Question 1

Which of the following is true of goodwill?

Accepted Answer

A) Goodwill must be capitalized when acquired, and amortized over 7 years or less. 
B) Both created and acquired goodwill must be recorded in the books. 
C) Goodwill must be expensed when acquired. 
D) Goodwill is not amortized.

Question 2

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. At the beginning of 2017, the company revised the total estimated life of the asset from 5 years to 4 years. The estimated residual value remained the same as estimated earlier. Calculate the depreciation expense for the year 2017.

Accepted Answer

A) $220,000 
B) $213,000 
C) $145,000 
D) $250,000

Question 3

On January 1, 2015, WAX-D purchased equipment for $60,000 cash, expecting it to remain in service for six years. The company depreciates the equipment on a straight-line basis, with $2,000 residual value. On April 30, 2017, the company sold the equipment for $48,000 cash. Record both depreciation expense for 2017 and sale of the equipment on April 30, 2017. (Do not round your intermediate calculations).

Accepted Answer

The answer of On January 1, 2015, WAX-D purchased equipment...

Question 4

Which of the following is an intangible asset?

Accepted Answer

A) plant and machinery 
B) goodwill 
C) building 
D) land

Question 5

On June 30, 2015, Adilide Inc. discarded equipment costing $40,000. Accumulated Depreciation as of December 31, 2014, was $25,000. Assume annual depreciation on the equipment is $2,500. Journalize the partial year depreciation expense and disposal of the equipment.

Accepted Answer

The answer of On June 30, 2015, Adilide Inc. discarded...

Question 6

Iverycoast Inc. had purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Prepare the depreciation schedule.

Accepted Answer

The answer of Iverycoast Inc. had purchased a van on...

Question 7

A trademark represents distinctive identifications of products or services.

Accepted Answer

A) True 
 B)False

Question 8

Goodwill is the excess amount paid to purchase another company over the market value of its net assets.

Accepted Answer

A) True 
 B)False

Question 9

On October 1, 2015, Nurix Company purchased a patent for $100,000 cash. Although the patent gives legal protection for 20 years, it is expected to be used for only eight years. Journalize the purchase of the patent.

Accepted Answer

The answer of On October 1, 2015, Nurix Company purchased...

Question 10

Franchises are privileges granted by a business to sell goods and services under specified conditions.

Accepted Answer

A) True 
 B)False

Question 11

The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested.

Accepted Answer

A) True 
 B)False

Question 12

The cost principle requires a business to record the assets acquired or services received at their actual cost.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a characteristic of a plant asset, such as a building?

Accepted Answer

A) It is used in the operation of a business. 
B) It is available for sale to customers in the ordinary course of business. 
C) It has a short useful life. 
D) It will have a negligible value at the end of its useful life.

Question 14

On Jan 1^st, 2015, Server Solutions paid $200,000 to acquire Tabletz Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Tabletz's assets was $200,000. The fair market value of its liabilities was $100,000. At the end of 2018, they measured goodwill and found its fair value to be $60,000. Calculate and record the impairment of goodwill.

Accepted Answer

The answer of On Jan 1^st, 2015, Server Solutions paid...

Question 15

The units-of-production method allocates varying amounts of depreciation each year based on the usage of the asset.

Accepted Answer

A) True 
 B)False

Question 16

In exchanges of plant assets with commercial substance, the new asset received will be recorded at its market value.

Accepted Answer

A) True 
 B)False

Question 17

Give journal entry to record the acquisition of a plant asset for cash.

Accepted Answer

The answer of Give journal entry to record the acquisition...

Question 18

Equipment was purchased for $24,000. The equipment's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Give journal entry to record the sale of the equipment if it is sold for $25,000 at the end of the first year.

Accepted Answer

The answer of Equipment was purchased for $24,000. The equipment's...

Question 19

Black n White Company purchased equipment for $45,000. The company recorded total depreciation of $36,000 on the equipment. On January 1, 2015, Black n White traded in the equipment for new equipment, paying $65,000 cash. The fair market value of the new equipment is $65,000. Journalize the company's exchange of equipment. Assume the exchange had commercial substance.

Accepted Answer

The answer of Black n White Company purchased equipment for...

Question 20

The lump-sum amount paid for a group of assets is divided among the assets acquired based on their relative market values. This method is known as the relative-market-value method.

Accepted Answer

A) True 
 B)False

Exam 10: Plant Assets, Natural Resources, and Intangibles

Which of the following is true of goodwill?

Which of the following is an intangible asset?

On June 30, 2015, Adilide Inc. discarded equipment costing $40,000. Accumulated Depreciation as of December 31, 2014, was $25,000. Assume annual depreciation on the equipment is $2,500. Journalize the partial year depreciation expense and disposal of the equipment.

Iverycoast Inc. had purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Prepare the depreciation schedule.

A trademark represents distinctive identifications of products or services.

Goodwill is the excess amount paid to purchase another company over the market value of its net assets.

On October 1, 2015, Nurix Company purchased a patent for $100,000 cash. Although the patent gives legal protection for 20 years, it is expected to be used for only eight years. Journalize the purchase of the patent.

Franchises are privileges granted by a business to sell goods and services under specified conditions.

The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested.

The cost principle requires a business to record the assets acquired or services received at their actual cost.

Which of the following is a characteristic of a plant asset, such as a building?

The units-of-production method allocates varying amounts of depreciation each year based on the usage of the asset.

In exchanges of plant assets with commercial substance, the new asset received will be recorded at its market value.

Give journal entry to record the acquisition of a plant asset for cash.

Equipment was purchased for $24,000. The equipment's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Give journal entry to record the sale of the equipment if it is sold for $25,000 at the end of the first year.

The lump-sum amount paid for a group of assets is divided among the assets acquired based on their relative market values. This method is known as the relative-market-value method.