Question 1

Depreciation should not be recorded for a depreciable asset that is increasing in value.

Accepted Answer

A) True 
 B)False

Question 2

A delivery truck was purchased for $32,000 two years ago. It has a carrying value of $24,000 and an estimated residual value of $4,000. Assuming the use of straight-line depreciation, the truck's estimated useful life must have been

Accepted Answer

A)  three and one-half years. 
B)  seven years. 
C)  14 years. 
D)  impossible to determine from the facts given. 
A)  three and one-half years. 
B)  seven years. 
C)  14 years. 
D)  impossible to determine from the facts given.

Question 3

A company purchases an oil well for $200,000. It estimates that the well contains 250,000 barrels, has a ten-year life, and has no salvage value. If the company extracts and sells 20,000 barrels during the first year, how much depletion expense should be recorded?

Accepted Answer

A)  $40,000 
B)  $16,000 
C)  $20,000 
D)  $100,000 
A)  $40,000 
B)  $16,000 
C)  $20,000 
D)  $100,000

Question 4

Starsky Manufacturing Company purchased three machines during the year:
 $\begin{array}{rlr}
\text { Feb. 10 } & \text { Machine 1 } & \$ 1,800 \
\text { July 26 } & \text { Machine 2 } & 12,000 \
\text { Oct. 11 } & \text { Machine 3 } & 21,600
\end{array}$
 Each machine is expected to last six years and have no residual value. The company's fiscal year corresponds to the calendar year. Using the straight-line method, compute the depreciation charge (amounts rounded) for each machine for the year.

Accepted Answer

Machine 1: $1,800 @#LAT-DLM& 1/6 @#LAT-DLM& 11/12

Question 5

The replacement of tires on a truck is considered an ordinary repair.

Accepted Answer

A) True 
 B)False

Question 6

Speedy Printing purchased a new printing press for $80,000. It depreciates the press over a five-year period, using the double-declining-balance method of depreciation. If the press has an $8,000 estimated residual value, calculate depreciation expense for each of the five years. (Show your work.)

Accepted Answer

Year 1: $32,000 (100% ÷ 5 = 20% @#LAT-DLM& 2 = 40%

Question 7

Above-average earnings is often the basis for the calculation of goodwill.

Accepted Answer

A) True 
 B)False

Question 8

In general, a cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost

Accepted Answer

A)  is incurred subsequent to asset use. 
B)  exceeds a certain dollar amount. 
C)  is incurred prior to asset use. 
D)  will expire in less than one year. 
A)  is incurred subsequent to asset use. 
B)  exceeds a certain dollar amount. 
C)  is incurred prior to asset use. 
D)  will expire in less than one year.

Question 9

The cost of repairing a machine damaged during installation should be charged as an operating expense.

Accepted Answer

A) True 
 B)False

Question 10

Equipment is purchased for $80,000. It has an eight-year useful life and a $42,750 residual value. Under the double-declining-balance method, what is the depreciation expense for year 3?

Accepted Answer

A)  $11,250 
B)  $1,750 
C)  $2,250 
D)  $2,750 
A)  $11,250 
B)  $1,750 
C)  $2,250 
D)  $2,750

Question 11

Which of the following would not be debited to the Machinery account?

Accepted Answer

A)  Installation costs 
B)  Electricity used by the machine 
C)  Freight charges 
D)  Cost of trial runs 
A)  Installation costs 
B)  Electricity used by the machine 
C)  Freight charges 
D)  Cost of trial runs

Question 12

Which of the following depreciation methods is the most logical for a machine that produces discrete (i.e., separate) units?

Accepted Answer

A)  Double-declining-balance 
B)  Straight-line 
C)  Group 
D)  Production 
A)  Double-declining-balance 
B)  Straight-line 
C)  Group 
D)  Production

Question 13

Art obtained a five year sublease and paid $10,000 to the current tenant. The annual cost of the lease is $5,000. The entry to record the lease payment for the first year is:

Accepted Answer

The answer of Art obtained a five year sublease and...

Question 14

Suppose an accounting intern mistakenly calculated depreciation expense on the Land account. She assigned it a 50-year life and a residual value of $10,000,000. Using the cost of the land (assume it was $811,000,000) and the straight-line method of depreciation, discuss the dollar effect of this error on pretax earnings and total assets.

Accepted Answer

The depreciable amount would be the $811

Question 15

The exclusive right to sell a computer program is called a copyright.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are needed for the computation of depreciation except

Accepted Answer

A)  residual value. 
B)  estimated useful life. 
C)  cost. 
D)  current market value. 
A)  residual value. 
B)  estimated useful life. 
C)  cost. 
D)  current market value.

Question 17

On January 2, 2009, Topanga Company purchased a machine for $90,000. The machine has a five-year estimated useful life and a $6,000 estimated residual value. In addition, the company expects to use the machine 200,000 hours. Assuming that the machine was used 35,000 hours during 2010, complete the following chart. If a figure cannot be determined, indicate so by placing an X in the box. (Show your work.)

Accepted Answer

@#IMG-DLM&
 a ($90,000 - $6,000) ÷ 5
b $

Question 18

The Land account would include all of the following costs except

Accepted Answer

A)  drainage costs. 
B)  commissions paid to real estate agents. 
C)  the cost of building a fence. 
D)  the cost of tearing down a building. 
A)  drainage costs. 
B)  commissions paid to real estate agents. 
C)  the cost of building a fence. 
D)  the cost of tearing down a building.

Question 19

The Accumulated Depreciation account typically is debited when a(n)

Accepted Answer

A)  betterment has been made. 
B)  ordinary repair has been made. 
C)  extraordinary repair has been made. 
D)  addition has been made. 
A)  betterment has been made. 
B)  ordinary repair has been made. 
C)  extraordinary repair has been made. 
D)  addition has been made.

Question 20

Extraordinary repairs are recorded with a debit to Accumulated Depreciation.

Accepted Answer

A) True 
 B)False

Exam 11: Long Term Assets

Depreciation should not be recorded for a depreciable asset that is increasing in value.

A delivery truck was purchased for $32,000 two years ago. It has a carrying value of $24,000 and an estimated residual value of $4,000. Assuming the use of straight-line depreciation, the truck's estimated useful life must have been

A company purchases an oil well for $200,000. It estimates that the well contains 250,000 barrels, has a ten-year life, and has no salvage value. If the company extracts and sells 20,000 barrels during the first year, how much depletion expense should be recorded?

The replacement of tires on a truck is considered an ordinary repair.

Speedy Printing purchased a new printing press for $80,000. It depreciates the press over a five-year period, using the double-declining-balance method of depreciation. If the press has an $8,000 estimated residual value, calculate depreciation expense for each of the five years. (Show your work.)

Above-average earnings is often the basis for the calculation of goodwill.

In general, a cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost

The cost of repairing a machine damaged during installation should be charged as an operating expense.

Equipment is purchased for $80,000. It has an eight-year useful life and a $42,750 residual value. Under the double-declining-balance method, what is the depreciation expense for year 3?

Which of the following would not be debited to the Machinery account?

Which of the following depreciation methods is the most logical for a machine that produces discrete (i.e., separate) units?

Art obtained a five year sublease and paid $10,000 to the current tenant. The annual cost of the lease is $5,000. The entry to record the lease payment for the first year is:

The exclusive right to sell a computer program is called a copyright.

All of the following are needed for the computation of depreciation except

The Land account would include all of the following costs except

The Accumulated Depreciation account typically is debited when a(n)

Extraordinary repairs are recorded with a debit to Accumulated Depreciation.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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