Question 1

The undepreciated cost of an asset is referred to as

Accepted Answer

A)  Salvage value 
B)  Book value 
C)  Market value 
D)  Sales value 
A)  Salvage value 
B)  Book value 
C)  Market value 
D)  Sales value

Question 2

On January 1, 2011, Meri-Ann Corporation purchased computer equipment for $23,000. The equipment had an estimated useful life of 4 years and a salvage value of $400. Meri-Ann uses the sum-of-the-years-digits method of depreciation. The accumulated depreciation at December 31, 2012, would be

Accepted Answer

A)  $9,040 
B)  $9,200 
C)  $15,820 
D)  $16,100 
A)  $9,040 
B)  $9,200 
C)  $15,820 
D)  $16,100

Question 3

On January 1, 2012, Salina Company purchased land and a building for $2,240,000. At the time of the purchase, it was estimated that the building had a market value of $1,400,000. On January 5, Alberta installed a fence around the property at a cost of $14,000. Given this information, the entry to record the cost of the fence would include a

Accepted Answer

A)  Debit to Land for $14,000 
B)  Debit to Fence Expense for $14,000 
C)  Credit to Land for $14,000 
D)  Debit to Land Improvements Expense for $14,000 
A)  Debit to Land for $14,000 
B)  Debit to Fence Expense for $14,000 
C)  Credit to Land for $14,000 
D)  Debit to Land Improvements Expense for $14,000

Question 4

Mini Computers purchased a delivery truck 4 years ago for $30,000. Currently the accumulated depreciation on the truck is $14,000. Prepare journal entries to show the sale of the truck assuming:

Accepted Answer

The answer of Mini Computers purchased a delivery truck 4...

Question 5

The entry to record an impairment loss on equipment would include which of the following?

Accepted Answer

A)  Credit to Loss on Impairment of Equipment 
B)  Credit to Equipment Impairment 
C)  Debit to Accumulated Depreciation, Equipment 
D)  Debit to Cash 
A)  Credit to Loss on Impairment of Equipment 
B)  Credit to Equipment Impairment 
C)  Debit to Accumulated Depreciation, Equipment 
D)  Debit to Cash

Question 6

On January 1, 2011, Heather Locks Corporation purchased drilling equipment for $11,500. The equipment has an estimated useful life of 4 years and a salvage value of $200. Given this information, if Heather uses the double-declining-balance method of depreciation and sells the equipment on December 31, 2012, for $3,000, it will have a

Accepted Answer

A)  $2,750 loss 
B)  $1,800 loss 
C)  $1,562 gain 
D)  $125 gain 
A)  $2,750 loss 
B)  $1,800 loss 
C)  $1,562 gain 
D)  $125 gain

Question 7

On July 1, 2011, Macro Inc. purchased a franchise to operate a Blended Coffee Corner at a cost of $180,000. Assuming that Macro amortizes franchises over a 10-year period, prepare journal entries to record:

Accepted Answer

The answer of On July 1, 2011, Macro Inc. purchased...

Question 8

Henner Corporation made a basket purchase of three pieces of machinery for $72,000. The fair market values of the machinery were determined to be as follows:   What cost should Henner record for Machine C?

Accepted Answer

A)  $40,500 
B)  $31,500 
C)  $27,000 
D)  $36,000 
A)  $40,500 
B)  $31,500 
C)  $27,000 
D)  $36,000

Question 9

The process of comparing the cost of an asset to the value of expected cash inflows, after adjusting for the time value of money, is called

Accepted Answer

A)  Acquisition analysis 
B)  Present value analysis 
C)  Capital budgeting 
D)  Long-term asset budgeting 
A)  Acquisition analysis 
B)  Present value analysis 
C)  Capital budgeting 
D)  Long-term asset budgeting

Question 10

A company leases an asset for a 7-year period under a capital lease and agrees to pay an annual rental of $15,000. The initial entry to record this transaction, assuming the present value of the lease payments is $84,000, would include

Accepted Answer

A)  Debit to Lease Expense for $15,000 
B)  Debit to Lease Expense for $12,000 
C)  Debit to Lease Asset for $84,000 
D)  Credit to Lease Liability for $12,000 
A)  Debit to Lease Expense for $15,000 
B)  Debit to Lease Expense for $12,000 
C)  Debit to Lease Asset for $84,000 
D)  Credit to Lease Liability for $12,000

Question 11

Which of the following is considered to be an intangible asset?

Accepted Answer

A)  A gold mine 
B)  A copyright 
C)  Land improvement 
D)  Building 
A)  A gold mine 
B)  A copyright 
C)  Land improvement 
D)  Building

Question 12

Which of the following is NOT a capitalizable cost on a self-constructed asset?

Accepted Answer

A)  Total materials used 
B)  Total labor costs incurred 
C)  Total company overhead 
D)  Interest associated with money borrowed to finance the construction project 
A)  Total materials used 
B)  Total labor costs incurred 
C)  Total company overhead 
D)  Interest associated with money borrowed to finance the construction project

Question 13

Leased assets are capitalized at

Accepted Answer

A)  Their historical cost 
B)  The future value of the future lease payments 
C)  The sum of the future lease payments 
D)  The present value of the future lease payments 
A)  Their historical cost 
B)  The future value of the future lease payments 
C)  The sum of the future lease payments 
D)  The present value of the future lease payments

Question 14

Thayer Company's financial statements on December 31, 2012, showed the following:
  
Given this information, compute Thayer Company's fixed asset turnover ratio for 2011 and 2012 (round to two decimal places).

Accepted Answer

Given this information, comput

Question 15

A truck that cost $19,200 and was expected to last 5 years was scrapped after 3 years. If the truck was being depreciated on a straight-line basis (with no salvage value), the book value of the truck at the time of disposal was

Accepted Answer

A)  $19,200 
B)  $11,520 
C)  $4,800 
D)  $7,680 
A)  $19,200 
B)  $11,520 
C)  $4,800 
D)  $7,680

Question 16

Sylvia Supply Company, a calendar-year corporation, purchased a new scale for $495,000 on April 1, 2012. Additional costs of the scale included sales tax of 5 percent, freight-in of $17,400, and installation costs of $15,300. The scale has a useful life of 5 years with no salvage value.

Accepted Answer

The answer of Sylvia Supply Company, a calendar-year corporation, purchased...

Question 17

How would a company classify a 2-year lease that requires monthly rental payments of $1,000 and also requires that the company must move out of the building, or negotiate a new lease when the current one ends?

Accepted Answer

A)  Capital lease 
B)  Sales lease 
C)  Operating lease 
D)  Buy-back lease 
A)  Capital lease 
B)  Sales lease 
C)  Operating lease 
D)  Buy-back lease

Question 18

On January 1, 2012, Versachi Industries, a calendar-year corporation, leased an airplane under a 7-year, noncancelable lease agreement that requires Versachi to pay the lessor $30,000 at the end of each year. The first payment is due December 31, 2012. The present value of the lease payments is $150,990, assuming an interest rate of 9 percent. At the end of the 7-year lease term, the airplane will be returned to the lessor unless Versachi Corporation chooses to purchase the airplane at its appraised market value. At January 1, 2012, the airplane has an estimated economic life of 10 years and a fair market value of $190,000.
1.Determine whether the airplane lease is an operating or a capital lease and explain your classification.
2.Without regard to your answer to (1), assume the lease is a capital lease and interest for 2012 is $13,600. Give the journal entries to record the lease at January 1 and the first payment at December 31, 2012.

Accepted Answer

The answer of On January 1, 2012, Versachi Industries, a...

Question 19

Which of the following is necessary when recording the disposal of a piece of equipment?

Accepted Answer

A)  Update the depreciation expense on the equipment to the date of sale 
B)  Remove the equipment and related accumulated depreciation balances from the accounts 
C)  Record any gain or loss on the disposal 
D)  All of these are necessary when recording the disposal of a piece of equipment 
A)  Update the depreciation expense on the equipment to the date of sale 
B)  Remove the equipment and related accumulated depreciation balances from the accounts 
C)  Record any gain or loss on the disposal 
D)  All of these are necessary when recording the disposal of a piece of equipment

Question 20

Depreciation can best be described as a method of

Accepted Answer

A)  Accumulating funds for the replacement of assets 
B)  Reducing the carrying cost of assets to current market values 
C)  Deriving tax benefits 
D)  Allocating the costs of assets over their useful lives 
A)  Accumulating funds for the replacement of assets 
B)  Reducing the carrying cost of assets to current market values 
C)  Deriving tax benefits 
D)  Allocating the costs of assets over their useful lives

Exam 9: Investments: Property, Plant, and Equipment and Intangible Assets

The undepreciated cost of an asset is referred to as

On January 1, 2011, Meri-Ann Corporation purchased computer equipment for $23,000. The equipment had an estimated useful life of 4 years and a salvage value of $400. Meri-Ann uses the sum-of-the-years-digits method of depreciation. The accumulated depreciation at December 31, 2012, would be

Mini Computers purchased a delivery truck 4 years ago for $30,000. Currently the accumulated depreciation on the truck is $14,000. Prepare journal entries to show the sale of the truck assuming:

The entry to record an impairment loss on equipment would include which of the following?

On July 1, 2011, Macro Inc. purchased a franchise to operate a Blended Coffee Corner at a cost of $180,000. Assuming that Macro amortizes franchises over a 10-year period, prepare journal entries to record:

Henner Corporation made a basket purchase of three pieces of machinery for $72,000. The fair market values of the machinery were determined to be as follows: What cost should Henner record for Machine C?

The process of comparing the cost of an asset to the value of expected cash inflows, after adjusting for the time value of money, is called

A company leases an asset for a 7-year period under a capital lease and agrees to pay an annual rental of $15,000. The initial entry to record this transaction, assuming the present value of the lease payments is $84,000, would include

Which of the following is considered to be an intangible asset?

Which of the following is NOT a capitalizable cost on a self-constructed asset?

Leased assets are capitalized at

Thayer Company's financial statements on December 31, 2012, showed the following: Given this information, compute Thayer Company's fixed asset turnover ratio for 2011 and 2012 (round to two decimal places).

A truck that cost $19,200 and was expected to last 5 years was scrapped after 3 years. If the truck was being depreciated on a straight-line basis (with no salvage value), the book value of the truck at the time of disposal was

Sylvia Supply Company, a calendar-year corporation, purchased a new scale for $495,000 on April 1, 2012. Additional costs of the scale included sales tax of 5 percent, freight-in of $17,400, and installation costs of $15,300. The scale has a useful life of 5 years with no salvage value.

How would a company classify a 2-year lease that requires monthly rental payments of $1,000 and also requires that the company must move out of the building, or negotiate a new lease when the current one ends?

Which of the following is necessary when recording the disposal of a piece of equipment?

Depreciation can best be described as a method of

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

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