Question 1

Acquisition cost is also known as historical cost with respect to property,plant,and equipment.

Accepted Answer

A) True 
 B)False

Question 2

Crouch Apartments purchased an apartment building to rent to university students on December 15,2016.The tenants moved in on January 1,2017.On Super Bowl Sunday,a student punched a hole in the wall when his favorite team fumbled the ball.It cost the landlord $400 to repair the hole.How should this cost be recorded?

Accepted Answer

A) It should be recorded as part of the asset account. 
B) It should be recorded as repair and maintenance expense. 
C) It should not be recorded as the tenants will be charged for the damage. 
D) It should not be recorded since this is an immaterial amount to the landlord. 
A) It should be recorded as part of the asset account. 
B) It should be recorded as repair and maintenance expense. 
C) It should not be recorded as the tenants will be charged for the damage. 
D) It should not be recorded since this is an immaterial amount to the landlord.

Question 3

​Cranberry Corp.constructed equipment to manufacture a new line of home products during 2017.The average balance of accumulated expenditures on the equipment during September through December 2017 was $500,000.Construction started on September 1,2017,and was still in progress at the end of 2017.If Cranberry borrowed $500,000 for one year on September 1,2017,to finance the construction,and the interest rate on the construction loan was 6%,how much interest can Cranberry capitalize as part of the equipment cost for 2017?

Accepted Answer

A) $0 
B) $10,000 
C) $20,000 
D) $30,000 
A) $0 
B) $10,000 
C) $20,000 
D) $30,000

Question 4

Explain how the costs associated with operating assets are reported on the balance sheet.

Accepted Answer

Tangible plant assets and natural resour

Question 5

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

Accepted Answer

A) True 
 B)False

Question 6

Pocono Co.purchased a patent at the beginning of 2017 for $490,000.Economic benefits were expected for seven years,but the patent's legal life was 20 years.Also,during 2017,the company incurred research and development costs of $150,000.Patent amortization expense for 2017 is

Accepted Answer

A) $24,500. 
B) $150,000. 
C) $72,143. 
D) $70,000. 
A) $24,500. 
B) $150,000. 
C) $72,143. 
D) $70,000.

Question 7

Which of the following statements is not true?

Accepted Answer

A) IFRS require that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. 
B) The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually. 
C) IFRS do not have a specific rule that requires residual value and asset life to be reviewed annually. 
D) The FASB generally requires operating assets to be recorded at acquisition cost,less depreciation,and the assets' values are not changed to reflect their fair market values or selling prices. 
A) IFRS require that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. 
B) The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually. 
C) IFRS do not have a specific rule that requires residual value and asset life to be reviewed annually. 
D) The FASB generally requires operating assets to be recorded at acquisition cost,less depreciation,and the assets' values are not changed to reflect their fair market values or selling prices.

Question 8

Norwood, Inc.

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018.

-Refer to the information for Norwood,Inc.  
Based on this information,what method of depreciation will produce the maximum depreciation expense in 2018?

Accepted Answer

A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2018. 
A) Straight-line 
B) Double-declining-balance 
C) Units-of-production 
D) All methods produce the same expense in 2018.

Question 9

Several years ago,Laurel Company purchased a patent and has since been amortizing it on a straight-line basis over its estimated useful life.The company's comparative balance sheets contain the following items:
?
 $$\begin{array} { l c c } 
\text { (In thousands) } & \text { December 31,2018 } & \text { December 31, 2017 } \
\text { Patent, less accumul ated amortization of } & \$ 280,000 & \$ 297,500 \
\$ 70,000 ( 2018 ) \text { and } \$ 52,500 ( 2017 ) & &
\end{array}$$ A. How much amortization expense was recorded during 2018 ?

B. How is the amortization expense reported on the company's statement of cash flows?

C. How much was the original cost of the patent?

D. How many years has the patent been amortized?

Accepted Answer

A. @#LAT-DLM&

B. If the company uses the indirect

Question 10

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

Accepted Answer

A) True 
 B)False

Question 11

Aliquippa Co.purchased equipment at the beginning of 2017 for $60,000.In addition,Aliquippa paid $2,000 for delivery of the equipment to its plant and $1,000 for installation of the equipment.The equipment has an estimated residual value of $7,000 and an estimated life of seven years or 70,000 hours of operation.Aliquippa is looking at alternative depreciation methods for the equipment.Calculate the following:
 A. The depreciation expense for the year 2017 using the straight-line depreciation method.

B. The total accumulated depreciation at December 31,2018, using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2017 and 12,000 hours in 2018 .

C. The book value of the equipment at December 31,2017 , using the double-declining-balance depreciation method.

D. Which of the above methods is considered accelerated?

E. What are the advantages of using an accelerated depreciation method as compared to the straight-line method for lowering taxes early in the life of the equipment?

Accepted Answer

?
?
 A. @#LAT-DLM&

B. @#LAT-DLM& per hour
Depreciation for

Question 12

Calhoun,Inc.purchased equipment at the beginning of 2017 for $180,000.Calhoun decided to depreciate the equipment over a five-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Calhoun's financial statements at December 31,2017?

Accepted Answer

A) The book value of the equipment is $108,000. 
B) The book value of the equipment is $72,000. 
C) The total accumulated depreciation is $90,000. 
D) Depreciation expense for 2017 is $60,000. 
A) The book value of the equipment is $108,000. 
B) The book value of the equipment is $72,000. 
C) The total accumulated depreciation is $90,000. 
D) Depreciation expense for 2017 is $60,000.

Question 13

Assume that Alabama Company purchased factory equipment on January 1,2017,for $75,000.The equipment has an estimated life of five years and an estimated residual value of $6,000.Alabama's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset.Because the company is beginning a new production process,the equipment will be used to produce 5,000 units in 2017,but production subsequent to 2017 will increase by 5,000 units each year.
?
Required
Calculate the depreciation expense,accumulated depreciation,and book value of the equipment under both methods for each of the five years of its life.Would the units-of production method yield reasonable results in this situation? Explain.

Accepted Answer

Depreciation,accumulated depreciation,an

Question 14

__________ depreciation is the GAAP depreciation method used most frequently.

Accepted Answer

The answer of __________ depreciation is the GAAP depreciation method...

Question 15

Distinguish between capital and revenue expenditures.

Accepted Answer

Capital expenditures are added to the ac

Question 16

When land and building are acquired for a lump sum,the purchase amount should be allocated on the basis of the market values of the two assets.

Accepted Answer

A) True 
 B)False

Question 17

Research and development costs are

Accepted Answer

A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development. 
A) treated as an expense when incurred. 
B) capitalized but not amortized. 
C) capitalized and amortized over the periods that will probably benefit from the research and development. 
D) included with the cost of the patent resulting from the research and development.

Question 18

When plant assets are purchased in a group,each asset increases the respective plant asset account for its fair market value at the time of acquisition.

Accepted Answer

A) True 
 B)False

Question 19

What is the relationship between the depreciation method chosen and income taxes paid in the early years? Explain.

Accepted Answer

The depreciation method chosen

Question 20

Capitalizing interest does not increase the recorded cost of a plant asset.

Accepted Answer

A) True 
 B)False

Acquisition cost is also known as historical cost with respect to property,plant,and equipment.

Explain how the costs associated with operating assets are reported on the balance sheet.

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

Pocono Co.purchased a patent at the beginning of 2017 for $490,000.Economic benefits were expected for seven years,but the patent's legal life was 20 years.Also,during 2017,the company incurred research and development costs of $150,000.Patent amortization expense for 2017 is

Which of the following statements is not true?

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

__________ depreciation is the GAAP depreciation method used most frequently.

Distinguish between capital and revenue expenditures.

When land and building are acquired for a lump sum,the purchase amount should be allocated on the basis of the market values of the two assets.

Research and development costs are

When plant assets are purchased in a group,each asset increases the respective plant asset account for its fair market value at the time of acquisition.

What is the relationship between the depreciation method chosen and income taxes paid in the early years? Explain.

Capitalizing interest does not increase the recorded cost of a plant asset.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

Acquisition cost is also known as historical cost with respect to property,plant,and equipment.

Explain how the costs associated with operating assets are reported on the balance sheet.

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

Pocono Co.purchased a patent at the beginning of 2017 for $490,000.Economic benefits were expected for seven years,but the patent's legal life was 20 years.Also,during 2017,the company incurred research and development costs of $150,000.Patent amortization expense for 2017 is

Which of the following statements is not true?

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

__________ depreciation is the GAAP depreciation method used most frequently.

Distinguish between capital and revenue expenditures.

When land and building are acquired for a lump sum,the purchase amount should be allocated on the basis of the market values of the two assets.

Research and development costs are

When plant assets are purchased in a group,each asset increases the respective plant asset account for its fair market value at the time of acquisition.

What is the relationship between the depreciation method chosen and income taxes paid in the early years? Explain.

Capitalizing interest does not increase the recorded cost of a plant asset.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters