Exam 2 – Clicker Questions 3/23/17

Which of the following subsequent expenditures would be capitalized? A. Ordinary repair B. Costs that increase the service life of an asset C. Routine maintenance D. Ordinary repair and routine maintenance

Which of the following subsequent expenditures would not be capitalized? A. Unsuccessful legal defense of intangible assets B. Additions C. Improvements D. Successful legal defense of intangible asset

Accumulated Depreciation is a liability account that is increased by credits A. True B. False

Book value or carrying value is equal to the original cost of the asset minus the current balance in Accumulated Depreciation A. True B. False

The factors used to compute depreciation expense are an asset's: A. Cost, residual value, and physical life B. Cost, residual value, and service life C. Fair market value, residual value, and economic life D. Cost, replacement value, and service life

Papercraft Corporation purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five‐year life, with a residual value of $5,000 at the end of five years. Using the straight‐ line method, depreciation expense for 2018 would be: A. $12,000 B. $11,000 C. $60,000 D. None of these

How much depreciation should be recorded for the first year for a delivery truck with a cost of $30,000, an expected life of six years, and an estimated residual value of $6,000? Assume the double‐declining‐balance method is used. A. $ 12,000 B. $ 10,000 C. $ 8,000 D. $ 5,000

During the first two years, Supplies, Inc. drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of deprecation expense should Supplies, Inc. record in the second year using the activity‐based method? A. $11,000 B. $18,500 C. $7,500 D. $16,000

Which of the following intangible assets has an indefinite useful life? A. Patents B. Copyrights C. Franchises D. Goodwill

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assuming the company uses the straight‐line method, what is the amortization expense for the first year? A. $0 B. $2,000 C. $3,333 D. $10,000

We record a gain if we sell an asset for less than book value A. True B. False

Costello Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight‐line method and was sold at the end of the second year of use for $5,000 cash. Costello should record A. a loss of $1,000 B. a gain of $1,000 C. neither a gain nor a loss ‐ the computer was sold at its book value D. neither a gain nor a loss ‐ the gain that occurred in this case would not be recognized

Losses on the sale of long‐term assets for cash: A. Are the excess of the book value over the cash received B. Are recorded as a credit C. Are reported on a net‐of‐tax basis if material D. Are the excess of the cash received over the book value