Question 1

The useful life of an asset is always measured in units of time,such as years or months.

Accepted Answer

A) True 
 B)False

Question 2

On September 1,2017,Acme,Inc,sold its sales manager's company car.The car was purchased in 2010 and was not yet fully depreciated.How many months of depreciation expense should Acme record on the car for the year ended December 31,2017?

Accepted Answer

A)   9
B)   12
C)   8
D)   0E) A) and B)
F) None of the above

Question 3

ABC Co.purchased a parcel of land for $300,000.It paid attorney fees of $2,000 to verify title to the land.In addition,it paid a broker's fee of $5,000 to help find a suitable parcel of land.This parcel of land should be recorded in the accounting records for:

Accepted Answer

A)   $300,000.
B)   $302,000.
C)   $305,000.
D)   $307,000.E) A) and B)
F) B) and C)

Question 4

Accumulated Depreciation is classified as a(n) :

Accepted Answer

A)   expense account.
B)   contra-asset account.
C)   liability account.
D)   stockholders' equity account.E) B) and D)
F) A) and C)

Question 5

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed.This fraud had many effects on WorldCom's balance sheet.Which of the following does not describe one of the misstatements that resulted on the company's balance sheet?

Accepted Answer

A)   Total assets were too high.
B)   Retained earnings were too high.
C)   The balance sheet was in balance.
D)   Total liabilities were too low.E) A) and B)
F) A) and C)

Question 6

The Tasman Company purchased land for $150,000.The cost to demolish the existing building and prepare the land for a new building was $20,000.The real estate commission paid to buy the land was $9,000.What amount should be recorded in Tasman's accounting records for the cost of the land?

Accepted Answer

A)   $179,000
B)   $150,000
C)   $159,000
D)   $170,000E) B) and D)
F) None of the above

Question 7

If a fully depreciated asset with no residual value is "retired" to a junk yard without receiving any cash:

Accepted Answer

A)   a gain on disposal will be recorded.
B)   depreciation must be recorded as though the asset were still on the books.
C)   a loss on disposal will be recorded.
D)   no gain or loss on disposal will be recorded.E) A) and B)
F) A) and C)

Question 8

On January 1,2017,Whittle,Inc.purchased timber rights for $1,500,000.It is expected to produce a total of 2,000,000 cords of wood over 4 years.The cords of wood cut were 200,000 in 2017.The effect of recording the 2017 depletion (not the sale of the wood) on the accounting equation is:

Accepted Answer

A)   total assets remain unchanged.
B)   total stockholders' equity decreases.
C)   total assets decrease.
D)   total liabilities increase.E) B) and C)
F) A) and D)

Question 9

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) A) and D)
F) B) and D)

Question 10

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is correct?

Accepted Answer

A)   Company A will have higher depreciation expense in the early years, but Company B will have the higher expense towards the end of the asset's useful life.
B)   Company A will consistently have higher depreciation expense until residual value is reached.
C)   Company B will have higher depreciation expense in the early years, but Company A will have the higher expense towards the end of the asset's useful life.
D)   Company B will consistently have higher depreciation expense until residual value is reached.E) C) and D)
F) A) and C)

Question 11

Busy Beaver,Inc.signed a $315,000,5-year note payable to buy a new industrial veneer cutter.Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs.What is the overall effect of this transaction on the accounting equation?

Accepted Answer

A)   Total liabilities increase $320,750.
B)   Total assets increase $309,250.
C)   Machinery, an asset, increases $315,000.
D)   Total liabilities increase $315,000.E) A) and D)
F) A) and C)

Question 12

Use the information above to answer the following question.Which of the following is correct about the depreciation recorded?

Accepted Answer

A)   Accumulated Depreciation will be debited for $266,667.
B)   The book value of the computer system at December 31, 2015 will be $1,225,000.
C)   Depreciation expense will be debited for $245,000.
D)   The depreciable cost of the computer system is $1,600,000.E) All of the above
F) B) and C)

Question 13

Acme Enterprises just bought a new manufacturing machine.Which of these costs should not be capitalized?

Accepted Answer

A)   The $500,000 invoice price of the machine
B)   The $15,000 freight bill to deliver the machine to Acme's factory
C)   The $8,000 cost of tearing down Acme's factory wall to get the machine inside
D)   The $100 increase in monthly utility bills to operate the machineE) None of the above
F) A) and B)

Question 14

Sunny Sky paid $30,000 cash for piece of land to be used for a new corporate headquarters building.What is the effect of this transaction on the accounting equation?

Accepted Answer

A)   One asset increases, while another asset decreases.
B)   Total assets increase and total liabilities increase.
C)   Total assets increase and total stockholders' equity increases.
D)   Total assets decrease and total liabilities decrease.E) A) and B)
F) None of the above

Question 15

Accumulated Depreciation:

Accepted Answer

A)   appears in the asset section of a balance sheet.
B)   appears on the income statement.
C)   is a liability on the balance sheet.
D)   is a contra-stockholders' equity item.E) A) and C)
F) B) and C)

Question 16

The cost of a new building that is currently under construction,not for sale but for a company's own use,is reported on the balance sheet:

Accepted Answer

A)   as an asset called Work in Process.
B)   after construction is complete.
C)   as an asset called Construction in Progress.
D)   as a liability until construction is complete.E) B) and D)
F) A) and B)

Question 17

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) A) and B)
F) A) and C)

Question 18

In recording the acquisition cost of an entire business:

Accepted Answer

A)   goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
B)   assets are recorded at the seller's book values.
C)   goodwill, if it exists, is never recorded.
D)   goodwill is recorded as the excess of cost over the book value of identifiable net assets.E) All of the above
F) None of the above

Question 19

Use the information above to answer the following question.What is the depreciation expense for the first year using the double-declining-balance method?

Accepted Answer

A)   $52,800
B)   $57,600
C)   $53,000
D)   $55,200E) B) and C)
F) All of the above

Question 20

The proper accounting for natural resources is to record the original cost as an:

Accepted Answer

A)   asset, then later transfer amounts to Inventory as the resource is depleted, and finally expense the cost as the resources are sold.
B)   asset, then expense the cost over its useful life.
C)   expense in the period purchased.
D)   asset, and then expense the cost over its useful life using straight-line depreciation.E) A) and B)
F) All of the above

Exam 9: Reporting and Interpreting Long-Lived Tangible and Intangible Assets

The Tasman Company purchased land for $150,000.The cost to demolish the existing building and prepare the land for a new building was $20,000.The real estate commission paid to buy the land was $9,000.What amount should be recorded in Tasman's accounting records for the cost of the land?

Correct AnswerverifiedShow Answer

ABC Co.purchased a parcel of land for $300,000.It paid attorney fees of $2,000 to verify title to the land.In addition,it paid a broker's fee of $5,000 to help find a suitable parcel of land.This parcel of land should be recorded in the accounting records for:

Correct AnswerverifiedShow Answer

If a fully depreciated asset with no residual value is "retired" to a junk yard without receiving any cash:

Correct AnswerverifiedShow Answer

On September 1,2017,Acme,Inc,sold its sales manager's company car.The car was purchased in 2010 and was not yet fully depreciated.How many months of depreciation expense should Acme record on the car for the year ended December 31,2017?

Correct AnswerverifiedShow Answer

In recording the acquisition cost of an entire business:

Correct AnswerverifiedShow Answer

Sunny Sky paid $30,000 cash for piece of land to be used for a new corporate headquarters building.What is the effect of this transaction on the accounting equation?

Correct AnswerverifiedShow Answer

Acme Enterprises just bought a new manufacturing machine.Which of these costs should not be capitalized?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the depreciation expense for the first year using the double-declining-balance method?

Correct AnswerverifiedShow Answer

The proper accounting for natural resources is to record the original cost as an:

Correct AnswerverifiedShow Answer

Accumulated Depreciation:

Correct AnswerverifiedShow Answer

On January 1,2017,Whittle,Inc.purchased timber rights for $1,500,000.It is expected to produce a total of 2,000,000 cords of wood over 4 years.The cords of wood cut were 200,000 in 2017.The effect of recording the 2017 depletion (not the sale of the wood) on the accounting equation is:

Correct AnswerverifiedShow Answer

Many companies use accelerated depreciation in computing taxable income because:

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

The useful life of an asset is always measured in units of time,such as years or months.

Correct AnswerverifiedShow Answer

Accumulated Depreciation is classified as a(n) :

Correct AnswerverifiedShow Answer

The cost of a new building that is currently under construction,not for sale but for a company's own use,is reported on the balance sheet:

Correct AnswerverifiedShow Answer

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Busy Beaver,Inc.signed a $315,000,5-year note payable to buy a new industrial veneer cutter.Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs.What is the overall effect of this transaction on the accounting equation?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.Which of the following is correct about the depreciation recorded?

Correct AnswerverifiedShow Answer

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed.This fraud had many effects on WorldCom's balance sheet.Which of the following does not describe one of the misstatements that resulted on the company's balance sheet?

Correct AnswerverifiedShow Answer

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