Question 1

Crestfield leases office space for $7,000 per month. On January 3, the company incurs $12,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

Accepted Answer

A)   Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000.
B)   Debit Depreciation Expense $1,200; credit Accumulated Depreciation $1,200.
C)   Debit Amortization Expense $1,200; credit Accumulated Amortization $1,200.
D)   Debit Amortization Expense $3,000; credit Accumulated Amortization $3,000.
E)   Debit Depletion Expense $12,000; credit Accumulated Depletion $12,000.

Question 2

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400.
- What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

Accepted Answer

A)   $2,320.
B)   $680.
C)   $2,720.
D)   $300.
E)   $600.

Question 3

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market) values.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of an extraordinary repair?

Accepted Answer

A)   Replacement of all florescent light tubes in an office.
B)   Carpet cleaning and repair.
C)   Routine machine maintenance.
D)   Replacing the roof on a manufacturing warehouse.
E)   New tires for a truck.

Question 5

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. 
-What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Accepted Answer

A)   Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500.
B)   Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.
C)   Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.
D)   Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500.
E)   Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.

Question 6

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. 
-Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Accepted Answer

A)   $5,000
B)   $20,000
C)   $9,250
D)   $10,000
E)   $5,500

Question 7

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

Accepted Answer

A)   $0.
B)   $100,000.
C)   $35,000.
D)   $30,435.
E)   $46,087.

Question 8

What are some of the variables that make a plant asset's useful life difficult to predict?

Accepted Answer

There are several factors that make it d...

Question 9

The total cost of an asset less its accumulated depreciation is called:

Accepted Answer

A)   Current (market)  value.
B)   Present value.
C)   Book value.
D)   Replacement cost.
E)   Historical cost.

Question 10

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Accepted Answer

A) True 
 B)False

Question 11

Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.

Accepted Answer

The costs of natural resources are recor...

Question 12

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Accepted Answer

A) True 
 B)False

Question 13

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. 
-What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Accepted Answer

A)   $600.
B)   $680.
C)   $480.
D)   $544.
E)   $300.

Question 14

Record the following events and transactions for Leonard Company for the current year.
1. On January 2, Leonard purchased a patent for $35,000 with a remaining useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year.
2. On January 3, Leonard made an advance payment on a leasehold of $840,000. The leasehold expires in 15 years. Prepare the journal entry to amortize the leasehold at the end of the first year.
3. On January 4, Leonard purchased a music distributor's collection of lyrics and songs for
$1,425,000. The copyrights have a remaining life of another 30 years. Prepare the journal entry to amortize the copyright at the end of the first year.

Accepted Answer

None...

Question 15

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

Accepted Answer

A)   Unrealized depreciation method.
B)   Accelerated depreciation method.
C)   Straight-line depreciation method.
D)   Book value depreciation method.
E)   Units-of-production depreciation method.

Question 16

If a machine is damaged during unpacking, the repairs are added to its cost.

Accepted Answer

A) True 
 B)False

Question 17

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Accepted Answer

A) True 
 B)False

Question 18

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Accepted Answer

A) True 
 B)False

Question 19

To capitalize an expenditure is to:

Accepted Answer

A)   Debit an expense account.
B)   Credit an expense account.
C)   Debit an asset account.
D)   Credit an asset account.
E)   Credit the owner's capital account.

Question 20

A total asset turnover ratio of 3.5 indicates that:

Accepted Answer

A)   For every $1 in assets, the firm earned $3.50 in net income.
B)   For every $1 in assets, the firm produced $3.50 in net sales during the period.
C)   For every $1 in assets, the firm paid $3.50 in expenses during the period.
D)   For every $1 in assets, the firm earned gross profit of $3.50 during the period.
E)   For every $1 in sales, the firm acquired $3.50 in assets during the period.

Exam 10: Plant Assets Natural Resoures and Intangibles

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Correct Answer
verified

Correct Answer
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None...
View Answer

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. -What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Correct Answer
verified

Correct Answer
verified

What are some of the variables that make a plant asset's useful life difficult to predict?

Correct Answer
verified
There are several factors that make it d...
View Answer

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market) values.

Correct Answer
verified

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Correct Answer
verified

Which of the following is an example of an extraordinary repair?

Correct Answer
verified

To capitalize an expenditure is to:

Correct Answer
verified

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

Correct Answer
verified

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. - What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

Correct Answer
verified

A total asset turnover ratio of 3.5 indicates that:

Correct Answer
verified

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

Correct Answer
verified

Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.

Correct Answer
verified
The costs of natural resources are recor...
View Answer

Correct Answer
verified

If a machine is damaged during unpacking, the repairs are added to its cost.

Correct Answer
verified

The total cost of an asset less its accumulated depreciation is called:

Correct Answer
verified

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 10: Plant Assets Natural Resoures and Intangibles

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. -What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are some of the variables that make a plant asset's useful life difficult to predict?

Correct AnswerverifiedThere are several factors that make it d...View AnswerShow Answer

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market) values.

Correct AnswerverifiedShow Answer

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Correct AnswerverifiedShow Answer

Which of the following is an example of an extraordinary repair?

Correct AnswerverifiedShow Answer

To capitalize an expenditure is to:

Correct AnswerverifiedShow Answer

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

Correct AnswerverifiedShow Answer

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. - What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

Correct AnswerverifiedShow Answer

A total asset turnover ratio of 3.5 indicates that:

Correct AnswerverifiedShow Answer

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

Correct AnswerverifiedShow Answer

Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.

Correct AnswerverifiedThe costs of natural resources are recor...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If a machine is damaged during unpacking, the repairs are added to its cost.

Correct AnswerverifiedShow Answer

The total cost of an asset less its accumulated depreciation is called:

Correct AnswerverifiedShow Answer

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
None...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
There are several factors that make it d...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The costs of natural resources are recor...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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