Question 1

An asset was purchased for $12 000. The asset's estimated useful life was 5 years, and its residual value was $2 000. Straight- line depreciation was used. How much gain or loss is reported if the asset is sold for $3 000 at the end of the fifth year?

Accepted Answer

A)  $2 000 loss
B)  No gain or loss
C)  $1 000 loss
D)  $1 000 gainE) All of the above
F) B) and D)

Question 2

An asset impairment will be reflected by an increase in the carrying amount of an asset, as shown on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is included in the cost of land?

Accepted Answer

A)  The cost of outdoor lighting
B)  The cost of clearing the land
C)  The cost of fencing
D)  The cost of pavingE) A) and B)
F) A) and D)

Question 4

If the sales price of an item of property, plant and equipment is lower than the carrying amount, there will be a loss on sale.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the amount capitalised as goodwill?

Accepted Answer

A)  The excess of the cost of an acquired company over the sum of the carrying amount of its assets
B)  The excess of the cost of an acquired company over the sum of the market value of its assets
C)  The excess of the cost of an acquired company over the sum of the carrying amount of its net assets
D)  The excess of the cost of an acquired company over the sum of the market value of its net assetsE) None of the above
F) A) and D)

Question 6

Roberts Construction Company paid $40 000 for equipment with a market value of $45 000. At which of the following amounts should the equipment be recorded?

Accepted Answer

A)  $5 000
B)  $42 500
C)  $40 000
D)  $45 000E) None of the above
F) C) and D)

Question 7

An asset was purchased for $12 000. The asset's estimated useful life was 5 years, and its residual value was $2 000. Straight- line depreciation was used. How much gain or loss is reported if the asset is sold for $4 500 at the end of the fourth year?

Accepted Answer

A)  No gain or loss
B)  $500 gain
C)  $1 500 loss
D)  $1 500 gainE) A) and C)
F) A) and B)

Question 8

Which of the following is TRUE when the estimate of an asset's useful life is increased?

Accepted Answer

A)  Annual depreciation expense is decreased for the remaining years of the asset's life.
B)  Prior years' financial statements must be restated.
C)  The new estimate is ignored until the last year of the asset's life.
D)  Annual depreciation expense is increased for the remaining years of the asset's life.E) All of the above
F) A) and B)

Question 9

Corey Sales sold its old office furniture for $400. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Accepted Answer

A)  Gain of $400
B)  Gain of $600
C)  Loss of $1 600
D)  Loss of $600E) A) and B)
F) A) and C)

Question 10

Corey Sales sold its old office furniture for $1 100. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Accepted Answer

A)  Loss of $1 600
B)  Loss of $600
C)  Gain of $400
D)  Gain of $100E) A) and D)
F) A) and C)

Question 11

Treating a capital expenditure as an expense causes an understatement of net profit.

Accepted Answer

A) True 
 B)False

Question 12

Sterling Company wishes to revalue some equipment with an original cost of $200 000 and accumulated depreciation of $30 000. The equipment now has a fair value of $100 000. What revaluation will be recorded?

Accepted Answer

A)  a decrement of $30 000
B)  a decrement of $100 000
C)  an increment of $100 000
D)  a decrement of $70 000E) None of the above
F) B) and D)

Question 13

Which of the following is the proper accounting treatment for a purchased patent?

Accepted Answer

A)  A purchased patent must be expensed.
B)  A purchased patent must be capitalised and amortised over 70 years or less.
C)  A purchased patent must be capitalised and amortised over 20 years or less.
D)  A purchased patent must be capitalised and expensed each year to the extent that the value has declined.E) None of the above
F) B) and C)

Question 14

Goodwill is amortised each year, similar to other intangible assets.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is included in the cost of an item of property, plant and equipment?

Accepted Answer

A)  Amounts paid to ready the asset for its intended use
B)  Normal repair cost
C)  Regular maintenance cost
D)  Wages of workers who use the assetE) None of the above
F) B) and D)

Question 16

A gain on disposal of an asset is recorded when cash received is less than carrying amount.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following intangible assets bars other manufacturers from using the same name for a product?

Accepted Answer

A)  Copyright
B)  Franchise
C)  Trademark
D)  PatentE) All of the above
F) A) and C)

Question 18

Equipment is sold for $1 000. The original cost was $9 000, residual value was estimated at $200, and useful life was estimated at 12 years. At time of sale, accumulated depreciation was $8 500. The sale resulted in a gain of $500.

Accepted Answer

A) True 
 B)False

Question 19

Avery Sales purchased telecom equipment for $5 000 on 1 November 2013. It has estimated residual value of $200, and an estimated life of 8 years. If Avery uses straight- line depreciation, how much expense will be recorded in 2013?

Accepted Answer

A)  $225
B)  $312
C)  $120
D)  $100E) A) and B)
F) A) and C)

Question 20

A loss on the sale of an item of property, plant and equipment is recorded when the sales price exceeds the carrying amount.

Accepted Answer

A) True 
 B)False

Exam 10: Non-Current Assets: Property, Plant and Equipment, and Intangibles

Roberts Construction Company paid $40 000 for equipment with a market value of $45 000. At which of the following amounts should the equipment be recorded?

Correct AnswerverifiedShow Answer

A loss on the sale of an item of property, plant and equipment is recorded when the sales price exceeds the carrying amount.

Correct AnswerverifiedShow Answer

Avery Sales purchased telecom equipment for $5 000 on 1 November 2013. It has estimated residual value of $200, and an estimated life of 8 years. If Avery uses straight- line depreciation, how much expense will be recorded in 2013?

Correct AnswerverifiedShow Answer

Equipment is sold for $1 000. The original cost was $9 000, residual value was estimated at $200, and useful life was estimated at 12 years. At time of sale, accumulated depreciation was $8 500. The sale resulted in a gain of $500.

Correct AnswerverifiedShow Answer

Sterling Company wishes to revalue some equipment with an original cost of $200 000 and accumulated depreciation of $30 000. The equipment now has a fair value of $100 000. What revaluation will be recorded?

Correct AnswerverifiedShow Answer

If the sales price of an item of property, plant and equipment is lower than the carrying amount, there will be a loss on sale.

Correct AnswerverifiedShow Answer

Which of the following is the amount capitalised as goodwill?

Correct AnswerverifiedShow Answer

Which of the following is included in the cost of land?

Correct AnswerverifiedShow Answer

Treating a capital expenditure as an expense causes an understatement of net profit.

Correct AnswerverifiedShow Answer

An asset impairment will be reflected by an increase in the carrying amount of an asset, as shown on the balance sheet.

Correct AnswerverifiedShow Answer

Which of the following is included in the cost of an item of property, plant and equipment?

Correct AnswerverifiedShow Answer

Which of the following is TRUE when the estimate of an asset's useful life is increased?

Correct AnswerverifiedShow Answer

A gain on disposal of an asset is recorded when cash received is less than carrying amount.

Correct AnswerverifiedShow Answer

Which of the following is the proper accounting treatment for a purchased patent?

Correct AnswerverifiedShow Answer

Corey Sales sold its old office furniture for $400. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Correct AnswerverifiedShow Answer

An asset was purchased for $12 000. The asset's estimated useful life was 5 years, and its residual value was $2 000. Straight- line depreciation was used. How much gain or loss is reported if the asset is sold for $4 500 at the end of the fourth year?

Correct AnswerverifiedShow Answer

Which of the following intangible assets bars other manufacturers from using the same name for a product?

Correct AnswerverifiedShow Answer

Goodwill is amortised each year, similar to other intangible assets.

Correct AnswerverifiedShow Answer

An asset was purchased for $12 000. The asset's estimated useful life was 5 years, and its residual value was $2 000. Straight- line depreciation was used. How much gain or loss is reported if the asset is sold for $3 000 at the end of the fifth year?

Correct AnswerverifiedShow Answer

Corey Sales sold its old office furniture for $1 100. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Correct AnswerverifiedShow Answer

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