Question 1

Explain how a choice of depreciation methods will have an impact on financial performance measures. Give one example.

Accepted Answer

If one firm uses straight line and anoth

Question 2

On September 10, 2014, Barden Company sold a piece of equipment for $3,000. The equipment had an original cost of $17,000 and accumulated depreciation of $15,500 at the time of the sale. Which of the following correctly shows the effect of the sale on the 2014 financial statements?

Accepted Answer

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

Question 3

On January 1, 2014, Ziskin Company spent $3,000 on an asset to improve its quality. The asset had been purchased on January 1, 2009 for $14,000. The asset had a $2,000 salvage value and a 6-year life. Ziskin uses straight-line depreciation. What would be the book value of the asset on January 1, 2015?

Accepted Answer

A)  $11,000. 
B)  $8,000. 
C)  $6,000. 
D)  $7,200. 
A)  $11,000. 
B)  $8,000. 
C)  $6,000. 
D)  $7,200.

Question 4

Depletion is the process of expensing intangible assets.

Accepted Answer

A) True 
 B)False

Question 5

Zabinski Co. paid $150,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $20,000, Building, $150,000, and Office furniture, $30,000. Based on this information the cost that would be allocated to the land is

Accepted Answer

A)  $17,500. 
B)  $20,000. 
C)  $25,000. 
D)  $15,000. 
A)  $17,500. 
B)  $20,000. 
C)  $25,000. 
D)  $15,000.

Question 6

On January 1, 2014, Stassi Corporation purchased equipment for $25,000. A discount of 2% was granted on the equipment; the shipping terms were FOB Shipping Point, and the shipping cost was $1,500; installation and testing amounted to $1,000. The equipment had an estimated useful life of 4 years and salvage value of $4,000. At the beginning of 2016, Stassi revised the expected life of the asset to six years and the salvage value to $5,000.
Required:
Compute the depreciation expense using straight-line method for each of the six years.

Accepted Answer

Original cost basis = $25,000 - 500 + 1,

Question 7

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
The XYZ Company purchased the ABC Company for $520,000 cash. ABC's assets had been appraised at $410,000. ABC had liabilities of $40,000, which XYZ assumed. How would the purchase of ABC affect XYZ's financial statements? $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Question 8

A substantial amount spent to improve the quality or extend the life of a long-term asset is a revenue expenditure.

Accepted Answer

A) True 
 B)False

Question 9

Give an example of a type of industry that requires a company to have a large amount of operational assets.

Accepted Answer

Some businesses use more depreciable ass

Question 10

On January 1, 2014, Santa Fe Company purchased a truck that cost $34,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. Based on this information alone:

Accepted Answer

A)  The amount of depreciation expense recognized in 2015 would be greater if Santa Fe depreciates the asset under the straight-line method than if the double declining balance method is used. 
B)  The total amount of depreciation expense recognized over the five year useful life will be greater under the double declining balance method than the straight-line method. 
C)  At the end of 2015, the amount in accumulated depreciation account will be less if the double declining balance method is used than it would be if the straight-line method is used. 
D)  The amount of depreciation expense recognized in 2015 would be greater if Santa Fe depreciates the asset under the straight-line method than if the double declining balance method is used and at the end of 2015, the amount in accumulated depreciation account will be less if the double declining balance method is used than it would be if the straight-line method is used. 
A)  The amount of depreciation expense recognized in 2015 would be greater if Santa Fe depreciates the asset under the straight-line method than if the double declining balance method is used. 
B)  The total amount of depreciation expense recognized over the five year useful life will be greater under the double declining balance method than the straight-line method. 
C)  At the end of 2015, the amount in accumulated depreciation account will be less if the double declining balance method is used than it would be if the straight-line method is used. 
D)  The amount of depreciation expense recognized in 2015 would be greater if Santa Fe depreciates the asset under the straight-line method than if the double declining balance method is used and at the end of 2015, the amount in accumulated depreciation account will be less if the double declining balance method is used than it would be if the straight-line method is used.

Question 11

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
Stanton Company recognized $5,000 of depreciation expense. $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Question 12

A trademark has a total legal and useful life of 50 years.

Accepted Answer

A) True 
 B)False

Question 13

Indicate whether each of the following statements is true or false.
1. The amount recorded in a Trademark account includes the cost to develop the trademark and to defend it
2. GAAP requires that research and development costs be capitalized and allocated over a reasonable period of time
3. Intangible assets generally are depreciated using the double declining-balance method
4. A trademark has an indefinite legal lifetime
5. The entry to record the amortization of a patent includes recognition of an expense

Accepted Answer

1. True
2.

Question 14

Which of the following statements is true with regard to depreciation expense?

Accepted Answer

A)  A company should use the depreciation method that best matches expense recognition with the use of the asset. 
B)  A company using straight line will show a smaller book value for assets than if the same company uses double declining balance. 
C)  Choosing double declining balance over straight line will produce a greater total depreciation expense over the asset's life. 
D)  Different companies in the same industry will always depreciate similar assets by the same methods. 
A)  A company should use the depreciation method that best matches expense recognition with the use of the asset. 
B)  A company using straight line will show a smaller book value for assets than if the same company uses double declining balance. 
C)  Choosing double declining balance over straight line will produce a greater total depreciation expense over the asset's life. 
D)  Different companies in the same industry will always depreciate similar assets by the same methods.

Question 15

Rodriquez Company paid $375,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture, $75,000; Building, $320,000; Land, $36,000. Based on this information the amount of cost that would be allocated to the office furniture is

Accepted Answer

A)  $58,250. 
B)  $65,255. 
C)  $75,000. 
D)  $78,422. 
A)  $58,250. 
B)  $65,255. 
C)  $75,000. 
D)  $78,422.

Question 16

Mobley Company purchased an asset with a list price of $35,000. Mobley received a 2% cash discount. The asset was delivered under terms FOB shipping point, and freight costs amounted to $700. Mobley paid $1,500 to have the asset installed. Insurance costs to protect the asset from fire and theft amounted to $400 for the first year of operations. Based on this information, the cost recorded in the asset account would be

Accepted Answer

A)  $36,500. 
B)  $36,900. 
C)  $35,000. 
D)  $35,800. 
A)  $36,500. 
B)  $36,900. 
C)  $35,000. 
D)  $35,800.

Question 17

Which of the following is an intangible asset with an identifiable useful life?

Accepted Answer

A)  copyrights 
B)  renewable franchises 
C)  goodwill 
D)  trademarks 
A)  copyrights 
B)  renewable franchises 
C)  goodwill 
D)  trademarks

Question 18

Which of the following assets is not considered to have an indefinite useful life?

Accepted Answer

A)  copyright 
B)  goodwill 
C)  renewable franchise 
D)  trademark 
A)  copyright 
B)  goodwill 
C)  renewable franchise 
D)  trademark

Question 19

When a building is purchased simultaneously with land, the purchase price must be allocated between the building and the land.

Accepted Answer

A) True 
 B)False

Question 20

For what types of assets is the recognition of expense called "amortization?"

Accepted Answer

The answer of For what types of assets is the...

Explain how a choice of depreciation methods will have an impact on financial performance measures. Give one example.

On September 10, 2014, Barden Company sold a piece of equipment for $3,000. The equipment had an original cost of $17,000 and accumulated depreciation of $15,500 at the time of the sale. Which of the following correctly shows the effect of the sale on the 2014 financial statements?

Depletion is the process of expensing intangible assets.

A substantial amount spent to improve the quality or extend the life of a long-term asset is a revenue expenditure.

Give an example of a type of industry that requires a company to have a large amount of operational assets.

On January 1, 2014, Santa Fe Company purchased a truck that cost $34,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. Based on this information alone:

A trademark has a total legal and useful life of 50 years.

Which of the following statements is true with regard to depreciation expense?

Which of the following is an intangible asset with an identifiable useful life?

Which of the following assets is not considered to have an indefinite useful life?

When a building is purchased simultaneously with land, the purchase price must be allocated between the building and the land.

For what types of assets is the recognition of expense called "amortization?"

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 6: Accounting for Long-Term Operational Assets

Explain how a choice of depreciation methods will have an impact on financial performance measures. Give one example.

On September 10, 2014, Barden Company sold a piece of equipment for $3,000. The equipment had an original cost of $17,000 and accumulated depreciation of $15,500 at the time of the sale. Which of the following correctly shows the effect of the sale on the 2014 financial statements?

Depletion is the process of expensing intangible assets.

A substantial amount spent to improve the quality or extend the life of a long-term asset is a revenue expenditure.

Give an example of a type of industry that requires a company to have a large amount of operational assets.

On January 1, 2014, Santa Fe Company purchased a truck that cost $34,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. Based on this information alone:

A trademark has a total legal and useful life of 50 years.

Which of the following statements is true with regard to depreciation expense?

Which of the following is an intangible asset with an identifiable useful life?

Which of the following assets is not considered to have an indefinite useful life?

When a building is purchased simultaneously with land, the purchase price must be allocated between the building and the land.

For what types of assets is the recognition of expense called "amortization?"

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters