Question 1

Which of the following statements about MACRS is not correct?

Accepted Answer

A) MACRS is the only accelerated depreciation method that may be used on newly acquired assets for federal income tax purposes. 
B) The method permits "depreciating" the asset to a tax basis of $0 over a specified recovery period. 
C) If a company uses MACRS in its income tax returns,it also must use MACRS in its financial statements. 
D) Most businesses would benefit from using MACRS rather than straight-line depreciation in their income tax returns. 
A) MACRS is the only accelerated depreciation method that may be used on newly acquired assets for federal income tax purposes. 
B) The method permits "depreciating" the asset to a tax basis of $0 over a specified recovery period. 
C) If a company uses MACRS in its income tax returns,it also must use MACRS in its financial statements. 
D) Most businesses would benefit from using MACRS rather than straight-line depreciation in their income tax returns.

Question 2

For the financial statements of publicly traded companies,MACRS:

Accepted Answer

A) Is recommended. 
B) Is required. 
C) Is optional. 
D) Is not considered to be in conformity with GAAP. 
A) Is recommended. 
B) Is required. 
C) Is optional. 
D) Is not considered to be in conformity with GAAP.

Question 3

Goodwill-financial reporting considerations
Cabot Corporation's balance sheet at December 31,2015,includes an asset entitled goodwill in the amount of $900,000.
(a)Briefly explain what is meant by the term goodwill.
(b)Under what circumstances is goodwill recorded in the accounting records? Include in your Answer a specific situation in which Cabot would have recorded the goodwill mentioned above.

Accepted Answer

(a)Goodwill is an intangible asset; the

Question 4

The rule of consistency is violated when a company uses one method of depreciation for financial statements and another method of depreciation for tax purposes.

Accepted Answer

A) True 
 B)False

Question 5

A capital expenditure is charged to owners' capital.

Accepted Answer

A) True 
 B)False

Question 6

An asset which costs $28,800 and has accumulated depreciation of $6,000 is sold for $21,600.What amount of gain or loss will be recognized when the asset is sold?

Accepted Answer

A) A gain of $1,200. 
B) A loss of $1,200. 
C) A loss of $7,200. 
D) A gain of $7,200. 
A) A gain of $1,200. 
B) A loss of $1,200. 
C) A loss of $7,200. 
D) A gain of $7,200.

Question 7

Under international accounting standards,companies may revalue their plant and equipment rather than using historical cost throughout the assets' lives.

Accepted Answer

A) True 
 B)False

Question 8

The entry to record amortization on a copyright would include:

Accepted Answer

A) A debit to amortization expense. 
B) A debit to accumulated amortization. 
C) A debit to copyright. 
D) A credit to amortization expense. 
A) A debit to amortization expense. 
B) A debit to accumulated amortization. 
C) A debit to copyright. 
D) A credit to amortization expense.

Question 9

Charging an expenditure directly to an expense account is based on the assumption that the benefits of that expenditure have been used up in the current period.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Depreciation in financial statements
Dynasty Co.uses straight-line depreciation in its financial statements,with depreciation for a partial year rounded to the nearest full month.
On September 28,2011 Dynasty purchased equipment at a cost of $140,000.For financial reporting purposes,the useful life of this equipment was estimated at 5 years,with a $30,000 salvage value.
Compute the depreciation expense relating to this equipment that Dynasty will recognize in its financial statements in the following years.If no depreciation will be recognized in a particular year,write zero.

Accepted Answer

The answer of Depreciation in financial statements
Dynasty Co.uses straight-line depreciation...

Question 12

Effects of depreciation on income and cash flows
In its financial statements,Flysafe Airlines has for many years depreciated its aircraft over an estimated useful life of 12 years.In preparing this year's financial statements,management decided to revise the estimate from 12 years to 15.Briefly explain how this revision in estimated life is likely to affect this year's:
(a)Net income.
(b)Net cash flow.
(c)Taxable income.

Accepted Answer

(a)By increasing the estimated useful li

Question 13

Yale Company purchased equipment having an invoice price of $21,500.The terms of sale were 2/10,n/30,and Yale paid within the discount period.In addition,Yale paid a $320 delivery charge,$350 installation charge,and $1,183 sales tax.The amount recorded as the cost of this equipment is:

Accepted Answer

A) $21,070. 
B) $21,500. 
C) $21,740. 
D) $22,923. 
A) $21,070. 
B) $21,500. 
C) $21,740. 
D) $22,923.

Question 14

When a company uses straight-line depreciation and the half-year convention,assets with a five-year life:

Accepted Answer

A) Will have the same depreciation expense in the first and last years. 
B) Will be depreciated over six accounting years. 
C) Will have a book value that exceeds its salvage value at the end of its economic life. 
D) All of these statements are correct. 
A) Will have the same depreciation expense in the first and last years. 
B) Will be depreciated over six accounting years. 
C) Will have a book value that exceeds its salvage value at the end of its economic life. 
D) All of these statements are correct.

Question 15

Assets are shown in the balance sheet at their book value.

Accepted Answer

A) True 
 B)False

Question 16

Book value represents the cost of an asset that has already been allocated to expense.

Accepted Answer

A) True 
 B)False

Question 17

Under the half-year convention,six months' depreciation is recorded on an asset in the year of acquisition and in the year of retirement regardless of the month in which the asset is actually purchased or retired.

Accepted Answer

A) True 
 B)False

Question 18

If an accelerated depreciation method is used for an asset with a useful life of five years,more depreciation expense would be recorded in the third year than in the fifth year.

Accepted Answer

A) True 
 B)False

Question 19

The fair market value of Lewis Company's net identifiable assets is $5,000,000.Martin Corporation purchases Lewis' entire business for $5,800,000.Which of the following statements is not correct?

Accepted Answer

A) Martin Corporation paid $800,000 for goodwill generated by Lewis Company. 
B) Martin feels that Lewis Company has the ability to generate earnings in excess of a normal return on net identifiable assets. 
C) Martin will record amortization expense over a period not to exceed 40 years. 
D) Martin Corporation will record $800,000 to goodwill,an intangible asset,which will be reported in its balance sheet. 
A) Martin Corporation paid $800,000 for goodwill generated by Lewis Company. 
B) Martin feels that Lewis Company has the ability to generate earnings in excess of a normal return on net identifiable assets. 
C) Martin will record amortization expense over a period not to exceed 40 years. 
D) Martin Corporation will record $800,000 to goodwill,an intangible asset,which will be reported in its balance sheet.

Question 20

Maintenance and fuel costs are types of revenue expenditures.

Accepted Answer

A) True 
 B)False

Exam 9: Plant and Intangible Assets

Which of the following statements about MACRS is not correct?

For the financial statements of publicly traded companies,MACRS:

The rule of consistency is violated when a company uses one method of depreciation for financial statements and another method of depreciation for tax purposes.

A capital expenditure is charged to owners' capital.

An asset which costs $28,800 and has accumulated depreciation of $6,000 is sold for $21,600.What amount of gain or loss will be recognized when the asset is sold?

Under international accounting standards,companies may revalue their plant and equipment rather than using historical cost throughout the assets' lives.

The entry to record amortization on a copyright would include:

Charging an expenditure directly to an expense account is based on the assumption that the benefits of that expenditure have been used up in the current period.

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

Yale Company purchased equipment having an invoice price of $21,500.The terms of sale were 2/10,n/30,and Yale paid within the discount period.In addition,Yale paid a $320 delivery charge,$350 installation charge,and $1,183 sales tax.The amount recorded as the cost of this equipment is:

When a company uses straight-line depreciation and the half-year convention,assets with a five-year life:

Assets are shown in the balance sheet at their book value.

Book value represents the cost of an asset that has already been allocated to expense.

Under the half-year convention,six months' depreciation is recorded on an asset in the year of acquisition and in the year of retirement regardless of the month in which the asset is actually purchased or retired.

If an accelerated depreciation method is used for an asset with a useful life of five years,more depreciation expense would be recorded in the third year than in the fifth year.

The fair market value of Lewis Company's net identifiable assets is $5,000,000.Martin Corporation purchases Lewis' entire business for $5,800,000.Which of the following statements is not correct?

Maintenance and fuel costs are types of revenue expenditures.

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

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