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

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 3

The formula for the double-declining balance method of computing depreciation expense is: Remaining book value times the straight-line rate.

Accepted Answer

A) True 
 B)False

Question 4

[The following information applies to the questions displayed below.]
On April 2,2017,Victor,Inc.acquired a new piece of filtering equipment.The cost of the equipment was $160,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years.
-Assume that in its financial statements,Victor uses straight-line depreciation and the half-year convention.Depreciation recognized on this equipment in 2017 and 2018 will be:

Accepted Answer

A) $40,000 in 2017 and $30,000 in 2018. 
B) $23,333 in 2017 and $30,000 in 2018. 
C) $17,500 in 2017 and $35,000 in 2018. 
D) $20,000 in 2017 and $35,000 in 2018. 
A) $40,000 in 2017 and $30,000 in 2018. 
B) $23,333 in 2017 and $30,000 in 2018. 
C) $17,500 in 2017 and $35,000 in 2018. 
D) $20,000 in 2017 and $35,000 in 2018.

Question 5

Lewis Imports sold a depreciable plant asset for cash of $135,000.The accumulated depreciation amounted to $170,000,and a loss of $15,000 was recognized on the sale.Under these circumstances,the original cost of the asset must have been:

Accepted Answer

A) $120,000. 
B) $155,000. 
C) $185,000. 
D) $320,000. 
A) $120,000. 
B) $155,000. 
C) $185,000. 
D) $320,000.

Question 6

Trade-ins
Dietz owned a delivery van with a book value of $2,000.It traded this old van for a new one that cost $16,000.The dealer allowed Dietz a trade-in allowance of $3,500 on the old van,and Dietz paid the remainder in cash.
Compute the following:

Accepted Answer

The answer of Trade-ins
Dietz owned a delivery van with a...

Question 7

Which of the following would not be amortized?

Accepted Answer

A) Goodwill. 
B) Copyright. 
C) Franchise fee. 
D) Patent. 
A) Goodwill. 
B) Copyright. 
C) Franchise fee. 
D) Patent.

Question 8

[The following information applies to the questions displayed below.]
On April 30,2017,Tilton Products purchased machinery for $88,000.The useful life of this machinery is estimated at 8 years,with an $8,000 residual value.
-Assume that in its financial statements,Tilton Products uses straight-line depreciation and the half-year convention.Depreciation expense recognized on this machinery in 2017 and 2018 will be:

Accepted Answer

A) $7,500 in 2017 and $11,000 in 2018. 
B) $6,000 in 2017 and $12,000 in 2018. 
C) $5,000 in 2017 and $10,000 in 2018. 
D) $5,500 in 2017 and $11,000 in 2018. 
A) $7,500 in 2017 and $11,000 in 2018. 
B) $6,000 in 2017 and $12,000 in 2018. 
C) $5,000 in 2017 and $10,000 in 2018. 
D) $5,500 in 2017 and $11,000 in 2018.

Question 9

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

Accepted Answer

A) Patents 
B) Copyrights 
C) Land 
D) Coal mine 
A) Patents 
B) Copyrights 
C) Land 
D) Coal mine

Question 10

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 11

Armstrong Company recently acquired a new computer system.Which of the following costs associated with the computer should not be debited to the Equipment account?

Accepted Answer

A) Insurance coverage purchased by Armstrong to cover the computer during shipment from the manufacturer 
B) Wages paid to system programmers hired to prepare the new computer for use 
C) Replacement of several circuit boards damaged during installation 
D) Installation of new electrical power supplies required for the computer 
A) Insurance coverage purchased by Armstrong to cover the computer during shipment from the manufacturer 
B) Wages paid to system programmers hired to prepare the new computer for use 
C) Replacement of several circuit boards damaged during installation 
D) Installation of new electrical power supplies required for the computer

Question 12

The cost of a new windshield wiper on a delivery vehicle would be classified as:

Accepted Answer

A) A capital expenditure. 
B) A revenue expenditure. 
C) Part of the cost of goods sold. 
D) An unusual and infrequent expense. 
A) A capital expenditure. 
B) A revenue expenditure. 
C) Part of the cost of goods sold. 
D) An unusual and infrequent expense.

Question 13

The systematic write-off of intangible assets to expense is called depletion.

Accepted Answer

A) True 
 B)False

Question 14

Incidental costs incurred in the purchase of land that are charged to Land Improvements will affect net income at some future time.

Accepted Answer

A) True 
 B)False

Question 15

Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot.In this situation:

Accepted Answer

A) The purchase price should be apportioned among the Land,Land Improvement,and Building accounts. 
B) The entire purchase price should be debited to the Land account only. 
C) Land,Land Improvement,and Building accounts should each be credited for the respective appraisal value of each item. 
D) Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods. 
A) The purchase price should be apportioned among the Land,Land Improvement,and Building accounts. 
B) The entire purchase price should be debited to the Land account only. 
C) Land,Land Improvement,and Building accounts should each be credited for the respective appraisal value of each item. 
D) Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods.

Question 16

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 17

Research and development-financial reporting
Alert Industries has spent $5 billion over the last three years in developing a new drug labeled BJ13.FDA approval is expected by the end of the month,at which time the drug will be available for sale.None of Alert's competitors has a product similar to BJ13,and the medical community is anxiously awaiting availability of this drug.Although BJ13 promises to be a "wonder drug" with huge financial success,Alert's income statements for the last few years have shown substantial losses and Alert's balance sheet does not include product BJ13 among the assets of the business.
Explain why one of Alert's seemingly most valuable assets apparently has been omitted from the balance sheet,and why Alert's income statements for the past few years reported substantial losses.

Accepted Answer

Generally accepted accounting principles

Question 18

Computation of goodwill
The income of Greystone,Inc. ,during the last several years has averaged $765,000 annually.The company is now being offered for sale as a going concern.The value of Greystone's net identifiable assets (total assets minus all liabilities)at the present time is $4,675,000.
One of several corporations interested in buying Greystone,offers to pay an amount equal to the value of the net identifiable assets and to assume all liabilities.In addition,this prospective buyer is willing to pay for goodwill an amount equal to net earnings in excess of 10% on net assets,expected to continue four years.
You are to use the above information as a basis for computing the price that the investing corporation will offer for Greystone,Inc.$________

Accepted Answer

$5,865,000

Question 19

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 20

Suffolk Associates sold office furniture for cash of $42,000.The accumulated depreciation at the date of sale amounted to $38,000,and a gain of $18,000 was recognized on the sale.The original cost of the asset must have been:

Accepted Answer

A) $56,000. 
B) $62,000. 
C) $84,000. 
D) $59,000. 
A) $56,000. 
B) $62,000. 
C) $84,000. 
D) $59,000.

Exam 9: Plant and Intangible Assets

Which of the following statements about MACRS is not correct?

The entry to record amortization on a copyright would include:

The formula for the double-declining balance method of computing depreciation expense is: Remaining book value times the straight-line rate.

Lewis Imports sold a depreciable plant asset for cash of $135,000.The accumulated depreciation amounted to $170,000,and a loss of $15,000 was recognized on the sale.Under these circumstances,the original cost of the asset must have been:

Trade-ins Dietz owned a delivery van with a book value of $2,000.It traded this old van for a new one that cost $16,000.The dealer allowed Dietz a trade-in allowance of $3,500 on the old van,and Dietz paid the remainder in cash. Compute the following:

Which of the following would not be amortized?

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

Armstrong Company recently acquired a new computer system.Which of the following costs associated with the computer should not be debited to the Equipment account?

The cost of a new windshield wiper on a delivery vehicle would be classified as:

The systematic write-off of intangible assets to expense is called depletion.

Incidental costs incurred in the purchase of land that are charged to Land Improvements will affect net income at some future time.

Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot.In this situation:

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.

For the financial statements of publicly traded companies,MACRS:

Suffolk Associates sold office furniture for cash of $42,000.The accumulated depreciation at the date of sale amounted to $38,000,and a gain of $18,000 was recognized on the sale.The original cost of the asset must have been:

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