Question 1

Once the estimated life is determined for a depreciable asset it can never be changed.

Accepted Answer

A) True 
 B)False

Question 2

Maintenance and fuel costs are types of revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 3

Cranston Instrumentation sold a depreciable asset for cash of $150,000.The original cost of the asset was $600,000.Cranston recognized a gain of $22,500 on the sale.What was the amount of accumulated depreciation on the asset at the time of its sale?

Accepted Answer

A) $472,500 
B) $127,500 
C) $577,500 
D) $495,000 
A) $472,500 
B) $127,500 
C) $577,500 
D) $495,000

Question 4

Physical deterioration refers to the process of an asset becoming outdated as a result of the availability of improved,more efficient assets.

Accepted Answer

A) True 
 B)False

Question 5

Land is purchased for $256,000.Additional costs include a $15,300 fee to a broker,a survey fee of $2,400,$1,750 to construct a fence,and a legal fee of $8,500.What is the cost of the land?

Accepted Answer

A) $256,000 
B) $271,300 
C) $283,950 
D) $282,200 
A) $256,000 
B) $271,300 
C) $283,950 
D) $282,200

Question 6

An asset that costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600.What amount of gain or loss will be recognized when the asset is sold?

Accepted Answer

A) A gain of $800. 
B) A loss of $800. 
C) A loss of $2,400. 
D) A gain of $2,400. 
A) A gain of $800. 
B) A loss of $800. 
C) A loss of $2,400. 
D) A gain of $2,400.

Question 7

Ding Company traded in one of its automobiles for a newer model.This transaction may result in a gain or a loss being recorded on Ding's financial statements.

Accepted Answer

A) True 
 B)False

Question 8

An asset that 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 9

In the fixed-percentage-of-declining-balance depreciation method,the book value of the asset is multiplied by:

Accepted Answer

A) An increasing depreciation rate. 
B) A constant depreciation rate. 
C) A decreasing depreciation rate. 
D) A rate that changes each year but is determined from a table. 
A) An increasing depreciation rate. 
B) A constant depreciation rate. 
C) A decreasing depreciation rate. 
D) A rate that changes each year but is determined from a table.

Question 10

If an accelerated depreciation method is used for an asset with a useful life of five years,more depreciation expense will be recorded in Year Three than in Year Five.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Which of the following would not be considered as part of the cost of equipment recently purchased?

Accepted Answer

A) Sales tax 
B) Transportation charges 
C) Installation and setup charges 
D) The cost to repair damage incurred after dropping the equipment 
A) Sales tax 
B) Transportation charges 
C) Installation and setup charges 
D) The cost to repair damage incurred after dropping the equipment

Question 13

The application of the matching principle to depreciation of plant and equipment can best be described as:

Accepted Answer

A) The matching of the book value of an asset with its market value. 
B) Offsetting the revenue of an accounting period with the estimated decline in market value of plant and equipment during the accounting period. 
C) Offsetting revenue of an accounting period with the portion of the cost of plant and equipment estimated to have been used up during the accounting period. 
D) The matching of the depreciation expense reported in the income statement for an accounting period with the accumulated depreciation reported in the balance sheet. 
A) The matching of the book value of an asset with its market value. 
B) Offsetting the revenue of an accounting period with the estimated decline in market value of plant and equipment during the accounting period. 
C) Offsetting revenue of an accounting period with the portion of the cost of plant and equipment estimated to have been used up during the accounting period. 
D) The matching of the depreciation expense reported in the income statement for an accounting period with the accumulated depreciation reported in the balance sheet.

Question 14

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 15

Goodwill is only recorded when the value of a company increases and not when it decreases in value.

Accepted Answer

A) True 
 B)False

Question 16

The book value of an asset in the plant and equipment category is:

Accepted Answer

A) The undepreciated cost of the asset. 
B) The current replacement cost of the asset. 
C) The original cost of the asset. 
D) The accumulated depreciation on the asset to date. 
A) The undepreciated cost of the asset. 
B) The current replacement cost of the asset. 
C) The original cost of the asset. 
D) The accumulated depreciation on the asset to date.

Question 17

The term "accumulated depreciation" as used in accounting is best defined as:

Accepted Answer

A) The portion of a plant asset recognized as expense since the asset was acquired. 
B) Funds (or cash)set aside to replace the asset being depreciated. 
C) Earnings retained in the business that will be used to purchase another asset when the present asset is depreciated. 
D) An expense of doing business. 
A) The portion of a plant asset recognized as expense since the asset was acquired. 
B) Funds (or cash)set aside to replace the asset being depreciated. 
C) Earnings retained in the business that will be used to purchase another asset when the present asset is depreciated. 
D) An expense of doing business.

Question 18

Computation of goodwill
Chopin Corporation has net assets (total assets minus total liabilities)valued at $880,000 and has earned an average net income of $132,000 per year for the past several years.Sands Company is negotiating the purchase of the company and has agreed to pay an amount equal to the value of the net identifiable assets,assume the liabilities,and pay a sum for goodwill equal to the earnings in excess of 12% on net assets,expected to continue for five years.What is the amount for goodwill Sands is including in its offer? $________

Accepted Answer

$132,000
C

Question 19

Which of the following is a capital expenditure?

Accepted Answer

A) Sales tax paid in conjunction with the purchase of office equipment 
B) Monthly rent of a delivery truck 
C) Monthly fuel costs for a truck owned by the company 
D) Small expenditures to acquire long-lived assets,such as $13 to purchase a wastebasket 
A) Sales tax paid in conjunction with the purchase of office equipment 
B) Monthly rent of a delivery truck 
C) Monthly fuel costs for a truck owned by the company 
D) Small expenditures to acquire long-lived assets,such as $13 to purchase a wastebasket

Question 20

Which of the following statements is not correct with respect to an asset with a five-year life owned by a company that uses straight-line depreciation and the half-year convention?

Accepted Answer

A) It will have the same depreciation expense in the first and last years. 
B) It will be depreciated over six accounting years. 
C) It will have a book value that exceeds its salvage value at the end of its economic life. 
D) It will have a smaller depreciation expense in Year 4 than it does in Year 2. 
A) It will have the same depreciation expense in the first and last years. 
B) It will be depreciated over six accounting years. 
C) It will have a book value that exceeds its salvage value at the end of its economic life. 
D) It will have a smaller depreciation expense in Year 4 than it does in Year 2.

Exam 9: Plant and Intangible Assets

Once the estimated life is determined for a depreciable asset it can never be changed.

Maintenance and fuel costs are types of revenue expenditures.

Cranston Instrumentation sold a depreciable asset for cash of $150,000.The original cost of the asset was $600,000.Cranston recognized a gain of $22,500 on the sale.What was the amount of accumulated depreciation on the asset at the time of its sale?

Physical deterioration refers to the process of an asset becoming outdated as a result of the availability of improved,more efficient assets.

Land is purchased for $256,000.Additional costs include a $15,300 fee to a broker,a survey fee of $2,400,$1,750 to construct a fence,and a legal fee of $8,500.What is the cost of the land?

An asset that costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600.What amount of gain or loss will be recognized when the asset is sold?

Ding Company traded in one of its automobiles for a newer model.This transaction may result in a gain or a loss being recorded on Ding's financial statements.

An asset that 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?

In the fixed-percentage-of-declining-balance depreciation method,the book value of the asset is multiplied by:

If an accelerated depreciation method is used for an asset with a useful life of five years,more depreciation expense will be recorded in Year Three than in Year Five.

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 of the following would not be considered as part of the cost of equipment recently purchased?

The application of the matching principle to depreciation of plant and equipment can best be described as:

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:

Goodwill is only recorded when the value of a company increases and not when it decreases in value.

The book value of an asset in the plant and equipment category is:

The term "accumulated depreciation" as used in accounting is best defined as:

Which of the following is a capital expenditure?

Which of the following statements is not correct with respect to an asset with a five-year life owned by a company that uses straight-line depreciation and the half-year convention?

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters