Question 1

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Accepted Answer

A) True 
 B)False

Question 2

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, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

Accepted Answer

A)  $5,000
B)  $15,000
C)  $15,125
D)  $20,000
E)  $13,750F) A) and D)
G) A) and E)

Question 3

Another name for a capital expenditure is:

Accepted Answer

A)  Revenue expenditure.
B)  Asset expenditure.
C)  Long-term expenditure.
D)  Contributed capital expenditure.
E)  Balance sheet expenditure.F) A) and C)
G) A) and E)

Question 4

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

Accepted Answer

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

Question 5

A leasehold is:

Accepted Answer

A)  A short-term rental agreement.
B)  The same as a patent.
C)  The rights granted to the lessee by the lessor of a lease.
D)  Recorded as revenue expenditure when paid.
E)  An asset held as an investment.F) C) and D)
G) A) and C)

Question 6

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

Accepted Answer

A) True 
 B)False

Question 7

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

Accepted Answer

A)  2 years.
B)  4 years.
C)  6 years.
D)  16 years.
E)  10 years.F) A) and C)
G) All of the above C

Question 8

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

Accepted Answer

A)  Historical cost.
B)  Book value.
C)  Present value.
D)  Current (market)  value.
E)  Replacement cost.F) None of the above
G) B) and D)

Question 9

The book value of an asset when using double-declining-balance depreciation is always greater than the book value from using straight-line depreciation, except at the beginning and the end of the asset's useful life, when it is the same.

Accepted Answer

A) True 
 B)False

Question 10

Natural resources may be reported under either plant assets or their own separate category on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Ordinary repairs meet all of the following criteria except:

Accepted Answer

A)  Are expenditures to keep an asset in normal operating condition.
B)  Are necessary if an asset is to perform to expectations over its useful life.
C)  Extend the useful life of an asset beyond its original estimate.
D)  Include cleaning, lubricating, and normal adjusting.
E)  Are treated as expenses.F) B) and E)
G) C) and E)

Question 12

Betterments are a type of capital expenditure.

Accepted Answer

A) True 
 B)False

Question 13

A benefit of using an accelerated depreciation method is that:

Accepted Answer

A)  It is preferred by the tax code.
B)  It is the simplest method to calculate.
C)  It yields larger depreciation expense in the early years of an asset's life.
D)  It yields a higher income in the early years of the asset's useful life.
E)  The results are identical to straight-line depreciation.F) All of the above
G) A) and E)

Question 14

Capital expenditures are expenditures that keep assets in normal, good operating condition.

Accepted Answer

A) True 
 B)False  True

Question 15

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Accepted Answer

A) True 
 B)False  True

Question 16

A company purchased a mineral deposit for $800,000. It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000. In the current year, the company mined and sold 9,000 tons of minerals. Its depletion expense for the current period equals:

Accepted Answer

A)  $15,000.
B)  $60,000.
C)  $150,000.
D)  $56,250.
E)  $139,500.F) C) and D)
G) C) and E)

Question 17

A total asset turnover ratio of 3.5 indicates that:

Accepted Answer

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

Question 18

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

Accepted Answer

A) True 
 B)False

Question 19

Explain the purpose of and method of depreciation for partial years.

Accepted Answer

Partial years' depreciation is often req...

Question 20

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Accepted Answer

A)  Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800.
B)  Debit Depletion Expense $29,025; credit Accumulated Depletion $29,025.
C)  Debit Depreciation Expense $29,025; credit Accumulated Depreciation $29,025.
D)  Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800.
E)  Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000.Depreciation Expense = [($135,000 - $15,000) /300,000] * 64,500 = $25,800F) All of the above
G) A) and B)

Exam 8: Accounting for Long-Term Assets

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Correct Answer
verified

Correct Answer
verified

Another name for a capital expenditure is:

Correct Answer
verified

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

Correct Answer
verified

A leasehold is:

Correct Answer
verified

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

Correct Answer
verified

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

Correct Answer
verified
C

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

Correct Answer
verified

The book value of an asset when using double-declining-balance depreciation is always greater than the book value from using straight-line depreciation, except at the beginning and the end of the asset's useful life, when it is the same.

Correct Answer
verified

Natural resources may be reported under either plant assets or their own separate category on the balance sheet.

Correct Answer
verified

Ordinary repairs meet all of the following criteria except:

Correct Answer
verified

Betterments are a type of capital expenditure.

Correct Answer
verified

A benefit of using an accelerated depreciation method is that:

Correct Answer
verified

Capital expenditures are expenditures that keep assets in normal, good operating condition.

Correct Answer
verified
True

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Correct Answer
verified
True

A company purchased a mineral deposit for $800,000. It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000. In the current year, the company mined and sold 9,000 tons of minerals. Its depletion expense for the current period equals:

Correct Answer
verified

A total asset turnover ratio of 3.5 indicates that:

Correct Answer
verified

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

Correct Answer
verified

Explain the purpose of and method of depreciation for partial years.

Correct Answer
verified
Partial years' depreciation is often req...
View Answer

Correct Answer
verified

Exam 8: Accounting for Long-Term Assets

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Another name for a capital expenditure is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A leasehold is:

Correct AnswerverifiedShow Answer

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

Correct AnswerverifiedShow Answer

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

The book value of an asset when using double-declining-balance depreciation is always greater than the book value from using straight-line depreciation, except at the beginning and the end of the asset's useful life, when it is the same.

Correct AnswerverifiedShow Answer

Natural resources may be reported under either plant assets or their own separate category on the balance sheet.

Correct AnswerverifiedShow Answer

Ordinary repairs meet all of the following criteria except:

Correct AnswerverifiedShow Answer

Betterments are a type of capital expenditure.

Correct AnswerverifiedShow Answer

A benefit of using an accelerated depreciation method is that:

Correct AnswerverifiedShow Answer

Capital expenditures are expenditures that keep assets in normal, good operating condition.

Correct AnswerverifiedTrue

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Correct AnswerverifiedTrue

A company purchased a mineral deposit for $800,000. It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000. In the current year, the company mined and sold 9,000 tons of minerals. Its depletion expense for the current period equals:

Correct AnswerverifiedShow Answer

A total asset turnover ratio of 3.5 indicates that:

Correct AnswerverifiedShow Answer

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

Correct AnswerverifiedShow Answer

Explain the purpose of and method of depreciation for partial years.

Correct AnswerverifiedPartial years' depreciation is often req...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Partial years' depreciation is often req...
View Answer

Correct Answer
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