Question 1

All of the following statements regarding revaluation under IFRS are except:

Accepted Answer

A)  The revalued amount is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. 
B)  Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. 
C)  Under IFRS, the fair value of property, plant and equipment is usually determined from market­based evidence by professional appraisal or valuation. 
D)  IFRS does not allow upward asset revaluations. 
E)  If there is no market­based evidence of fair value, an entity may need to estimate it using an income or a depreciated replacement cost approach. 
A)  The revalued amount is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. 
B)  Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. 
C)  Under IFRS, the fair value of property, plant and equipment is usually determined from market­based evidence by professional appraisal or valuation. 
D)  IFRS does not allow upward asset revaluations. 
E)  If there is no market­based evidence of fair value, an entity may need to estimate it using an income or a depreciated replacement cost approach.

Question 2

Asset turnover is computed by dividing average total assets by cost of sales.

Accepted Answer

A) True 
 B)False

Question 3

Goodwill:

Accepted Answer

A)  Is not amortized, but is tested annually for impairment. 
B)  Is amortized using the straight-line method. 
C)  Is amortized using the units-of-production method. 
D)  May be amortized using either the straight-line or units-of-production method. 
E)  Is never amortized or tested for impairment. 
A)  Is not amortized, but is tested annually for impairment. 
B)  Is amortized using the straight-line method. 
C)  Is amortized using the units-of-production method. 
D)  May be amortized using either the straight-line or units-of-production method. 
E)  Is never amortized or tested for impairment.

Question 4

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

Accepted Answer

A) True 
 B)False

Question 5

Lomax Enterprises purchased a depreciable asset for $22,000 on March 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's residual value is $2,000, Lomax Enterprises should recognize depreciation expense in Year 2 in the amount of:

Accepted Answer

A)  $19,166.67 
B)  $5,000.00 
C)  $5,500.00 
D)  $20,000.00 
E)  $4,166.67 
A)  $19,166.67 
B)  $5,000.00 
C)  $5,500.00 
D)  $20,000.00 
E)  $4,166.67

Question 6

A company purchased and installed a machine on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no residual value. The machine was disposed of on July 1 of the fourth year. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to July 1 in the fourth year.
2. Prepare the general journal entry to record the disposal of the machine under each of these

Accepted Answer

three independent situations:
a. The mac

Question 7

Carmel Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Accepted Answer

A)  Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100. 
B)  Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500. 
C)  Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500. 
D)  Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500. 
E)  Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100. 
A)  Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100. 
B)  Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500. 
C)  Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500. 
D)  Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500. 
E)  Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.

Question 8

When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Accepted Answer

A) True 
 B)False

Question 9

On July 1 of the current year, Botox Mining Co. pays $5,400,000 for land estimated to contain 7,200,000 tons of recoverable ore. It installs machinery on July 3 costing $864,000 that has an 8 year life and no residual value and is capable of mining the ore deposit in six years. The company removes and sells 745,000 tons of ore during its first six months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.
Prepare entries to record (a) the purchase of the ore deposit, (b) the costs and installation of the machinery, (c) the depletion assuming the land has a zero residual value, and (d) the depreciation on the machinery.

Accepted Answer

The answer of On July 1 of the current year,...

Question 10

Obsolescence:

Accepted Answer

A)  Occurs when an asset is at the end of its useful life. 
B)  Refers to an item of property, plant and equipment that is no longer useful in producing goods and services with a competitive advantage. 
C)  Refers to the insufficient capacity of a company's property, plant and equipment to meet the company's productive demands. 
D)  Occurs when an asset's residual value is less than its replacement cost. 
E)  Does not affect property, plant and equipment. 
A)  Occurs when an asset is at the end of its useful life. 
B)  Refers to an item of property, plant and equipment that is no longer useful in producing goods and services with a competitive advantage. 
C)  Refers to the insufficient capacity of a company's property, plant and equipment to meet the company's productive demands. 
D)  Occurs when an asset's residual value is less than its replacement cost. 
E)  Does not affect property, plant and equipment.

Question 11

A loss on disposal of an item of property, plant and equipment occurs if the cash proceeds received from the asset sale is less than the asset's carrying amount.

Accepted Answer

A) True 
 B)False

Question 12

A company had net sales of $541,500 in 2010 and $475,300 in 2011. Its average assets were $410,000 for 2010 and $400,000 for 2011. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.

Accepted Answer

2010: $541,500/$410,000 = 1.32
2011: $47

Question 13

On April 1, 2010, a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1, 2006. The equipment had a residual value of $5,000, and a useful life 10 years. The double-declining-balance depreciation method was used. On December 31, 2009, accumulated depreciation was $20,664. Prepare a journal entry to record depreciation for 2010 up to the date of disposal of the equipment, and prepare a journal entry to record the disposal of the equipment.

Accepted Answer

The answer of On April 1, 2010, a company disposed...

Question 14

Natural resources are often called wasting assets because they are physically consumed when used.

Accepted Answer

A) True 
 B)False

Question 15

Capital expenditures are also called balance sheet expenditures.

Accepted Answer

A) True 
 B)False

Question 16

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

Accepted Answer

A) True 
 B)False

Question 17

When the usefulness of property, plant and equipment used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Accepted Answer

A) True 
 B)False

Question 18

Many companies use an accelerated depreciation method because:

Accepted Answer

A)  It is required by the tax code. 
B)  It is required by financial reporting rules. 
C)  It yields larger depreciation expense in the early years of an asset's life. 
D)  It yields a higher income in the early years of the asset's useful life. 
E)  The results are identical to straight-line depreciation. 
A)  It is required by the tax code. 
B)  It is required by financial reporting rules. 
C)  It yields larger depreciation expense in the early years of an asset's life. 
D)  It yields a higher income in the early years of the asset's useful life. 
E)  The results are identical to straight-line depreciation.

Question 19

_____________________ is an estimate of an asset's value at the end of its benefit period.

Accepted Answer

Residual v

Question 20

On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4 years, and a residual value of $1,000. Based on straight-line depreciation, the accumulated depreciation as of December 31, 2009 was $10,700.
a. Prepare the journal entry to record depreciation up to the date of disposal of the computer.
b. Prepare the journal entry to record the disposal of the computer.

Accepted Answer

The answer of On April 1, 2010, a company discarded...

All of the following statements regarding revaluation under IFRS are except:

Asset turnover is computed by dividing average total assets by cost of sales.

Goodwill:

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Obsolescence:

A loss on disposal of an item of property, plant and equipment occurs if the cash proceeds received from the asset sale is less than the asset's carrying amount.

A company had net sales of $541,500 in 2010 and $475,300 in 2011. Its average assets were $410,000 for 2010 and $400,000 for 2011. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.

Natural resources are often called wasting assets because they are physically consumed when used.

Capital expenditures are also called balance sheet expenditures.

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

Many companies use an accelerated depreciation method because:

_____________________ is an estimate of an asset's value at the end of its benefit period.

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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Exam 10: Long-Term Assets

All of the following statements regarding revaluation under IFRS are except:

Asset turnover is computed by dividing average total assets by cost of sales.

Goodwill:

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Obsolescence:

A loss on disposal of an item of property, plant and equipment occurs if the cash proceeds received from the asset sale is less than the asset's carrying amount.

A company had net sales of $541,500 in 2010 and $475,300 in 2011. Its average assets were $410,000 for 2010 and $400,000 for 2011. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.

Natural resources are often called wasting assets because they are physically consumed when used.

Capital expenditures are also called balance sheet expenditures.

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

Many companies use an accelerated depreciation method because:

_____________________ is an estimate of an asset's value at the end of its benefit period.

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

Filters