Question 1

Your company rents computers to local businesses and schools.You have 1,000 computers with a book value of $160,000.As a result of changing technology,your computers are more difficult to rent so you must drastically reduce your rental price,which causes a decrease in estimated future cash flows.The fair value of the computers is estimated to be $125,000 because of their outdated technology.Your company should report an asset impairment loss of:

Accepted Answer

A)  $160,000.
B)  $125,000.
C)  $35,000.
D)  $0.E) None of the above
F) A) and B)

Question 2

A company sells a piece of equipment half-way through the accounting period.The straight-line rate of depreciation on the equipment is $40,000 per year.Before preparing the entry to record the sale of the equipment,the company should first debit:

Accepted Answer

A)  Depreciation Expense for $40,000 and credit Accumulated Depreciation for $40,000.
B)  Accumulated Depreciation for $40,000 and credit Cash for $40,000.
C)  Depreciation Expense for $20,000 and credit Accumulated Depreciation for $20,000.
D)  Cash for $20,000 and credit Depreciation Expense for $20,000.E) All of the above
F) None of the above

Question 3

Match each term with the appropriate explanation.Not all explanations will be used.
-Declining-balance method

Accepted Answer

A)  Assets that will be used for more than a year.
B)  When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated.
C)  The numerator of the fixed asset turnover ratio.
D)  The cost of financing an asset.
E)  When costs are recorded as assets rather than expenses.F) How expenses are reported in the income statement.G) The denominator of the fixed asset turnover ratio.H) The average proportion of a company's total assets that is long-lived.I) A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years.J) When a company writes down the value of an asset because estimated future cash flows fall below the book value.K) Assets that have physical substance.L) A depreciation method that spreads asset cost by use rather than time.M) The process of transferring the cost of long-lived tangible assets to expenses.N) Also known as book value.O) F) and L)
P) A) and H)

Question 4

On January 1,2017,Xit Company bought a new delivery truck for $30,000.Xit plans to use the truck for 4 years,after which it will be sold for $6,000.Depreciation expense for 2020,the fourth year of use,using double-declining-balance equals:

Accepted Answer

A)  $1,500.
B)  $3,750.
C)  $6,000.
D)  $0.E) All of the above
F) B) and C)

Question 5

Orangewood Industries bought a new cash register for $7,500.Orangewood originally planned to use the cash register for 4 years and then sell it for $600.After 4 years,Orangewood had recorded $6,900 of depreciation.If the company continues to use the cash register,still planning to sell it eventually for $600,then Orangewood should record:

Accepted Answer

A)  no additional depreciation.
B)  $600 of additional depreciation.
C)  $1,725 of additional depreciation.
D)  the removal of the cash register from its books because it is fully depreciated.E) None of the above
F) B) and C)

Question 6

All costs to get an asset in place and ready for use should be:

Accepted Answer

A)  expensed.
B)  capitalized.
C)  recorded as construction in progress.
D)  recorded only when they are paid in cash.E) All of the above
F) B) and C)

Question 7

The costs assigned to the individual assets acquired in a basket purchase are based on their relative:

Accepted Answer

A)  historical costs.
B)  market values.
C)  book values.
D)  depreciable costs.E) B) and D)
F) A) and C)

Question 8

Sony,Inc.spent $1,000,000 of development cost for commercially feasible prototypes.If Sony follows IFRS not GAAP,then the $1,000,000 would:

Accepted Answer

A)  be recorded as an asset.
B)  be recorded as an expense.
C)  be recorded as revenue.
D)  not be recorded.E) A) and B)
F) A) and C)

Question 9

Which of the following is not an amount that is needed to calculate straight-line depreciation?

Accepted Answer

A)  The cost of the asset.
B)  An estimate of the asset's useful economic life to the company.
C)  The estimated amount that the company will receive when it disposes of the asset.
D)  The cost the company will be required to incur to replace the asset.E) A) and D)
F) B) and C)

Question 10

If a company wants to receive exclusive rights to a manufacturing process,it should obtain a:

Accepted Answer

A)  license.
B)  copyright.
C)  patent.
D)  trademark.E) B) and C)
F) B) and D)

Question 11

A category of long-lived assets that are depleted over time is:

Accepted Answer

A)  delivery equipment.
B)  natural resources.
C)  machinery.
D)  cash.E) B) and C)
F) None of the above

Question 12

MacKenzie Manufacturing purchased equipment for $160,000.In addition,shipping charges of $2,000 were incurred to obtain the equipment.The company paid $12,500 to construct a foundation and install the equipment.The equipment is estimated to have a residual value of $15,000 at the end of its 5-year useful life. Using the straight-line method,what is the book value of the equipment at the end of the third full year of use?

Accepted Answer

A)  $78,800
B)  $55,300
C)  $71,000
D)  $63,800E) None of the above
F) B) and C)

Question 13

Trademarks and goodwill are intangible assets that are not amortized.

Accepted Answer

A) True 
 B)False

Question 14

On September 1,Emil Rovey purchased a vehicle for $57,500 with a residual value of $7,500.The estimated useful life is 5 years and the company uses the straight-line method.What is the depreciation expense for the year ended December 31?

Accepted Answer

A)  $3,333
B)  $2,500
C)  $10,000
D)  $3,833E) A) and B)
F) B) and C)

Question 15

A company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Accepted Answer

A)  a gain,increasing net income and stockholders' equity.
B)  revenue,increasing net income and stockholders' equity.
C)  expenses,decreasing net income and stockholders' equity.
D)  a loss,decreasing net income and stockholders' equity.E) None of the above
F) B) and C)

Question 16

On January 1,2018,Manzanita Manufacturing purchased a machine for $345,000 with an expected life of 5 years and a residual value of $37,500.In addition,the company paid delivery costs of $3,000 and $12,000 to have the machine installed.Manzanita uses the double-declining-balance method of depreciation. If the company sells the machine at the end of 5 years and receives $28,750,the journal entry to record the sale will include which of the following?

Accepted Answer

A)  Debit to Accumulated Depreciation for $345,000.
B)  Credit to Machine for $345,000.
C)  Debit to Loss on Sale for $8,750.
D)  Credit to Residual Value for $30,000.E) All of the above
F) B) and D)

Question 17

Matching part of the cost of a long-lived asset with the revenues generated by the asset is:

Accepted Answer

A)  a basket purchase.
B)  not required by GAAP.
C)  not required by IFRS.
D)  depreciation.E) C) and D)
F) None of the above

Question 18

Depletion is different from depreciation and amortization in that depletion is:

Accepted Answer

A)  added to inventory.
B)  used for intangible assets.
C)  no different from depreciation and amortization.
D)  an accelerated method.E) B) and C)
F) B) and D)

Question 19

Which of the following intangible assets has an unlimited life?

Accepted Answer

A)  Copyrights
B)  Licensing rights
C)  Goodwill
D)  FranchisesE) A) and B)
F) A) and C)

Question 20

Loma Linda,Inc.sells a long-lived asset that originally cost $400,000 for $100,000 on December 31,2018.The Accumulated Depreciation account had a balance of $220,000 after the current year's depreciation of $90,000 had been recorded.The company should recognize a:

Accepted Answer

A)  $200,000 loss on sale.
B)  $80,000 gain on sale.
C)  $80,000 loss on sale.
D)  $50,000 loss on sale.E) C) and D)
F) B) and C)

Exam 9: Long-Lived Tangible and Intangible Assets

A company sells a piece of equipment half-way through the accounting period.The straight-line rate of depreciation on the equipment is $40,000 per year.Before preparing the entry to record the sale of the equipment,the company should first debit:

Correct Answer
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If a company wants to receive exclusive rights to a manufacturing process,it should obtain a:

Correct Answer
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On September 1,Emil Rovey purchased a vehicle for $57,500 with a residual value of $7,500.The estimated useful life is 5 years and the company uses the straight-line method.What is the depreciation expense for the year ended December 31?

Correct Answer
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Which of the following intangible assets has an unlimited life?

Correct Answer
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Correct Answer
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Depletion is different from depreciation and amortization in that depletion is:

Correct Answer
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All costs to get an asset in place and ready for use should be:

Correct Answer
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Loma Linda,Inc.sells a long-lived asset that originally cost $400,000 for $100,000 on December 31,2018.The Accumulated Depreciation account had a balance of $220,000 after the current year's depreciation of $90,000 had been recorded.The company should recognize a:

Correct Answer
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A category of long-lived assets that are depleted over time is:

Correct Answer
verified

A company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Correct Answer
verified

Match each term with the appropriate explanation.Not all explanations will be used. -Declining-balance method

Correct Answer
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Correct Answer
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The costs assigned to the individual assets acquired in a basket purchase are based on their relative:

Correct Answer
verified

Matching part of the cost of a long-lived asset with the revenues generated by the asset is:

Correct Answer
verified

Sony,Inc.spent $1,000,000 of development cost for commercially feasible prototypes.If Sony follows IFRS not GAAP,then the $1,000,000 would:

Correct Answer
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Correct Answer
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Trademarks and goodwill are intangible assets that are not amortized.

Correct Answer
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Which of the following is not an amount that is needed to calculate straight-line depreciation?

Correct Answer
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On January 1,2017,Xit Company bought a new delivery truck for $30,000.Xit plans to use the truck for 4 years,after which it will be sold for $6,000.Depreciation expense for 2020,the fourth year of use,using double-declining-balance equals:

Correct Answer
verified

Correct Answer
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Exam 9: Long-Lived Tangible and Intangible Assets

A company sells a piece of equipment half-way through the accounting period.The straight-line rate of depreciation on the equipment is $40,000 per year.Before preparing the entry to record the sale of the equipment,the company should first debit:

Correct AnswerverifiedShow Answer

If a company wants to receive exclusive rights to a manufacturing process,it should obtain a:

Correct AnswerverifiedShow Answer

On September 1,Emil Rovey purchased a vehicle for $57,500 with a residual value of $7,500.The estimated useful life is 5 years and the company uses the straight-line method.What is the depreciation expense for the year ended December 31?

Correct AnswerverifiedShow Answer

Which of the following intangible assets has an unlimited life?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Depletion is different from depreciation and amortization in that depletion is:

Correct AnswerverifiedShow Answer

All costs to get an asset in place and ready for use should be:

Correct AnswerverifiedShow Answer

Loma Linda,Inc.sells a long-lived asset that originally cost $400,000 for $100,000 on December 31,2018.The Accumulated Depreciation account had a balance of $220,000 after the current year's depreciation of $90,000 had been recorded.The company should recognize a:

Correct AnswerverifiedShow Answer

A category of long-lived assets that are depleted over time is:

Correct AnswerverifiedShow Answer

A company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Correct AnswerverifiedShow Answer

Match each term with the appropriate explanation.Not all explanations will be used. -Declining-balance method

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The costs assigned to the individual assets acquired in a basket purchase are based on their relative:

Correct AnswerverifiedShow Answer

Matching part of the cost of a long-lived asset with the revenues generated by the asset is:

Correct AnswerverifiedShow Answer

Sony,Inc.spent $1,000,000 of development cost for commercially feasible prototypes.If Sony follows IFRS not GAAP,then the $1,000,000 would:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trademarks and goodwill are intangible assets that are not amortized.

Correct AnswerverifiedShow Answer

Which of the following is not an amount that is needed to calculate straight-line depreciation?

Correct AnswerverifiedShow Answer

On January 1,2017,Xit Company bought a new delivery truck for $30,000.Xit plans to use the truck for 4 years,after which it will be sold for $6,000.Depreciation expense for 2020,the fourth year of use,using double-declining-balance equals:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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