Question 1

Which of the following companies (all U.S.companies except for Lego,which is a Danish company) would most likely capitalize the costs of developing a prototype?

Accepted Answer

A)  Lego
B)  Southwest Airlines
C)  Walmart
D)  Cedar FairE) None of the above
F) C) and D)

Question 2

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

Accepted Answer

A)  The carrying value of long-lived assets is $240,000.
B)  The market value of long-lived assets is $350,000.
C)  The carrying value of long-lived assets is $350,000.
D)  The market value of long-lived assets is $460,000.E) B) and C)
F) All of the above

Question 3

The book value of a depreciable asset can never be less than its:

Accepted Answer

A)  historical cost.
B)  market value.
C)  capitalized cost.
D)  residual value.E) A) and B)
F) C) and D)

Question 4

If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

Accepted Answer

A)  Net income is overstated.
B)  Revenues are understated.
C)  Expenses are overstated.
D)  Assets are overstated.E) All of the above
F) None of the above

Question 5

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

Accepted Answer

A)  6
B)  7
C)  12
D)  0E) A) and B)
F) B) and C)

Question 6

Many companies use accelerated depreciation in computing taxable income because:

Accepted Answer

A)  it reports higher net income in the early years as compared to other methods.
B)  it is required by IFRS.
C)  it is easier than straight-line deprecation.
D)  it postpones tax payments until later years because it lowers taxable income in the early years.E) B) and D)
F) B) and C)

Question 7

If net sales revenue and the average book value of fixed assets both rise 5%:

Accepted Answer

A)  the fixed asset turnover ratio will rise.
B)  the fixed asset turnover ratio will fall.
C)  the fixed asset turnover ratio will stay the same.
D)  the impact on the fixed asset turnover ratio cannot be determined since the beginning values are unknown.E) A) and B)
F) None of the above

Question 8

Which of the following is the depreciation formula for the revision of an estimate?

Accepted Answer

A)  (Book value − New residual value) × (1 ÷ Remaining life) 
B)  (Cost − residual value) × (1 ÷ Life) 
C)  (Book value − new residual value) × (1 ÷ Life) 
D)  (Cost − residual value) × (1 ÷ Remaining life) E) C) and D)
F) None of the above

Question 9

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Accepted Answer

A)  November 1,2018.
B)  October 1,2018.
C)  October 21,2018.
D)  January 1,2019.E) All of the above
F) C) and D)

Question 10

The balance sheet category "Intangible Assets" includes:

Accepted Answer

A)  patents,trademarks,and franchises.
B)  equipment,land,and buildings.
C)  investments,receivables,and cash.
D)  goodwill,inventory,and vehicles.E) A) and B)
F) None of the above

Question 11

California Spas recently learned that the value of its building required a write-down because of the discovery that it was on an earthquake fault line.The building cost $2,000,000 and has a book value of $1,570,000 before the discovery and the fair value was $975,000 after the discovery.Which of the following journal entries will be used to record the asset impairment?

Accepted Answer

A)  Debit Impairment Loss and credit Accumulated Depreciation for $595,000
B)  Debit Depreciation Expense and credit Building for $595,000
C)  Debit Accumulated Depreciation and credit Building for $430,000
D)  Debit Impairment Loss and credit Accumulated Depreciation for $430,000E) A) and C)
F) B) and D)

Question 12

Which account is credited in a journal entry to record depreciation on machinery?

Accepted Answer

A)  Depreciation Expense
B)  Accumulated Depreciation
C)  Machinery
D)  CashE) B) and C)
F) None of the above

Question 13

City View Limousine depreciates its stretch Hummer using the units-of-production depreciation method and bases usage on the miles driven per year.The estimated useful life of the vehicle is 250,000 miles.The vehicle was purchased for $115,000 and is not expected to have any residual value at the end of its life.It was driven a total of 40,000 miles during the first year of its useful life and 25,000 miles during the second year.What is the amount of Accumulated Depreciation recorded on the vehicle at the end of those two years?

Accepted Answer

A)  $70,769
B)  $29,900
C)  $46,000
D)  $18,400E) A) and B)
F) A) and C)

Question 14

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Accepted Answer

A)  reduces book value below residual value.
B)  does not consider the useful life of the asset in the calculation of depreciation.
C)  cannot be used for tax purposes.
D)  uses book value instead of depreciable cost in the calculation of depreciation.E) All of the above
F) B) and C)

Question 15

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Accepted Answer

A)  assets to be understated.
B)  cash to be overstated.
C)  retained earnings to be overstated.
D)  liabilities to be understated.E) None of the above
F) A) and C)

Question 16

On January 1,2018,Manzanita Manufacturing purchased a machine for $345,000 with an expected life of 5 years and a residual value of $37,500.In addition,the company paid delivery costs of $3,000 and $12,000 to have the machine installed.Manzanita uses the double-declining-balance method of depreciation. What is the depreciation expense for the first year using the double-declining-balance method?

Accepted Answer

A)  $132,000
B)  $144,000
C)  $132,500
D)  $138,000E) None of the above
F) A) and C)

Question 17

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

Accepted Answer

A)  expensed.
B)  capitalized.
C)  a liability.
D)  an addition to contributed capital.E) B) and C)
F) All of the above

Question 18

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

Accepted Answer

A)  2 years.
B)  5 years.
C)  7 years.
D)  10 years.E) B) and D)
F) B) and C)

Question 19

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Accepted Answer

A)  $5,000,000 to purchase the land.
B)  $5,000 paid to Jack Mogul for a title search.
C)  $50,000 paid to cut down timber to make way for ski runs
D)  $7,500 paid for a party to celebrate the grand opening.E) None of the above
F) All of the above

Question 20

Which of the following characteristics is not associated with intangible assets?

Accepted Answer

A)  Lack physical substance.
B)  Those with an unlimited life are not amortized.
C)  Usually have a residual value.
D)  Amortization expense is reported each period for those with finite lives.E) None of the above
F) B) and D)

Exam 9: Long-Lived Tangible and Intangible Assets

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Correct Answer
verified

The balance sheet category "Intangible Assets" includes:

Correct Answer
verified

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

Correct Answer
verified

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

Correct Answer
verified

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Correct Answer
verified

Correct Answer
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If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

Correct Answer
verified

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Correct Answer
verified

Which account is credited in a journal entry to record depreciation on machinery?

Correct Answer
verified

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

Correct Answer
verified

If net sales revenue and the average book value of fixed assets both rise 5%:

Correct Answer
verified

Which of the following companies (all U.S.companies except for Lego,which is a Danish company) would most likely capitalize the costs of developing a prototype?

Correct Answer
verified

Many companies use accelerated depreciation in computing taxable income because:

Correct Answer
verified

Correct Answer
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Correct Answer
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Which of the following characteristics is not associated with intangible assets?

Correct Answer
verified

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Correct Answer
verified

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

Correct Answer
verified

Which of the following is the depreciation formula for the revision of an estimate?

Correct Answer
verified

The book value of a depreciable asset can never be less than its:

Correct Answer
verified

Exam 9: Long-Lived Tangible and Intangible Assets

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Correct AnswerverifiedShow Answer

The balance sheet category "Intangible Assets" includes:

Correct AnswerverifiedShow Answer

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

Correct AnswerverifiedShow Answer

Larkspur,Inc.bought a derelict hunting lodge,which it tore down at a cost of $78,000 and replaced with a new lodge.The demolition cost should be:

Correct AnswerverifiedShow Answer

On October 21,2018,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2018,Xit's accountant will assume that the truck was purchased on:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a company expenses costs that should be capitalized,how is its income statement for the current period impacted?

Correct AnswerverifiedShow Answer

Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?

Correct AnswerverifiedShow Answer

Which account is credited in a journal entry to record depreciation on machinery?

Correct AnswerverifiedShow Answer

Forest Grove Industries has long-lived tangible assets with a cost of $350,000;its Accumulated Depreciation account has a balance of $110,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If net sales revenue and the average book value of fixed assets both rise 5%:

Correct AnswerverifiedShow Answer

Which of the following companies (all U.S.companies except for Lego,which is a Danish company) would most likely capitalize the costs of developing a prototype?

Correct AnswerverifiedShow Answer

Many companies use accelerated depreciation in computing taxable income because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following characteristics is not associated with intangible assets?

Correct AnswerverifiedShow Answer

Seldon Industries amortizes its copyright of $65,000 over 40 years.Ms.Alice,the bookkeeper,mistakenly recorded the amortization twice in the current year.The effect of this mistake causes:

Correct AnswerverifiedShow Answer

On June 22,2018,Ace Electronics sold an office building,which was not yet fully depreciated.How many months of depreciation expense should Ace record on the building for the year ended December 31,2018?

Correct AnswerverifiedShow Answer

Which of the following is the depreciation formula for the revision of an estimate?

Correct AnswerverifiedShow Answer

The book value of a depreciable asset can never be less than its:

Correct AnswerverifiedShow Answer

Correct Answer
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