Exam 11: Long Term Assets

Which of the following most appropriately describes depreciation?

An intangible asset with a determinable useful life should be amortized over that useful life.

A reduction in carrying value as a result of impairment is recorded as a loss.

One reason for an asset's limited useful life is obsolescence.

What is goodwill and when may it be recorded?

Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account.

It is necessary to distinguish between capital and revenue expenditures because of which of the following accounting rules or principles?

Rebuilding the engine of a company vehicle is an example of an ordinary repair.

Which of the following would not be included in the cost of land?

Federal tax law allows the rapid write-off of plant assets.

Fair value is the amount for which an asset could be bought or sold in a current transaction.

Plant assets used in conjunction with a natural resource typically are depreciated

The exclusive right to publish and sell a literary, artistic, or musical work is called a

Noncompete covenants should be amortized over the specified life of the contract.

A graph depicting yearly depreciation expense under an accelerated depreciation method will contain a line that goes

If net cash flows from operating activities total $115,000, purchases of plant assets total $30,000, dividends total $12,000, and sales of plant assets total $17,000, the free cash flow equals

Nick purchased a computer for $2,240. It has an estimated useful life of four years and an estimated residual value of $240. The entry to record the depreciation charge for the first year using double declining balance method is:

Prior to the disposal of an asset, depreciation should be updated and recorded.

Free cash flow is a good measure of a company's ability to finance long-term assets.

Indicate whether each of the following expenditures should be classified as land (L), land improvements (LI), buildings (B), equipment (E), or none of these (X). _____ 1. Clearing costs _____ 2. Driveway cost _____ 3. Computer installation cost _____ 4. Architect's fee for building plans _____ 5. Surveying costs _____ 6. Cost of assembly line trial run _____ 7. Property taxes paid after purchase _____ 8. Grading costs _____ 9. Insurance and freight on computer purchased _____ 10. Cost of lighting for parking lot _____ 11. Landscaping cost _____ 12. Material and labor costs incurred to construct factory _____ 13. Cost of tearing down a warehouse on land just purchased _____ 14. Utilities cost during first year _____ 15. Cost of building wing _____ 16. Sales tax on file cabinets purchased _____ 17. Real estate commissions on land purchased _____ 18. Contractor's fee for building construction _____ 19. Cost to put up chain-link fence _____ 20. Accrued taxes on land purchased