Deck 8: Capital Assets

Question 1

Firms whose assets consist of a significant amount of property plant and equipment are known as being:

A)risky.
B)highly leveraged.
C)capital intensive.
D)credit worthy.

Answer 1

C

Question 2

The amount at which an asset could be sold between knowledgeable arm's length parties is known as?

A)Fair value
B)Replacement cost
C)Net book value
D)Historical cost

Answer 2

A

Question 3

If managers were trying to decide whether to purchase an asset or not, which method of valuing the asset should they use?

A)Net realizable value
B)Replacement cost
C)Market value
D)Value-in-use

Answer 3

D

Question 4

Which of the following is not a tangible capital asset?

A)Buildings
B)Land
C)Patent
D)Equipment

Question 5

If a company were going to pledge its capital assets to a bank as collateral for a loan, which method of valuing the assets would be more useful to the bank?

A)Fair value
B)Replacement cost
C)Net book value
D)Historical cost

Question 6

If a user wanted to predict the future cash flows of the company, which method of valuing capital assets would be more useful?

A)Net realizable value
B)Replacement cost
C)Market value
D)Historical cost

Question 7

What is the most useful method of valuing capital assets when trying to meet the stewardship objective of accounting?

A)Net realizable value
B)Replacement cost
C)Market value
D)Historical cost

Question 8

If a company incurs an incidental cost related to the purchase of an asset, would it prefer to expense or capitalize the cost under each of the following accounting objectives? $\begin{array}{ll}&\text { Tax}&\text { Income}\\&\text { Minimization } & \text { Maximization } \\\hline a)&\text { Expense } & \text { Expense } \\b)&\text { Expense } & \text { Capitalize } \\c)&\text { Capitalize } & \text { Expense } \\d)&\text { Capitalize } & \text { Capitalize }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 9

Which method of valuing capital assets is more relevant for tax purposes?

A)Net realizable value
B)Replacement cost
C)Market value
D)Historical cost

Question 10

A company recently built itself a new production machine and has incurred the following costs.All of the costs can be included in the cost of the asset except?

A)Interest expense on the loan during the construction.
B)Freight, taxes and duties.
C)Installation costs.
D)Repairs required within the first month of using the machine.

Question 11

What is the net present value of the cash flows that an asset will generate over its life called?

A)Net realizable value
B)Replacement cost
C)Market value
D)Value-in-use

Question 12

Most companies value capital assets on the balance sheet at:

A)net realizable value.
B)replacement cost.
C)market value.
D)historical cost.

Question 13

Why is fair value not normally used to value capital assets?

A)Because it is less comparable than historical cost.
B)Because it is less relevant than historical cost.
C)Because it is less consistent than historical cost.
D)Because it is less reliable than historical cost.

Question 14

Gatineau recently purchased a new set of office furniture for their head offices.They incurred the following costs: invoice price $256,000, taxes $36,000, delivery charges $4,500, wages paid to employees for assembling the furniture $4,000.What is the cost of the office furniture for accounting purposes?

A)$292,000
B)$292,500
C)$296,500
D)$300,500

Question 15

A company was filing an insurance claim for capital assets damaged in a flood; which method of valuing the asset should they use?

A)Net realizable value
B)Replacement cost
C)Market value
D)Value-in-use

Question 16

Laurier Ltd.recently purchased a new delivery truck and incurred the following costs: invoice price $45,000, taxes, delivery and preparation $8,300.They had the truck painted with the company logo for $650 and paid the increase in the insurance premium of $1,100 on the truck.What is the cost of the truck for accounting purposes?

A)$45,000
B)$53,300
C)$53,950
D)$54, 400

Question 17

If an investor were trying to determine the value of an entity, which method of valuing the capital assets would be the most useful?

A)Net realizable value
B)Replacement cost
C)Market value
D)Value-in-use

Question 18

In order for a capital asset to be presented on a company's balance sheet, all of the following criteria must be met except:

A)the company must control the asset.
B)the company must own the asset.
C)the asset must be tangible or intangible.
D)the asset is not bought and sold in the ordinary course of business.

Question 19

A company recently bought a new production machine and has incurred the following costs.All of the costs can be included in the cost of the asset except?

A)Interest expense on the loan to finance the purchase after the asset is put into use.
B)Freight, taxes and duties.
C)Installation costs.
D)Cost of training personnel to use the machine.

Question 20

All of the following would be classified as capital assets except:

A)buildings in current use.
B)land purchased for resale.
C)machinery.
D)tools used in production.

Question 21

On January 1, 2013, Latke Tool and Manufacturing Company (Latke) purchased a machine that cost $22,000.The machine has an estimated five-year life and a 10 percent residual value.It is expected to be used for a total of 1,600 productive hours over the next 5 years.During 2013, it was used 400 hours.Latke has a December 31 year-end.What is the depreciation expense for 2013 if Latke uses the straight-line method?

A)$2,200
B)$3,960
C)$4,400
D)$4,950

Question 22

On January 1, 2013, LaMonte Paint and Repair purchased a piece of equipment that cost $300,000.It has an estimated useful life 10 years over which it was expected to produce 100,000 units of output.The equipment is expected to have an estimated residual value of $80,000.The company amortizes all equipment using the straight-line method.In the first two years of operation, the asset produced units of output as follows: 2013, 18,000 units; 2014, 15,000 units.The accounting year ends December 31.What is the amount of depreciation expense and in the accumulated depreciation account (after adjusting entries) at the end of 2014? $\begin{array}{lll}&\text { Depreciation } & \text { Accumulated } \\&\text { Expense } & \text { Depreciation }\\\text { A) } & \$ 44,000 & \$ 44,000 \\\text { B) } & \$ 22,000 & \$ 44,000 \\\text { C) } & \$ 30,000 & \$ 30,000 \\\text { D) } & \$ 30,000 & \$ 60,000\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 23

Longsford Transport spent money in conducting its five-year maintenance program for its fleet of delivery vans.Management feels the work increases the value of the vans and that many vans would break down and have a shorter useful life if the work is not taken place.How should the cost of the work be accounted for?

A)Expensed
B)Capitalized
C)Recorded as a decrease to retained earnings.
D)Recorded as a decrease in accumulated depreciation.

Question 24

All of the following terms can be used for the process of allocating the cost of a capital asset to expense over time except?

A)Depreciation
B)Depletion
C)Amortization
D)Expensing

Question 25

An improvement made to an existing machine increased its fair market value and its production capacity by 30% and extended the machine's useful life by 5 years.How should the cost of the improvements be accounted for?

A)Expensed
B)Capitalized
C)Recorded as a decrease to retained earnings.
D)Recorded as a decrease in accumulated depreciation.

Question 26

Jacob-Morley Company recently purchased 2 hectares of land with a manufacturing facility and several pieces of equipment for $3.7 million.As a part of the financing terms, the assets had to be appraised.The appraisal report outlined the following values: land $1.2 million, building $2 million and equipment $950,000.At what cost should Jacob-Morley record each of the assets? $\begin{array}{rrr}&\text { Land } & \text { Building }& \text { Equipment }\\a)&\$ 0 & \$ 3,700,000 & \$ 0 \\b)&\$ 1,069,880 & \$ 1,783,132 & \$ 846,988 \\c)&\$ 1,200,000 & \$ 2,000,000 & \$ 950,000 \\d)&\$ 1,069,880 & \$ 2,630,120 & \$ 0\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 27

Which of the following would be an example of betterment for a car?

A)A new larger transmission.
B)An oil change.
C)Replacement of the brakes.
D)Annual rust proofing inspection.

Question 28

Kramer Limited purchased a new tractor for use in its daily operations.The tractor had a list price of $82,000, but Kramer's management was able to purchase the machine for $75,000 plus $3,000 in taxes.Kramer paid $2,000 to have the tractor delivered and an additional $1,000 to have it tested and calibrated.At what cost should the tractor be recorded in Kramer's books?

A)$75,000
B)$78,000
C)$81,000
D)$88,000

Question 29

On January 1, 2013, Latke Tool and Manufacturing Company purchased a machine that cost $22,000.The machine has an estimated five-year life, and a 10 percent residual value.It is expected to be used for a total of 1,600 productive hours over the next 5 years.During 2013, it was used 400 hours.Latke has a December 31 year-end.What is the depreciation expense for 2013 if Latke uses the units-of-production method?

A)$2,200
B)$3,960
C)$4,400
D)$4,950

Question 30

On January 1, 2013, LaMonte Paint and Repair purchased a piece of equipment that cost $300,000.It has an estimated useful life 10 years over which it was expected to produce 100,000 units of output.The equipment is expected to have an estimated residual value of $80,000.The company amortizes all equipment using the units-of-production method.In the first two years of operation, the asset produced units of output as follows: 2013, 18,000 units; 2014, 15,000 units.The accounting year ends December 31.What is the amount of depreciation expense and in the accumulated depreciation account (after adjusting entries) at the end of 2014? Depreciation Accumulated
a)
\begin{tabular} { l r }
Expense & Depreciation \\
\hline $\$ 45,000$ & $\$ 99,000$ \\
$\$ 33,000$ & $\$ 72,600$ \\
$\$ 72,600$ & $\$ 72,600$ \\
$\$ 33,000$ & $\$ 33,000$
\end{tabular}

A)Option A
B)Option B
C)Option C
D)Option D

Question 31

On January 1, 2013, Latke Tool and Manufacturing Company purchased a machine that cost $22,000.The machine has an estimated five-year life, and a 10 percent residual value.It is expected to be used for a total of 1,600 productive hours over the next 5 years.During 2013, it was used 400 hours.Latke has a December 31 year-end.What is the depreciation expense for 2013 if Latke uses the accelerated method at a rate of 20%?

A)$2,200
B)$3,960
C)$4,400
D)$4,950

Question 32

On January 1, 2013, LaMonte Paint and Repair purchased a piece of equipment that cost $300,000.It has an estimated useful life 10 years over which it was expected to produce 100,000 units of output.The equipment is expected to have an estimated residual value of $80,000.The company amortizes all equipment using the accelerated method at a rate of 20%.In the first two years of operation, the asset produced units of output as follows: 2013, 18,000 units; 2014, 15,000 units.The accounting year ends December 31.What is the amount of depreciation expense and in the accumulated depreciation account (after adjusting entries) at the end of 2014? $\begin{array}{rrr}&\text { Depreciation } & \text { Accumulated } \\&\text { Expense } & \text { Depreciation }\\\text { A) } & \$ 48,000 & \$ 108,000 \\\text { B) } & \$ 48,000 & \$ 48,000 \\\text { C) } & \$ 60,000 & \$ 120,000 \\\text { D) } & \$ 35,200 & \$ 79,200\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 33

If Messerschmidt's objective was that of tax minimization, what value would they assign to the warehouse?

A)$900,000
B)$1,000,000
C)$1,100,000
D)$750,000

Question 34

Which of the following would be an example of a repair expense for a car?

A)A new, larger transmission.
B)Addition of a trailer hitch, to be able to tow additional loads.
C)Replacement of the brakes.
D)Painting the company logo on the side of the car.

Question 35

If management at Messerschmidt's received a bonus based on net income, at what cost would they record the warehouse on their books?

A)$814,814
B)$880,000
C)$1,100,000
D)$750,000

Question 36

Abbott Industries bought a property with land and a building on it for $20,000,000.An independent appraisal of the land put the value of the land between $5,000,000 and $8,000,000.If Abbott's financial reporting objective is to report maximum performance how should the cost be allocated to the two assets? $\begin{array}{ll}&\text {Land }&\text {Building }\\\hline\text { A) } &\$ 5,000,000 & \$ 15,000,000 \\\text { B) } &\$ 6,500,000 & \$ 13,500,000 \\\text { C) } &\$ 8,000,000 & \$ 12,000,000 \\\text { D) }& \$ 10,000,000 & \$ 10,000,000\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 37

What are expenditures that are made to improve an existing capital asset called?

A)Repairs
B)Betterments
C)Maintenance
D)Capital expenses

Question 38

If Messerschmidt's objective was that of tax minimization, at what cost would they record the warehouse on their books?

A)$814,814
B)$880,000
C)$1,100,000
D)$750,000

Question 39

On January 1, 2013, LaMonte Paint and Repair purchased a piece of equipment that cost $300,000.It has an estimated useful life 10 years over which it was expected to produce 100,000 units of output.The equipment is expected to have an estimated residual value of $80,000.The company amortizes all equipment using the units-of-production method.In the first two years of operation, the asset produced units of output as follows: 2013, 18,000 units; 2014, 15,000 units.The accounting year ends December 31.What is the amount of depreciation expense and in the accumulated depreciation account (after adjusting entries) at the end of 2013? $\begin{array}{lrr}&\text { Depreciation } & \text { Accumulated } \\&\text { Expense } & \text { Depreciation }\\\text { A) } & \$ 54,000 & \$ 54,000 \\\text { B) } & \$ 54,000 & \$ 0 \\\text { C) } & \$ 33,000 & \$ 33,000 \\\text { D) } & \$ 39,600 & \$ 39,600\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D
[300,000 - 80,000]/100,000 = 2.20/unit, 2013: 2.20 x 18,000 = 39,600

Question 40

Abbott Industries bought a property with land and a building on it for $20,000,000.An independent appraisal of the land put the value of the land between $5,000,000 and $8,000,000.If Abbott's financial reporting objective is to minimize taxes how should the cost be allocated to the two assets? $\begin{array}{ll}&\text {Land }&\text {Building }\\\hline\text { A) } &\$ 5,000,000 & \$ 15,000,000 \\\text { B) } &\$ 6,500,000 & \$ 13,500,000 \\\text { C) } &\$ 8,000,000 & \$ 12,000,000 \\\text { D) }& \$ 10,000,000 & \$ 10,000,000\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 41

In addition to measuring capital assets at historical cost, IFRS permits the use of which method, providing certain conditions are met?

A)Replacement cost
B)Net realizable value
C)Estimated cost
D)Fair value

Question 42

What is the most common method of depreciation for natural resource companies?

A)Straight-line
B)Declining balance
C)Units-of-production
D)Capital cost allowance

Question 43

If the expiry of the asset is a function of its usage, what is the most appropriate depreciation method for it?

A)Straight-line
B)Declining balance
C)Units-of-production
D)Market value

Question 44

Kozy Kitchens Inc.has a new showroom that cost $400,000.It will be amortized using the declining balance method at a rate of 5%.The estimated residual value of the building is $50,000, and it has an expected useful life of 20 years.Assuming the first year's depreciation expense was recorded properly, what would be the amount of accumulated depreciation at the end of the second year (after adjusting entries)?

A)$19,000
B)$34,125
C)$39,000
D)$40,000

Question 45

Which method of depreciation ignores the residual value in the calculation of the annual depreciation expense?

A)Straight-line
B)Declining balance
C)Units-of-production
D)Annuity- based

Question 46

If managers are concerned about the level of income their company reports, which method of depreciation are they most likely to use?

A)Straight-line
B)Declining balance
C)Units-of-production
D)Market value

Question 47

What is the most common method of accelerated depreciation in Canada?

A)Double-declining balance
B)Declining balance
C)Units-of-production
D)Capital cost allowance

Question 48

On January 1, 2012, Lasche Auto Sales and Service purchased a vehicle for use in the business at a cost of $22,000.The vehicle has a 4-year useful life with an expected residual value of $2,000.The company has a December 31 year-end and uses straight-line depreciation for all capital assets.Which of the following is the journal entry to record their depreciation expense for 2014?
A. Dr. Depreciation expense $\quad$$\quad$$\quad$ 5,000
$\quad$$\quad$ Cr. Accumulated depreciation $\quad$$\quad$$\quad$$\quad$ 5,000
B. Dr. Depreciation expense $\quad$$\quad$$\quad$ 10,000
$\quad$$\quad$ Cr. Accumulated depreciation $\quad$$\quad$$\quad$ 10,000
C. Dr. Depreciation expense $\quad$$\quad$$\quad$ 5,000
$\quad$$\quad$ Cr. Capital assets $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 5,000
D. Dr. Accumulated Depreciation $\quad$ 5,000
$\quad$$\quad$ Cr. Depreciation expense $\quad$$\quad$$\quad$$\quad$$\quad$ 5,000

A)Option A
B)Option B
C)Option C
D)Option D

Question 49

If an asset is sensitive to obsolescence and becomes less efficient as time passes, what would be the most appropriate depreciation method for it?

A)Straight-line
B)Accelerated
C)Usage-based
D)Annuity- based

Question 50

On January 1, 2012, Lasche Auto Sales and Service purchased a vehicle for use in the business at a cost of $22,000.The vehicle has a 4-year useful life with an expected residual value of $2,000.The company has a December 31 year-end and uses straight-line depreciation for all capital assets.What is the vehicle's net book value on December 31, 2014?

A)$5,500
B)$7,000
C)$15,000
D)$20,000

Question 51

Kozy Kitchens Inc.has a new showroom that cost $400,000.It will be amortized using the declining balance method at a rate of 5%.The estimated residual value of the showroom is $50,000, and it has an expected useful life of 20 years.Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

A)$10,000
B)$16,625
C)$19,000
D)$20,000

Question 52

Kozy Kitchens Inc.has a new showroom that cost $400,000.It will be amortized using the declining balance method at a rate of 5%.The estimated residual value of the building is $50,000, and it has an expected useful life of 20 years.Assuming the first year's depreciation expense was recorded properly, what would be the net book value of the showroom at the end of the second year (after adjusting entries)?

A)$360,000
B)$361,000
C)$365,875
D)$381,000

Question 53

Which of the following would allow a company to report higher net income in earlier periods?

A)A lower residual value
B)A shorter useful life
C)Use of straight-line depreciation
D)Use of declining balance depreciation

Question 54

Manotik in Motion has recently expanded their operation and had built a large manufacturing facility and head office complex on the outskirts of Ottawa.To finance the expansion, they have taken out a loan with the Canadian Bank of Royal.The loan has a covenant stating that they must not exceed a certain debt-to-assets ratio.Management is now selecting the depreciation policies they will use on all the assets bought as part of the expansion.Which of the following will best help them meet their debt covenant?

A)Straight-line depreciation
B)Declining balance depreciation
C)Units-of-production depreciation
D)Expensing all interest costs during the construction period

Question 55

Which of the following would most likely allow a company to report higher net income in earlier periods?

A)A higher residual value
B)A shorter useful life
C)Use of units-of - production
D)Use of declining balance depreciation

Question 56

On January 1, 2012, Lasche Auto Sales and Service purchased a vehicle for use in the business at a cost of $22,000.The vehicle has a 4-year useful life with an expected residual value of $2,000.The company has a December 31 year-end and uses straight-line depreciation for all capital assets.What are the balances in the capital asset and accumulated depreciation account (after adjusting entries) on December 31, 2014? $\begin{array}{lll}&\text {Capital }&\text { Accumulated}\\&\text { Assets }&\text {Depreciation }\\\text { A) } & \$ 22,000 & \$ 15,000 \\\text { B) } & \$ 22,000 & \$ 16,500 \\\text { C) } &\$ 20,000 & \$ 15,000 \\\text { D) }& \$ 20,000 & \$ 16,500\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 57

The fair value model of accounting for Property, Plant, and Equipment assets:

A)should be applied to investment property only.
B)recognizes gains in the asset's fair value in other comprehensive income.
C)once chosen for one investment property does not have to be applied to all investment property.
D)recognizes gains and losses in the asset's fair value in other comprehensive income.

Question 58

Which of the following statements about depreciation is correct?

A)The depreciation method selected has no impact on cash flows.
B)The depreciation method selected has no impact on net income.
C)Consistency requires that the same method of depreciation should be used for all classes of assets.
D)Straight-line depreciation produces higher depreciation expense in the early years of an asset's useful life.

Question 59

A company reported the following depreciation expenses for the first three years of an asset's life: $10,000, $8,000, $6,400.Which of the following depreciation methods are they most likely using?

A)Straight-line
B)Accelerated
C)Usage-based
D)Annuity- based

Question 60

Which of the following best describes the purpose of depreciation?

A)To reflect the change in the market value of an asset.
B)To record the asset at its replacement cost.
C)To allocate an asset's cost over its physical life.
D)To allocate an asset's cost over its useful life.

Question 61

How will the money spent on purchasing intangible assets, such as a patent, normally be recorded?

A)As an expense when incurred.
B)As a prepaid asset.
C)As an intangible asset and not amortized.
D)As an intangible asset and amortized over its useful life.

Question 62

Under IFRS, many intangible assets are expensed instead of capitalized.What is the effect on the future years of expensing intangible assets on the following ratios?
$\begin{array}{ll}&\text { Profit } & \text { Debt-to } \\&\text { Margin } & \text { Assets }\\\hlineA.&\text { Overstated } & \text { Overstated } \\B.&\text { Overstated } & \text { Understated } \\C.&\text { Understated } & \text { Overstated } \\D.&\text { Understated } & \text { Understated }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 63

Under IFRS, when a company chooses to value capital assets at market value, which of the following statements is true?

A)At least three licensed appraisers must agree on a market price.
B)The unrealized gain recorded when the asset is written up allows the company to show stronger net income in that year.
C)The company is required to value all similar assets in the same way.
D)The carrying value of the asset remains the same, but the accumulated depreciation is eliminated.

Question 64

If a company owned a valuable brand name that was not recorded at its fair value, which of the following statements would be true?

A)The company's fair value would be higher than its book value.
B)The company's fair value would be lower than its book value.
C)Its assets would be equal to its fair value.
D)It assets would be equal to its book value.

Question 65

Which of the following best describes the accounting concept of goodwill?

A)Goodwill is the amount paid by a purchaser over and above the fair value of the purchased entity's identifiable assets and liabilities.
B)Goodwill is the amount that represents the value of all the intangibles on the company's balance sheet.
C)Goodwill is the value the company adds to its balance sheet to reflect the superior management capabilities existing at the company.
D)Goodwill is the amount paid by a purchaser for superior management capabilities.

Question 66

MacIntosh Inc.has decided to record their property plant and equipment at fair value.Prior to making the adjustment, the capital asset account had a debit balance of $3,200,000 and the related accumulated depreciation was $1,440,000.An independent appraisal has determined a fair value of $6.3 million.Using the proportional method, what would be the gross carrying amount of the assets immediately after the adjustment to fair value?

A)$2,817,391
B)$6,300,000
C)$0
D)$11,454,545

Question 67

A general description of the depreciation methods applicable to major classes of depreciable assets:

A)is not a current practice in financial reporting.
B)is not essential to a fair presentation of financial position.
C)is needed in financial reporting when company policy differs from income tax policy.
D)should be included in corporate financial statements or notes to the financial statements.

Question 68

When analyzing the capital assets note in a company's Notes to the Financial Statements, all of the following would be relevant except:

A)a reconciliation of the change in capital assets with the cash flows for investing activities.
B)the basis for and the estimated useful lives for depreciating each major class of capital assets.
C)a description of any impairment of capital assets and how it is determined.
D)an explanation of any goodwill and where it came from.

Question 69

Pharma-Mart is currently undertaking research in hopes of developing a drug to prevent cavities.If the company is successful, they expect to start selling the drug in five years' time.Under IFRS, what is the effect of the current accounting policies with respect to research on their net income, currently and in five years' time when they start to sell the drug?
$\begin{array}{ll}&\text { Current year }&\text { In } 5 \text { Years }\\\hlineA.&\text { Overstated } & \text { Overstated } \\B.&\text { Overstated } & \text { Understated } \\C.&\text { Understated } & \text { Overstated } \\D.&\text { Understated } & \text { Understated }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 70

How will the money spent on developing intangible assets, such as a patent, normally be recorded?

A)As an expense when incurred.
B)As a prepaid asset.
C)As an intangible asset and not amortized.
D)As an intangible asset and amortized over its useful life.

Question 71

Sudbury Inc purchased a patent from French River Corp for $25,000.Sudbury was pleased with the purchase, because the patent was going to allow them to produce Widgets that were complimentary to their existing product of Nidgets.They had developed the patent for Nidgets themselves at a cost of $8,000 and estimated that it was worth about $20,000.What value will Sudbury report for intangible assets related to patents on their balance sheet immediately after the purchase?

A)Nothing - all costs will be expensed.
B)$25,000
C)$33,000
D)$45,000

Question 72

The revaluation model of accounting for Property, Plant, &Equipment assets:

A)may be applied to all classes of PP&E including investment property.
B)uses a revaluation surplus account to hold net increases in the asset's fair value.
C)should not be applied to investment property.
D)should only be applied to investment property.

Question 73

Under IFRS, many intangible assets are expensed instead of capitalized.Which of the following accounting principles is violated by this approach?

A)Matching
B)Materiality
C)Revenue recognition
D)Comparability

Question 74

MacIntosh Inc.has decided to record their property plant and equipment at fair value.Prior to making the adjustment, the capital asset account had a debit balance of $3,220,000 and the related accumulated depreciation was $1,440,000.An independent appraisal has determined a fair value of $6.3 million.Using the proportional method, at what amount would the assets be recorded on the balance sheet immediately after the adjustment to fair value?

A)$1,780,000
B)$6,300,000
C)$3,220,000
D)$3,482,609

Question 75

The Fair value of accounting for Property, Plant, and Equipment assets:

A)should be applied to investment property only.
B)should be applied to other Property, Plant, & Equipment assets only.
C)can be applied to all classes of Property, Plant, & Equipment including investment property.
D)is not appropriate under current Canadian GAAP.

Question 76

Financial statement disclosure for capital assets includes all of the following except:

A)the measurement basis for determining the carrying amount.
B)depreciation method and useful lives for each major category of capital assets.
C)depreciation expense.
D)the value-in-use for the next five years for each major category of capital assets.

Question 77

What is the main reason that contemporary accounting models expense many costs related to intangible assets instead of capitalizing them?

A)Matching
B)Measurability
C)Relevance
D)Materiality

Question 78

MacIntosh Inc.has decided to record their property plant and equipment at fair value.Prior to making the adjustment, the capital asset account had a debit balance of $3,220,000 and the related accumulated depreciation was $1,440,000.An independent appraisal has determined a fair value of $6.3 million.Using the proportional method, what would be the amount of accumulated depreciation immediately after the adjustment to fair value?

A)$2,835,000
B)$5,154,545
C)$0
D)$1,440,000

Question 79

Which of the following is not an intangible asset that can be recorded as an asset under IFRS?

A)Patent
B)Research
C)Trademark
D)Customer list

Question 80

Under the revaluation model, when as asset is written down to fair value, which of the following statements is incorrect?

A)Property plant and equipment can be valued at market value if market value can be measured reliably.
B)The loss recorded when a capital asset is written down flows through other comprehensive income, so that net income is not affected.
C)The company is required to value all similar assets in the same way.
D)Under IFRS, a write down reduces the carrying amount of the capital asset and the loss is charged to net income.