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Exam 9: Long-Lived Tangible and Intangible Assets

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Question 61

Multiple Choice

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If a company capitalizes costs that should be expensed,how is its income statement for current period impacted?

A) Net income will be lower than it should be.
B) Revenues will be lower than they should be.
C) Expenses will be lower than they should be.
D) Assets will be lower than they should be.

E) None of the above
F) All of the above

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Question 62

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Capitalizing costs refers to the process of converting assets to expenses.

A) True
B) False

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Question 63

Multiple Choice

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All of the following costs should be capitalized when equipment is acquired,except,

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the depreciation rate is:

A journal entry is usually needed to update depreciation expense on a long-lived asset at the time of disposal.

A machine is purchased on January 1,2018,for $90,000.It is expected to have a useful life of five years and a residual value of $5,000.The company closes its books on December 31.Under the double-declining balance method,what is the total amount of depreciation to be expensed during the 2019 fiscal year (year 2 of 5) ?

Your company buys a computer system from IBM for $3 million and pays IBM $200,000 to install the computer system.Your company should record:

Your company rents out computers to local businesses and schools.You have 1,000 computers with a net book value of $160,000.As a result of changing technology,your computers are more difficult to rent so you must severely 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 outmoded technology.Your company should report an asset impairment loss of:

A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was disposed of for $2,000 cash.The entry to record this event would include a:

Research and development costs are treated as a capital asset.

When assets are purchased as a group,the total cost must be divided up and allocated to each asset in proportion to the market value of the assets as a whole.

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the depreciation expense for this period is:

Under the cost principle:

When a company sells a long-lived asset,shareholders' equity will change by the:

Purchase cost minus residual value is equivalent to depreciation expense under the straight-line method.

Your company pays $620,000 for a patent that has 10 years remaining.Each year,your company should:

Companies within the same industry do not always use the same depreciation method but will use the same expected useful life for the same piece of equipment.

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 a year.Before recording the asset sale,the company should debit:

A declining fixed asset turnover ratio suggests that a:

At the end of an asset's life,after it has been fully depreciated,the total amount of depreciation will equal the asset's depreciable cost,regardless of the depreciation method used.