Question 1

Land is not depreciated because it

Accepted Answer

A) appreciates in value. 
B) does not have an established depreciable life. 
C) has a useful life that is limited to the period of time a company is in business 
D) will provide future benefits for a company for an unlimited period of time.

Question 2

Flott Corp. purchased a machine on January 1, 2012, for $60,000. The company decided to depreciate the machine over a 8-year period using the straight-line method. The company estimated its residual value at $4,000. Show how the costs should be presented on the balance sheet and income statement for the full year ended June 30, 2014. Label the statements properly.

Accepted Answer

The answer of Flott Corp. purchased a machine on January...

Question 3

To revise depreciation expense, the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

Accepted Answer

A) True 
 B)False

Question 4

Futronics purchased a truck at the beginning of 2012 for $41,500 and decided to depreciate it over a 6-year period using the straight-line method. The estimated residual value was $5,500. At the beginning of 2013, the company determined that a 4-year life should have been used to depreciate the truck. The estimated residual value was not affected by the revision in the asset's life.

Accepted Answer

The answer of Futronics purchased a truck at the beginning...

Question 5

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 6

Fantasy Cruise Lines
On January 1, 2013, the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual value of $100,000. The company uses the double-declining-balance method.
-Refer to Fantasy Cruise Lines. Compute the amount of depreciation expense for the year ended December 31, 2013.

Accepted Answer

A) $ 90,000 
B) $100,000 
C) $180,000 
D) $200,000

Question 7

MATCHING
For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
a. capital expenditure
b. revenue expenditure
-Costs incurred after putting the asset into service which keep the asset in normal operating condition.

Accepted Answer

The answer of MATCHING
For each of the following items, indicate...

Question 8

Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment?

Accepted Answer

A) $1.00 
B) $1.10 
C) $0.10 
D) $0.12

Question 9

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 10

Match these terms with their correct definition.
a.Book value
e.Depreciation
b.Cost
f.Impairment
c.Depletion
g.Involuntary disposal
d.Depreciable cost
h.Residual value
-Any expenditure necessary to acquire an asset and to prepare it for use

Accepted Answer

The answer of Match these terms with their correct definition.
a.Book...

Question 11

Equipment purchased at the beginning of 2013 for $200,000 with residual value of $20,000 is being depreciated over a 5-year period using the double-declining-balance method. Which of the following statements is correct concerning the financial statements at December 31, 2013?

Accepted Answer

A) The equipment account now has a balance of $120,000. 
B) The book value of the equipment is now $80,000. 
C) The accumulated depreciation account balance is now $80,000. 
D) Depreciation expense for 2013 is $72,000.

Question 12

Match these terms with their correct definition.
a.Book value
e.Depreciation
b.Cost
f.Impairment
c.Depletion
g.Involuntary disposal
d.Depreciable cost
h.Residual value
-The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

Accepted Answer

The answer of Match these terms with their correct definition.
a.Book...

Question 13

Fantasy Cruise Lines
On January 1, 2013, the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual value of $100,000. The company uses the double-declining-balance method.
-Refer to Fantasy Cruise Lines. What will be the book value of the ship at the end of its useful life?

Accepted Answer

A) $ -0- 
B) $100,000 
C) $200,000 
D) Need more information to determine this answer.

Question 14

Depreciation is a process by which

Accepted Answer

A) replacement funds are accumulated for plant and equipment. 
B) the decline in market value of plant and equipment is determined and recorded. 
C) the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. 
D) the difference between current market value and historical cost of plant and equipment.

Question 15

"You Decide" Essay
You are an entrepreneur with a great idea for a new business. In order to obtain financing, the loan officer at First Second Third National Bank has requested a budgeted set of financial statements. An accountant friend of yours has mentioned that there are several options associated with plant assets that are available to help you improve your budgeted income.Describe several decisions concerning property, plant, and equipment that have an impact on reported net income. Are there any ethical concerns in this area?

Accepted Answer

The answer of "You Decide" Essay
You are an entrepreneur with...

Question 16

A company purchased a patent for $100,000 at the beginning of 2013 which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in 2013?

Accepted Answer

A) $0 
B) $5,000 
C) $20,000 
D) $100,000

Question 17

Refer to Falling Leaves Lawn Care. The company wants to use the depreciation method that will result in the highest depreciation expense for 2013. Which method should be used?

Accepted Answer

A) straight-line 
B) units-of-production 
C) double-declining-balance 
D) All methods create the same income in 2013.

Question 18

The effect of recording depreciation for the year is a(n)

Accepted Answer

A) decrease in assets and a decrease in net income. 
B) decrease in assets but no change in owners' equity. 
C) increase in assets and an increase in net income. 
D) decrease in net income and no change in assets.

Question 19

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
a.Balance Sheet--Property, Plant, and Equipment
b.Balance Sheet--Intangible Assets
c.Balance Sheet--Current Assets
d.Balance Sheet--Other Assets
e.Income Statement--Operating Section
f.Income Statement--Other Revenue and Expense Section
-Loss on disposal of plant asset

Accepted Answer

The answer of Identify where each of the following accounts...

Question 20

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
a.Straight-line
b.Units-of-production
c.Double-declining-balance
d.MACRS
-This method minimizes taxable income

Accepted Answer

The answer of Given the following list of methods of...

Exam 7: Operating Assets

Land is not depreciated because it

To revise depreciation expense, the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment?

Costs incurred to keep plant assets in normal operating condition are called revenue expenditures.

Match these terms with their correct definition. a.Book value e.Depreciation b.Cost f.Impairment c.Depletion g.Involuntary disposal d.Depreciable cost h.Residual value -Any expenditure necessary to acquire an asset and to prepare it for use

Equipment purchased at the beginning of 2013 for $200,000 with residual value of $20,000 is being depreciated over a 5-year period using the double-declining-balance method. Which of the following statements is correct concerning the financial statements at December 31, 2013?

Match these terms with their correct definition. a.Book value e.Depreciation b.Cost f.Impairment c.Depletion g.Involuntary disposal d.Depreciable cost h.Residual value -The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

Depreciation is a process by which

A company purchased a patent for $100,000 at the beginning of 2013 which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in 2013?

Refer to Falling Leaves Lawn Care. The company wants to use the depreciation method that will result in the highest depreciation expense for 2013. Which method should be used?

The effect of recording depreciation for the year is a(n)

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) a.Straight-line b.Units-of-production c.Double-declining-balance d.MACRS -This method minimizes taxable income