Question 1

Which of the following is true of asset turnover ratio?

Accepted Answer

A) It measures how efficiently a business uses its sales to finance the assets. 
B) It measures how efficiently a business uses its average total assets to generate sales. 
C) It measures how efficiently a business uses its net profit to finance the assets. 
D) It measures how the ending inventory helps in increasing the value of assets. 
A) It measures how efficiently a business uses its sales to finance the assets. 
B) It measures how efficiently a business uses its average total assets to generate sales. 
C) It measures how efficiently a business uses its net profit to finance the assets. 
D) It measures how the ending inventory helps in increasing the value of assets.

Question 2

A fully depreciated asset that is still in service must not be reported as an asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 3

The process by which businesses spread the allocation of a natural resource's cost over its usage is known as depreciation.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following accounting principles requires businesses to record depreciation?

Accepted Answer

A) the revenue recognition principle 
B) the matching principle 
C) the cost principle 
D) the going concern principle 
A) the revenue recognition principle 
B) the matching principle 
C) the cost principle 
D) the going concern principle

Question 5

According to generally accepted accounting principles, if the fair value of goodwill decreases, an impairment loss must be recorded.

Accepted Answer

A) True 
 B)False

Question 6

Roberts Construction Group paid $5,000, for a plant asset that had a market value of $7,500. At which of the following amounts should the plant asset be recorded?

Accepted Answer

A) $7,500 
B) $2,500 
C) $5,000 
D) $10,000 
A) $7,500 
B) $2,500 
C) $5,000 
D) $10,000

Question 7

Useful life of a plant asset refers to the period for which it can be used for the purposes of the business.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the correct accounting treatment for a patent?

Accepted Answer

A) A patent must be shown as a current asset on the balance sheet. 
B) A patent must be depreciated or impaired, but not amortized. 
C) A patent must be capitalized and amortized over 20 years or less. 
D) A patent must be expensed, not capitalized, in the period in which it is purchased. 
A) A patent must be shown as a current asset on the balance sheet. 
B) A patent must be depreciated or impaired, but not amortized. 
C) A patent must be capitalized and amortized over 20 years or less. 
D) A patent must be expensed, not capitalized, in the period in which it is purchased.

Question 9

Server Solutions paid $200,000 to acquire Tabletz Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Tabletz's assets was $200,000. The fair market value of its liabilities was $100,000. How much goodwill did Server Solutions purchase as part of the acquisition of Tabletz?

Accepted Answer

A) $200,000 
B) $50,000 
C) $100,000 
D) $150,000 
A) $200,000 
B) $50,000 
C) $100,000 
D) $150,000

Question 10

Fred owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?

Accepted Answer

A) oil change and lubrication 
B) major engine overhaul 
C) modification for new use 
D) addition to storage capacity 
A) oil change and lubrication 
B) major engine overhaul 
C) modification for new use 
D) addition to storage capacity

Question 11

Ordinary repairs to plant assets are referred to as revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 12

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2015.

Accepted Answer

A) $650,000, 
B) $750,000 
C) $710,000 
D) $658,000 
A) $650,000, 
B) $750,000 
C) $710,000 
D) $658,000

Question 13

On July 31, 2015, Colorful Printers purchased a printer for $50,000. It expects the printer to last for four years and have a residual value of $2,000. Compute the depreciation expense on the printer for the year ended December 31, 2015, using the straight-line method.

Accepted Answer

A) $50,000 
B) $5,000 
C) $12,500 
D) $25,000 
A) $50,000 
B) $5,000 
C) $12,500 
D) $25,000

Question 14

Briyanne Company purchased a computer for $5,000. During 2015 and 2016, the company recorded total depreciation of $4,000 on the computer. On January 1, 2017, the company traded in the computer for a new one, paying $4,000 cash. The fair market value of the new computer is $6,000. Journalize the company's exchange of computers. Assume the exchange had commercial substance.

Accepted Answer

The answer of Briyanne Company purchased a computer for $5,000....

Question 15

On October 1, 2015, Nurix Company purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. Journalize the amortization expense for 2015. Assume straight-line amortization.

Accepted Answer

The answer of On October 1, 2015, Nurix Company purchased...

Question 16

A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

Accepted Answer

A) Net income will be understated. 
B) Expenses will be overstated. 
C) Assets will be overstated. 
D) Liabilities will be overstated. 
A) Net income will be understated. 
B) Expenses will be overstated. 
C) Assets will be overstated. 
D) Liabilities will be overstated.

Question 17

On January 1, 2015, Zade Manufacturing Company purchased a machine for $40,000,000. The company expects to use the machine for 24,000 hours over the next 6 years. The estimated sale value of the machine at the end of the sixth year is $40,000. The company used the machine for 3,600 hours in 2015 and 5,000 hours in 2016. What is depreciation expense for the year 2015 if the company uses the units-of-production method of depreciation?

Accepted Answer

A) $5,994,000, 
B) $13,333,333 
C) $6,666,660 
D) $12,222,000 
A) $5,994,000, 
B) $13,333,333 
C) $6,666,660 
D) $12,222,000

Question 18

Which of the following categories of assets should be depreciated?

Accepted Answer

A) tangible property, plant and equipment, other than land 
B) intangible property 
C) land 
D) natural resources 
A) tangible property, plant and equipment, other than land 
B) intangible property 
C) land 
D) natural resources

Question 19

On January 1, 2015, Anodel Inc. acquired a machine for $1,000,000. The estimated useful life of the asset is 5 years. The residual value at the end of 5 years is estimated to be $50,000. What is the book value of the machine at the end of 2016, if the company uses the straight-line method of depreciation?

Accepted Answer

A) $600,000, 
B) $620,000 
C) $570,000 
D) $550,000 
A) $600,000, 
B) $620,000 
C) $570,000 
D) $550,000

Question 20

On June 30, 2015, Regal Furniture discarded a fully depreciated equipment costing $35,000. Journalize the disposal of the equipment.

Accepted Answer

The answer of On June 30, 2015, Regal Furniture discarded...

Exam 10: Plant Assets, Natural Resources, and Intangibles

Which of the following is true of asset turnover ratio?

A fully depreciated asset that is still in service must not be reported as an asset on the balance sheet.

The process by which businesses spread the allocation of a natural resource's cost over its usage is known as depreciation.

Which of the following accounting principles requires businesses to record depreciation?

According to generally accepted accounting principles, if the fair value of goodwill decreases, an impairment loss must be recorded.

Roberts Construction Group paid $5,000, for a plant asset that had a market value of $7,500. At which of the following amounts should the plant asset be recorded?

Useful life of a plant asset refers to the period for which it can be used for the purposes of the business.

Which of the following is the correct accounting treatment for a patent?

Fred owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?

Ordinary repairs to plant assets are referred to as revenue expenditures.

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2015.

On July 31, 2015, Colorful Printers purchased a printer for $50,000. It expects the printer to last for four years and have a residual value of $2,000. Compute the depreciation expense on the printer for the year ended December 31, 2015, using the straight-line method.

On October 1, 2015, Nurix Company purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. Journalize the amortization expense for 2015. Assume straight-line amortization.

A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

Which of the following categories of assets should be depreciated?

On June 30, 2015, Regal Furniture discarded a fully depreciated equipment costing $35,000. Journalize the disposal of the equipment.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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