Question 1

Which of the following statements is true with regard to depreciation expense?

Accepted Answer

A)  A company should use the depreciation method that best matches expense recognition with the use of the asset. 
B)  A company using straight line will show a smaller book value for assets than if the same company uses double declining balance. 
C)  Choosing double declining balance over straight line will produce a greater total depreciation expense over the asset's life. 
D)  Different companies in the same industry will always depreciate similar assets by the same methods.

Question 2

An expenditure that improves the quality of service provided by a plant asset is added to the balance in the asset account.

Accepted Answer

A) True 
 B)False

Question 3

Give an example of a type of industry that requires a company to have a large amount of operational assets.

Accepted Answer

The answer of Give an example of a type of...

Question 4

Expenditures that extend the useful life of a plant asset are added to the asset account.

Accepted Answer

A) True 
 B)False

Question 5

On January 1,2012,Hanson Manufacturing Company purchased equipment for $95,000.Hanson paid $2,000 to have the machine installed.The equipment is expected to have a 5 year useful life and a salvage value of $7,000.
Required:
a)Compute depreciation expense for 2012 and 2013 using straight line depreciation.
b)What is the book value at the beginning of 2014?
c)Assume the equipment was sold on January 1,2014,for $65,000.Compute the amount of gain or loss from the sale.

Accepted Answer

The answer of On January 1,2012,Hanson Manufacturing Company purchased equipment...

Question 6

Explain the meaning of "impairment" as used in accounting for goodwill.

Accepted Answer

The answer of Explain the meaning of "impairment" as used...

Question 7

Stanton Company recognized $5,000 of depreciation expense.

Accepted Answer

The answer of Stanton Company recognized $5,000 of depreciation expense....

Question 8

Hamilton Mining Company recognized $2,000,000 of depletion expense.

Accepted Answer

The answer of Hamilton Mining Company recognized $2,000,000 of depletion...

Question 9

On January 1,2012,Rubens Company made a basket purchase including land,a building and equipment for $380,000.The appraised values of the assets are $20,000 for the land,$340,000 for the building and $40,000 for equipment.Rubens uses the double declining balance method of depreciation for the equipment which is estimated to have a useful life of five years and a salvage value of $5,000.For 2012,the depreciation expense on the equipment is:

Accepted Answer

A)  $7,600 
B)  $13,200 
C)  $9,120 
D)  $15,200

Question 10

On March 1,Zane Company purchased a new stamping machine with a list price of $24,000.The company paid cash for the machine; therefore,it was allowed a 3% discount.Other costs associated with the machine were: transportation costs,$1,270; sales tax paid,$1,680; installation costs,$450; routine maintenance during the first month of operation,$500.The cost recorded for the machine was:

Accepted Answer

A)  $23,730. 
B)  $24,000. 
C)  $25,960. 
D)  $26,680.

Question 11

Generally accepted accounting principles require that,when the estimated useful life of a long-term asset is changed,previously-issued financial statements are not revised.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following assets is not considered to have an indefinite useful life?

Accepted Answer

A)  copyright 
B)  goodwill 
C)  renewable franchise 
D)  trademark

Question 13

In 2012,Harvest Corporation recognized an impairment loss of $20,000 of goodwill.The goodwill was originally recorded two years earlier in connection with the purchase of another company.Show how the impairment loss affected the financial statements in 2012.

Accepted Answer

The answer of In 2012,Harvest Corporation recognized an impairment loss...

Question 14

The choice of depreciation methods for long-term assets affects the results of financial analysis for a company.

Accepted Answer

A) True 
 B)False

Question 15

What is meant by a "basket purchase" and what method is normally used to determine the cost?

Accepted Answer

The answer of What is meant by a "basket purchase"...

Question 16

On April 1,2012,Marlin Company purchased a producing oil well at a cash cost of $3,500,000.It is estimated that 500,000 barrels of oil can be produced over the remaining life of the well.By December 31,2012,25,000 barrels of oil had been produced and sold.The amount of depletion expense on this well for 2012 would be:

Accepted Answer

A)  $17,500. 
B)  $200,000. 
C)  $175,000. 
D)  $12,000.

Question 17

What are the life cycle phases for a plant asset?

Accepted Answer

The answer of What are the life cycle phases for...

Question 18

In 2012,Harold Corporation Co.acquired a patent from a competitor for $65,000.At the time of purchase,it had 12 years of its legal life remaining; however,Harold believes that the patent will only be useful for 7 years.Compute the amortization expense for 2012.

Accepted Answer

The answer of In 2012,Harold Corporation Co.acquired a patent from...

Question 19

Recognizing depreciation expense on equipment or a building is an asset use transaction.

Accepted Answer

A) True 
 B)False

Question 20

Describe what is meant by the term "Goodwill."

Accepted Answer

The answer of Describe what is meant by the term...

Exam 6: Accounting for Long-Term Operational Assets

Which of the following statements is true with regard to depreciation expense?

An expenditure that improves the quality of service provided by a plant asset is added to the balance in the asset account.

Give an example of a type of industry that requires a company to have a large amount of operational assets.

Expenditures that extend the useful life of a plant asset are added to the asset account.

Explain the meaning of "impairment" as used in accounting for goodwill.

Stanton Company recognized $5,000 of depreciation expense.

Hamilton Mining Company recognized $2,000,000 of depletion expense.

Generally accepted accounting principles require that,when the estimated useful life of a long-term asset is changed,previously-issued financial statements are not revised.

Which of the following assets is not considered to have an indefinite useful life?

In 2012,Harvest Corporation recognized an impairment loss of $20,000 of goodwill.The goodwill was originally recorded two years earlier in connection with the purchase of another company.Show how the impairment loss affected the financial statements in 2012.

The choice of depreciation methods for long-term assets affects the results of financial analysis for a company.

What is meant by a "basket purchase" and what method is normally used to determine the cost?

What are the life cycle phases for a plant asset?

In 2012,Harold Corporation Co.acquired a patent from a competitor for $65,000.At the time of purchase,it had 12 years of its legal life remaining; however,Harold believes that the patent will only be useful for 7 years.Compute the amortization expense for 2012.

Recognizing depreciation expense on equipment or a building is an asset use transaction.

Describe what is meant by the term "Goodwill."