Question 1

If an item of property, plant, and equipment is recognized as an asset it is probable that the company will NOT receive economic benefits from the item.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following items is NOT a consideration when recording periodic depreciation expense on long-lived assets?

Accepted Answer

A)  residual value 
B)  estimated useful life 
C)  cash needed to replace the long-lived asset 
D)  cost 
A)  residual value 
B)  estimated useful life 
C)  cash needed to replace the long-lived asset 
D)  cost

Question 3

Natural resource depreciation is

Accepted Answer

A)  a decrease in fair value of natural resources. 
B)  the amount of spoilage that occurs when natural resources are extracted. 
C)  the process of allocating the cost of natural resources extracted and sold to expense. 
D)  the method used to record unsuccessful oil well explorations. 
A)  a decrease in fair value of natural resources. 
B)  the amount of spoilage that occurs when natural resources are extracted. 
C)  the process of allocating the cost of natural resources extracted and sold to expense. 
D)  the method used to record unsuccessful oil well explorations.

Question 4

Which of the following assets does NOT decline in service potential over the course of its useful life?

Accepted Answer

A)  equipment 
B)  furnishings 
C)  land 
D)  fixtures 
A)  equipment 
B)  furnishings 
C)  land 
D)  fixtures

Question 5

Recording depreciation on long-lived assets affects the balance sheet and the income statement.

Accepted Answer

A) True 
 B)False

Question 6

A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000.
-The building will be recorded at a cost of

Accepted Answer

A)  $150,000. 
B)  $140,000. 
C)  $135,000. 
D)  $138,461. 
A)  $150,000. 
B)  $140,000. 
C)  $135,000. 
D)  $138,461.

Question 7

Under CRA, depreciation expense is NOT optional in calculating profit.

Accepted Answer

A) True 
 B)False

Question 8

If a mining company extracts 1,500,000 tonnes in a period but only sells 1,200,000 tonnes,

Accepted Answer

A)  accumulated depreciation on the mine is based on the 1,200,000 tonnes. 
B)  depreciation included in cost of goods sold is based on the 1,500,000 tonnes extracted. 
C)  depreciation included in cost of goods sold is based on the 1,200,000 tonnes extracted and sold. 
D)  a separate accumulated depreciation account is set up to record depreciation on the 300,000 tonnes extracted but not sold. 
A)  accumulated depreciation on the mine is based on the 1,200,000 tonnes. 
B)  depreciation included in cost of goods sold is based on the 1,500,000 tonnes extracted. 
C)  depreciation included in cost of goods sold is based on the 1,200,000 tonnes extracted and sold. 
D)  a separate accumulated depreciation account is set up to record depreciation on the 300,000 tonnes extracted but not sold.

Question 9

Newman Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. Which of the following statements is true with respect to these additions?

Accepted Answer

A)  $30,000 should be debited to the Land account. 
B)  $12,000 should be debited to Land Improvements. 
C)  $42,000 should be debited to the Land account. 
D)  $42,000 should be debited to Land Improvements. 
A)  $30,000 should be debited to the Land account. 
B)  $12,000 should be debited to Land Improvements. 
C)  $42,000 should be debited to the Land account. 
D)  $42,000 should be debited to Land Improvements.

Question 10

An example of operating costs of a long-lived asset would NOT include the following.

Accepted Answer

A)  insurance costs paid after the asset is being used in operations 
B)  maintenance costs 
C)  repair costs 
D)  insurance costs paid before the asset is being used in operations 
A)  insurance costs paid after the asset is being used in operations 
B)  maintenance costs 
C)  repair costs 
D)  insurance costs paid before the asset is being used in operations

Question 11

It is NOT necessary to disclose the amount of accumulated amortization in the financial statements.

Accepted Answer

A) True 
 B)False

Question 12

The asset turnover ratio indicates how efficiently a company uses its assets to generate sales.

Accepted Answer

A) True 
 B)False

Question 13

McGuinness Mining Company purchased land containing an estimated 15 million tonnes of ore at a cost of $5,400,000. The land without the ore is estimated to be worth $600,000. The company expects to operate the mine for 10 years. Buildings costing $800,000 are erected on the site and are expected to last for 25 years. Equipment costing $1,000,000 with an estimated life of 12 years is installed. The buildings and the equipment possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tonnes of ore.
Instructions
a. Calculate the depreciation cost per tonne of the mine.
b. Calculate the depreciation expense for the first year on the mine.
c. Calculate the appropriate first year's depreciation expense for the buildings.
d. Calculate the appropriate first year's depreciation expense for the equipment.

Accepted Answer

a. Depreciation cost per tonne:
($5,400,

Question 14

If a fully depreciated long-lived asset is still used by a company, the

Accepted Answer

A)  estimated remaining useful life must be revised to calculate the correct revised depreciation. 
B)  asset is removed from the books. 
C)  accumulated depreciation account is removed from the books but the asset account remains. 
D)  asset and the accumulated depreciation continue to be reported on the balance sheet without adjustment until the asset is retired. 
A)  estimated remaining useful life must be revised to calculate the correct revised depreciation. 
B)  asset is removed from the books. 
C)  accumulated depreciation account is removed from the books but the asset account remains. 
D)  asset and the accumulated depreciation continue to be reported on the balance sheet without adjustment until the asset is retired.

Question 15

Equipment was purchased for $15,000. Freight charges amounted to $700, and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Accepted Answer

A)  $3,540. 
B)  $2,940. 
C)  $2,460. 
D)  $2,400. 
A)  $3,540. 
B)  $2,940. 
C)  $2,460. 
D)  $2,400.

Question 16

Zedel Delivery Services has a December 31, 2014 year end. On January 1, 2014, Zedel has a delivery van with a cost of $35,000 and accumulated depreciation of $12,000. The van was expected to have a residual value of $5,000 and a useful life of 5 years. Zedel uses straight-line depreciation. Zedel plans to replace its delivery van on April 1, 2014, and is considering two alternatives.
1. Zedel has been offered $14,000 for the old van. If Zedel accepts this offer, Zedel would then purchase a replacement for $50,000 cash.
2. Trade the old van for a new one. The dealer will allow a $22,000 trade-in allowance on the old van, and Zedel will have to pay additional cash of $28,000.
Instructions
a. Record the updated depreciation on the old van to April 1, 2014.
b. Record the disposal of the van under each of the two alternatives.
c. Which alternative do you recommend and why?

Accepted Answer

a. Depreciation Jan 1 - Apr 1, 2014:
($3

Question 17

A franchise should be classified on the balance sheet as a(n)

Accepted Answer

A)  current asset. 
B)  prepaid expanse. 
C)  intangible asset. 
D)  property, plant, and equipment. 
A)  current asset. 
B)  prepaid expanse. 
C)  intangible asset. 
D)  property, plant, and equipment.

Question 18

Costs that benefit future periods are included in a long-lived asset account, and are called operating expenses.

Accepted Answer

A) True 
 B)False

Question 19

On October 1, 2014, Marshwinds Wind Turbine Company places a new asset into service. The cost of the asset is $8,000 with an estimated 5-year life and $2,000 residual value at the end of its useful life.
-What is the depreciation expense for 2014 if Marshwinds Wind Turbine Company uses the straight-line method of depreciation?

Accepted Answer

A)  $300 
B)  $1,600 
C)  $400 
D)  $800 
A)  $300 
B)  $1,600 
C)  $400 
D)  $800

Question 20

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

Accepted Answer

A)  Legal Expense. 
B)  a Loss on Intangibles account. 
C)  the Patent account. 
D)  an operating expenditure account. 
A)  Legal Expense. 
B)  a Loss on Intangibles account. 
C)  the Patent account. 
D)  an operating expenditure account.

If an item of property, plant, and equipment is recognized as an asset it is probable that the company will NOT receive economic benefits from the item.

Which one of the following items is NOT a consideration when recording periodic depreciation expense on long-lived assets?

Natural resource depreciation is

Which of the following assets does NOT decline in service potential over the course of its useful life?

Recording depreciation on long-lived assets affects the balance sheet and the income statement.

A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000. -The building will be recorded at a cost of

Under CRA, depreciation expense is NOT optional in calculating profit.

If a mining company extracts 1,500,000 tonnes in a period but only sells 1,200,000 tonnes,

Newman Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. Which of the following statements is true with respect to these additions?

An example of operating costs of a long-lived asset would NOT include the following.

It is NOT necessary to disclose the amount of accumulated amortization in the financial statements.

The asset turnover ratio indicates how efficiently a company uses its assets to generate sales.

If a fully depreciated long-lived asset is still used by a company, the

A franchise should be classified on the balance sheet as a(n)

Costs that benefit future periods are included in a long-lived asset account, and are called operating expenses.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

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

If an item of property, plant, and equipment is recognized as an asset it is probable that the company will NOT receive economic benefits from the item.

Which one of the following items is NOT a consideration when recording periodic depreciation expense on long-lived assets?

Natural resource depreciation is

Which of the following assets does NOT decline in service potential over the course of its useful life?

Recording depreciation on long-lived assets affects the balance sheet and the income statement.

A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000. -The building will be recorded at a cost of

Under CRA, depreciation expense is NOT optional in calculating profit.

If a mining company extracts 1,500,000 tonnes in a period but only sells 1,200,000 tonnes,

Newman Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. Which of the following statements is true with respect to these additions?

An example of operating costs of a long-lived asset would NOT include the following.

It is NOT necessary to disclose the amount of accumulated amortization in the financial statements.

The asset turnover ratio indicates how efficiently a company uses its assets to generate sales.

If a fully depreciated long-lived asset is still used by a company, the

A franchise should be classified on the balance sheet as a(n)

Costs that benefit future periods are included in a long-lived asset account, and are called operating expenses.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

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