Question 1

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. 
-Using the straight-line method, depreciation for 2018 would be:

Accepted Answer

A)   $13,200.
B)   $14,400.
C)   $72,000.
D)   None of these answer choices are correct.E) A) and B)
F) A) and C)

Question 2

Which of the following represents an event that indicates an asset's book value may not be recoverable?

Accepted Answer

A)   A significant adverse change in how the asset is being used or in its physical condition.
B)   A significant adverse change in legal factors or in the business climate.
C)   A realization that the asset will be disposed of significantly before the end of its estimated useful life.
D)   All of these answer choices are correct.E) All of the above
F) None of the above

Question 3

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Depreciation

Accepted Answer

A)  Cost allocation for plant and equipment.
B)  Results in depreciation declining by the same amount in subsequent years.
C)  The reason for not amortizing goodwill.
D)  Estimates service life in years.
E)  Aggregates assets that are similar.F) D) and E)
G) C) and D)

Question 4

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term.
-Rearrangements

Accepted Answer

A)  Triggers commencement of depreciation.
B)  Cost less accumulated depreciation.
C)  Expenditures made to restructure an asset without addition, replacement, or improvement.
D)  Only used for tax purposes.
E)  Three methods are employed to record these costs.F) A) and B)
G) D) and E)

Question 5

Briefly differentiate between activity-based and time-based allocation methods.

Accepted Answer

Time-based methods allocate an asset's c...

Question 6

On January 3, 2018, Tracer Incorporated purchased a patent for $450,000 to manufacture a new type of chair. The patent has a remaining legal life of 12 years. Tracer plans to manufacture the chair for eight years and then sell the patent for $50,000. The company amortizes intangible assets using the straight-line method. On December 29, 2020, Tracer decides to sell the patent for $325,000. Assuming the company has a December 31 year end, what is the gain or loss recorded on the sale of the patent?

Accepted Answer

A)   $12,500 gain.
B)   $25,000 gain.
C)   $58,333 loss.
D)   $25,000 loss.E) None of the above
F) C) and D)

Question 7

On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and has a residual value of $6,000. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 25,000 and 84,000 units, respectively, were produced. 
-Required:
Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the units-of-production method is used.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> 2018 depreciation: ...

Question 8

Any method of depreciation should be both systematic and rational.

Accepted Answer

A) True 
 B)False

Question 9

Briefly explain the disclosures that are required relative to depreciable assets.

Accepted Answer

The note presenting the summary of signi...

Question 10

Notsofast Inc. acquired land for $500,000 on July 1, 2017. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2018.

Accepted Answer

If material, the $500,000 should have be...

Question 11

A major addition to equipment should have been capitalized in the year 2018 but was incorrectly expensed. Which of the following is (are)  true?

Accepted Answer

A)   Income in 2018 is understated.
B)   Income in future years is overstated.
C)   Assets in 2018 are understated.
D)   All of these answer choices are true.E) B) and C)
F) None of the above

Question 12

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term.
-Depletion

Accepted Answer

A)  Cost allocation for an intangible asset.
B)  Adding a new major component to existing plant and equipment.
C)  Can be expressed in units of time or in units of activity.
D)  Cost allocation for natural resources.
E)  The amount the company expects to receive for the asset at the end of its life.F) The replacement of a major component of plant and equipment asset.G) Allocates an equal amount of depreciable base to each period.H) Estimates service life in terms of a measure of activity.I) The difference between cost and residual value.J) Multiplies book value by twice the straight-line rate.K) B) and F)
L) C) and F)

Question 13

Fryer Inc. owns equipment for which it paid $90 million. At the end of 2018, it had accumulated depreciation on the equipment of $27 million. Due to adverse economic conditions, Fryer's management determined that it should assess whether an impairment loss should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment's fair value at that point is $40 million. Under these circumstances, Fryer:

Accepted Answer

A)   Would record no impairment loss on the equipment.
B)   Would record a $3 million impairment loss on the equipment.
C)   Would record a $23 million impairment loss on the equipment.
D)   None of these answer choices are correct.E) B) and D)
F) All of the above

Question 14

Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. 
-Using the double-declining balance method, depreciation for 2019 and book value at December 31, 2019, would be:

Accepted Answer

A)   $10,000 and $5,000.
B)   $10,000 and $10,000.
C)   $11,250 and $6,250.
D)   $11,250 and $11,250.E) B) and D)
F) A) and B)

Question 15

An asset was acquired on September 30, 2018, for $100,000 with an estimated 5-year life and $20,000 residual value. The company uses double-declining-depreciation. Calculate the gain or loss if the asset was sold on December 31, 2019, for $50,000. Partial-year depreciation is to be calculated.

Accepted Answer

A)   $1,200 gain.
B)   $14,000 gain.
C)   $16,000 loss.
D)   $4,000 loss.E) B) and C)
F) None of the above

Question 16

International Financial Reporting Standards (IFRS) require goodwill to be tested for impairment at least annually.

Accepted Answer

A) True 
 B)False

Question 17

Russell Enterprises acquired a franchise from Michael Incorporated for $300,000. The franchise agreement is for a period of six years. Russell uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?

Accepted Answer

A)   $300,000.
B)   $250,000.
C)   $200,000.
D)   $100,000.E) A) and B)
F) A) and C)

Question 18

The physical life of a depreciable asset is bounded by its service life.

Accepted Answer

A) True 
 B)False

Question 19

Briefly explain how to account for a change in depreciation method.

Accepted Answer

A change in depreciation method is treat...

Question 20

Natural resources that have been harvested but not yet sold are accounted for as:

Accepted Answer

A)   Property, plant and equipment.
B)   Cost of goods sold.
C)   Operating expense.
D)   Inventory.E) A) and D)
F) A) and C)

Exam 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Notsofast Inc. acquired land for $500,000 on July 1, 2017. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2018.

Correct Answer
verified
If material, the $500,000 should have be...
View Answer

Briefly differentiate between activity-based and time-based allocation methods.

Correct Answer
verified
Time-based methods allocate an asset's c...
View Answer

Correct Answer
verified
2018 depreciation: ...
View Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Depreciation

Correct Answer
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Listed below are five terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term. -Rearrangements

Correct Answer
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Which of the following represents an event that indicates an asset's book value may not be recoverable?

Correct Answer
verified

Russell Enterprises acquired a franchise from Michael Incorporated for $300,000. The franchise agreement is for a period of six years. Russell uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?

Correct Answer
verified

Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. -Using the double-declining balance method, depreciation for 2019 and book value at December 31, 2019, would be:

Correct Answer
verified

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. -Depletion

Correct Answer
verified

Correct Answer
verified

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. -Using the straight-line method, depreciation for 2018 would be:

Correct Answer
verified

The physical life of a depreciable asset is bounded by its service life.

Correct Answer
verified

Briefly explain the disclosures that are required relative to depreciable assets.

Correct Answer
verified
The note presenting the summary of signi...
View Answer

Briefly explain how to account for a change in depreciation method.

Correct Answer
verified
A change in depreciation method is treat...
View Answer

A major addition to equipment should have been capitalized in the year 2018 but was incorrectly expensed. Which of the following is (are) true?

Correct Answer
verified

An asset was acquired on September 30, 2018, for $100,000 with an estimated 5-year life and $20,000 residual value. The company uses double-declining-depreciation. Calculate the gain or loss if the asset was sold on December 31, 2019, for $50,000. Partial-year depreciation is to be calculated.

Correct Answer
verified

International Financial Reporting Standards (IFRS) require goodwill to be tested for impairment at least annually.

Correct Answer
verified

Correct Answer
verified

Natural resources that have been harvested but not yet sold are accounted for as:

Correct Answer
verified

Any method of depreciation should be both systematic and rational.

Correct Answer
verified

Exam 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Notsofast Inc. acquired land for $500,000 on July 1, 2017. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2018.

Correct AnswerverifiedIf material, the $500,000 should have be...View AnswerShow Answer

Briefly differentiate between activity-based and time-based allocation methods.

Correct AnswerverifiedTime-based methods allocate an asset's c...View AnswerShow Answer

Correct Answerverified 2018 depreciation: ...View AnswerShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Depreciation

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term. -Rearrangements

Correct AnswerverifiedShow Answer

Which of the following represents an event that indicates an asset's book value may not be recoverable?

Correct AnswerverifiedShow Answer

Russell Enterprises acquired a franchise from Michael Incorporated for $300,000. The franchise agreement is for a period of six years. Russell uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?

Correct AnswerverifiedShow Answer

Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. -Using the double-declining balance method, depreciation for 2019 and book value at December 31, 2019, would be:

Correct AnswerverifiedShow Answer

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. -Depletion

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. -Using the straight-line method, depreciation for 2018 would be:

Correct AnswerverifiedShow Answer

The physical life of a depreciable asset is bounded by its service life.

Correct AnswerverifiedShow Answer

Briefly explain the disclosures that are required relative to depreciable assets.

Correct AnswerverifiedThe note presenting the summary of signi...View AnswerShow Answer

Briefly explain how to account for a change in depreciation method.

Correct AnswerverifiedA change in depreciation method is treat...View AnswerShow Answer

A major addition to equipment should have been capitalized in the year 2018 but was incorrectly expensed. Which of the following is (are) true?

Correct AnswerverifiedShow Answer

An asset was acquired on September 30, 2018, for $100,000 with an estimated 5-year life and $20,000 residual value. The company uses double-declining-depreciation. Calculate the gain or loss if the asset was sold on December 31, 2019, for $50,000. Partial-year depreciation is to be calculated.

Correct AnswerverifiedShow Answer

International Financial Reporting Standards (IFRS) require goodwill to be tested for impairment at least annually.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Natural resources that have been harvested but not yet sold are accounted for as:

Correct AnswerverifiedShow Answer

Any method of depreciation should be both systematic and rational.

Correct AnswerverifiedShow Answer

Correct Answer
verified
If material, the $500,000 should have be...
View Answer

Correct Answer
verified
Time-based methods allocate an asset's c...
View Answer

Correct Answer
verified
2018 depreciation: ...
View Answer

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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The note presenting the summary of signi...
View Answer

Correct Answer
verified
A change in depreciation method is treat...
View Answer

Correct Answer
verified

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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