Question 1

Which of the following would not be amortized?

Accepted Answer

A)  Goodwill.
B)  Copyright.
C)  Franchise fee.
D)  Patent. A

Question 2

When comparing the units-of-output method of depreciation with straight-line depreciation:

Accepted Answer

A)  The depreciation expense in the first year will always be greater under units-of-output method.
B)  The depreciation expense in the first year will always be less under the units-of-output method.
C)  The depreciation expense in the first year will always be the same under both the methods.
D)  The depreciation expense in the first year may be greater than,equal to,or less under the units-of-output method. D

Question 3

Machinery acquired new on January 1 at a cost of $80,000 was estimated to have a useful life of 10 years and a residual salvage value of $20,000.Straight-line depreciation was used.On January 1,following six full years of use of the machinery,management decided that the estimate of useful life had been too long and that the machinery would have to be retired after three years,that is,at the end of the ninth year of service.Under this revised estimate,the depreciation expense for the seventh year of use would be:

Accepted Answer

A)  $8,000.
B)  $10,000.
C)  $13,000.
D)  $24,000. A

Question 4

It is an acceptable accounting practice to treat an expenditure that is not material in dollar amount as an expense of the current period even though the expenditure may benefit several periods.

Accepted Answer

A) True 
 B)False

Question 5

Suffolk Associates sold office furniture for cash of $42,000.The accumulated depreciation at the date of sale amounted to $38,000,and a gain of $18,000 was recognized on the sale.The original cost of the asset must have been:

Accepted Answer

A)  $56,000.
B)  $62,000.
C)  $84,000.
D)  $59,000.

Question 6

The term net identifiable assets means:

Accepted Answer

A)  All assets minus all liabilities.
B)  All assets except goodwill,plus all liabilities.
C)  All assets except intangibles,minus all liabilities.
D)  All fixed assets less liabilities.

Question 7

For depreciable property other than real estate,MACRS is based upon:

Accepted Answer

A)  The declining-balance method.
B)  The straight-line method.
C)  A 10-year recovery period.
D)  The depreciation method and recovery period used by the company in its financial statements.

Question 8

Early in the current year,Amazon Co.purchased the Rio Silver Mine at a cost of $30,000,000.The mine was estimated to contain 400,000 tons of ore and to have a residual value of $7,500,000 after mining operations are completed.During the year,115,000 tons of ore were removed from the mine.At year-end,the book value of the mine is:

Accepted Answer

A)  $22,500,000.
B)  $6,468,750.
C)  $23,531,250.
D)  $30,000,000.

Question 9

Which of the following would not be considered as part of the cost of equipment recently purchased?

Accepted Answer

A)  Sales tax.
B)  Transportation charges.
C)  Installation and setup charges.
D)  The cost to repair damage incurred after dropping the equipment.

Question 10

The erroneous recording of a revenue expenditure as a capital expenditure will cause an overstatement of net income for the period.

Accepted Answer

A) True 
 B)False

Question 11

Gains and losses in financial statements and tax returns
Explain why the amount of gain or loss resulting from the sale of a depreciable asset usually differs between the seller's financial statements and income tax return.In which of these accounting reports is the gain usually larger (or the loss smaller)? Explain your reasoning.

Accepted Answer

The answer of Gains and losses in financial statements and...

Question 12

Wanda Company sold an asset for $10,000 on September 6,2015.The historical cost of the asset was $22,000,and the asset's accumulated depreciation at the date of sale was $14,500.Which of the following statements is correct?

Accepted Answer

A)  Wanda will record a cash inflow from operating activities of $10,000 in its 2015 financial statements.
B)  Wanda will record a cash inflow from investing activities of $10,000 in its 2015 financial statements.
C)  Wanda will record a cash inflow from investing activities of $2,500 in its 2015 financial statements.
D)  Wanda will record no cash flows related to this asset on its 2015 statement of cash flows.

Question 13

In the fixed-percentage-of-declining-balance depreciation method,the book value of the asset is multiplied by:

Accepted Answer

A)  An increasing depreciation rate.
B)  A constant depreciation rate.
C)  A decreasing depreciation rate.
D)  A rate that changes each year but is determined from a table.

Question 14

The adjusting entries to record depreciation or amortization expense or to write down assets that have become impaired:

Accepted Answer

A)  Reduce both net income and cash balances.
B)  Reduce net income,but have no direct effect on cash balances.
C)  Decrease cash balances,but have no direct effect upon net income.
D)  Affect neither net income nor cash balances.

Question 15

An asset which costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600.What amount of gain or loss will be recognized when the asset is sold?

Accepted Answer

A)  A gain of $800.
B)  A loss of $800.
C)  A loss of $2,400.
D)  A gain of $2,400.

Question 16

The systematic write-off of intangible assets to expense is called depletion.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a capital expenditure?

Accepted Answer

A)  Sales tax paid in conjunction with the purchase of office equipment.
B)  Monthly rent of a delivery truck.
C)  Monthly fuel costs for a truck owned by the company.
D)  Small expenditures to acquire long-lived assets,such as $13 to purchase a wastebasket.

Question 18

Land is purchased for $456,000.Additional costs include a $30,300 fee to a broker,a survey fee of $3,400,$2,750 to construct a fence,and a legal fee of $12,500.What is the cost of the land?

Accepted Answer

A)  $456,000.
B)  $486,300.
C)  $502,200.
D)  $504,950.

Question 19

Depreciation and disposal--a comprehensive problem
Domino,Inc.uses straight-line depreciation with a half-year convention in its financial statements.On March 10,2010,Domino acquired a computer system at a cost of $98,800.Estimated useful life is six years,with residual value of $5,200.
(a)Complete the following schedule,showing depreciation expense Domino expects to recognize each year in the financial statements.  (b)Assume Domino sells the computer system on October 3,2013,for $26,650.

Accepted Answer

The answer of Depreciation and disposal--a comprehensive problem
Domino,Inc.uses straight-line depreciation...

Question 20

For financial reporting purposes,the gain or loss on the sale of a plant asset is determined by comparing the asset's:

Accepted Answer

A)  Cost with its book value.
B)  Sales price with its book value.
C)  Tax basis with its book value.
D)  Sales price with its tax basis.

Exam 9: Plant and Intangible Assets

Which of the following would not be amortized?

When comparing the units-of-output method of depreciation with straight-line depreciation:

It is an acceptable accounting practice to treat an expenditure that is not material in dollar amount as an expense of the current period even though the expenditure may benefit several periods.

Suffolk Associates sold office furniture for cash of $42,000.The accumulated depreciation at the date of sale amounted to $38,000,and a gain of $18,000 was recognized on the sale.The original cost of the asset must have been:

The term net identifiable assets means:

For depreciable property other than real estate,MACRS is based upon:

Which of the following would not be considered as part of the cost of equipment recently purchased?

The erroneous recording of a revenue expenditure as a capital expenditure will cause an overstatement of net income for the period.

Wanda Company sold an asset for $10,000 on September 6,2015.The historical cost of the asset was $22,000,and the asset's accumulated depreciation at the date of sale was $14,500.Which of the following statements is correct?

In the fixed-percentage-of-declining-balance depreciation method,the book value of the asset is multiplied by:

The adjusting entries to record depreciation or amortization expense or to write down assets that have become impaired:

An asset which costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600.What amount of gain or loss will be recognized when the asset is sold?

The systematic write-off of intangible assets to expense is called depletion.

Which of the following is a capital expenditure?

Land is purchased for $456,000.Additional costs include a $30,300 fee to a broker,a survey fee of $3,400,$2,750 to construct a fence,and a legal fee of $12,500.What is the cost of the land?

For financial reporting purposes,the gain or loss on the sale of a plant asset is determined by comparing the asset's: