Question 1

A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900.It has a useful life of 4 years and a residual value of $300.Determine depreciation expense for the first two years, assuming a fiscal year end of December 31 and using (a) the straight-line method and (b) the double-declining-balance method.

Accepted Answer

(a)Straight-line method
Year 1: $675; ($...

Question 2

Fixed assets are ordinarily presented on the balance sheet:

Accepted Answer

A)   at its current market value.
B)   at its replacement cost.
C)   at its cost less accumulated depreciation.
D)   under intangible assets.E) B) and D)
F) B) and C)

Question 3

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets.

Accepted Answer

A) True 
 B)False

Question 5

A machine was purchased for $68,000.It has a useful life of 5 years and a residual value of $8,000.Determine the annual depreciation expense using the straight-line method?

Accepted Answer

A)   $20,000
B)   $12,000
C)   $60,000
D)   $16,000E) A) and B)
F) A) and C)

Question 6

_____ is an example of a fixed asset.

Accepted Answer

A)   A machine
B)   A prepaid expense
C)   Land held for investment
D)   An accrued revenueE) A) and B)
F) B) and D)

Question 7

A patent was purchased for $585,000 with a legal life of 20 years.Management estimates that the patent has a 12-year economic life.The entry to record amortization would include:

Accepted Answer

A)   an increase in amortization expense for $29,250.
B)   an increase in research and development expense for $585,000.
C)   a decrease in patent for $48,750.
D)   an increase in accumulated amortization for $585,000.E) A) and D)
F) None of the above

Question 8

If a revenue expenditure is treated as a capital expenditure, then:

Accepted Answer

A)   expenses are overstated and owners' equity is understated.
B)   expenses are overstated and assets are overstated.
C)   expenses are understated and owners' equity is overstated.
D)   net income is overstated and owners' equity is understated.E) A) and B)
F) None of the above

Question 9

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method.

Accepted Answer

A) True 
 B)False

Question 10

Research and development costs incurred for developing patents are recorded as:

Accepted Answer

A)   current operating expenses.
B)   long-term operating assets.
C)   accrued expenses.
D)   working capital.E) A) and B)
F) A) and C)

Question 11

Paleota Company purchased a patent from Finise for $234,000.At the time of purchase, the patent had a remaining useful life of 10 years.Determine the patent amortization expense for the first year.

Accepted Answer

A)   $23,400
B)   $23,000
C)   $14,000
D)   $9,800E) All of the above
F) C) and D)

Question 12

Land improvements include:

Accepted Answer

A)   freight.
B)   surveying fees.
C)   sales tax.
D)   outdoor lighting.E) B) and C)
F) A) and B)

Question 13

Which of the following is a characteristic of accumulated depreciation account?

Accepted Answer

A)   Accumulated depreciation represents cash reserved for asset replacement.
B)   Accumulated depreciation account is a contra-liability account.
C)   Accumulated depreciation may be disclosed in the notes to the income statement.
D)   Accumulated depreciation is reported on the balance sheet as a deduction from the cost of the asset.E) B) and C)
F) All of the above

Question 14

A company acquired mineral rights for $7,500,000.The mineral deposit is estimated at 600,000 tons and during the year 100,000 tons were extracted and sold.
(a)Calculate depletion expense for the year.
(b)Show the effects of (a) on the accounts and the financial statements of the company.
(c)What is the book value of the mineral rights at the end of the current year?

Accepted Answer

(a)$1,250,000 = 100,000 × ($7,500,000 / ...

Question 15

Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment? ​

Accepted Answer

A)   ​Its free cash flow decreases.
B)   ​Its free cash flow increases.
C)   ​Its asset turnover increases.
D)   ​Its asset turnover remains unaffected.E) A) and B)
F) A) and C)

Question 16

To measure depreciation, which of the following must be known?

Accepted Answer

A)   market value of asset.
B)   fixed asset turnover
C)   cost of asset.
D)   the amount of cash to replace fixed assetE) None of the above
F) A) and B)

Question 17

Losses on discarding fixed assets are _____.

Accepted Answer

A)   opportunity costs
B)   nonoperating items
C)   capital expenditures
D)   accumulated depreciationE) A) and B)
F) None of the above

Question 18

_____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended.

Accepted Answer

A)   Physical depreciation
B)   Effective depreciation
C)   Accelerated depreciation
D)   Functional depreciationE) B) and C)
F) A) and D)

Question 19

Which of the following is not an intangible asset?

Accepted Answer

A)   Goodwill
B)   Trademark
C)   Copyright
D)   Long-term receivableE) All of the above
F) A) and C)

Question 20

Intangible assets do not exist physically.

Accepted Answer

A) True 
 B)False

Exam 7: Fixed Assets, Natural Resources, and Intangible Assets

Intangible assets do not exist physically.

Correct Answer
verified

Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets.

Correct Answer
verified

Which of the following is not an intangible asset?

Correct Answer
verified

_____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended.

Correct Answer
verified

A patent was purchased for $585,000 with a legal life of 20 years.Management estimates that the patent has a 12-year economic life.The entry to record amortization would include:

Correct Answer
verified

Paleota Company purchased a patent from Finise for $234,000.At the time of purchase, the patent had a remaining useful life of 10 years.Determine the patent amortization expense for the first year.

Correct Answer
verified

If a revenue expenditure is treated as a capital expenditure, then:

Correct Answer
verified

Land improvements include:

Correct Answer
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Losses on discarding fixed assets are _____.

Correct Answer
verified

Which of the following is a characteristic of accumulated depreciation account?

Correct Answer
verified

A machine was purchased for $68,000.It has a useful life of 5 years and a residual value of $8,000.Determine the annual depreciation expense using the straight-line method?

Correct Answer
verified

Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment?

Correct Answer
verified

Fixed assets are ordinarily presented on the balance sheet:

Correct Answer
verified

Correct Answer
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(a)Straight-line method
Year 1: $675; ($...
View Answer

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method.

Correct Answer
verified

Research and development costs incurred for developing patents are recorded as:

Correct Answer
verified

To measure depreciation, which of the following must be known?

Correct Answer
verified

Correct Answer
verified
(a)$1,250,000 = 100,000 × ($7,500,000 / ...
View Answer

_____ is an example of a fixed asset.

Correct Answer
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The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Correct Answer
verified

Exam 7: Fixed Assets, Natural Resources, and Intangible Assets

Intangible assets do not exist physically.

Correct AnswerverifiedShow Answer

Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets.

Correct AnswerverifiedShow Answer

Which of the following is not an intangible asset?

Correct AnswerverifiedShow Answer

_____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended.

Correct AnswerverifiedShow Answer

A patent was purchased for $585,000 with a legal life of 20 years.Management estimates that the patent has a 12-year economic life.The entry to record amortization would include:

Correct AnswerverifiedShow Answer

Paleota Company purchased a patent from Finise for $234,000.At the time of purchase, the patent had a remaining useful life of 10 years.Determine the patent amortization expense for the first year.

Correct AnswerverifiedShow Answer

If a revenue expenditure is treated as a capital expenditure, then:

Correct AnswerverifiedShow Answer

Land improvements include:

Correct AnswerverifiedShow Answer

Losses on discarding fixed assets are _____.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of accumulated depreciation account?

Correct AnswerverifiedShow Answer

A machine was purchased for $68,000.It has a useful life of 5 years and a residual value of $8,000.Determine the annual depreciation expense using the straight-line method?

Correct AnswerverifiedShow Answer

Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment? ​

Correct AnswerverifiedShow Answer

Fixed assets are ordinarily presented on the balance sheet:

Correct AnswerverifiedShow Answer

Correct Answerverified(a)Straight-line methodYear 1: $675; ($...View AnswerShow Answer

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method.

Correct AnswerverifiedShow Answer

Research and development costs incurred for developing patents are recorded as:

Correct AnswerverifiedShow Answer

To measure depreciation, which of the following must be known?

Correct AnswerverifiedShow Answer

Correct Answerverified(a)$1,250,000 = 100,000 × ($7,500,000 / ...View AnswerShow Answer

_____ is an example of a fixed asset.

Correct AnswerverifiedShow Answer

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Correct AnswerverifiedShow Answer

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Correct Answer
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Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(a)Straight-line method
Year 1: $675; ($...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(a)$1,250,000 = 100,000 × ($7,500,000 / ...
View Answer

Correct Answer
verified

Correct Answer
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