Question 1

Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed.

Accepted Answer

A) True 
 B)False

Question 2

All of the following are possible reasons for using accelerated depreciation except

Accepted Answer

A) greater efficiency of assets when new. 
B) increasing repair costs in later years. 
C) rapid changes in technology. 
D) increasing use of an asset over the years. 
A) greater efficiency of assets when new. 
B) increasing repair costs in later years. 
C) rapid changes in technology. 
D) increasing use of an asset over the years.

Question 3

Whether exchanging similar or dissimilar assets,accounting for the transaction is the same.

Accepted Answer

A) True 
 B)False

Question 4

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

Accepted Answer

A) True 
 B)False

Question 5

Leasehold improvements become the property of the lessor at the end of the lease.

Accepted Answer

A) True 
 B)False

Question 6

Mercado Photography purchased photographic equipment for $75,000.The equipment was to be used for ten years and had a $5,000 estimated residual value.After the company took three years of straight-line depreciation,it decided that the equipment would instead have a $2,000 residual value and a total useful life of eleven years.Calculate depreciation expense that should be recorded in year 4.(Show your work. )

Accepted Answer

$75,000 - $5,000 = $70,000;$70

Question 7

Linkletter obtained a five-year sublease and paid $25,000 to the current tenant on January 1,20X1.The entry to record the transaction is:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would be considered a revenue expenditure?

Accepted Answer

A) Cleaning the ink from a printing press 
B) Addition of a storeroom 
C) Purchase of office furniture 
D) Installation of audiovisual equipment in a classroom 
A) Cleaning the ink from a printing press 
B) Addition of a storeroom 
C) Purchase of office furniture 
D) Installation of audiovisual equipment in a classroom

Question 10

A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been recorded was disposed of on January 1.Assume that the truck was traded for a similar truck having a price of $13,000,that an $1,800 trade-in was allowed,and that the balance was paid in cash.The amount of the gain or loss recognized on this transaction would be

Accepted Answer

A) a $1,200 loss. 
B) a $1,200 gain. 
C) a $2,400 loss. 
D) no gain or loss recognized. 
A) a $1,200 loss. 
B) a $1,200 gain. 
C) a $2,400 loss. 
D) no gain or loss recognized.

Question 11

Which of the following is not a component of free cash flow?

Accepted Answer

A) Purchases of plant assets 
B) Net income 
C) Dividends 
D) Net cash flows from operating activities 
A) Purchases of plant assets 
B) Net income 
C) Dividends 
D) Net cash flows from operating activities

Question 12

If the carrying value of goodwill is more than its fair value,an impairment loss must be recorded.

Accepted Answer

A) True 
 B)False

Question 13

Management has considerable latitude in making judgments and estimates regarding portions of an asset's cost to expense and to retain on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

If a company's free cash flow is $90,000,net cash flows from operating activities total $220,000,purchases of plant assets total $100,000,and sales of plant assets total zero,what amount is committed to dividends?

Accepted Answer

A) $20,000 
B) $30,000 
C) $60,000 
D) Impossible to determine from the facts given. 
A) $20,000 
B) $30,000 
C) $60,000 
D) Impossible to determine from the facts given.

Question 15

The cost of assets acquired for a lump sum should be allocated equally among the acquired assets.

Accepted Answer

A) True 
 B)False

Question 16

Lewis Company purchased a machine for $60,000.The machine has an estimated life of 20,000 hours and no salvage value.The entry to record the depreciation charge under the production method assuming that the machine was used for 4,000 hours is:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 17

The depreciable cost of an asset is

Accepted Answer

A) the unexpired cost of the asset. 
B) original cost minus residual value. 
C) the expired cost of the asset. 
D) original cost minus accumulated depreciation. 
A) the unexpired cost of the asset. 
B) original cost minus residual value. 
C) the expired cost of the asset. 
D) original cost minus accumulated depreciation.

Question 18

Chow Company sold a car for $18,100.The cost of the car was $37,500 and an accumulated depreciation of $20,400 had been recorded on the same.The entry to record the disposal of the car is:

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 19

According to generally accepted accounting principles,the proper accounting treatment of the cost of developing intangible assets is to

Accepted Answer

A) carry the cost as an asset indefinitely. 
B) amortize the cost over five years. 
C) amortize the cost over a reasonable life. 
D) write off the cost immediately. 
A) carry the cost as an asset indefinitely. 
B) amortize the cost over five years. 
C) amortize the cost over a reasonable life. 
D) write off the cost immediately.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Long -Term Assets

Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed.

All of the following are possible reasons for using accelerated depreciation except

Whether exchanging similar or dissimilar assets,accounting for the transaction is the same.

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

Leasehold improvements become the property of the lessor at the end of the lease.

Linkletter obtained a five-year sublease and paid $25,000 to the current tenant on January 1,20X1.The entry to record the transaction is:

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

Which of the following would be considered a revenue expenditure?

Which of the following is not a component of free cash flow?

If the carrying value of goodwill is more than its fair value,an impairment loss must be recorded.

Management has considerable latitude in making judgments and estimates regarding portions of an asset's cost to expense and to retain on the balance sheet.

If a company's free cash flow is $90,000,net cash flows from operating activities total $220,000,purchases of plant assets total $100,000,and sales of plant assets total zero,what amount is committed to dividends?

The cost of assets acquired for a lump sum should be allocated equally among the acquired assets.

Lewis Company purchased a machine for $60,000.The machine has an estimated life of 20,000 hours and no salvage value.The entry to record the depreciation charge under the production method assuming that the machine was used for 4,000 hours is:

The depreciable cost of an asset is

Chow Company sold a car for $18,100.The cost of the car was $37,500 and an accumulated depreciation of $20,400 had been recorded on the same.The entry to record the disposal of the car is:

According to generally accepted accounting principles,the proper accounting treatment of the cost of developing intangible assets is to

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

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

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

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

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 and Capital Budgeting

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