Question 1

Intangible assets do not include:

Accepted Answer

A)   Leaseholds.
B)   Copyrights.
C)   Patents.
D)   Trademarks.
E)   Goodwill. E

Question 2

If the book value of a property, plant and equipment item is less than the amount to be recovered through the asset's use or sale, the difference is an impairment loss and the asset is described as impaired.

Accepted Answer

A) True 
 B)False  False

Question 3

Residual value is an estimate of an asset's value at the end of its useful life.

Accepted Answer

A) True 
 B)False  True

Question 4

An asset with a current book value of $5,000 has a current market value of $2,000. The company should recognize an impairment loss of $3,000.

Accepted Answer

A) True 
 B)False

Question 5

On October 1 of this year, SportsWorld purchased a delivery van for $23,000 with a residual value of $3,000. The van has an estimated useful life of 5 years. Usingstraight-line depreciation and the half-year rule, how much depreciation expense should SportsWorld recognize on December 31 of this year?

Accepted Answer

A)   $1,333.
B)   $2,000.
C)   $1,000.
D)   $4,600.
E)   $1,465.

Question 6

Goodwill is not depreciated or amortized but is instead decreased only if its value has been determined by management to be impaired.

Accepted Answer

A) True 
 B)False

Question 7

Regardless of the method of depreciation, total depreciation expense will be the same over an asset's useful life.

Accepted Answer

A) True 
 B)False

Question 8

When originally purchased, a vehicle had cost $23,000, with an estimated residual value of $1,500, and an estimated useful life of 8 years. After 4 years of straight-linedepreciation, the estimated useful life was revised from 8 to 6 years, but with zero residual value. The depreciation expense in year 5 should be:

Accepted Answer

A)   $2,856.25.
B)   $2.687.50.
C)   $10,750.00.
D)   $5,543.75.
E)   $6,125.00.

Question 9

At the end of the year, SportsWorld completed an asset impairment test and noted that a piece of equipment, with a book value of 12,000, has a recoverable value of $2,000.Calculate the amount of impairment loss on the equipment.

Accepted Answer

A)   $2,160.
B)   $2,000.
C)   $14,800.
D)   $10,000.
E)   $12,800.

Question 10

When assigning values to an exchange of assets you should always use the fair value of the asset received.

Accepted Answer

A) True 
 B)False

Question 11

The impairment of goodwill appears directly on the statement of changes in equity and not on the income statement.

Accepted Answer

A) True 
 B)False

Question 12

Subsequent expenditures are purchases made after the acquisition of equipment to operate, maintain, repair, and improve it.

Accepted Answer

A) True 
 B)False

Question 13

Revenue expenditures:

Accepted Answer

A)   Benefit future periods.
B)   Are additional costs related to property, plant and equipment that do not materially increase the asset's life.
C)   Are balance sheet expenditures.
D)   Extend the asset's useful life.
E)   Are debited to asset accounts.

Question 14

CamCo Ltd. leased floor space in a new office building. Rent will cost $10,000 permonth for a ten-year lease, but some renovations are needed and will be paid by CamCo to customize the space. The renovations include installing walls to create a new office and boardroom cost $8,000), new flooring cost $5,800), painting cost $1,500) andupdated wiring to accommodate computer servers cost $8,700). How should these costs be handled for accounting purposes by CamCo?

Accepted Answer

A)   They should all be charged to rent expense.
B)   They should be capitalized as development costs.
C)   They should all be capitalized as leasehold improvements.
D)   Painting costs should be capitalized to leasehold improvements and other costs should be charged to rent expense.
E)   Painting costs should be charged to rent expense and the other costs should be capitalized to leasehold improvements.

Question 15

The original cost of an asset minus accumulated depreciation is called:

Accepted Answer

A)   Book value.
B)   Replacement cost.
C)   Current value.
D)   Historical cost.
E)   Present value.

Question 16

Goodwill is written down to its fair value if the fair value is less than its carrying value.

Accepted Answer

A) True 
 B)False

Question 17

The first step in accounting for the disposal of property, plant and equipment is calculating the gain or loss on disposal.

Accepted Answer

A) True 
 B)False

Question 18

The half year rule is the partial-year depreciation method that calculates depreciation by determining if the asset was used for more than half of the month.

Accepted Answer

A) True 
 B)False

Question 19

Impairment losses must be assessed by companies on an annual basis.

Accepted Answer

A) True 
 B)False

Question 20

Intangible assets should be amortized over their anticipated legal, regulatory, contractual, competitive or economic life.

Accepted Answer

A) True 
 B)False

Exam 9: Property, Plant and Equipment and Intangibles

Intangible assets do not include:

If the book value of a property, plant and equipment item is less than the amount to be recovered through the asset's use or sale, the difference is an impairment loss and the asset is described as impaired.

Residual value is an estimate of an asset's value at the end of its useful life.

An asset with a current book value of $5,000 has a current market value of $2,000. The company should recognize an impairment loss of $3,000.

Goodwill is not depreciated or amortized but is instead decreased only if its value has been determined by management to be impaired.

Regardless of the method of depreciation, total depreciation expense will be the same over an asset's useful life.

At the end of the year, SportsWorld completed an asset impairment test and noted that a piece of equipment, with a book value of 12,000, has a recoverable value of $2,000.Calculate the amount of impairment loss on the equipment.

When assigning values to an exchange of assets you should always use the fair value of the asset received.

The impairment of goodwill appears directly on the statement of changes in equity and not on the income statement.

Subsequent expenditures are purchases made after the acquisition of equipment to operate, maintain, repair, and improve it.

Revenue expenditures:

The original cost of an asset minus accumulated depreciation is called:

Goodwill is written down to its fair value if the fair value is less than its carrying value.

The first step in accounting for the disposal of property, plant and equipment is calculating the gain or loss on disposal.

The half year rule is the partial-year depreciation method that calculates depreciation by determining if the asset was used for more than half of the month.

Impairment losses must be assessed by companies on an annual basis.

Intangible assets should be amortized over their anticipated legal, regulatory, contractual, competitive or economic life.