ACCT Chap 7

The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use. a. True b. False

Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the ordinary course of business are called fixed assets. a. True b. False

Expenditures made to extend an asset's life are called revenue expenditures. a. True b.False

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account. a. True b. False

The estimated amount that an asset can be sold for at the end of its useful life is called its book value. a. True b. False

Under the straight-line method, the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000, and a useful life of 5 years, will be $18,000. a. True b. False

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended. a. True b. False

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year. a. True b. False

The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the straight-line method. a. True b. False

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost. a. True b. False

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method. a. True b. False

Companies usually compute depletion by using the double-declining-balance method. a. True b. False

A current asset account must be increased for revenue expenditures since they benefit only the current period. a. True b. False

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale, a loss is recorded. a. True b. False

If an asset is discarded, a loss is recognized equal to its salvage value. a. True b. False

If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized. a. True b. False

Intangible assets do not exist physically. a. True b. False

Goodwill refers to the excess of purchase price of a business over the fair value of its net assets. a. True b. False

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet a. True b. False

Fixed assets are reported at their book value on the balance sheet. a. True b. False

The inventory turnover measures how efficiently a company is using its operating assets to generate sales. a. True b. False

Which of the following is a characteristic of fixed assets?

Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment?

Which of the following expenditures would be included in the cost of a fixed asset?

A company acquired some land for $75,000 to construct a new office complex. Legal fees paid were $2,750, delinquent taxes assumed were $3,250, and $6,350 was paid to remove an old building. Materials salvaged from the demolition of the building were sold for $2,300. Determine the cost of the land to be reported on the balance sheet.

A(n) _____ is a contract for the use of an asset for a period of time without having to buy the asset.

The cost of removal of an old building to make the land ready for its intended use is charged to:

Which of the following should be included in the acquisition cost of a piece of equipment?

_____ is an example of a fixed asset.

Land improvements include:

Capital expenditure is reported on the:

If a revenue expenditure is treated as a capital expenditure, then:

The effect of recording a capital expenditure as a revenue expenditure is that:

The cost incurred to extend an asset's useful life is recorded as:

Which of the following is an example of a capital expenditure?

The book value of an asset is computed as the asset's:

_____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended

Which of the following is considered under the straight-line method but not under double-declining-balance method?

Depreciable cost is computed as:

Which of the following is a characteristic of accumulated depreciation account?

Which method of depreciation considers residual value in computing the normal periodic depreciation?

The accounting term depreciation measures:

The Modified Accelerated Cost Recovery System is used to:

Recording depreciation:

To measure depreciation, which of the following must be known

A machine was purchased for $68,000. It has a useful life of 5 years and a residual value of $8,000. Determine the annual depreciation expense using the straight-line method?

An equipment was purchased for $15,000. It has a useful life of 5 years and a residual value of $4,000. Determine the depreciation expense for the first year using the double-declining-balance method?

A computer equipment was acquired at the beginning of the year at a cost of $56,000 with an estimated residual value of $5,000, and an estimated useful life of 5 years. Determine the second year's depreciation expense using the straight-line method.

An equipment was purchased for $30,000. It has a useful life of 5 years, and a residual value of $4,000. Compute the depreciation expense for the second year using the double-declining-balance method.

On September 1, a machine was purchased for $47,000 with a useful life of 8 years, and a residual value of $3,000. What is the depreciation expense in the year of purchase under straight-line method, assuming a December 31 year-end?

Which of the following is the effect on the transaction metrics of a company when it records depreciation?

A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000. Compute the annual depreciation expense using the straight-line method.

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must:

Losses on discarding fixed assets are _____.

A fixed asset with a cost of $15,000 and accumulated depreciation of $12,500 is sold for $1,750. What is the amount of gain or loss on disposal of the fixed asset?

A gain is recorded on the sale of fixed assets when:

A fully depreciated asset must be:

A company sold a delivery truck for $22,000 cash. The truck costs $45,800 and had accumulated depreciation of $32,000 as of the date of sale. The entry to record the sale would include:

A company sold office furniture costing $15,800 with accumulated depreciation of $13,000 for $1,500 cash. The entry to record the sale would include:

Which of the following transactions will have no effect on the liquidity metric of a company?

Goodwill is:

Which of the following is not an intangible asset?

Which of the following intangible assets are amortized over their useful life?

Which of the following statement is true about intangible assets?

The exclusive right to use a certain name or symbol is called a

Paleota Company purchased a patent from Finise for $234,000. At the time of purchase, the patent had a remaining useful life of 10 years. Determine the patent amortization expense for the first year.

Research and development costs incurred for developing patents are recorded as:

The cost of a patent should be amortized :

Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

A patent was purchased for $585,000 with a legal life of 20 years. Management estimates that the patent has a 12-year economic life. The entry to record amortization would include:

Fixed assets are ordinarily presented on the balance sheet:

Which of the following is true of asset turnover?

The asset turnover is calculated as _____.

An asset turnover ratio of 1.87 for a company indicates that: