Question 1

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.

Accepted Answer

A) True 
 B)False

Question 2

Identify the following as a fixed asset FA,or intangible asset IA,natural resource NR,or none of theseN
a. computer
b. patent
c .oil reserve
d. goodwill
e. U.S.Treasury note
f. land used for employee parking
g. gold mine

Accepted Answer

The answer of Identify the following as a fixed asset...

Question 3

A building with an appraisal value of $154,000 is made available at an offer price of $172,000.The purchaser acquires the property for $40,000 in cash,a 90-day note payable for $45,000,and a mortgage amounting to $75,000.The cost basis recorded in the buyer's accounting records to recognize this purchase is

Accepted Answer

A) $160,000 
B) $120,000 
C) $172,000 
D) $154,000

Question 4

Prior to adjustment at the end of the year,the balance in Trucks is $300,900 and the balance in Accumulated
Depreciation-Trucks is $88,200.Details of the subsidiary ledger are as follows:
 $\begin{array}{|l|r|r|r|r|r|}
\hline \begin{array}{l}
\text { Truck } \
\text { No. }
\end{array} & {\text { Cost }} & \begin{array}{l}
\text { Estimated } \
\text { Residual Value }
\end{array} & \begin{array}{l}
\text { Estimated } \
\text { Useful Life }
\end{array} & \begin{array}{l}
\text { Accumulated } \
\text { Depreciation at } \
\text { Beginning of Year }
\end{array} & \begin{array}{l}
\text { Miles } \
\text { Operated } \
\text { During Year }
\end{array} \
\hline 1 & \$ 100,000 & \$ 13,000 & 300,000 & - & 30,000 \
\hline 2 & 72,900 & 9,900 & 300,000 & \$ 60,000 & 25,000 \
\hline 3 & 38,000 & 3,000 & 200,000 & 8,050 & 45,000 \
\hline 4 & 90,000 & 13,000 & 200,000 & 20,150 & 40,000 \
\hline
\end{array}$ Required:
1 Based on the units-of-output method,determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation section of each of the subsidiary accounts for the miles operated during the current year.
2 Journalize the entry to record depreciation for the year.

Accepted Answer

The answer of Prior to adjustment at the end of...

Question 5

The higher the fixed asset turnover,the

Accepted Answer

A) more efficiently a company is using its fixed assets in generating sales 
B) more efficiently a company is using its intangible assets in generating sales 
C) less efficiently a company is using its fixed assets in generating sales 
D) more efficiently a company is using its current assets in generating sales

Question 6

Fixed assets are ordinarily presented on the balance sheet

Accepted Answer

A) at current market values 
B) at cost less accumulated depreciation 
C) at replacement costs 
D) in a separate section along with intangible assets

Question 7

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700.The old machinery originally cost $9,000 and had accumulated depreciation of $5,000.In recording this transaction,Bacon Company should record

Accepted Answer

A) a loss of $1,500 
B) the new machinery at $16,700 
C) a gain of $1,500 
D) the new machinery at $12,700

Question 8

Convert each of the following estimates of useful life to a straight-line depreciation rate,stated as a percentage.
1. 2 years
2. 8 years
3. 10 years
4. 20 years
5. 25 years
6. 40 years
7. 50 years

Accepted Answer

The answer of Convert each of the following estimates of...

Question 9

The accumulated depletion of a natural resource is reported on the

Accepted Answer

A) balance sheet as depreciation from the cost of the resource 
B) income statement as a deduction from revenues 
C) income statement as an increase in revenue 
D) balance sheet as a deduction from the cost of the resource

Question 10

The book value of a fixed asset reported on the balance sheet represents its market value on that date.

Accepted Answer

A) True 
 B)False

Question 11

Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

Accepted Answer

A) True 
 B)False

Question 12

Chasteen Company acquired mineral rights for $9,100,000.The mineral deposit is estimated at 65,000,000 tons.During the current year,18,375,000 tons were mined and sold.
Required:
1 Determine the amount of depletion expense for the current year.
2 Journalize the adjusting entry to recognize the depletion expense.

Accepted Answer

The answer of Chasteen Company acquired mineral rights for $9,100,000.The...

Question 13

A new machine with a purchase price of $109,000,with transportation costs of $12,000,installation costs of $5,000,and special acquisition fees of $6,000,would have a cost basis of

Accepted Answer

A) $121,000 
B) $132,000 
C) $114,000 
D) $126,000

Question 14

The acquisition costs of property,plant,and equipment should include all normal,reasonable and necessary costs to get the asset in place and ready for use.

Accepted Answer

A) True 
 B)False

Question 15

The following information was taken from a recent annual report of Harrison Company in millions:
 $\begin{array}{|l|r|r|}
\hline & \text { Current Year } & \text { Preceding Year } \
\hline \text { Land and buildings } & \$ 726 & \$ 361 \
\hline \text { Machinery, equipment, and internal-use software } & 595 & 470 \
\hline \text { Office furniture and equipment } & 94 & 81 \
\hline \text { Other fixed assets related to leases } & 760 & 569 \
\hline \text { Accumulated depreciation and amortization } & 894 & 644 \
\hline
\end{array}$ Required:
1 Compute the book value of the fixed assets for the current year and the preceding year and explain the differences,if any.
2 Would you normally expect the book value of fixed assets to increase or decrease during the year?

Accepted Answer

The answer of The following information was taken from a...

Question 16

The depreciation method that does not use residual value in calculating the first year's depreciation expense is

Accepted Answer

A) straight-line 
B) units-of-output 
C) double-declining-balance 
D) none of the above

Question 17

What is the cost of the land,based upon the following data?

Accepted Answer

The answer of What is the cost of the land,based...

Question 18

The journal entry for recording payment for the short-term lease of a fixed asset would

Accepted Answer

A) debit the fixed asset and credit Cash 
B) debit Rent Expense and credit Cash 
C) debit a liability and credit Cash 
D) be a memo entry only

Question 19

Expected useful life is

Accepted Answer

A) calculated when the asset is sold 
B) estimated at the time that the asset is placed in service 
C) determined each year that the depreciation calculation is made 
D) none of these

Question 20

A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased January 1.Compute the yearly depreciation expense using straight-line depreciation.

Accepted Answer

The answer of A machine costing $57,000 with a 6-year...

Exam 9: Fixed Assets and Intangible Assets

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.

Identify the following as a fixed asset FA,or intangible asset IA,natural resource NR,or none of theseN a. computer b. patent c .oil reserve d. goodwill e. U.S.Treasury note f. land used for employee parking g. gold mine

The higher the fixed asset turnover,the

Fixed assets are ordinarily presented on the balance sheet

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700.The old machinery originally cost $9,000 and had accumulated depreciation of $5,000.In recording this transaction,Bacon Company should record

Convert each of the following estimates of useful life to a straight-line depreciation rate,stated as a percentage. 1. 2 years 2. 8 years 3. 10 years 4. 20 years 5. 25 years 6. 40 years 7. 50 years

The accumulated depletion of a natural resource is reported on the

The book value of a fixed asset reported on the balance sheet represents its market value on that date.

Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

A new machine with a purchase price of $109,000,with transportation costs of $12,000,installation costs of $5,000,and special acquisition fees of $6,000,would have a cost basis of

The acquisition costs of property,plant,and equipment should include all normal,reasonable and necessary costs to get the asset in place and ready for use.

The depreciation method that does not use residual value in calculating the first year's depreciation expense is

What is the cost of the land,based upon the following data?

The journal entry for recording payment for the short-term lease of a fixed asset would

Expected useful life is

A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased January 1.Compute the yearly depreciation expense using straight-line depreciation.