Question 1

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and willhave a residual value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

Accepted Answer

A) True 
 B)False

Question 2

The straight-line method and the double-declining-balance method of depreciation:

Accepted Answer

A)   Produce the same total depreciation over an asset's useful life.
B)   Allocate an asset's cost in a systematic and rational manner.
C)   Are both acceptable for GAAP.
D)   Do not produce the same book value each year.
E)   All of these answers are correct.

Question 3

When accumulated depreciation equals the asset's cost, the asset is fully depreciated. The entry to record the removal of the asset is called exchanging the equipment.

Accepted Answer

A) True 
 B)False

Question 4

Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

Accepted Answer

A) True 
 B)False

Question 5

Depreciation amounts can be revised because of changes in the estimates for residual value, useful life or because of subsequent revenue expenditures.

Accepted Answer

A) True 
 B)False

Question 6

Intangible assets:

Accepted Answer

A)   Are rights, privileges, and competitive advantages to the owner, used in operations, having no physical substance.
B)   Can be amortized.
C)   Are rights, privileges, and competitive advantages to the owner, used in operations, having no physical substance and can be amortized.
D)   Include patents, leaseholds, and land improvements.
E)   All of these answers are correct.

Question 7

SportsWorld paid $140,000 for a property. The property included land appraised at$67,500, land improvements appraised at $25,000, and a building appraised at $55,500. What should be the allocation of costs in the accounting records round calculations to 3 decimals) ?

Accepted Answer

A)   Land $62,000; land improvements, $23,800; building, $46,200.
B)   Land $79,500; land improvements, $32,600; building, $47,700.
C)   Land $63,840; land improvements, $23,660; building, $52,500.
D)   Land $62,000; land improvements, $23,000; building, $45,000.
E)   Land $87,500; land improvements; $35,000; building; $52,500.

Question 8

Non-current assets can be divided into two groups including tangible and intangibleassets. These assets are generally used in operations of a business and have useful lives extending over more than one accounting period.

Accepted Answer

A) True 
 B)False

Question 9

Depreciation should always be recorded as soon as an asset is purchased.

Accepted Answer

A) True 
 B)False

Question 10

Sports Med sold an X-ray machine that originally cost $100,000 for $60,000. Theaccumulated depreciation on the machine to the date of sale was $40,000. On this sale, Sports Med should recognize:

Accepted Answer

A)   $25,000 gain.
B)   $40,000 loss.
C)   $60,000 gain.
D)   $20,000 gain.
E)   $0 gain or loss.

Question 11

A patent:

Accepted Answer

A)   Is an exclusive right granted to its owner to manufacture and sell a machine or device, or to use a process, for 50 years.
B)   Gives the owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 50 years.
C)   Gives the owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.
D)   The amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately.
E)   Is an exclusive right granted to its owner to manufacture and sell a machine or device, or to use a process, for 20 years.

Question 12

SportsWorld discarded a display case it had purchased for $8,000. $7,200 inaccumulated depreciation had been recorded to the date of sale. SportsWorld should recognize a gain or loss on disposal of:

Accepted Answer

A)   $8,000 loss.
B)   $0.
C)   $7,200 loss.
D)   $800 loss.
E)   $800 gain.

Question 13

SportsWorld spent $17,000 to remodel its store. This cost will be recognized with a debit to Store Building.

Accepted Answer

A) True 
 B)False

Question 14

The full disclosure principle allows us to record an asset costing $50 as a revenue expenditure.

Accepted Answer

A) True 
 B)False

Question 15

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Accepted Answer

A) True 
 B)False

Question 16

Drilling rights are legal permissions to extract natural resources from the earth and are treated as intangible assets.

Accepted Answer

A) True 
 B)False

Question 17

Subsequent capital expenditures:

Accepted Answer

A)   Are expenditures making a property, plant and equipment asset more efficient.
B)   Are added to the cost of the asset.
C)   Are often called improvements.
D)   Often extend an asset's useful life.
E)   All of these answers are correct.

Question 18

Each year goodwill is examined to see if its value has been impaired. If the value has been impaired goodwill will:

Accepted Answer

A)   Decrease.
B)   Not change.
C)   Increase.
D)   Be depreciated.
E)   Be amortized.

Question 19

Treating small-dollar-amount capital expenditures as revenue expenditures is likely to mislead users of financial statements.

Accepted Answer

A) True 
 B)False

Question 20

Impairment can result from a variety of situations that include a significant decline in an asset's market value or a major adverse effect caused by technological, economic, orlegal factors.

Accepted Answer

A) True 
 B)False

Exam 9: Property, Plant and Equipment and Intangibles

Depreciation amounts can be revised because of changes in the estimates for residual value, useful life or because of subsequent revenue expenditures.

Correct AnswerverifiedShow Answer

SportsWorld discarded a display case it had purchased for $8,000. $7,200 inaccumulated depreciation had been recorded to the date of sale. SportsWorld should recognize a gain or loss on disposal of:

Correct AnswerverifiedShow Answer

Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

Correct AnswerverifiedShow Answer

SportsWorld spent $17,000 to remodel its store. This cost will be recognized with a debit to Store Building.

Correct AnswerverifiedShow Answer

SportsWorld paid $140,000 for a property. The property included land appraised at$67,500, land improvements appraised at $25,000, and a building appraised at $55,500. What should be the allocation of costs in the accounting records round calculations to 3 decimals) ?

Correct AnswerverifiedShow Answer

A patent:

Correct AnswerverifiedShow Answer

Sports Med sold an X-ray machine that originally cost $100,000 for $60,000. Theaccumulated depreciation on the machine to the date of sale was $40,000. On this sale, Sports Med should recognize:

Correct AnswerverifiedShow Answer

Subsequent capital expenditures:

Correct AnswerverifiedShow Answer

Drilling rights are legal permissions to extract natural resources from the earth and are treated as intangible assets.

Correct AnswerverifiedShow Answer

When accumulated depreciation equals the asset's cost, the asset is fully depreciated. The entry to record the removal of the asset is called exchanging the equipment.

Correct AnswerverifiedShow Answer

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and willhave a residual value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

Correct AnswerverifiedShow Answer

Treating small-dollar-amount capital expenditures as revenue expenditures is likely to mislead users of financial statements.

Correct AnswerverifiedShow Answer

Depreciation should always be recorded as soon as an asset is purchased.

Correct AnswerverifiedShow Answer

The straight-line method and the double-declining-balance method of depreciation:

Correct AnswerverifiedShow Answer

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Correct AnswerverifiedShow Answer

The full disclosure principle allows us to record an asset costing $50 as a revenue expenditure.

Correct AnswerverifiedShow Answer

Non-current assets can be divided into two groups including tangible and intangibleassets. These assets are generally used in operations of a business and have useful lives extending over more than one accounting period.

Correct AnswerverifiedShow Answer

Impairment can result from a variety of situations that include a significant decline in an asset's market value or a major adverse effect caused by technological, economic, orlegal factors.

Correct AnswerverifiedShow Answer

Intangible assets:

Correct AnswerverifiedShow Answer

Each year goodwill is examined to see if its value has been impaired. If the value has been impaired goodwill will:

Correct AnswerverifiedShow Answer

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