Question 1

Component accounting is mandated under both IFRS and ASPE.

Accepted Answer

A) True 
 B)False

Question 2

Costs of reinstalling or rearranging factory machinery to attain greater productive efficiency should be:

Accepted Answer

A)  treated as a correction of prior years' errors. 
B)  expensed in the period in which the outlays occur. 
C)  debited to related accumulated amortization accounts with no change in the amortization rate. 
D)  capitalized, then amortized during current and subsequent accounting periods. 
A)  treated as a correction of prior years' errors. 
B)  expensed in the period in which the outlays occur. 
C)  debited to related accumulated amortization accounts with no change in the amortization rate. 
D)  capitalized, then amortized during current and subsequent accounting periods.

Question 3

A firm currently occupies a facility on land it also owns. The firm decides to raze this facility and in its place construct a new state-of-the-art complex. The gross cost to raze the old facility is $100,000 but the firm was able to sell some of the salvage material for $15,000. The book value of the old facility was $30,000 before demolition. What is the recognized loss on the old facility?

Accepted Answer

A)  Zero; the loss is capitalized as part of the new complex 
B)  $85,000 
C)  $115,000 
D)  $130,000 
E)  $15,000 
A)  Zero; the loss is capitalized as part of the new complex 
B)  $85,000 
C)  $115,000 
D)  $130,000 
E)  $15,000

Question 4

MC exchanged one of its milling machines, which had cost $60,000 and on which amortization of $50,000 had been recorded for a smaller milling machine with a firm cash asking price of $14,000. MC received a cash difference (boot) of $6,000.
(A) Give the entry on MC's books to record the exchange.
(B) Refer to the data given immediately above. Assume the same facts, except that MC paid cash boot of $6,000. Record the exchange on MC's books.

Accepted Answer

The answer of MC exchanged one of its milling machines,...

Question 5

Goodwill is measured as the excess of the price paid for an entity in excess of total market value of the identifiable net assets of the purchased entity.

Accepted Answer

A) True 
 B)False

Question 6

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be:

Accepted Answer

A)  added to the cost of the plant. 
B)  amortized over the estimated time period between the tearing down of the building and the completion of the plant. 
C)  expensed as incurred. 
D)  added to the cost of the land. 
A)  added to the cost of the plant. 
B)  amortized over the estimated time period between the tearing down of the building and the completion of the plant. 
C)  expensed as incurred. 
D)  added to the cost of the land.

Question 7

ABC Inc. is a public entity which applies the Fair Value Model to all of its Investment property. On January 1, Year 1, the company purchased Land held for resale for $120,000. This land was independently appraised at $100,000 on December 31st, Year 1. The year-end adjusting journal entry would include:

Accepted Answer

A)  a loss of $20,000. 
B)  a debit to Revaluation surplus - OCI- Land. 
C)  a credit to depreciation expense of $20,000. 
D)  a debit to contributed surplus of $20,000. 
A)  a loss of $20,000. 
B)  a debit to Revaluation surplus - OCI- Land. 
C)  a credit to depreciation expense of $20,000. 
D)  a debit to contributed surplus of $20,000.

Question 8

An intangible asset is usually amortized by a direct credit to the related asset account.

Accepted Answer

A) True 
 B)False

Question 9

EC exchanged an old widget-making machine (Model A) that originally cost $46,000 (accumulated amortization, $37,400) plus $10,000 cash for an improved widget-making machine (model B) owned by IC. IC originally acquired the Model B machine for $77,000 (accumulated amortization to date, $42,000). EC's machine has a current market value of $5,000 and IC's has a current market value of $20,000. These are similar assets. EC should record the cost of the Model B widget-making machine acquired at:

Accepted Answer

A)  $15,000. 
B)  $17,600. 
C)  $18,600. 
D)  $20,000. 
A)  $15,000. 
B)  $17,600. 
C)  $18,600. 
D)  $20,000.

Question 10

Intangible assets have all of the following characteristics, except:

Accepted Answer

A)  their ownership 
B)  confers rights, but no physical substance. 
C)  they provide benefits to current operations only. 
D)  they are relatively long-lived. 
E)  they have no physical substance. 
A)  their ownership 
B)  confers rights, but no physical substance. 
C)  they provide benefits to current operations only. 
D)  they are relatively long-lived. 
E)  they have no physical substance.

Question 11

Capitalization of involuntary safety costs is mandatory under IFRS but not under ASPE.

Accepted Answer

A) True 
 B)False

Question 12

Involuntary safety costs must always be capitalized under both IFRS and ASPE.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following confers exclusive right to conduct business in a particular territory?

Accepted Answer

A)  Leasehold 
B)  Trademark 
C)  Franchise 
D)  Patent 
E)  Copyright 
A)  Leasehold 
B)  Trademark 
C)  Franchise 
D)  Patent 
E)  Copyright

Question 14

Plant assets may properly include:

Accepted Answer

A)  property held for investment purposes. 
B)  land held for possible use as a future plant site. 
C)  deposits on machinery purchased and not yet received. 
D)  idle equipment awaiting sale. 
E)  self-constructed assets currently in use. 
A)  property held for investment purposes. 
B)  land held for possible use as a future plant site. 
C)  deposits on machinery purchased and not yet received. 
D)  idle equipment awaiting sale. 
E)  self-constructed assets currently in use.

Question 15

DC bought Assets A, B, and C for a total cash price of $324,000. The assets were reflected in the accounts of the seller as follows: A, $75,000, B, $60,000, and C, $65,000. The property tax assessments were: A, $15,000, B, $4,000, and C, $6,000. Because the tax assessments were made by untrained people, they bear little resemblance to actual market prices. An independent and competent appraisal showed the following: A, $105,000, B, $70,000, and C, $95,000. DC should record the costs of the assets as follows: $$\begin{array} { | l | l | l | } 
\hline \text { Asset A } & \text { Asset B } & \text { Asset C } \
\hline 1 \$ 108,000 & \$ 108,000 & \$ 108,000 \
\hline 2126,000 & 84,000 & 114,000 \
\hline 3105,000 & 70,000 & 95,000 \
\hline 475,000 & 60,000 & 65,000 \
\hline
\end{array}$$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4

Question 16

RJ owns a used crane that was originally purchased on August 1, 2012, for $180,000. Straight-line monthly amortization has been recorded on the basis of an estimated useful life of 5 years and no residual value. On January 31, 2015, RJ sold the crane for $92,000 cash. The pre-tax gain (loss) on the disposal was:

Accepted Answer

A)  $88,000 loss. 
B)  $-0- 
C)  $2,000 gain. 
D)  $4,000 gain. 
A)  $88,000 loss. 
B)  $-0- 
C)  $2,000 gain. 
D)  $4,000 gain.

Question 17

The cost of self-constructed assets includes a reasonable allowance for overhead specific to the construction, and this overhead should be applied at a rate approximating practical capacity.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would Bezel, Inc. capitalize to land?

Accepted Answer

A)  Cost to excavate a foundation for a building to be constructed on the land owned by Bezel 
B)  Cost to raze an old building owned by Bezel 
C)  Cost to raze an old building on land just purchased by Bezel 
D)  Cost to pave a parking lot on land owned by Bezel 
A)  Cost to excavate a foundation for a building to be constructed on the land owned by Bezel 
B)  Cost to raze an old building owned by Bezel 
C)  Cost to raze an old building on land just purchased by Bezel 
D)  Cost to pave a parking lot on land owned by Bezel

Question 19

A firm received an asset as a donation from a shareholder. However, the shareholder imposed a condition to be met before title transfers to the firm. The firm will be unable to meet the condition during the current fiscal year. How should the firm account for this donated asset?

Accepted Answer

A)  Debit a liability 
B)  No recognition is necessary until the condition is met 
C)  Credit revenue 
D)  Credit a liability 
A)  Debit a liability 
B)  No recognition is necessary until the condition is met 
C)  Credit revenue 
D)  Credit a liability

Question 20

The lack of Goodwill on a company's financial statements indicates poor earnings potential.

Accepted Answer

A) True 
 B)False

Component accounting is mandated under both IFRS and ASPE.

Costs of reinstalling or rearranging factory machinery to attain greater productive efficiency should be:

Goodwill is measured as the excess of the price paid for an entity in excess of total market value of the identifiable net assets of the purchased entity.

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be:

An intangible asset is usually amortized by a direct credit to the related asset account.

Intangible assets have all of the following characteristics, except:

Capitalization of involuntary safety costs is mandatory under IFRS but not under ASPE.

Involuntary safety costs must always be capitalized under both IFRS and ASPE.

Which of the following confers exclusive right to conduct business in a particular territory?

Plant assets may properly include:

The cost of self-constructed assets includes a reasonable allowance for overhead specific to the construction, and this overhead should be applied at a rate approximating practical capacity.

Which of the following would Bezel, Inc. capitalize to land?

A firm received an asset as a donation from a shareholder. However, the shareholder imposed a condition to be met before title transfers to the firm. The firm will be unable to meet the condition during the current fiscal year. How should the firm account for this donated asset?

The lack of Goodwill on a company's financial statements indicates poor earnings potential.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 9: Long-Lived Assets

Component accounting is mandated under both IFRS and ASPE.

Costs of reinstalling or rearranging factory machinery to attain greater productive efficiency should be:

Goodwill is measured as the excess of the price paid for an entity in excess of total market value of the identifiable net assets of the purchased entity.

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be:

An intangible asset is usually amortized by a direct credit to the related asset account.

Intangible assets have all of the following characteristics, except:

Capitalization of involuntary safety costs is mandatory under IFRS but not under ASPE.

Involuntary safety costs must always be capitalized under both IFRS and ASPE.

Which of the following confers exclusive right to conduct business in a particular territory?

Plant assets may properly include:

The cost of self-constructed assets includes a reasonable allowance for overhead specific to the construction, and this overhead should be applied at a rate approximating practical capacity.

Which of the following would Bezel, Inc. capitalize to land?

A firm received an asset as a donation from a shareholder. However, the shareholder imposed a condition to be met before title transfers to the firm. The firm will be unable to meet the condition during the current fiscal year. How should the firm account for this donated asset?

The lack of Goodwill on a company's financial statements indicates poor earnings potential.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters