Question 1

When there is a change in the useful life of an asset, depreciation must be revised if you are using

Accepted Answer

A)  straight-line depreciation. 
B)  units-of-production depreciation. 
C)  diminishing-balance depreciation. 
D)  any of the above depreciation methods. 
A)  straight-line depreciation. 
B)  units-of-production depreciation. 
C)  diminishing-balance depreciation. 
D)  any of the above depreciation methods.

Question 2

On March 31, 2014 Delhon Industries purchased a new plant for $2,500,000 cash. Before completing the purchase, Delhon had obtained valuations to determine the relative value of the different components purchased.
The valuation indicated that the fair value of the land, if purchased separately, would be $375,000, the building's value is $1,900,000, the manufacturing equipment $192,500, and the office and computer equipment $55,000. In addition to the land, building and equipment, the purchase price includes inventory with a net realizable value of $27,500.
The anticipated life of the building is 25 years, the manufacturing equipment 10 years, and the office and computer equipment 5 years, with no residual value for any of them. Delhon has a December 31 year end.
Instructions
a. Record the purchase on March 31, 2014.
b. Record the depreciation expense for 2014 using the straight-line method assuming the company chooses to prorate depreciation based on the number of months the asset has been in use.

Accepted Answer

a. Allocation of cos

Question 3

On January 1, 2013, Katsumi Company purchased and installed a telephone system at a cost of $20,000. The equipment was expected to last five years with a residual value of $3,000. On January 1, 2014 more telephone equipment was purchased to tie-in with the current system for $8,000. The new equipment is expected to have a useful life of four years. Through an error, the new equipment was debited to Telephone Expense. Katsumi Company uses the straight-line method of depreciation.
Instructions
Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation Expense, and profit for each year and in total beginning in 2014 through the useful life of the new equipment.

Accepted Answer

The answer of On January 1, 2013, Katsumi Company purchased...

Question 4

All long-lived assets must be depreciated for accounting purposes.

Accepted Answer

A) True 
 B)False

Question 5

When an asset is retired, there are no proceeds received.

Accepted Answer

A) True 
 B)False

Question 6

A change in the estimated residual value of a long-lived asset requires a restatement of prior years' depreciation.

Accepted Answer

A) True 
 B)False

Question 7

The Hang-Out, a popular pizza restaurant, has a thriving delivery business. The Hang-Out has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows:   Instructions 
a. Determine the depreciation rates per kilometre for each car.
b. Determine the depreciation expense for each car for the current year.
c. Make one compound journal entry to record the annual depreciation expense for the fleet.

Accepted Answer

The answer of The Hang-Out, a popular pizza restaurant, has...

Question 8

The cost of successfully defending a patent in an infringement suit should be

Accepted Answer

A)  charged to Legal Expenses. 
B)  deducted from the carrying amount of the patent. 
C)  added to the cost of the patent. 
D)  recognized as a loss in the current period. 
A)  charged to Legal Expenses. 
B)  deducted from the carrying amount of the patent. 
C)  added to the cost of the patent. 
D)  recognized as a loss in the current period.

Question 9

Mendelsohn Company purchased a machine on January 1, 2013, at a cost of $48,000. The machine is expected to have an estimated residual value of $3,000 at the end of its 5-year life. The company's new accountant has used the double diminishing-balance method to depreciate the machine at December 31, 2013. However, the company has a policy of using the straight-line method to depreciate equipment. Profit for the year ended December 31, 2013 was $55,000 as the result of depreciating the machine incorrectly.
Instructions
Using the method of depreciation which the company normally follows, prepare the correcting entry and determine the corrected profit. (Show calculations.)

Accepted Answer

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

Question 10

If disposal of a long-lived asset occurs during the year, depreciation is

Accepted Answer

A)  not recorded for the year. 
B)  recorded for the whole year. 
C)  recorded for the fraction of the year to the date of the disposal. 
D)  not recorded if the asset is scrapped. 
A)  not recorded for the year. 
B)  recorded for the whole year. 
C)  recorded for the fraction of the year to the date of the disposal. 
D)  not recorded if the asset is scrapped.

Question 11

Which of the following would NOT be considered a natural resource?

Accepted Answer

A)  mineral deposit 
B)  herd of cows 
C)  gravel pit 
D)  timberlands 
A)  mineral deposit 
B)  herd of cows 
C)  gravel pit 
D)  timberlands

Question 12

Goodwill should be amortized on the lesser of useful life or 20 years.

Accepted Answer

A) True 
 B)False

Question 13

Match between columns
                        Premises: Overhaul of a truck motor. One year extension in useful life is expected
Painting and lettering of a used truck upon acquisition of the truck
Oil change on a company truck
Replacing a network server's hard drive, this increases data storage capacity by ten times. No extension of useful life expected
Purchased a wastebasket, with an expected useful life of five years, at a cost of $10
Construction of a new wing on an office building
Replacement of worn out gears on factory machinery
Painting the exterior of a building

Accepted Answer

The Answer of capital expenditures and operating expenditures. is...

Question 14

Copyrights are granted by the federal government

Accepted Answer

A)  for the life of the creator or 50 years, whichever is longer. 
B)  for the life of the creator plus 50 years. 
C)  for the life of the creator or 50 years, whichever is shorter. 
D)  and therefore cannot be amortized. 
A)  for the life of the creator or 50 years, whichever is longer. 
B)  for the life of the creator plus 50 years. 
C)  for the life of the creator or 50 years, whichever is shorter. 
D)  and therefore cannot be amortized.

Question 15

Equipment acquired on October 1, 2014, at a cost of $540,000 has an estimated useful life of 10 years. The residual value is estimated to be $55,000 at the end of the equipment's useful life. The company has a December 31 year end.
Instructions
Calculate the depreciation expense for December 31, 2014 and 2015 using:
a. the straight-line method.
b. the double diminishing-balance method.

Accepted Answer

The answer of Equipment acquired on October 1, 2014, at...

Question 16

Most Canadian companies reporting under IFRS do NOT use the revaluation method when accounting for their long-lived assets.

Accepted Answer

A) True 
 B)False

Question 17

Straight-line depreciation will result in a higher profit than the double diminishing-balance method in the early years of an asset's life.

Accepted Answer

A) True 
 B)False

Question 18

Natural resources do NOT have to be tested for impairment annually.

Accepted Answer

A) True 
 B)False

Question 19

Which is NOT a characteristic of goodwill?

Accepted Answer

A)  It can be sold. 
B)  It is never amortized. 
C)  It is tested for impairment annually. 
D)  It has indefinite life. 
A)  It can be sold. 
B)  It is never amortized. 
C)  It is tested for impairment annually. 
D)  It has indefinite life.

Question 20

On January 1, 2014, Keebler Company purchased the copyright to Bodine Computer Tutorials for $81,000. It is estimated that the copyright will have a useful life of 5 years with an estimated residual value of $6,000. The amount of amortization expense recognized for the year 2014 would be

Accepted Answer

A)  $16,200. 
B)  $7,500. 
C)  $15,000. 
D)  $8,100. 
A)  $16,200. 
B)  $7,500. 
C)  $15,000. 
D)  $8,100.

When there is a change in the useful life of an asset, depreciation must be revised if you are using

All long-lived assets must be depreciated for accounting purposes.

When an asset is retired, there are no proceeds received.

A change in the estimated residual value of a long-lived asset requires a restatement of prior years' depreciation.

The cost of successfully defending a patent in an infringement suit should be

If disposal of a long-lived asset occurs during the year, depreciation is

Which of the following would NOT be considered a natural resource?

Goodwill should be amortized on the lesser of useful life or 20 years.

Copyrights are granted by the federal government

Most Canadian companies reporting under IFRS do NOT use the revaluation method when accounting for their long-lived assets.

Straight-line depreciation will result in a higher profit than the double diminishing-balance method in the early years of an asset's life.

Natural resources do NOT have to be tested for impairment annually.

Which is NOT a characteristic of goodwill?

On January 1, 2014, Keebler Company purchased the copyright to Bodine Computer Tutorials for $81,000. It is estimated that the copyright will have a useful life of 5 years with an estimated residual value of $6,000. The amount of amortization expense recognized for the year 2014 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 9: Long-Lived Assets

When there is a change in the useful life of an asset, depreciation must be revised if you are using

All long-lived assets must be depreciated for accounting purposes.

When an asset is retired, there are no proceeds received.

A change in the estimated residual value of a long-lived asset requires a restatement of prior years' depreciation.

The cost of successfully defending a patent in an infringement suit should be

If disposal of a long-lived asset occurs during the year, depreciation is

Which of the following would NOT be considered a natural resource?

Goodwill should be amortized on the lesser of useful life or 20 years.

Copyrights are granted by the federal government

Most Canadian companies reporting under IFRS do NOT use the revaluation method when accounting for their long-lived assets.

Straight-line depreciation will result in a higher profit than the double diminishing-balance method in the early years of an asset's life.

Natural resources do NOT have to be tested for impairment annually.

Which is NOT a characteristic of goodwill?

On January 1, 2014, Keebler Company purchased the copyright to Bodine Computer Tutorials for $81,000. It is estimated that the copyright will have a useful life of 5 years with an estimated residual value of $6,000. The amount of amortization expense recognized for the year 2014 would be

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters