Question 1

Zenda Corporation purchased a building for $800,000. The current book value of the building is $400,000 and the fair value is $360,000. The sum of future cash flows from the building is $320,000. The amount of impairment loss that should be recognized is

Accepted Answer

A)  $0 
B)  $40,000 
C)  $80,000 
D)  $240,000

Question 2

Coppola Company purchased a machine on January 1, 2011, for $20,000 cash. In addition, Coppola paid $4,000 to have the machine delivered and installed. The estimated useful life of the machine is 4 years, after which time it is expected to have a salvage value of $8,000. It is also estimated that the machine will produce 200,000 units of product during its useful life. Assuming that the straight-line depreciation method is used, what will be the machine's book value on December 31, 2013?

Accepted Answer

A)  $8,000 
B)  $12,000 
C)  $16,000 
D)  $14,000

Question 3

When purchasing an entire company, what is the accounting term for the purchase price in excess of identifiable assets?

Accepted Answer

A)  Goodwill 
B)  Excess value 
C)  Patent 
D)  Intangible asset

Question 4

On January 1, 2010, Mena Co. purchased a new machine for $2,000,000. The machine has an estimated useful life of 5 years and a salvage value of $200,000. Mena uses the double-declining-balance method of depreciation. The amount of depreciation expense for 2012 is

Accepted Answer

A)  $480,000 
B)  $288,000 
C)  $432,000 
D)  $259,200

Question 5

A depreciable asset's book value can never be less than its

Accepted Answer

A)  Historical cost 
B)  Fair market value 
C)  Capitalized cost 
D)  Salvage value

Question 6

On March 3, 2012, Binford Tools acquired the following assets from Mace Hardware for $360,000:  How much goodwill should Binford record for this acquisition?

Accepted Answer

A)  $61,000 
B)  $58,000 
C)  $39,000 
D)  $0

Question 7

Land and a building were purchased for a sum of $200,000. If appraisals set the value of the land at $140,000 and the building at $70,000, the building will be recorded at

Accepted Answer

A)  $60,000 
B)  $66,667 
C)  $80,000 
D)  $133,333

Question 8

During 2012, Bernard Inc. constructed a new factory. Bernard used its current employees to build the factory. Building material costs for the new factory were $2,700,000; total labor costs were $1,400,000; total company overhead was $7,500,000 (20% of which could be assigned to the new project); and interest paid on a new construction loan for the project was $750,000. What was the total cost of the self-constructed factory?

Accepted Answer

A)  $6,350,000 
B)  $4,850,000 
C)  $5,600,000 
D)  $12,350,000

Question 9

The entry to record a gain on the increase in value of land would include which of the following?

Accepted Answer

A)  Credit to Gain on Land Increase 
B)  Debit to Land 
C)  Credit to Non-Impairment of Land 
D)  No entry is required

Question 10

How many of the criteria for determining whether a lease should be classified as an operating lease or a capital lease must a noncancelable lease meet to be recorded as a capital lease?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 11

Spears Corporation bought a machine on January 1, 2011. In purchasing the machine, the company paid $50,000 cash and signed an interest-bearing note for $100,000. The estimated useful life of the machine is 5 years, after which time the salvage value is expected to be $15,000. The company uses the sum-of-the-years'-digits depreciation method. Given this information, how much depreciation expense would be recorded for the year ending December 31, 2012?

Accepted Answer

A)  $45,000 
B)  $40,000 
C)  $36,000 
D)  $34,000

Question 12

On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment has an estimated useful life of 5 years and a salvage value of $2,000. Kinnear Company uses the straight-line depreciation method for all its assets. Given this information, if Kinnear Company sells the equipment for $13,600 on December 31, 2012, it will have a(n)

Accepted Answer

A)  $2,000 loss 
B)  $2,000 gain 
C)  $800 loss 
D)  $800 gain

Question 13

On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment has an estimated useful life of 5 years and a salvage value of $2,000. Kinnear Company uses the straight-line depreciation method for all its assets. Given this information, if Kinnear Company scraps the equipment on December 31, 2012, it will have a loss of

Accepted Answer

A)  $18,000 
B)  $0 
C)  $12,800 
D)  $5,600

Question 14

If a truck's engine is overhauled for $8,000, the journal entry would normally include a debit to

Accepted Answer

A)  Truck 
B)  Notes Payable 
C)  Depreciation 
D)  Cash

Question 15

The calculation for depletion of natural resources is similar to the calculation for

Accepted Answer

A)  Straight-line depreciation 
B)  Units-of-production depreciation 
C)  Sum-of-the-years'-digits depreciation 
D)  Declining-balance depreciation

Question 16

On January 1, 2011, Gecho Corporation purchased computer equipment for $23,000. The equipment has an estimated useful life of 4 years and a salvage value of $400. Given this information, if Gecho uses the double-declining-balance method of depreciation and sells the equipment of December 31, 2012, for $250, it will have a

Accepted Answer

A)  $250 gain 
B)  $3,124 gain 
C)  $3,600 loss 
D)  $5,500 loss

Question 17

A truck that cost $19,200 and was expected to last 5 years was scrapped after 3 years. If the truck was being depreciated on a straight-line basis (with no salvage value), the loss recognized on disposal would be

Accepted Answer

A)  $19,200 
B)  $7,680 
C)  $9,600 
D)  $11,520

Question 18

Belpre Inc. constructed a new office building. Building material costs for the new building were $3,000,000; total labor costs were $2,500,000; total company overhead was $9,000,000 (25% of which could be assigned to the new project); and interest paid on a new construction loan for the project was $1,250,000.
Calculate the total cost of the self-constructed building.

Accepted Answer

The answer of Belpre Inc. constructed a new office building....

Question 19

If an asset value recovers after an impairment loss has been recognized for the asset, what amount of restoration of that loss is recognized?

Accepted Answer

A)  The difference between the original loss and the new value 
B)  The difference between the original cost and the new value 
C)  The difference between the value recognized at the impairment and the new value 
D)  None of the recovered value is recognized

Question 20

The Accumulated Depreciation account is credited when

Accepted Answer

A)  An asset is traded for a similar asset 
B)  A new asset is purchased 
C)  The depreciation expense for the year is recorded 
D)  An asset is traded for a dissimilar asset

Exam 9: Investments: Property, Plant, and Equipment and Intangible Assets