Question 1

A building not currently used because economic conditions have limited a company's expansion is classified as an investment.

Accepted Answer

A) True 
 B)False

Question 2

On January 1,2014,Huan Manufacturing Company purchased for $94,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of five years and an estimated residual value of $4,000.Calculate the following amounts: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2015,under the production method (assume that 13,000 units were produced that year);and (c)accumulated depreciation at the end of 2015,under the double-declining-balance method.(Show your work. )

Accepted Answer

a.$31,000 [($94,000 - $4,000)@#LAT-DLM& 5 = $18,00

Question 3

Which of the following is not a characteristic of all long-term assets?

Accepted Answer

A) Possess physical substance 
B) Not for resale 
C) Used in operations of business 
D) Useful life of more than a year 
A) Possess physical substance 
B) Not for resale 
C) Used in operations of business 
D) Useful life of more than a year

Question 4

All of the following are used in estimating a depreciable asset's useful life except

Accepted Answer

A) the asset's present condition. 
B) the useful life required by the government for tax purposes. 
C) experience with similar assets. 
D) current technology and industry trends. 
A) the asset's present condition. 
B) the useful life required by the government for tax purposes. 
C) experience with similar assets. 
D) current technology and industry trends.

Question 5

A revenue expenditure results in a

Accepted Answer

A) debit to an expense account. 
B) credit to an expense account. 
C) debit to an asset account. 
D) credit to an asset account. 
A) debit to an expense account. 
B) credit to an expense account. 
C) debit to an asset account. 
D) credit to an asset account.

Question 6

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

Accepted Answer

A) True 
 B)False

Question 7

When an asset lasts longer than its estimated useful life,depreciation no longer should be recorded.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is irrelevant in computing a machine's depreciation expense using the production method?

Accepted Answer

A) Actual units produced in a given period 
B) Residual value 
C) Estimated useful life in years 
D) Estimated units produced over its life 
A) Actual units produced in a given period 
B) Residual value 
C) Estimated useful life in years 
D) Estimated units produced over its life

Question 9

A contract limiting the rights of others to go into business in a specific industry or line of business for a specified period is called a

Accepted Answer

A) noncompete covenant. 
B) patent. 
C) copyright. 
D) trademark. 
A) noncompete covenant. 
B) patent. 
C) copyright. 
D) trademark.

Question 10

Improperly classifying large expenditures as assets rather than expenses

Accepted Answer

A) could constitute fraud. 
B) understates income for the period. 
C) understates equity on the balance sheet. 
D) results in none of these options. 
A) could constitute fraud. 
B) understates income for the period. 
C) understates equity on the balance sheet. 
D) results in none of these options.

Question 11

Overestimating the number of tons of a mineral that can be mined over a mineral deposit's life will result in

Accepted Answer

A) understated total assets each year. 
B) understated net income each year. 
C) understated depletion expense each year. 
D) no effect on total assets each year. 
A) understated total assets each year. 
B) understated net income each year. 
C) understated depletion expense each year. 
D) no effect on total assets each year.

Question 12

Boulder Company had net cash flows of $150,000 from operating activities.It extended $60,000 for purchases of plant assets,sold plant assets for $5,000,and paid dividends of $70,000.The company's free cash flow is

Accepted Answer

A) $25,000. 
B) $50,000. 
C) $60,000. 
D) $75,000. 
A) $25,000. 
B) $50,000. 
C) $60,000. 
D) $75,000.

Question 13

Equipment is purchased for $40,000.It has an eight-year useful life and a $21,375 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?

Accepted Answer

A) $875 
B) $1,125 
C) $1,375 
D) $5,625 
A) $875 
B) $1,125 
C) $1,375 
D) $5,625

Question 14

Carrying value

Accepted Answer

A) equals cost minus accumulated depreciation. 
B) equals cost minus residual value. 
C) is the expired cost of an asset. 
D) is the same as residual value. 
A) equals cost minus accumulated depreciation. 
B) equals cost minus residual value. 
C) is the expired cost of an asset. 
D) is the same as residual value.

Question 15

The unexpired cost of a plant asset is referred to as its

Accepted Answer

A) depreciable cost. 
B) carrying value. 
C) accumulated depreciation. 
D) original cost. 
A) depreciable cost. 
B) carrying value. 
C) accumulated depreciation. 
D) original cost.

Question 16

Depreciation is a process of allocation,not of valuation.

Accepted Answer

A) True 
 B)False

Question 17

When an extraordinary repair has been made to equipment,which of the following accounts is debited?

Accepted Answer

A) Extraordinary Repairs 
B) Equipment 
C) Accumulated Deprecation 
D) Cash 
A) Extraordinary Repairs 
B) Equipment 
C) Accumulated Deprecation 
D) Cash

Question 18

What is goodwill and when may it be recorded?

Accepted Answer

Goodwill represents the excess

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) Matching 
B) Full disclosure 
C) Materiality 
D) Consistency 
A) Matching 
B) Full disclosure 
C) Materiality 
D) Consistency

Exam 9: Long-Term Assets

A building not currently used because economic conditions have limited a company's expansion is classified as an investment.

Which of the following is not a characteristic of all long-term assets?

All of the following are used in estimating a depreciable asset's useful life except

A revenue expenditure results in a

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

When an asset lasts longer than its estimated useful life,depreciation no longer should be recorded.

Which of the following is irrelevant in computing a machine's depreciation expense using the production method?

A contract limiting the rights of others to go into business in a specific industry or line of business for a specified period is called a

Improperly classifying large expenditures as assets rather than expenses

Overestimating the number of tons of a mineral that can be mined over a mineral deposit's life will result in

Boulder Company had net cash flows of $150,000 from operating activities.It extended $60,000 for purchases of plant assets,sold plant assets for $5,000,and paid dividends of $70,000.The company's free cash flow is

Equipment is purchased for $40,000.It has an eight-year useful life and a $21,375 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?

Carrying value

The unexpired cost of a plant asset is referred to as its

Depreciation is a process of allocation,not of valuation.

When an extraordinary repair has been made to equipment,which of the following accounts is debited?

What is goodwill and when may it be recorded?

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

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

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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