Question 1

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Accepted Answer

A) True 
 B)False

Question 2

On March 1, 2014, Anniston Company purchased an oil well at a cost of $1,000,000. It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2014, 15,000 barrels of oil were produced and 10,000 barrels were sold. Which of the following statements is correct with respect to the accounting for the oil well?

Accepted Answer

A)   The 2014 cost of goods sold was $90,000.
B)   The book value of the oil well decreased $60,000 during 2014.
C)  The inventory of oil was $30,000 at December 31, 2014.
D)  The 2014 cost of goods sold was $30,000.E) A) and B)
F) B) and C)

Question 3

Which one of the following would not be recorded as an intangible asset?

Accepted Answer

A)   Patents
B)   Copyrights
C)  Internally generated goodwill
D)  FranchisesE) A) and B)
F) A) and C)

Question 4

On January 1, 2014, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. What is the vehicle's book value as of December 31, 2015, assuming Wasson uses the straight-line depreciation method?

Accepted Answer

A)   $12,000.
B)   $24,000.
C)  $30,000.
D)  $28,000.E) None of the above
F) A) and B)

Question 5

Schager Company purchased a computer system on January 1, 2014, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance depreciation method. How much is the 2015 depreciation expense?

Accepted Answer

A)   $5,000.
B)   $4,120.
C)  $4,000.
D)  $3,520.E) None of the above
F) A) and B)

Question 6

Which of the following would most likely not be a revenue expenditure?

Accepted Answer

A)   Repairing the carpet in the sales department offices.
B)   Repairing a leaky roof.
C)  Putting a hydraulic lift on a delivery truck making it easier and quicker to deliver appliances.
D)  Painting the exterior of the factory building.E) B) and C)
F) A) and D)

Question 7

Which of the following is most likely to be an intangible asset with an indefinite life?

Accepted Answer

A)   Leasehold
B)   Franchise
C)  Patent
D)  GoodwillE) C) and D)
F) A) and D)

Question 8

A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is

Accepted Answer

A)   3 years.
B)   4 years.
C)  5 years.
D)  6 years.E) A) and B)
F) C) and D)

Question 9

A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?

Accepted Answer

A)   The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
B)   The loss account is debited for $0.4 million and the asset account is credited for $0.4 million.
C)  The loss account is debited for $5.4 million and the asset account is credited for $5.4 million.
D)  The loss account is debited for $4.8 million and the asset account is credited for $4.8 million.E) None of the above
F) C) and D)

Question 10

Which of the following statements about asset impairment is false?

Accepted Answer

A)   Asset impairment loss is the difference between an asset's net book value and its estimated future cash flows.
B)   If an asset is impaired, a loss would be recognized in the period it can be estimated.
C)  Impairment will lead to writing down the asset's net book value.
D)  Asset impairment occurs when the estimated future cash flows are less than the asset's net book value.E) B) and D)
F) All of the above

Question 11

The equipment cost initially reported on the balance sheet includes the equipment-related installation and transportation costs.

Accepted Answer

A) True 
 B)False

Question 12

If depreciation expense is calculated without taking into account the asset's residual value, depreciation expense will be overstated.

Accepted Answer

A) True 
 B)False

Question 13

Lincoln Restaurants reported net income in 2014 of $45.9 million and depreciation expense of $48.8 million. It also reported additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2014 statement of cash flows?

Accepted Answer

A)   Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be added under investing activities.
B)   Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be added under investing activities.
C)  Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be deducted under investing activities.
D)  Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be deducted under investing activities.E) None of the above
F) B) and C)

Question 14

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Accepted Answer

A)   The company has high technology, robotic equipment in its plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets' lives.
B)   The company wants to maximize its net income during the earlier years of the asset's life.
C)  The company wants to maximize the asset's book value in the earlier years of the asset's life.
D)  The company wants to maximize the total depreciation expense over the life of the asset.E) A) and D)
F) A) and C)

Question 15

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following transactions would not increase the fixed asset turnover ratio?

Accepted Answer

A)   A decrease in sales revenue.
B)   A profitable sale of fixed assets for cash.
C)  Selling manufacturing equipment for a loss.
D)  A decrease in operating expenses.E) B) and C)
F) A) and D)

Question 17

On December 31, 2014, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2014. What is the gain or loss from the December 31, 2014 equipment sale?

Accepted Answer

A)   $600,000 gain.
B)   $600,000 loss.
C)  $200,000 loss.
D)  $200,000 gain.E) None of the above
F) C) and D)

Question 18

Failure to record amortization expense on a patent during the current year will result in which of the following?

Accepted Answer

A)   Net income will be overstated, but there would be no effect on total assets.
B)   Net income for the year and total assets would both be overstated.
C)  Assets will be overstated, but there would be no effect on net income for the year.
D)  Net income and assets will both be understateD.Failure to record patent amortization results in an understatement of expenses and therefore an overstatement of net income. Assets are overstated because the patent account was not reduced by the amortization that was not recorded.E) A) and C)
F) None of the above

Question 19

The following information was available for Landmark Restaurants for the past three years.
Required:
Using this information, compute the fixed asset turnover ratio for Year 3 and Year 2. Round your answers to two decimal places. $$\begin{array} { l r r r r } 
\text { In thousands } & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \
\text { Net fixed assets } & \$ 965,575 & \$ 830,930 & \$ 587,829 \
\text { Net sales } & 1,105,755 & 894,795 & 746,642 \
\text { Net income } & 45,901 & 41,522 & 26,920
\end{array}$$

Accepted Answer

Year 3 fixed asset turnover ra...

Question 20

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

Accepted Answer

A) True 
 B)False

Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

If depreciation expense is calculated without taking into account the asset's residual value, depreciation expense will be overstated.

Correct Answer
verified

Correct Answer
verified

Failure to record amortization expense on a patent during the current year will result in which of the following?

Correct Answer
verified

Schager Company purchased a computer system on January 1, 2014, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance depreciation method. How much is the 2015 depreciation expense?

Correct Answer
verified

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

Correct Answer
verified

A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?

Correct Answer
verified

Which one of the following would not be recorded as an intangible asset?

Correct Answer
verified

Which of the following would most likely not be a revenue expenditure?

Correct Answer
verified

On December 31, 2014, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2014. What is the gain or loss from the December 31, 2014 equipment sale?

Correct Answer
verified

Which of the following transactions would not increase the fixed asset turnover ratio?

Correct Answer
verified

Correct Answer
verified
Year 3 fixed asset turnover ra...
View Answer

Lincoln Restaurants reported net income in 2014 of $45.9 million and depreciation expense of $48.8 million. It also reported additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2014 statement of cash flows?

Correct Answer
verified

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Correct Answer
verified

The equipment cost initially reported on the balance sheet includes the equipment-related installation and transportation costs.

Correct Answer
verified

Which of the following is most likely to be an intangible asset with an indefinite life?

Correct Answer
verified

A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is

Correct Answer
verified

On January 1, 2014, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. What is the vehicle's book value as of December 31, 2015, assuming Wasson uses the straight-line depreciation method?

Correct Answer
verified

Which of the following statements about asset impairment is false?

Correct Answer
verified

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Correct Answer
verified

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

Correct Answer
verified

Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

If depreciation expense is calculated without taking into account the asset's residual value, depreciation expense will be overstated.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Failure to record amortization expense on a patent during the current year will result in which of the following?

Correct AnswerverifiedShow Answer

Schager Company purchased a computer system on January 1, 2014, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance depreciation method. How much is the 2015 depreciation expense?

Correct AnswerverifiedShow Answer

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

Correct AnswerverifiedShow Answer

A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?

Correct AnswerverifiedShow Answer

Which one of the following would not be recorded as an intangible asset?

Correct AnswerverifiedShow Answer

Which of the following would most likely not be a revenue expenditure?

Correct AnswerverifiedShow Answer

On December 31, 2014, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2014. What is the gain or loss from the December 31, 2014 equipment sale?

Correct AnswerverifiedShow Answer

Which of the following transactions would not increase the fixed asset turnover ratio?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYear 3 fixed asset turnover ra...View AnswerShow Answer

Lincoln Restaurants reported net income in 2014 of $45.9 million and depreciation expense of $48.8 million. It also reported additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2014 statement of cash flows?

Correct AnswerverifiedShow Answer

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Correct AnswerverifiedShow Answer

The equipment cost initially reported on the balance sheet includes the equipment-related installation and transportation costs.

Correct AnswerverifiedShow Answer

Which of the following is most likely to be an intangible asset with an indefinite life?

Correct AnswerverifiedShow Answer

A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is

Correct AnswerverifiedShow Answer

On January 1, 2014, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. What is the vehicle's book value as of December 31, 2015, assuming Wasson uses the straight-line depreciation method?

Correct AnswerverifiedShow Answer

Which of the following statements about asset impairment is false?

Correct AnswerverifiedShow Answer

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Correct AnswerverifiedShow Answer

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

Correct AnswerverifiedShow Answer

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
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Correct Answer
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Correct Answer
verified
Year 3 fixed asset turnover ra...
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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