Question 1

To capitalize an expenditure means charging it to an asset account.

Accepted Answer

A) True 
 B)False

Question 2

Determining cost of plant assets
New equipment was purchased by Hunter Corporation at a list price of $94,000, with credit terms of 2/10, n/30. Payment was made within the discount period and included $7,800 sales tax in addition to the net purchase price. The company also paid delivery charges of $940 and labor costs of $1,380 for installing the new equipment at the appropriate location. During installation, an inexperienced employee punctured several containers with a forklift, causing damage to the equipment. Cost to repair the damage was $1,960. What is the total cost of Hunter's equipment?

Accepted Answer

Cost is $102,240 [$9

Question 3

Which depreciation method is most commonly used among publicly owned corporations?

Accepted Answer

A)  Straight-line. 
B)  Double-declining balance. 
C)  Units-of-output. 
D)  All of the various depreciation methods are used equally. 
A)  Straight-line. 
B)  Double-declining balance. 
C)  Units-of-output. 
D)  All of the various depreciation methods are used equally.

Question 4

The term net identifiable assets means:

Accepted Answer

A)  All assets minus all liabilities. 
B)  All assets except goodwill, minus all liabilities. 
C)  All assets except intangibles, minus all liabilities. 
D)  All fixed assets less liabilities. 
A)  All assets minus all liabilities. 
B)  All assets except goodwill, minus all liabilities. 
C)  All assets except intangibles, minus all liabilities. 
D)  All fixed assets less liabilities.

Question 5

Harvard Company purchased equipment having an invoice price of $11,500. The terms of sale were 2/10, n/30, and Harvard paid within the discount period. In addition, Harvard paid a $160 delivery charge, $185 installation charge, and $931 sales tax. The amount recorded as the cost of this equipment is:

Accepted Answer

A)  $11,845. 
B)  $12,776. 
C)  $11,615. 
D)  $12,546. 
A)  $11,845. 
B)  $12,776. 
C)  $11,615. 
D)  $12,546.

Question 6

All of the following assets are amortized except:

Accepted Answer

A)  Patents. 
B)  Franchises. 
C)  Copyrights. 
D)  Natural resources. 
A)  Patents. 
B)  Franchises. 
C)  Copyrights. 
D)  Natural resources.

Question 7

Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be:

Accepted Answer

A)  $7,500 in 2009 and $11,000 in 2010. 
B)  $6,000 in 2009 and $12,000 in 2010. 
C)  $5,000 in 2009 and $10,000 in 2010. 
D)  $5,500 in 2009 and $11,000 in 2010. 
A)  $7,500 in 2009 and $11,000 in 2010. 
B)  $6,000 in 2009 and $12,000 in 2010. 
C)  $5,000 in 2009 and $10,000 in 2010. 
D)  $5,500 in 2009 and $11,000 in 2010.

Question 8

Refer to the information above. In the year 2015, Tilton Products sells this machinery for $4,500. At the date of sale, the machinery had been depreciated by Tilton Products to its estimated residual value of $8,000. This sale results in:

Accepted Answer

A)  A $3,500 loss in both the company's financial statements and income tax return. 
B)  No gain or loss in either the financial statements or income tax return. 
C)  A $3,500 loss in the financial statements, a $3,500 gain in the income tax return. 
D)  A $3,500 loss in the financial statements, but no gain or loss in the income tax return. 
A)  A $3,500 loss in both the company's financial statements and income tax return. 
B)  No gain or loss in either the financial statements or income tax return. 
C)  A $3,500 loss in the financial statements, a $3,500 gain in the income tax return. 
D)  A $3,500 loss in the financial statements, but no gain or loss in the income tax return.

Question 9

Suffolk Associates sold office furniture for cash of $42,000. The accumulated depreciation at the date of sale amounted to $38,000, and a gain of $18,000 was recognized on the sale. The original cost of the asset must have been:

Accepted Answer

A)  $31,000. 
B)  $62,000. 
C)  $84,000. 
D)  $59,000. 
A)  $31,000. 
B)  $62,000. 
C)  $84,000. 
D)  $59,000.

Question 10

In its financial statements, Shoreham uses double-declining-balance depreciation with half-year convention. The book value of the equipment at December 31, 2009, will be:

Accepted Answer

A)  $20,267. 
B)  $12,667. 
C)  $25,333. 
D)  Some other amount. 
A)  $20,267. 
B)  $12,667. 
C)  $25,333. 
D)  Some other amount.

Question 11

The erroneous recording of a revenue expenditure as a capital expenditure will cause an overstatement of total revenue for the period.

Accepted Answer

A) True 
 B)False

Question 12

Expenditures for research and development intended to lead to new products of commercial value:

Accepted Answer

A)  Should be recorded as intangible assets and amortized during the years in which benefits are expected. 
B)  Should be charged to expense when incurred. 
C)  Should be capitalized only if patents are expected to be granted. 
D)  Should be classified as deferred charges. 
A)  Should be recorded as intangible assets and amortized during the years in which benefits are expected. 
B)  Should be charged to expense when incurred. 
C)  Should be capitalized only if patents are expected to be granted. 
D)  Should be classified as deferred charges.

Question 13

The formula for the double-declining balance method of depreciation is: Remaining book value times the straight line rate is equal to depreciation expense.

Accepted Answer

A) True 
 B)False

Question 14

Glouchester Associates sold office equipment for cash of $142,000. The accumulated depreciation at date of sale amounted to $138,000, and a gain of $18,000 was recognized on the sale. The original cost of the asset must have been:

Accepted Answer

A)  $260,000. 
B)  $262,000. 
C)  $280,000. 
D)  $156,000. 
A)  $260,000. 
B)  $262,000. 
C)  $280,000. 
D)  $156,000.

Question 15

Any reasonable and necessary expenditures to place a newly acquired plant asset in service should be debited to a separate asset account.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

Accepted Answer

A)  Patents. 
B)  Copyrights. 
C)  Land. 
D)  Coal mine. 
A)  Patents. 
B)  Copyrights. 
C)  Land. 
D)  Coal mine.

Question 17

If the 150% declining balance method is being used and an asset has a useful life of 20 years what is the depreciation rate?

Accepted Answer

A)  7.5%. 
B)  10%. 
C)  15%. 
D)  Some other amount. 
A)  7.5%. 
B)  10%. 
C)  15%. 
D)  Some other amount.

Question 18

On April 1, 2010, Sanders Construction paid $10,000 for equipment with an estimated useful life of 10 years and a residual value of $2,000. The company uses the double-declining-balance method of depreciation and applies the half-year convention to fractional periods. In 2011, the amount of depreciation expense to be recognized on this equipment is:

Accepted Answer

A)  $1,600. 
B)  $1,400. 
C)  $1,280. 
D)  Some other amount. 
A)  $1,600. 
B)  $1,400. 
C)  $1,280. 
D)  Some other amount.

Question 19

Lewis Imports sold a depreciable plant asset for cash of $135,000. The accumulated depreciation amounted to $170,000, and a loss of $15,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

Accepted Answer

A)  $120,000. 
B)  $155,000. 
C)  $185,000. 
D)  $320,000. 
A)  $120,000. 
B)  $155,000. 
C)  $185,000. 
D)  $320,000.

Question 20

Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot. In this situation:

Accepted Answer

A)  The purchase price should be apportioned among the Land, Land Improvement, and Building accounts. 
B)  The entire purchase price should be debited to the Plant and Equipment account. 
C)  Land, Land Improvement, and Building accounts should each be debited for the respective appraisal value of each item. 
D)  Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods. 
A)  The purchase price should be apportioned among the Land, Land Improvement, and Building accounts. 
B)  The entire purchase price should be debited to the Plant and Equipment account. 
C)  Land, Land Improvement, and Building accounts should each be debited for the respective appraisal value of each item. 
D)  Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods.

Exam 9: Plant and Intangible Assets

To capitalize an expenditure means charging it to an asset account.

Which depreciation method is most commonly used among publicly owned corporations?

The term net identifiable assets means:

All of the following assets are amortized except:

Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be:

Refer to the information above. In the year 2015, Tilton Products sells this machinery for $4,500. At the date of sale, the machinery had been depreciated by Tilton Products to its estimated residual value of $8,000. This sale results in:

Suffolk Associates sold office furniture for cash of $42,000. The accumulated depreciation at the date of sale amounted to $38,000, and a gain of $18,000 was recognized on the sale. The original cost of the asset must have been:

In its financial statements, Shoreham uses double-declining-balance depreciation with half-year convention. The book value of the equipment at December 31, 2009, will be:

The erroneous recording of a revenue expenditure as a capital expenditure will cause an overstatement of total revenue for the period.

Expenditures for research and development intended to lead to new products of commercial value:

The formula for the double-declining balance method of depreciation is: Remaining book value times the straight line rate is equal to depreciation expense.

Glouchester Associates sold office equipment for cash of $142,000. The accumulated depreciation at date of sale amounted to $138,000, and a gain of $18,000 was recognized on the sale. The original cost of the asset must have been:

Any reasonable and necessary expenditures to place a newly acquired plant asset in service should be debited to a separate asset account.

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

If the 150% declining balance method is being used and an asset has a useful life of 20 years what is the depreciation rate?

Lewis Imports sold a depreciable plant asset for cash of $135,000. The accumulated depreciation amounted to $170,000, and a loss of $15,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot. In this situation:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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