Deck 10: Long Term Assets

Question 1

The replacement of tires on a truck is considered an ordinary repair.

Answer 1

True

Question 2

A natural resource is subject to a process called depletion.

Answer 2

True

Question 3

A reduction in carrying value as a result of impairment is recorded as a gain.

Answer 3

False

Question 4

A tractor held by a farm equipment company for sale to farmers is classified as a long-term asset.

Question 5

Asset impairment occurs when the fair value of a long-term asset falls below its carrying value.

Question 6

A betterment adds to the physical layout of an asset.

Question 7

Intangible assets are subject to a process called depletion.

Question 8

Fair value is the amount for which an asset could be bought or sold in a current transaction.

Question 9

Mineral deposits are subject to a process called amortization.

Question 10

Leasehold improvements become the property of the lessor at the end of the lease.

Question 11

Free cash flow is a good measure of a company's ability to finance long-term assets.

Question 12

An older term for long-term assets is variable assets.

Question 13

A positive net present value of a long-term asset under consideration for purchase indicates that the asset should not be purchased.

Question 14

Land held for speculative purposes should be classified as a long-term investment.

Question 15

A building not currently used because economic conditions have limited a company's expansion should not be classified as property,plant,and equipment.

Question 16

In the calculation of free cash flow,dividends and purchases of plant assets are both deducted.

Question 17

If the net present value of a long-term asset under consideration for purchase is negative,then the asset should not be purchased.

Question 18

Depreciation refers to the periodic allocation of the cost of a tangible long-lived asset over its estimated useful life.

Question 19

Inventory is not classified as a long-term asset.

Question 20

Book value refers to unexpired portion of an asset's cost.

Question 21

Additions and betterments are examples of revenue expenditures.

Question 22

The routine overhaul of the engine of a company vehicle is an example of an ordinary repair.

Question 23

A capital expenditure results in the recognition of an asset.

Question 24

In accounting,depreciation means the decline in value of an asset.

Question 25

Installation of an air-conditioning system is considered a betterment.

Question 26

Extraordinary repairs are recorded with a debit to Accumulated Depreciation.

Question 27

Driveways and parking lots are properly included in the Land Improvements account because they are subject to depreciation.

Question 28

The cost of assets acquired for a lump sum should be apportioned between the acquired assets.

Question 29

A capital expenditure will result in an immediate increase in long-term assets.

Question 30

The cost of a sewage system should be included in the Land Improvements account.

Question 31

The cost of equipment would include the cost of test runs to see that the equipment is operating properly.

Question 32

A revenue expenditure results in the immediate recognition of an expense.

Question 33

The cost of land should include accrued property taxes paid by the purchaser.

Question 34

A capital expenditure is an expenditure that benefits several future accounting periods.

Question 35

Small expenditures for what ordinarily are considered revenue expenditures are expensed as incurred.

Question 36

A debit to Accumulated Depreciation will increase the carrying value of an asset.

Question 37

Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account.

Question 38

Leasehold improvements are subject to depreciation because they have a limited life.

Question 39

The cost of repairing a machine damaged during installation should be charged to the cost of the equipment.

Question 40

The cost of land would not include the cost of a building purchased with the land and torn down because it was not needed.

Question 41

Accelerated methods of depreciation result in higher net income in the last years of an asset's life compared to the straight-line method.

Question 42

Typically,depreciation calculations are rounded to the nearest whole month.

Question 43

Depreciation is a process of allocation,not of valuation.

Question 44

The straight-line method is an accelerated method of depreciation.

Question 45

For tax purposes,small businesses may expense the first $500,000 of equipment expenditures,rather than having to allocate their costs over a number of years.

Question 46

One reason for an asset's limited useful life is physical deterioration.

Question 47

Computation of a partial year's depreciation is often required for the proper determination of net income.

Question 48

When the trade-in allowance exceeds the carrying value of an asset exchanged,a loss has occurred.

Question 49

Gain on Sale of Machinery is recorded as a credit.

Question 50

Federal tax law does not allow the rapid write-off of plant assets.

Question 51

Depreciation should not be recorded for a depreciable asset that is increasing in value.

Question 52

Residual value is not relevant when calculating double-declining-balance depreciation.

Question 53

One argument in favor of accelerated depreciation is that repair expense is likely to be smaller in later years.

Question 54

When disposing of equipment,the Equipment account is credited for the existing carrying value.

Question 55

Depreciation for tax purposes is identical to depreciation for financial reporting purposes.

Question 56

Plant asset exchanges can only be categorized as the exchange of similar assets.

Question 57

When depreciation rates are revised,only the remaining years of the asset's life are affected by the new computation.

Question 58

Prior to the disposal of an asset,depreciation should be updated and recorded.

Question 59

Group depreciation is not an appropriate method for a large company calculating depreciation on office equipment.

Question 60

One argument in favor of accelerated depreciation is that the assets benefit is greater in the earlier years.

Question 61

The exclusive right to use an identifying symbol is called a trademark.

Question 62

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

Question 63

Noncompete covenants should be amortized over the specified life of the contract.

Question 64

In calculating the depletion of a natural resource,its useful life in years is irrelevant.

Question 65

A patent has a legal life of 30 years.

Question 66

Goodwill equals the excess paid for a business over the fair market value of the net assets purchased.

Question 67

Licenses are properly classified as intangible assets.

Question 68

Natural resources are classified as long-term assets on the balance sheet.

Question 69

The exclusive right to sell a computer program is called a copyright.

Question 70

If the fair value of goodwill is less than its carrying value,an impairment loss must be recorded.

Question 71

An on-site building with a twelve-year life will be abandoned after the associated timber tract with a nine-year life is depleted.The building should be depreciated over twelve years.

Question 72

Customer lists are classified as intangible assets.

Question 73

An intangible asset with a determinable useful life should be amortized over the legal life of the asset.

Question 74

A $2,000 gain on the sale of an asset means that $2,000 in cash was received.

Question 75

Estimated useful life and legal life are synonymous terms when dealing with intangible assets.

Question 76

According to generally accepted accounting principles,most expenditures for intangible assets acquired from others should be treated as revenue expenditures when incurred.

Question 77

Drilling equipment with a five-year useful life is used solely in conjunction with an oil well that has an eight-year life.The equipment should be depreciated over eight years.

Question 78

When disposing of equipment,Accumulated Depreciation is debited for the existing accumulated depreciation on the equipment.

Question 79

When an asset lasts longer than its estimated useful life,depreciation no longer should be recorded past the point at which its carrying value equals its residual value.

Question 80

A copyright should be amortized over useful life of the copyright and not the life of the author,plus 70 years.