Question 1

The useful lives of many franchises are indefinite and therefore are not amortized.

Accepted Answer

A) True 
 B)False

Question 2

New Tech Company acquired a patent on January 1,2019 for $35,000.The residual value of the patent is $0.The patent is expected to benefit New Tech Company for 5 years.After using the patent one year,it was discovered that the patent would only be useful for 3 more years.
Required:
1.Prepare the journal entry to record the acquisition of the patent.Omit explanations.
2.Prepare the adjusting journal entry at December 31,2019.Omit explanation.
3.Prepare the adjusting journal entry at December 31,2020.Omit explanation.

Accepted Answer

The answer of New Tech Company acquired a patent on...

Question 3

Patents are amortized over a period of:

Accepted Answer

A) 20 years. 
B) 25 years. 
C) 70 years plus the life of inventor. 
D) 70 years.

Question 4

Minor Company purchased land which is being prepared for the construction of a new office building.Which of the following should be included in the cost of the land?

Accepted Answer

A) cost of removing an old building 
B) cost of clearing and grading the land 
C) cost of the fence which surrounds the property 
D) A and B

Question 5

The cost of land includes the cost of fencing the property and paving the parking lot on the land.

Accepted Answer

A) True 
 B)False

Question 6

Equipment with a historical cost of $70,000 and Accumulated Depreciation of $15,000 is junked.No cash is received upon disposal.Which journal entry is necessary?

Accepted Answer

A) debit Accumulated Depreciation - Equipment for $70,000 and credit Equipment for $70,000 
B) debit Accumulated Depreciation - Equipment for $15,000,debit Gain on Disposal of Equipment for $55,000 and credit Equipment for $70,000 
C) debit Accumulated Depreciation - Equipment for $15,000,debit Loss on Disposal of Equipment for $55,000 and credit Equipment for $70,000 
D) debit Accumulated Depreciation - Equipment for $15,000 and credit Equipment for $15,000

Question 7

The impairment test for long-term assets applies to:

Accepted Answer

A) tangible long-term assets. 
B) intangible long-term assets. 
C) all assets. 
D) A and B.

Question 8

Remini Company sells equipment for $20,000 cash.The equipment has a historical cost of $80,000 and accumulated depreciation of $50,000.What is the journal entry to record the sale of the equipment?

Accepted Answer

A) debit Cash for $20,000 and credit Gain on Sale of Equipment for $20,000 
B) debit Cash for $20,000,debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $70,000 
C) debit Loss on Sale of Equipment for $10,000,debit Cash for $20,000,debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $80,000 
D) debit Cash for $20,000,debit Accumulated Depreciation - Equipment for $50,000,debit Gain on Sale of Equipment $10,000 and credit Equipment for $80,000

Question 9

Equipment is acquired by issuing a note payable for $58,000 and a making a down payment of $26,000.The statement of cash flows will report a:

Accepted Answer

A) $26,000 outflow in the operating activities section. 
B) $84,000 outflow in the investing activities section. 
C) $58,000 inflow in the financing activities section. 
D) $26,000 outflow in the investing activities section.

Question 10

Which statement is FALSE?

Accepted Answer

A) Depreciation is caused by the physical wear and tear of a plant asset. 
B) Depreciation is caused by obsolescence of a plant asset. 
C) Depreciation is not based on changes in the market value of a plant asset. 
D) Accumulated depreciation is a cash fund to be used to replace a plant asset when it wears out.

Question 11

When plant assets are exchanged,the gain or loss on the exchange equals:

Accepted Answer

A) the difference between the fair value and the book value of the asset received. 
B) the difference between the fair value and the book value of the asset given up. 
C) the fair value of the asset received plus the cash paid. 
D) the fair value of the asset given up plus the cash paid.

Question 12

For each of the following scenarios,use the two step approach to determine whether a long-term asset has been impaired and,if so,the amount of loss that should be recorded.
a.Equipment
  b.Patent

Accepted Answer

The answer of For each of the following scenarios,use the...

Question 13

On June 1,Roadway's Trucking Company paid $9,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years.It also paid $8,000 to change the storage capacity of the truck so that it could haul more merchandise.Which of the following statements is TRUE?

Accepted Answer

A) The $9,000 is a capital expenditure and the $8,000 is an expense. 
B) The $9,000 is an expense and the $8,000 is a capital expenditure. 
C) Both items are capital expenditures. 
D) Both items are expenses.

Question 14

The cost of installing lights in a company's parking lot should be recorded as a cost of:

Accepted Answer

A) land. 
B) land improvements. 
C) leasehold improvements. 
D) leaseholds.

Question 15

According to U.S.GAAP,________ is not amortized because for many entities,it increases in value over time.

Accepted Answer

A) research and development costs 
B) goodwill 
C) patients 
D) copyrights

Question 16

When compared to the accelerated depreciation methods,the use of the straight-line method increases a company's tax liability.

Accepted Answer

A) True 
 B)False

Question 17

A company exchanges an old machine for a new machine and cash is paid for the new machine.Assume there is a Gain on Exchange of Machine.In the journal entry to record the exchange by the owner of the old machine,which accounts will be debited?

Accepted Answer

A) Machine and Accumulated Depreciation - Machine 
B) Cash and Machine 
C) Accumulated Depreciation - Machine,Cash and Machine 
D) Accumulated Depreciation - Machine,Cash,Machine and Gain on Exchange of Machine

Question 18

Sylvia Company has a long-term plant asset with the following information as of the end of the year:  The amount of the impairment loss is:

Accepted Answer

A) $17,500. 
B) $3,000. 
C) $157,500. 
D) $20,500.

Question 19

Intangible assets can have either finite or indefinite lives.

Accepted Answer

A) True 
 B)False

Question 20

The distinction between a capital expenditure and an immediate expense for a plant asset requires judgment.

Accepted Answer

A) True 
 B)False

Exam 7: Plant Assets, natural Resources, Intangibles

The useful lives of many franchises are indefinite and therefore are not amortized.

Patents are amortized over a period of:

Minor Company purchased land which is being prepared for the construction of a new office building.Which of the following should be included in the cost of the land?

The cost of land includes the cost of fencing the property and paving the parking lot on the land.

Equipment with a historical cost of $70,000 and Accumulated Depreciation of $15,000 is junked.No cash is received upon disposal.Which journal entry is necessary?

The impairment test for long-term assets applies to:

Remini Company sells equipment for $20,000 cash.The equipment has a historical cost of $80,000 and accumulated depreciation of $50,000.What is the journal entry to record the sale of the equipment?

Equipment is acquired by issuing a note payable for $58,000 and a making a down payment of $26,000.The statement of cash flows will report a:

Which statement is FALSE?

When plant assets are exchanged,the gain or loss on the exchange equals:

For each of the following scenarios,use the two step approach to determine whether a long-term asset has been impaired and,if so,the amount of loss that should be recorded. a.Equipment b.Patent

On June 1,Roadway's Trucking Company paid $9,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years.It also paid $8,000 to change the storage capacity of the truck so that it could haul more merchandise.Which of the following statements is TRUE?

The cost of installing lights in a company's parking lot should be recorded as a cost of:

According to U.S.GAAP,________ is not amortized because for many entities,it increases in value over time.

When compared to the accelerated depreciation methods,the use of the straight-line method increases a company's tax liability.

A company exchanges an old machine for a new machine and cash is paid for the new machine.Assume there is a Gain on Exchange of Machine.In the journal entry to record the exchange by the owner of the old machine,which accounts will be debited?

Sylvia Company has a long-term plant asset with the following information as of the end of the year: The amount of the impairment loss is:

Intangible assets can have either finite or indefinite lives.

The distinction between a capital expenditure and an immediate expense for a plant asset requires judgment.