 
C)  if the asset acquisition is financed by a long-term note payable. 
D)  if it is a part of a lump-sum purchase.

Question 10

Under U.S. GAAP

Accepted Answer

A)  property, plant, and equipment may not be revalued. 
B)  component depreciation is not required. 
C)  research and development costs are expensed as incurred. 
D)  All of these answer choices are correct. 
A)  property, plant, and equipment may not be revalued. 
B)  component depreciation is not required. 
C)  research and development costs are expensed as incurred. 
D)  All of these answer choices are correct.

Question 11

Identify the following expenditures as capital expenditures or revenue expenditures.
(a) Replacement of worn out gears on factory machinery.
(b) Construction of a new wing on an office building.
(c) Painting the exterior of a building.
(d) Oil change on a company truck.
(e) Replacing an old computer chip with a faster chip, which increases productive capacity. No extension of useful life expected.
(f) Overhaul of a truck motor. One year extension in useful life is expected.
(g) Purchased a wastebasket at a cost of $10.
(h) Painting and lettering of a used truck upon acquisition of the truck.

Accepted Answer

(a) Revenue (e) Capi

Question 12

A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 10-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

Accepted Answer

A)  10%. 
B)  15%. 
C)  20%. 
D)  2%. 
A)  10%. 
B)  15%. 
C)  20%. 
D)  2%.

Question 13

Railsback Company purchased a machine on January 1, 2014, at a cost of $72,000. The machine is expected to have an estimated salvage value of $4,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2014 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2014, was $45,000 before taxes as the result of depreciating the machine incorrectly.
Instructions
Using the method of depreciation that the company normally follows, prepare the correcting entry and determine the corrected net income for 2014. (Show computations.)

Accepted Answer

The answer of Railsback Company purchased a machine on January...

Question 14

A machine that was purchased on January 1 for $45,000 has an estimated salvage value of $9,000. If the machine's depreciation rate is 20%, its annual depreciation is

Accepted Answer

A)  $9,000. 
B)  $36,000. 
C)  $7,200. 
D)  $10,800. 
A)  $9,000. 
B)  $36,000. 
C)  $7,200. 
D)  $10,800.

Question 15

Goodwill can be recorded

Accepted Answer

A)  when customers keep returning because they are satisfied with the company's products. 
B)  when the company acquires a good location for its business. 
C)  when the company has exceptional management. 
D)  only when there is an exchange transaction involving the purchase of an entire business. 
A)  when customers keep returning because they are satisfied with the company's products. 
B)  when the company acquires a good location for its business. 
C)  when the company has exceptional management. 
D)  only when there is an exchange transaction involving the purchase of an entire business.

Question 16

Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014?

Accepted Answer

A)  $9,600. 
B)  $7,200. 
C)  $14,400. 
D)  $19,200. 
A)  $9,600. 
B)  $7,200. 
C)  $14,400. 
D)  $19,200.

Question 17

Which of the following statements concerning IFRS and U.S. GAAP is correct?

Accepted Answer

A)  IFRS permits revaluation of all intangible assets, whereas U.S. GAAP prohibits revaluation of intangible assets. 
B)  Gains on exchange of assets when the exchange has commercial substance are recognized under both IFRS and U.S. GAAP. 
C)  Changes in depreciation method under IFRS are reported in current and future periods, under U.S. GAAP such changes are treated as prior period adjustments. 
D)  All of these answer choices are correct. 
A)  IFRS permits revaluation of all intangible assets, whereas U.S. GAAP prohibits revaluation of intangible assets. 
B)  Gains on exchange of assets when the exchange has commercial substance are recognized under both IFRS and U.S. GAAP. 
C)  Changes in depreciation method under IFRS are reported in current and future periods, under U.S. GAAP such changes are treated as prior period adjustments. 
D)  All of these answer choices are correct.

Question 18

With the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Accepted Answer

The answer of With the exception of land, plant assets...

Question 19

Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one of its airplanes. If Jamison's accountant expensed this amount, which of the following statements is true?

Accepted Answer

A)  The entry will improperly understate net income for the year. 
B)  The entry will improperly overstate net income for the year. 
C)  The entry is the correct treatment. 
D)  The entry will overstate the balance sheet for the year. 
A)  The entry will improperly understate net income for the year. 
B)  The entry will improperly overstate net income for the year. 
C)  The entry is the correct treatment. 
D)  The entry will overstate the balance sheet for the year.

Question 20

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

An expenditure for which of the following items would be considered a revenue expenditure?

All of the following statements are true regarding the declining-balance method of depreciation except

Under the double-declining-balance method, the depreciation rate used each year remains constant.

A machine was purchased for $54,000 and it was estimated to have a $9,000 salvage value at the end of its useful life. Monthly depreciation expense of $750 was recorded using the straight-line method. The annual depreciation rate is

The return on assets ratio indicates how efficiently a company uses its assets.

Aber Company buys land for $145,000 on 12/31/13. As of 3/31/14, the land has appreciated in value to $152,000. On 12/31/14, the land has an appraised value of $155,400. By what amount should the Land account be increased in 2014?

Interest may be included in the acquisition cost of a plant asset

Under U.S. GAAP

A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 10-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

A machine that was purchased on January 1 for $45,000 has an estimated salvage value of $9,000. If the machine's depreciation rate is 20%, its annual depreciation is

Goodwill can be recorded

Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014?

Which of the following statements concerning IFRS and U.S. GAAP is correct?

With the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one of its airplanes. If Jamison's accountant expensed this amount, which of the following statements is true?

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

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters

Exam 9: Reporting and Analyzing Long-Lived Assets

An expenditure for which of the following items would be considered a revenue expenditure?

All of the following statements are true regarding the declining-balance method of depreciation except

Under the double-declining-balance method, the depreciation rate used each year remains constant.

A machine was purchased for $54,000 and it was estimated to have a $9,000 salvage value at the end of its useful life. Monthly depreciation expense of $750 was recorded using the straight-line method. The annual depreciation rate is

The return on assets ratio indicates how efficiently a company uses its assets.

Aber Company buys land for $145,000 on 12/31/13. As of 3/31/14, the land has appreciated in value to $152,000. On 12/31/14, the land has an appraised value of $155,400. By what amount should the Land account be increased in 2014?

Interest may be included in the acquisition cost of a plant asset

Under U.S. GAAP

A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 10-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

A machine that was purchased on January 1 for $45,000 has an estimated salvage value of $9,000. If the machine's depreciation rate is 20%, its annual depreciation is

Goodwill can be recorded

Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014?

Which of the following statements concerning IFRS and U.S. GAAP is correct?

With the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one of its airplanes. If Jamison's accountant expensed this amount, which of the following statements is true?

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

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters