Question 1

The ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.

Accepted Answer

A) book-value 
B) cost 
C) gross margin ratio 
D) relative-sales-value 
A) book-value 
B) cost 
C) gross margin ratio 
D) relative-sales-value

Question 2

On June 5,2019,Mabel Company purchased an oil well for $850,000.The well contains an estimated $85,000 barrels of oil,with an estimated residual value of zero.During July,2019,$25,500 barrels of oil were removed from the well.All of the oil went into inventory.What amount of Depletion Expense is recorded in July,2019? (Round your final answer to the nearest dollar. )

Accepted Answer

A) $0. 
B) $850,000. 
C) $85,000. 
D) $255,000. 
A) $0. 
B) $850,000. 
C) $85,000. 
D) $255,000.

Question 3

If a natural resource is extracted and then immediately sold,which of the following accounts are debited and credited?

Accepted Answer

A) debit Cost of Goods Sold and credit Inventory 
B) debit Natural Resource and credit Accumulated Depletion 
C) debit Depletion Expense and credit Accumulated Depletion 
D) debit Depreciation Expense and credit Accumulated Depreciation 
A) debit Cost of Goods Sold and credit Inventory 
B) debit Natural Resource and credit Accumulated Depletion 
C) debit Depletion Expense and credit Accumulated Depletion 
D) debit Depreciation Expense and credit Accumulated Depreciation

Question 4

Jerry Willis Company purchased equipment on May 1,2019 for $900,000.The residual value is $25,000 and the estimated useful life is 10 years.What is the Depreciation Expense for the year ending December 31,2019,if the company uses the double-declining-balance method? (Round your final answer to the nearest dollar. )

Accepted Answer

A) $90,000 
B) $120,000 
C) $180,000 
D) $87,500 
A) $90,000 
B) $120,000 
C) $180,000 
D) $87,500

Question 5

Book value of a plant asset equals the cost of the asset less the current year's depreciation expense.

Accepted Answer

A) True 
 B)False

Question 6

Marvin Company purchased Marathon Company on August 31st,2016 and recorded goodwill.How will Marvin Company account for this goodwill in future accounting periods?

Accepted Answer

A) Marvin Company will amortize the goodwill over a 40-year life. 
B) If the value of the goodwill increases in subsequent years,Marvin Company will increase the Goodwill account. 
C) If the goodwill is impaired in subsequent years,Marvin Company will decrease the Goodwill account. 
D) Marvin Company is not allowed to change the value of the Goodwill account. 
A) Marvin Company will amortize the goodwill over a 40-year life. 
B) If the value of the goodwill increases in subsequent years,Marvin Company will increase the Goodwill account. 
C) If the goodwill is impaired in subsequent years,Marvin Company will decrease the Goodwill account. 
D) Marvin Company is not allowed to change the value of the Goodwill account.

Question 7

In respect to accounting for depreciation,IFRS uses a "components" approach for assets such as buildings,aircraft,and manufactured equipment.

Accepted Answer

A) True 
 B)False

Question 8

Patents are state government grants that give the holder the exclusive right to produce and sell an invention for 20 years.

Accepted Answer

A) True 
 B)False

Question 9

On January 4,2019,Margaret's Cafe acquired equipment for $147,500.The estimated life of the equipment is 4 years or 42,500 hours.The estimated residual value is $20,000.What is the depreciation for 2019,if Margaret's Cafe uses the asset 14,400 hours and uses the units-of-production method of depreciation?

Accepted Answer

A) $31,875 
B) $43,200 
C) $20,000 
D) $36,875 
A) $31,875 
B) $43,200 
C) $20,000 
D) $36,875

Question 10

Roho Company acquired equipment on July 1,2019,for $100,000.The residual value is $20,000 and the estimated life is 5 years or 40,000 hours.Compute the depreciation expense for the years ending December 31,2019 and December 31,2020 if Roho Company uses the double-declining-balance method of depreciation.

Accepted Answer

A) $40,000 for 2019;$24,000 for 2020 
B) $20,000 for 2019;$32,000 for 2020 
C) $11,000 for 2019;$35,600 for 2020 
D) $5,500 for 2019;$11,000 for 2020 
A) $40,000 for 2019;$24,000 for 2020 
B) $20,000 for 2019;$32,000 for 2020 
C) $11,000 for 2019;$35,600 for 2020 
D) $5,500 for 2019;$11,000 for 2020

Question 11

If a long-term plant asset is impaired,generally accepted accounting principles require the owner to adjust the carrying value downward from its book value to its fair value.

Accepted Answer

A) True 
 B)False

Question 12

The depreciation process follows the revenue recognition principle.

Accepted Answer

A) True 
 B)False

Question 13

The book value of a plant asset is defined as:

Accepted Answer

A) historical cost minus estimated residual value. 
B) historical cost minus accumulated depreciation. 
C) current sales value minus historical cost. 
D) replacement cost minus accumulated depreciation. 
A) historical cost minus estimated residual value. 
B) historical cost minus accumulated depreciation. 
C) current sales value minus historical cost. 
D) replacement cost minus accumulated depreciation.

Question 14

On January 4,2019,David Company paid $250,000 for an oil field that contains an estimated 20,000 barrels of oil.The oil field has no residual value.5,000 barrels are extracted and sold in 2019 and 6,500 barrels are extracted and sold in 2020.
Required:
Prepare all journal entries.Explanations are not required.

Accepted Answer

$250,000 ÷ 20,000 = $12.50 dep

Question 15

What is the distinction between a capital expenditure (for a long-term asset)and an immediate expense?

Accepted Answer

Does the cost extend the asset's useful

Question 16

Major Company purchased equipment to be used in its distribution center.All of the following should be included in the cost of the equipment EXCEPT for:

Accepted Answer

A) insurance while in transit. 
B) wages of workers who test the equipment before it is placed in service. 
C) employee training costs before the equipment is placed in service. 
D) insurance costs after the equipment is up and running. 
A) insurance while in transit. 
B) wages of workers who test the equipment before it is placed in service. 
C) employee training costs before the equipment is placed in service. 
D) insurance costs after the equipment is up and running.

Question 17

Which the following statements regarding accounting for natural resources is INCORRECT?

Accepted Answer

A) Natural resources are often called wasting assets because they are actually physically used up over time. 
B) When the natural resource is extracted,the entity follows an approach much like the straight-line method of depreciation to account for the production. 
C) If all of the natural resource that is extracted is sold,the amount depleted is transferred directly from long-term assets to the income statement as depletion expense. 
D) The portion of the extracted natural resource that is not immediately sold,becomes inventory. 
A) Natural resources are often called wasting assets because they are actually physically used up over time. 
B) When the natural resource is extracted,the entity follows an approach much like the straight-line method of depreciation to account for the production. 
C) If all of the natural resource that is extracted is sold,the amount depleted is transferred directly from long-term assets to the income statement as depletion expense. 
D) The portion of the extracted natural resource that is not immediately sold,becomes inventory.

Question 18

Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives?

Accepted Answer

A) straight-line method 
B) depletion method 
C) double-declining-balance method 
D) units-of-production method 
A) straight-line method 
B) depletion method 
C) double-declining-balance method 
D) units-of-production method

Question 19

The normal balance of the Accumulated Depreciation account is a debit.

Accepted Answer

A) True 
 B)False

Question 20

When compared to the other methods of depreciation,the double-declining-balance method of depreciation gives depreciation expense that is:

Accepted Answer

A) less in the earlier periods. 
B) higher in the earlier periods. 
C) approximately the same in earlier periods as with other methods. 
D) the same from year to year. 
A) less in the earlier periods. 
B) higher in the earlier periods. 
C) approximately the same in earlier periods as with other methods. 
D) the same from year to year.

The ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.

If a natural resource is extracted and then immediately sold,which of the following accounts are debited and credited?

Book value of a plant asset equals the cost of the asset less the current year's depreciation expense.

Marvin Company purchased Marathon Company on August 31st,2016 and recorded goodwill.How will Marvin Company account for this goodwill in future accounting periods?

In respect to accounting for depreciation,IFRS uses a "components" approach for assets such as buildings,aircraft,and manufactured equipment.

Patents are state government grants that give the holder the exclusive right to produce and sell an invention for 20 years.

If a long-term plant asset is impaired,generally accepted accounting principles require the owner to adjust the carrying value downward from its book value to its fair value.

The depreciation process follows the revenue recognition principle.

The book value of a plant asset is defined as:

What is the distinction between a capital expenditure (for a long-term asset)and an immediate expense?

Major Company purchased equipment to be used in its distribution center.All of the following should be included in the cost of the equipment EXCEPT for:

Which the following statements regarding accounting for natural resources is INCORRECT?

Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives?

The normal balance of the Accumulated Depreciation account is a debit.

When compared to the other methods of depreciation,the double-declining-balance method of depreciation gives depreciation expense that is:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters

Exam 7: Plant Assets, natural Resources, Intangibles

The ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.

If a natural resource is extracted and then immediately sold,which of the following accounts are debited and credited?

Book value of a plant asset equals the cost of the asset less the current year's depreciation expense.

Marvin Company purchased Marathon Company on August 31st,2016 and recorded goodwill.How will Marvin Company account for this goodwill in future accounting periods?

In respect to accounting for depreciation,IFRS uses a "components" approach for assets such as buildings,aircraft,and manufactured equipment.

Patents are state government grants that give the holder the exclusive right to produce and sell an invention for 20 years.

If a long-term plant asset is impaired,generally accepted accounting principles require the owner to adjust the carrying value downward from its book value to its fair value.

The depreciation process follows the revenue recognition principle.

The book value of a plant asset is defined as:

What is the distinction between a capital expenditure (for a long-term asset)and an immediate expense?

Major Company purchased equipment to be used in its distribution center.All of the following should be included in the cost of the equipment EXCEPT for:

Which the following statements regarding accounting for natural resources is INCORRECT?

Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives?

The normal balance of the Accumulated Depreciation account is a debit.

When compared to the other methods of depreciation,the double-declining-balance method of depreciation gives depreciation expense that is:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Inventory Cost of Goods Sold

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

Filters