Question 1

Depreciation measures the actual decline in market value of an asset.

Accepted Answer

A) True 
 B)False

Question 2

Another name for a capital expenditure is:

Accepted Answer

A)  Revenue expenditure. 
B)  Asset expenditure. 
C)  Long-term expenditure. 
D)  Contributed capital expenditure. 
E)  Balance sheet expenditure. 
A)  Revenue expenditure. 
B)  Asset expenditure. 
C)  Long-term expenditure. 
D)  Contributed capital expenditure. 
E)  Balance sheet expenditure.

Question 3

A company purchased an equipment system for $325,000 on January 2. The company expects the equipment to last for eight years or 60,000 hours of operation, with an estimated residual value of $25,000. During the first year, the equipment was in operation for 8,000 hours, while in the second year, the equipment was in operation for 8,700 hours. Compute the depreciation expense relating to the equipment for Year 1 and Year 2 using the following depreciation methods:
a. Straight-line.
b. Double-declining-balance.
c. Units-of-production.

Accepted Answer

a. ($325,000 - $25,000)/8 = $37,500 for

Question 4

Heidel Co. paid $750,000 cash to buy the property, plant and equipment of Rogers Co. that went out of business. An independent appraiser assigned the following values to the assets acquired:
Prepare Heidel's journal entry to record the acquisition of these assets.

Accepted Answer

The answer of Heidel Co. paid $750,000 cash to buy...

Question 5

Land improvements are:

Accepted Answer

A)  Assets that increase the usefulness of land, and like land, are not depreciated. 
B)  Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. 
C)  Included in the cost of the land account. 
D)  Expensed in the period incurred. 
E)  Also called basket purchases. 
A)  Assets that increase the usefulness of land, and like land, are not depreciated. 
B)  Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. 
C)  Included in the cost of the land account. 
D)  Expensed in the period incurred. 
E)  Also called basket purchases.

Question 6

A new machine is expected to produce 600,000 units of product during its 8-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 residual value.
1. Calculate the depreciation if the machine produces 70,000 units of product during its first year, using the units-of-production method.
2. Calculate the depreciation on the machine using the double-declining-balance method.
3. Calculate the depreciation on the machine using the straight-line method.

Accepted Answer

1. ($1,800,000 - $60,000)/600,

Question 7

A method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A)  Accelerated depreciation. 
B)  Declining-balance depreciation. 
C)  Straight-line depreciation. 
D)  Units-of-production depreciation. 
E)  Equivalent depreciation. 
A)  Accelerated depreciation. 
B)  Declining-balance depreciation. 
C)  Straight-line depreciation. 
D)  Units-of-production depreciation. 
E)  Equivalent depreciation.

Question 8

Cambria Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.

Accepted Answer

A)  1.31. 
B)  2.02. 
C)  13. 
D)  76. 
E)  50. 
A)  1.31. 
B)  2.02. 
C)  13. 
D)  76. 
E)  50.

Question 9

Once the estimated depreciation expense for an asset is calculated:

Accepted Answer

A)  It cannot be changed due to the historical cost principle. 
B)  It may be revised based on new information. 
C)  Any changes are accumulated and recognized when the asset is sold. 
D)  The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. 
E)  It cannot be changed due to the consistency principle. 
A)  It cannot be changed due to the historical cost principle. 
B)  It may be revised based on new information. 
C)  Any changes are accumulated and recognized when the asset is sold. 
D)  The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. 
E)  It cannot be changed due to the consistency principle.

Question 10

The formula for computing annual straight-line depreciation is:

Accepted Answer

A)  Depreciable cost divided by useful life in units. 
B)  Cost plus residual value divided by the useful life in years. 
C)  Cost less residual value divided by the useful life in years. 
D)  Cost multiplied by useful life in years. 
E)  Cost divided by useful life in units. 
A)  Depreciable cost divided by useful life in units. 
B)  Cost plus residual value divided by the useful life in years. 
C)  Cost less residual value divided by the useful life in years. 
D)  Cost multiplied by useful life in years. 
E)  Cost divided by useful life in units.

Question 11

Inadequacy refers to the insufficient capacity of a company's property, plant and equipment to meet the company's growing productive demands.

Accepted Answer

A) True 
 B)False

Question 12

An expenditure that improves the type or amount of service an asset provides is a type of capital expenditure.

Accepted Answer

A) True 
 B)False

Question 13

The relevant factor(s) in computing depreciation include:

Accepted Answer

A)  Cost. 
B)  Residual value. 
C)  Useful life. 
D)  Depreciation method. 
E)  All of these. 
A)  Cost. 
B)  Residual value. 
C)  Useful life. 
D)  Depreciation method. 
E)  All of these.

Question 14

Total asset cost plus depreciation expense equals carrying amount.

Accepted Answer

A) True 
 B)False

Question 15

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

Accepted Answer

A) True 
 B)False

Question 16

Natural resources are assets that include standing timber, mineral deposits, and oil and gas fields.

Accepted Answer

A) True 
 B)False

Question 17

_____________________ are revenue expenditures to keep an asset in normal, good operating condition; they are necessary if an asset is to perform to expectations over its useful life.

Accepted Answer

The answer of _____________________ are revenue expenditures to keep an...

Question 18

Property, plant and equipment are used in operations and have useful lives that extend over more than one accounting period.

Accepted Answer

A) True 
 B)False

Question 19

A company purchased mining property for $1,560,000. The property was estimated to contain 13,000,000 tons of ore. In the current year, the company removed and sold 247,000 tons of ore. Calculate the depletion expense for the current year.

Accepted Answer

$1,560,000/13,000,00

Question 20

An asset's carrying amount is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Accepted Answer

A)  Neither a gain or loss is recognized on this type of transaction. 
B)  A gain on sale of $2,000. 
C)  A loss on sale of $1,000. 
D)  A gain on sale of $1,000. 
E)  A loss on sale of $2,000. 
A)  Neither a gain or loss is recognized on this type of transaction. 
B)  A gain on sale of $2,000. 
C)  A loss on sale of $1,000. 
D)  A gain on sale of $1,000. 
E)  A loss on sale of $2,000.

Exam 10: Long-Term Assets

Depreciation measures the actual decline in market value of an asset.

Another name for a capital expenditure is:

Heidel Co. paid $750,000 cash to buy the property, plant and equipment of Rogers Co. that went out of business. An independent appraiser assigned the following values to the assets acquired: Prepare Heidel's journal entry to record the acquisition of these assets.

Land improvements are:

A method that charges the same amount of expense to each period of the asset's useful life is called:

Cambria Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.

Once the estimated depreciation expense for an asset is calculated:

The formula for computing annual straight-line depreciation is:

Inadequacy refers to the insufficient capacity of a company's property, plant and equipment to meet the company's growing productive demands.

An expenditure that improves the type or amount of service an asset provides is a type of capital expenditure.

The relevant factor(s) in computing depreciation include:

Total asset cost plus depreciation expense equals carrying amount.

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

Natural resources are assets that include standing timber, mineral deposits, and oil and gas fields.

_____________________ are revenue expenditures to keep an asset in normal, good operating condition; they are necessary if an asset is to perform to expectations over its useful life.

Property, plant and equipment are used in operations and have useful lives that extend over more than one accounting period.

A company purchased mining property for $1,560,000. The property was estimated to contain 13,000,000 tons of ore. In the current year, the company removed and sold 247,000 tons of ore. Calculate the depletion expense for the current year.

An asset's carrying amount is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

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