Deck 8: Long-Term and Other Assets

Question 1

McDonald's "golden arches" are an example of a(n)_______, which would be classified as a(n)_______.

A)patent; intangible asset
B)trademark; plant asset
C)trademark; intangible asset
D)patent; plant asset

Answer 1

trademark; intangible asset

Question 2

When determining the cost of a plant asset, GAAP requires the use of the market value principle.

Answer 2

False

Question 3

Which of the following would NOT be considered a fixed asset?

A)office equipment
B)company car
C)oil
D)office building

Answer 3

oil

Question 4

Neither land nor land improvements are depreciated.

Question 5

The cost of furniture and fixtures, such as file cabinets or shelving, includes its basic cost plus all other costs to ready the asset for its intended use.

Question 6

The cost of long-term assets must be allocated to an expense as the asset is used up.

Question 7

Assets that CANNOT be seen, touched, or held are called:

A)intangible assets.
B)natural resources.
C)plant assets.
D)tangible assets.

Question 8

Which of the following would be considered a natural resource?

A)Corn
B)Livestock
C)Timber
D)Wheat

Question 9

Which of the following would be considered a fixed asset?

A)land
B)patents
C)timber
D)both A and C are fixed assets

Question 10

An example of an other asset would be a trademark.

Question 11

When a company pays a single price for a group of assets, the purchase is referred to as a basket purchase.

Question 12

The cash registers at WalMart are an example of a(n)_______, which would be expensed through _________.

A)fixed asset; depreciation
B)physical asset; depletion
C)plant asset; amortization
D)intangible asset; amortization

Question 13

Timber, coal, and other minerals are long-term assets called natural resources.

Question 14

Costs of testing machinery or equipment before they are used would be included in the price of the machinery or the equipment.

Question 15

Which of the following would NOT be considered an intangible asset?

A)Goodwill
B)Franchise
C)Land
D)Copyright

Question 16

Which of the following matches the correct cost allocation terms with the given assets?

A)
B)
C)
D)

Question 17

Patents, copyrights, and trademarks are:

A)amortized.
B)depleted.
C)depreciated.
D)expensed.

Question 18

Minerals, timer and coal are:

A)amortized.
B)depleted.
C)depreciated.
D)expensed.

Question 19

Whether a building is purchased or constructed, the same items are used to compute the price of the building.

Question 20

Equipment, buildings, and vehicles are:

A)amortized.
B)depleted.
C)depreciated.
D)expensed.

Question 21

The total cost allocated to each item in a basket purchase is based upon:

A)the original cost of the items.
B)their relative market values.
C)their individual selling price.
D)their individual market values.

Question 22

Metropolitan Masonry made a basket purchase of three items. Item X was appraised at $39,000; item Y was appraised at $57,000 and item Z was appraised at $61,000. The purchase price was $129,000. The amount at which item Y should be recorded is:

A)($57,000/$129,000)× $157,000.
B)($57,000/$157,000)× $129,000.
C)($57,000/$100,000)× $157,000.
D)($57,000/$100,000)× $129,000.

Question 23

Lionworks Corporation made a basket purchase of three items. Item X was appraised at $30,000; item Y was appraised at $55,000; and item Z was appraised at $65,000. The purchase price was $125,000. The amount at which item X should be recorded (rounded to the nearest dollar)is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$36,000.
B)$25,000.
C)$5,000
D)$30,000.

Question 24

Bob's Bakery made a basket purchase involving four assets. Their market values were A: $50,000; B: $46,000 C: $48,000; and D: $56,000. The price Bob's paid for the four assets was $150,000. To the nearest dollar, what final price will be recorded for asset D? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$6,000
B)$36,000
C)$56,000
D)$42,000

Question 25

Which of the following would be considered part of the cost of machinery and equipment?

A)Sales taxes
B)Repairs after start-up
C)Maintenance
D)Insurance after purchase

Question 26

Which of the following would NOT be considered part of the cost of the land?

A)Survey and legal fees
B)Realtor commissions
C)Paving
D)Unpaid property taxes on the land

Question 27

Which of the following would be considered as part of the cost of purchasing an existing building?

A)Architectural fees
B)Contractor charges
C)Title transfer fees
D)Payment for materials

Question 28

Costs that should be charged to the land account include:

A)the cost of removing unwanted buildings.
B)paving the parking lot.
C)installing fences.
D)the cost of a sign.

Question 29

Sydney's Siding made a basket purchase involving four assets. Their market values were A: $41,000; B: $40,000; C: $45,000; and D: $54,000. The price Sydney's paid for the four assets was $170,000. What percentage of the $170,000 price would be allocated to asset C to the nearest one-tenth of a percent? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)33.3%
B)26.5%
C)25%
D)22.2%

Question 30

Which of the following would be considered part of land improvements?

A)Removal of unwanted building on the land
B)Title transfer fees
C)Paving of the parking lot
D)Surveying fees

Question 31

Which of the following would NOT be a part of land improvements?

A)Paving of the parking lot
B)Installing fences around the property
C)Putting in sidewalks
D)Grading and leveling the land

Question 32

Other than land, long-term assets that are capitalized are:

A)expensed in the year of purchase.
B)depreciated over the life of the asset.
C)recorded at market value.
D)recorded at net realizable value.

Question 33

Which of the following would NOT be considered part of the cost of machinery and equipment?

A)Repairs and maintenance after start-up
B)Delivery charges
C)Installation costs
D)In-transit insurance costs

Question 34

Manitou, Inc. purchased land for $94,000 by signing a note payable for the same amount. Additionally, Manitou paid cash for the following: title insurance of $1,600, a commission of $9,400, $5,000 to remove an unwanted building, $3,400 to level and grade the property, $26,000 for paving, $23,000 to construct a fence around the perimeter, and $5,400 for lighting. The journal entry for the cash payment is:

A)debit land $19,400, debit land improvement $54,400, credit cash $73,800
B)debit land $11,000, debit land improvement $62,800, credit cash $73,800
C)debit land $113,400, debit land improvement $54,400, credit cash $167,800
D)debit land $105,000, debit land improvement $62,800, credit cash $167,800

Question 35

Which of the following would NOT be considered as part of the cost of a constructed building?

A)Building permit fees
B)Contractor charges
C)Realtor commissions
D)Architectural fees

Question 36

Rose Corp. purchased land for $77,000. Additionally, Rose paid title insurance of $700, a commission of $7,000, and back taxes due in the amount of $1,000. To ready the land for construction, Rose paid $3,000 to remove an unwanted building, $6,000 to level and grade the property, and $12,000 for paving. The cost of the company's land is _______, and the land improvements are _______.

A)$77,000; $29,700
B)$85,700; $21,000
C)$88,700; $15,000
D)$94,700; $12,000

Question 37

Capitol Construction Company made a basket purchase of three items. Item X was appraised at $55,000; item Y was appraised at $65,000 and item Z was appraised at $40,000. The purchase price was $125,000. The amount at which item Z should be recorded (rounded to the nearest dollar)is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$51,200.
B)$40,000.
C)$31,250.
D)$42,969.

Question 38

The costs associated with clearing land and removing buildings are considered land improvements.

Question 39

When a company buys a building, realtor commissions are NOT included in the cost of the building.

Question 40

Which of the following would be included in the cost of a constructed building?

A)Purchase price of the building
B)Payments for material, labor, and overhead
C)Survey and legal fees
D)Realtor commissions

Question 41

In accounting, what is the meaning of capitalized?

A)Capitalized means that a liability account is credited (increased)for the cost of an asset.
B)Capitalized means that an asset account is debited (increased)for the cost of an asset.
C)Capitalized means that the cost of an asset is recorded as a debit (increase)to expense.
D)Capitalized means that a given city has been selected as a government center.

Question 42

Calculating depreciation using a base such as miles driven per year would be an example of double-declining balance depreciation.

Question 43

Leo's Lawncare purchased equipment on January 1. The cost was $15,000, and the equipment had a residual value of $5,000. The equipment was given a useful life of 10 years. After the end of two years, it was determined that the equipment would be obsolete in 5 more years and the residual value would still be $5,000. What will be the depreciation under the straight-line method to the nearest dollar be for the third year?

A)$1,000
B)$1,600
C)$1,500
D)$8,000

Question 44

Depreciation is based upon cost, useful life and salvage value.

Question 45

A company should choose a depreciation method that most closely matches the cost of the asset against the future revenues it generates.

Question 46

Double-declining balance is an accelerated method of calculating depreciation where salvage value is NOT part of the initial computation.

Question 47

Which of the following would be considered part of the cost of a printing press?

A)The medical fees for a worker who was injured while installing the press
B)The cost of a test run to make sure the press worked properly
C)Both A and B are part of the cost of the printing press.
D)Neither A nor B are part of the cost of the printing press.

Question 48

Custom Closets purchased office fixtures on January 1. The cost was $16,000, and the fixtures had a residual value of $6,000. The fixtures were given a useful life of 8 years. After the end of three years, it was determined that the fixtures would be obsolete in 2 more years and their residual value would still be $6,000. What will be the depreciation under the straight-line method to the nearest dollar be for the fourth year? (Round your final answer to the nearest dollar.)

A)$1,250
B)$2,000
C)$3,125
D)$3,750

Question 49

Depreciation is a process of valuation of an asset.

Question 50

A company purchased a computer on August 1, 2016. Using straight-line depreciation, the company would report four (4)months depreciation on December 31, 2016.

Question 51

A company purchased furniture on January 1. Its cost was $15,600, and it had a residual value of $3,600. Its useful life is determined to be 8 years. Using double-declining balance depreciation, the depreciation for year 1 to the nearest dollar will be:

A)$3,900.
B)$3,000.
C)$1,950.
D)$1,500.

Question 52

A company purchased a computer system on March 1. Its cost was $40,000, and it had an estimated salvage value of $5,000. It was expected to have a useful life of five years. To the nearest dollar, the depreciation for year 1 using straight-line depreciation will be: (Assume company year-end is December 31. Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$10,000.
B)$8,750.
C)$5,810.
D)$6,563.

Question 53

Book value is depreciable cost minus accumulated depreciation.

Question 54

A fixed asset's useful life may be shorter than its physical life due to obsolescence.

Question 55

Cesario Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 15,000 units. To the nearest dollar, the depreciation for the first year under the units of production method will be:

A)$37,500.
B)$31,250.
C)$34,500.
D)$28,750.

Question 56

A new vehicle was purchased on January 1 for $46,000. It has a salvage value of $7,000 and a useful life of 6 years. To the nearest dollar, how much will the depreciation expense for the vehicle be for the first year using the straight-line method?

A)$6,500
B)$639
C)$7,667
D)$542

Question 57

A company purchased a computer system on March 1. Its cost was $55,000 and it had an estimated salvage value of $10,000. It was expected to have a useful life of 5 years. To the nearest dollar, the depreciation for year 2 using straight-line depreciation will be: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$11,000.
B)$9,000.
C)$7,500.
D)$6,750.

Question 58

New equipment was purchased on January 1 for $144,000. It has a salvage value of $28,000 and a useful life of 10 years. To the nearest dollar, how much will the depreciation expense for the equipment be for the first year using the straight-line method?

A)$967
B)$14,400
C)$10
D)$11,600

Question 59

If an asset generates revenue evenly over time, the depreciation method best suited for this asset would be the:

A)double-declining balance method.
B)straight-line method.
C)units-of-production method.
D)expense method.

Question 60

The choice of depreciation method depends on the cost of the asset and its' expected useful life.

Question 61

Only Organics has a delivery truck that was purchased for $48,000 and has a salvage value of $4,000. It expects the truck to last 200,000 miles. During Year 1, the truck traveled 32,500 miles and during Year 2, the truck traveled 29,500 miles. What is the depreciation expense for Year 2 to the nearest dollar using the units-of-production method? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)

A)$7,150
B)$7,080
C)$7,800
D)$6,490

Question 62

Replacing an engine on a delivery truck would be considered a betterment.

Question 63

Incorrectly capitalizing an expense results in net income being overstated.

Question 64

If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the:

A)expense method.
B)units-of-production method.
C)double-declining balance method.
D)straight-line method.

Question 65

It is determined that a computer's depreciation expense for the year is $3,500. The journal entry to record this will be:

A)debit Depreciation Expense - computer $3,500; credit Cash $3,500.
B)debit Accumulated Depreciation - computer $3,500; credit Cash $3,500.
C)debit Depreciation Expense - computer $3,500; credit Accumulated Depreciation, $3,500.
D)debit Cash $3,500; credit Depreciation Expense - computer $3,500.

Question 66

Ironworks Industries purchased a piece of equipment for $80,000 with an estimated salvage value of $15,000 on January 1. Its estimated life is 5 years. To the nearest dollar, what is the equipment's depreciation using double-declining-balance for year 2? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$32,000
B)$13,000
C)$19,200
D)$26,000

Question 67

After an asset is fully depreciated, the asset:

A)must be removed from the Balance Sheet.
B)remains on the Balance Sheet at a value of $0.
C)remains on the Balance Sheet at (cost - Accumulated Depreciation).
D)remains on the Balance Sheet at cost.

Question 68

Acme paid $120,000 for a machine with a $10,000 salvage value and an estimated life of 200,000 hours. Acme reports on a calendar year basis and used the machine for 1800 hours during the first year it owned the asset. Which of the following statements accurately compare the first year depreciation expense if the asset had been purchased on January 1 of the current year versus a March 1 acquisition date. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)Depreciation Expense if acquired January 1 is $990 and if acquired March 1 is $825.
B)Depreciation Expense if acquired January 1 is $990 and if acquired March 1 is $743.
C)In both cases, the Depreciation Expense is $990.
D)Depreciation Expense if acquired January 1 is $1080 and if acquired March 1 is $900.

Question 69

A building was purchased on August 1 for $490,000. It has a salvage value of $38,000 and a useful life of 30 years. To the nearest dollar, how much will the depreciation expense for the building be for the first year ended December 31, using the straight-line method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$15,067
B)$16,333
C)$6,278
D)$6,805

Question 70

The depreciation method often used for income tax purposes is the:

A)expense method.
B)units-of-production method.
C)double-declining balance method.
D)straight-line method.

Question 71

Expenditures incurred, such as changing the oil and filter on a delivery truck, would be considered ordinary repairs.

Question 72

Wolfe Company purchased a truck for $62,000, with an estimated useful life of 8 years and a salvage value of $10,000. The company uses the double-declining-balance method of depreciation; however, after year 3 they switch to the straight-line method. There is no change to the estimated useful life or salvage value. What is the accumulated depreciation balance at the end of year 5 (round to the nearest dollar)? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$39,075
B)$42,306
C)$46,615
D)$42,383

Question 73

After 4 years, a machine had an accumulated depreciation of $40,000. Originally, the machine had an anticipated life of 8 years and a salvage value of $6,000. If the current book value after 4 years is $45,000 and the machine has only 2 years of useable life left, how much will be depreciated in Year 5 and in Year 6 using the straight-line method of depreciation, and assuming the salvage value is still $6,000? (Round your final answer to the nearest dollar.)

A)$10,625 each year
B)$9,875 each year
C)$19,500 each year
D)$22,500 each year

Question 74

Adding on 30 rooms to an existing hotel would be considered a betterment because the addition added to the hotel's capacity.

Question 75

A company purchased a van at a cost of $42,000 and expects its salvage value to be $6,000 after 100,000 miles of service. Using the units-of-production method, what is the first year's depreciation if the van is driven 30,000 miles? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$12,600
B)$14,400
C)$10,800
D)$1,800

Question 76

Coyote, Inc. purchased a van for $68,000, with an estimated useful life of 5 years and a residual value of $8000. The company uses the double-declining-balance method of depreciation; however, for year 3 they switch to the straight-line method. There is no change to the estimated useful life or residual value. What is the accumulated depreciation balance at the end of year 4? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$49,013
B)$59,187
C)$54,506
D)$48,000

Question 77

The matching principle dictates whether the cost of a repair should be expensed or depreciated.

Question 78

A method best suited for depreciating items, such as copy machines and vehicles, would be the:

A)expense method.
B)units-of-production method.
C)double-declining balance method.
D)straight-line method.

Question 79

An asset has a cost of $70,000 with a residual value of $14,000. It has a life of 5 years and was purchased on January 1. Its fourth full year of depreciation expense under double-declining-balance will be: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A)$10,080.
B)$6,048.
C)$1,120.
D)$0.

Question 80

Lubricating a machine on a regular basis would be considered a(n):

A)betterment.
B)capital expenditure.
C)ordinary repair.
D)capital expense.