Question 1

A plant asset's useful life is the length of time it is productively used in a company's operations.

Accepted Answer

A) True 
 B)False

Question 2

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

Accepted Answer

A)  Debit Depletion Expense $93,750; credit Natural Resources $93,750. 
B)  Debit Cash $112,500; credit Natural Resources $112,500. 
C)  Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750. 
D)  Debit Cash $93,750; credit Accumulated Depletion $93,750. 
E)  Debit Depletion Expense $112,500; credit Accumulated Depletion $112,500. 
A)  Debit Depletion Expense $93,750; credit Natural Resources $93,750. 
B)  Debit Cash $112,500; credit Natural Resources $112,500. 
C)  Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750. 
D)  Debit Cash $93,750; credit Accumulated Depletion $93,750. 
E)  Debit Depletion Expense $112,500; credit Accumulated Depletion $112,500.

Question 3

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,what will be the amount of accumulated depreciation on this asset on December 31,Year 3?

Accepted Answer

A)  $5,000 
B)  $15,000 
C)  $15,125 
D)  $20,000 
E)  $13,750 
A)  $5,000 
B)  $15,000 
C)  $15,125 
D)  $20,000 
E)  $13,750

Question 4

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

Accepted Answer

A)  $0.75. 
B)  $0.625. 
C)  $0.875. 
D)  $6.00. 
E)  $8.00. 
A)  $0.75. 
B)  $0.625. 
C)  $0.875. 
D)  $6.00. 
E)  $8.00.

Question 5

When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

Accepted Answer

A) True 
 B)False

Question 6

Match each of the following terms with the appropriate definitions.
-A cost reported as an expense on the current income statement because it does not provide a material benefit in future periods.

Accepted Answer

A) Revenue expenditure 
B) Units-of production method 
C) Accelerated depreciation 
D) Goodwill 
E) Ordinary repairs
F)Total asset turnover
G)Intangible assets
H)Betterment
I)Depletion 
A) Revenue expenditure 
B) Units-of production method 
C) Accelerated depreciation 
D) Goodwill 
E) Ordinary repairs
F)Total asset turnover
G)Intangible assets
H)Betterment
I)Depletion

Question 7

Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

Accepted Answer

extraordin

Question 8

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash.
   
Prepare the general journal entries to record these transactions.

Accepted Answer

None

Question 9

A change in an accounting estimate is:

Accepted Answer

A)  Reflected in past financial statements. 
B)  Reflected in future financial statements and also requires modification of past statements. 
C)  Reflected in current and future years' financial statements, not in prior statements. 
D)  Not allowed under current accounting rules. 
E)  Considered an error in the financial statements. 
A)  Reflected in past financial statements. 
B)  Reflected in future financial statements and also requires modification of past statements. 
C)  Reflected in current and future years' financial statements, not in prior statements. 
D)  Not allowed under current accounting rules. 
E)  Considered an error in the financial statements.

Question 10

The cost of land would not include:

Accepted Answer

A)  Purchase price. 
B)  Cost of parking lot lighting. 
C)  Costs of removing existing structures. 
D)  Fees for insuring the title. 
E)  Government assessments. 
A)  Purchase price. 
B)  Cost of parking lot lighting. 
C)  Costs of removing existing structures. 
D)  Fees for insuring the title. 
E)  Government assessments.

Question 11

A machine costing $75,000 is purchased on September 1,Year 1.The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.Double-declining-balance depreciation is used.If the machine is sold on December 31,Year 3 for $13,000,the journal entry to record the sale will include:

Accepted Answer

A)  A credit to gain on sale for $8,000. 
B)  A debit to loss on sale for $2,625. 
C)  A credit to accumulated depreciation for $59,375. 
D)  A debit to loss on sale for $3,042. 
E)  A credit to gain on sale for $4,979. 
A)  A credit to gain on sale for $8,000. 
B)  A debit to loss on sale for $2,625. 
C)  A credit to accumulated depreciation for $59,375. 
D)  A debit to loss on sale for $3,042. 
E)  A credit to gain on sale for $4,979.

Question 12

Match each of the following terms with the appropriate definitions.
-Assets that increase the benefits of land,have a limited useful life,and are subject to depreciation.

Accepted Answer

A) Salvage value 
B) Book value 
C) Depletion 
D) Leasehold improvements 
E) Extraordinary repairs
F)Inadequacy
G)Land improvements
H)Patent
I)Obsolescence
J)Copyright 
A) Salvage value 
B) Book value 
C) Depletion 
D) Leasehold improvements 
E) Extraordinary repairs
F)Inadequacy
G)Land improvements
H)Patent
I)Obsolescence
J)Copyright

Question 13

On April 1,Year 1,Raines Co.purchased and placed a plant asset in service.The following information is available regarding the plant asset:
 $$\begin{array} { l l } 
\text { Acquisition cost } & \$ 130,000 \
\text { Estimated salvage value } & \$ 15,000 \
\text { Estimated useful life } & 5 \text { years }
\end{array}$$ 
Make the necessary adjusting journal entries at December 31,Year 1,and December 31,Year 2 to record depreciation for each year under the double-declining balance depreciation method:

Accepted Answer

None

Question 14

Cliff Company traded in an old truck for a new one.The old truck had a cost of $75,000 and accumulated depreciation of $60,000.The new truck had an invoice price of $125,000.Huffington was given a $12,000 trade-in allowance on the old truck,which meant they paid $113,000 in addition to the old truck to acquire the new truck.If this transaction has commercial substance,what is the recorded value of the new truck?

Accepted Answer

A)  $15,000 
B)  $75,000 
C)  $113,000 
D)  $125,000 
E)  $128,000 
A)  $15,000 
B)  $75,000 
C)  $113,000 
D)  $125,000 
E)  $128,000

Question 15

Match each of the following terms with the appropriate definitions.
-The total cost of a plant asset less its accumulated depreciation.

Accepted Answer

A) Salvage value 
B) Book value 
C) Depletion 
D) Leasehold improvements 
E) Extraordinary repairs
F)Inadequacy
G)Land improvements
H)Patent
I)Obsolescence
J)Copyright 
A) Salvage value 
B) Book value 
C) Depletion 
D) Leasehold improvements 
E) Extraordinary repairs
F)Inadequacy
G)Land improvements
H)Patent
I)Obsolescence
J)Copyright

Question 16

Prepare journal entries to record the following transactions of a company during the current year:

Accepted Answer

\[\begin{array} { l l } 
\text { Mar. }

Question 17

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A)  Accelerated depreciation. 
B)  Declining-balance depreciation. 
C)  Straight-line depreciation. 
D)  Units-of-production depreciation. 
E)  Modified accelerated cost recovery system (MACRS) depreciation. 
A)  Accelerated depreciation. 
B)  Declining-balance depreciation. 
C)  Straight-line depreciation. 
D)  Units-of-production depreciation. 
E)  Modified accelerated cost recovery system (MACRS) depreciation.

Question 18

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Accepted Answer

A)  $10,000 
B)  $5,000 
C)  $5,500 
D)  $20,000 
E)  $9,250 
A)  $10,000 
B)  $5,000 
C)  $5,500 
D)  $20,000 
E)  $9,250

Question 19

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?

Accepted Answer

A)  U.S. GAAP allows companies to record increases in the value of plant assets. 
B)  IFRS prohibits upward asset revaluations. 
C)  Under GAAP, a company can reverse an impairment and record that increase in income. 
D)  U.S. GAAP prohibits companies from recording increases in the value of plant assets. 
E)  Under IFRS, an impairment increase beyond as asset's original cost is not recorded. 
A)  U.S. GAAP allows companies to record increases in the value of plant assets. 
B)  IFRS prohibits upward asset revaluations. 
C)  Under GAAP, a company can reverse an impairment and record that increase in income. 
D)  U.S. GAAP prohibits companies from recording increases in the value of plant assets. 
E)  Under IFRS, an impairment increase beyond as asset's original cost is not recorded.

Question 20

Another name for a capital expenditure is:

Accepted Answer

A)  Revenue expenditure. 
B)  Asset expenditure. 
C)  Long-term expenditure. 
D)  Contributed capital expenditure. 
E)  Balance sheet expenditure. 
A)  Revenue expenditure. 
B)  Asset expenditure. 
C)  Long-term expenditure. 
D)  Contributed capital expenditure. 
E)  Balance sheet expenditure.

A plant asset's useful life is the length of time it is productively used in a company's operations.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

Match each of the following terms with the appropriate definitions. -A cost reported as an expense on the current income statement because it does not provide a material benefit in future periods.

Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

A change in an accounting estimate is:

The cost of land would not include:

Match each of the following terms with the appropriate definitions. -Assets that increase the benefits of land,have a limited useful life,and are subject to depreciation.

Match each of the following terms with the appropriate definitions. -The total cost of a plant asset less its accumulated depreciation.

Prepare journal entries to record the following transactions of a company during the current year:

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?

Another name for a capital expenditure is:

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 8: Accounting for Long-Term Assets

A plant asset's useful life is the length of time it is productively used in a company's operations.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

Match each of the following terms with the appropriate definitions. -A cost reported as an expense on the current income statement because it does not provide a material benefit in future periods.

Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

A change in an accounting estimate is:

The cost of land would not include:

Match each of the following terms with the appropriate definitions. -Assets that increase the benefits of land,have a limited useful life,and are subject to depreciation.

Match each of the following terms with the appropriate definitions. -The total cost of a plant asset less its accumulated depreciation.

Prepare journal entries to record the following transactions of a company during the current year:

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?

Another name for a capital expenditure is:

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Investments

Partnership Accounting

Filters