Deck 16: Accounting for Property, plant, equipment, and Intangible Assets

Question 1

The entry to record the purchase of a machine on account that costs $20,000,set-up fees,$1,000,and freight,$500,would be:

A)debit Machinery $20,000; credit Accounts Payable $20,000.
B)debit Machinery $21,500; credit Accounts Payable $21,500.
C)debit Machinery $20,000,debit Expenses $1,500; and credit Accounts Payable $21,500.
D)debit Machinery $20,500; credit Accounts Payable $20,500.

Answer 1

B

Question 2

R.J.Berkshire incurred the following expenditures to buy new equipment:
Discount taken
The amount the Equipment account will be debited for is ________.

Answer 2

$27,550 (25000 × .97)+ 1800 + 1500

Question 3

Which of the following is an example of a land improvement?

A)Shrubbery
B)Fences
C)Driveway
D)All of these answers are correct.

Answer 3

D

Question 4

A purchase of land and buildings would require the use of only one asset account,Land and Buildings.

Question 5

Mount Company purchased a machine at an invoice cost of $21,000 subject to terms of 3/10,n/30.The discount was taken.Additional costs were installation,$1200; insurance on the machine after it was in operation,$370.The total cost to be added to the machinery account is:

A)$21,940.
B)$21,000.
C)$21,570.
D)$20,740.

Question 6

Land Improvements is an asset account that records improvements to land that have an unlimited life.

Question 7

The cost of a plant asset was increased for the payment of this year's insurance premium.This error would cause:

A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period's end assets to be understated.
D)None of these are correct.

Question 8

The cost of a plant asset did not include installation costs that were expensed.This error would cause:

A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period end assets to be understated.
D)both B and C.

Question 9

A company purchased new machinery and incurred freight,assembly,and installation costs in addition to the invoice cost of the machinery.These additional costs should be debited to:

A)Cash.
B)Machinery.
C)Installation Expense.
D)Machinery Expense.

Question 10

The amount to include in the entry to record the cost of a property,plant,and equipment asset would include:

A)acquisition cost.
B)freight.
C)installation.
D)All of these answers are correct.

Question 11

Land is depreciated based on the MACRS schedule.

Question 12

If there are repairs needed in the process of installation,this should be charged to the cost of the machine.

Question 13

Costs and assessments that should be charged to the land account include:

A)streets.
B)parks.
C)flood prevention.
D)All should be included.

Question 14

Which of the following assets would not be classified as property,plant,and equipment?

A)Delivery truck
B)Copyright
C)Land
D)Furniture

Question 15

Tangible assets include:

A)patents.
B)cash.
C)trademarks.
D)copyrights.

Question 16

Which of the following is a non-depreciable asset?

A)Desk chairs
B)Land
C)Computer
D)Building

Question 17

Assets that are not expected to provide benefits for a number of accounting periods are called:

A)current assets.
B)fixed assets.
C)long-term assets.
D)property,plant,and equipment.

Question 18

Chocolate Supreme purchased new baking equipment for $15,000 subject to terms 4/10,n/45.The discount was taken.Additional costs included sales tax $900 and installation $300.The total cost to be added to the machinery account is:

A)$15,900.
B)$15,300.
C)$15,000.
D)$15,600.

Question 19

A company purchased new computer equipment from a local vendor.An employee offered to pick up the equipment and received a speeding ticket on his way back to the office.The cost of the speeding ticket should be charged to the cost of the equipment.

Question 20

Assembly costs,and any other costs necessary to get a machine ready for operation,except for freight costs,would be added to the cost of the machine.

Question 21

Salvage value was ignored when originally calculating the units-of-production depreciation.This error would cause:

A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period end assets to be overstated.
D)None of these are correct.

Question 22

The depreciation method that does not base the expense on the passage of time but on the level of use is:

A)units-of-production.
B)straight-line.
C)modified accelerated cost recovery.
D)double-declining-balance.

Question 23

The cost of equipment is expensed:

A)at the time it is paid.
B)over the periods that benefit the company.
C)in the period it is purchased.
D)in the period it is sold.

Question 24

What would the depreciation expense be in year 3 for a computer system using the straight-line method when cost is $5,000,residual value is $1,000,and the expected life is 4 years?

A)$2,000
B)$1,500
C)$1,250
D)$1,000

Question 25

When calculating declining balance depreciation,the straight-line rate was used instead of double the straight-line rate.In the first year of ownership,this error would cause:

A)the period's depreciation expense to be overstated.
B)the period's depreciation expense to be understated.
C)the period end assets to be understated.
D)None of these are correct.

Question 26

Which depreciation method uses the current book value in determining depreciation?

A)Straight-line
B)MACRS
C)Units-of-production
D)Double-declining balance

Question 27

J.Long purchased computer equipment for $5,000 on January 1,200x.It has a residual value of $500 with a useful life of 5 years.After the appropriate adjusting entries are made,the book value of the asset on December 31,200x,under the double-declining-balance method,is:

A)$4,000.
B)$3,200.
C)$3,000.
D)$4,100.

Question 28

Assuming a useful life of five years,which of the following methods would most likely result in the least depreciation in the first year?

A)Straight-line
B)MACRS
C)Double-declining-balance
D)None of these answers are correct.

Question 29

Rockwell Industries purchased a plant asset to be used in its business.The expenditures included:
The Machine account will be debited for ________.

Question 30

Jason Moore purchased computer equipment for $2,800 on January 1,2012.It has a residual value of $400 with a useful life of 4 years.After the appropriate adjusting entries have been made,the balance in Accumulated Depreciation account for this asset on January 1,2014,under the straight-line method,should be:

A)$1,200.
B)$600.
C)$700.
D)$1,400.

Question 31

What would be the depreciation expense using double-declining-balance to compute the expense for year 2 of a machine costing $15,000,when residual value is $5,000,and useful life is 5 years?

A)$3,600
B)$6,000
C)$5,000
D)$3,000

Question 32

The depreciation method which charges more expense in earlier years than in later years is the:

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

Question 33

In the last year of useful life,the salvage value was ignored using double-declining-balance depreciation.This error would cause:

A)the period's depreciation expense to be overstated.
B)the period's depreciation expense to be understated.
C)the period end assets to be overstated.
D)None of these are correct.

Question 34

Which depreciation method uses twice the straight-line rate?

A)Units-of-production
B)Modified accelerated cost recovery
C)Straight-line
D)Double-declining-balance

Question 35

The cost of an asset less its accumulated depreciation is called:

A)residual value.
B)salvage value.
C)market value.
D)book value.

Question 36

Straight-line depreciation is used in the first year when double-declining-balance should be used.This error would cause:

A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period end assets to be understated.
D)None of these are correct.

Question 37

Josh Kindel purchased equipment for $60,000 on January 1.Its residual value is $4,000 with a useful life of 8 years.The amount of depreciation expense in the first year under the double-declining-balance method is:

A)$14,000.
B)$ 7,500.
C)$ 7,000.
D)$15,000.

Question 38

Which depreciation method does not deduct residual value when computing depreciation expense?

A)Units-of-production
B)Straight-line
C)Double-declining-balance
D)Both A and B are correct.

Question 39

Lacy purchased equipment for $77,000 on January 1.Its residual value is $5,000 with a useful life of 9 years.The amount of depreciation expense in the first year under the straight-line method is:

A)$8,556.
B)$8,000.
C)$16,940.
D)$15,840.

Question 40

The depreciation method(s)in which an even amount of depreciation expense is taken each year is (are)called:

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

Question 41

Using MACRS rates for a 3,5,7,and 10-year property,what is the percentage for the depreciable rate?

A)200 percent
B)150 percent
C)125 percent
D)100 percent

Question 42

A piece of equipment is purchased for $78,000 on January 1.It has a 5-year life and a salvage value of $8,000.Compute the annual depreciation expense using the double-declining-balance method for all 5 years.

Question 43

What would the accumulated depreciation at the end of year 3 for a computer system using the straight-line method when cost is $5,000,residual value is $1,000,and the expected life is 4 years?

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

Question 44

Yamara Company purchased a $75,000 machine at the beginning of the year.The machine is expected to have a useful life of 5 years or 40,000 operating hours and a residual value of $15,000.The machine was used for 6,000 hours in the first year and 4,400 hours in the second year.Compute the amount of depreciation expense for the first and second years under each of the methods below.

Question 45

To calculate the double-declining-balance rate,you would divide 2 by the number of years of useful life.

Question 46

Accumulated depletion should be reported as a(an)________ on the income statement.

Question 47

According to the MACRS tax rate table,the following classes use straight-line depreciation:

A)residential rental property.
B)automobiles.
C)railroad tracks.
D)race horses.

Question 48

A company purchased a new delivery van on January 1,2012 for $25,000.The company expects to use the van for 5 years and then sell it for $5,000.Complete the following depreciation table assuming straight-line depreciation:

Question 49

What would be the depreciation expense in year 1,using units-of-production,for a molding machine that cost $18,000,had a useful life of 3 years,no residual value,and an estimated total machine hours of 36,000? Production in year 1 was 10,000 hours.

A)$2,667
B)$4,000
C)$6,000
D)$5,000

Question 50

The units-of-production method does not take into account the passage of time.

Question 51

Assume an asset costing $72,000 is expected to produce 400,000 units and have a salvage value of $6,000.During year 1,75,000 units were produced; during year 2,68,000 units were produced; and during year 3,70,000 units were produced.Using units-of-production,compute the depreciation expense for each of the three years.

Question 52

Talarico's Subs purchased a new van for $25,000,its estimated useful life at 100,000 miles,residual value of $5,000.The van was driven 15,000 miles in year 1.What is the depreciation expense in year 1?

A)$6,667
B)$3,000
C)$3,750
D)$4,000

Question 53

A plant asset is fully depreciated when the book value is:

A)greater than the salvage value.
B)greater than the market value.
C)equal to the salvage value.
D)equal to the market value.

Question 54

What would be the depreciation expense in year 1,using units-of-production,for a molding machine that cost $18,000,had a useful life of 3 years,and an estimated total machine hours of 36,000? The salvage value is $3,000 and production in year 1 was 10,000 hours.

A)$5,000
B)$4,167
C)$6,000
D)$2,167

Question 55

Double-declining-balance method is used in the first year when straight-line should be used.This error would cause:

A)the period's net income to be overstated.
B)the period's net income to be understated.
C)the period end assets to be overstated.
D)None of these are correct.

Question 56

The amortization method and double-declining-balance method are both accelerated depreciation methods.

Question 57

A car is purchased for $25,000 on January 1.It has a 4-year life and a salvage value of $1,000.Compute the annual depreciation expense using the double-declining-balance method for all 4 years.

Question 58

Tender Years purchased a new van on January 1,200x,for $40,000.The life of the van is 4 years or 100,000 miles,with an estimated residual value of $5,000.During the first year,the van was driven 20,000 miles.Compute the depreciation expense for the first year applying each of the methods below.
a)________ Straight-line
b)________ Units-of-production
c)________ Double-declining-balance

Question 59

What would the book value be at the end of year 3 for a computer system using the straight-line method when cost is $5,000,residual value is $1,000,and the expected life is 4 years?

A)$2,000
B)$1,500
C)$1,250
D)$1,000

Question 60

Net income is affected by the depreciation method used.

Question 61

For tax purposes,residential real property is depreciated using the straight-line method under MACRS.

Question 62

Revenue expenditures include:

A)additions to existing plant assets.
B)periodic normal maintenance costs.
C)initial costs of acquiring plant assets.
D)All of these answers are correct.

Question 63

Payments for ordinary maintenance of an asset are called ________.

Question 64

Under MACRS,furniture is depreciated over five years.

Question 65

A capital expenditure is recorded in an asset account.

Question 66

Prepare journal entries for the following for Bartz,Inc.
May 11 Replaced the engine in a Van #1,paying cash of $5,400.
May 18 Paid cash for a tune-up of the engine in Van #2 of $570.
May 29 Paid cash to add a lift to Van #2 of $3,700

Question 67

Define and compare capital expenditures and revenue expenditures.

Question 68

Budgeting for items such as equipment and furniture would be considered:

A)capital expenses.
B)capital expenditures.
C)general expenses.
D)general expenditures.

Question 69

Some of the past depreciation is canceled in recording an extraordinary repair.

Question 70

The entry to record the payment of an extraordinary repair of $5,000 that will extend the life of the machine 5 years,when the machine cost $30,000,and has accumulated depreciation of $26,000,is to:

A)debit Machinery $5,000; credit Accumulated Depreciation $5,000.
B)debit Accumulated Depreciation $5,000; credit Cash $5,000.
C)debit Accumulated Depreciation $1,000; credit Cash $1,000.
D)debit Machinery $1,000; credit Cash $1,000.

Question 71

Two depreciation methods that ignore the salvage value are ________ and ________.

Question 72

A budgeted item such as a building is listed as a ________.

Question 73

For tax purposes,________ establishes the guidelines and the percentages for depreciation.

Question 74

Under MACRS,the salvage value is:

A)added to the straight-line depreciation.
B)subtracted from the cost of the asset.
C)ignored.
D)added to the cost of the asset.

Question 75

What is the difference between an extraordinary repair and a betterment?

A)A betterment extends the life of the asset; an extraordinary repair does not.
B)An extraordinary repair is a capital expenditure; a betterment is not.
C)An extraordinary repair may extend the life of the asset; a betterment does not.
D)None of these answers are correct.

Question 76

A depreciation method that allocates depreciation of a plant asset based on the Tax Act of 1989 is the:

A)straight-line method.
B)units-of-production method.
C)modified accelerated cost recovery method.
D)double-declining-balance method.

Question 77

A company expanded its manufacturing facility by adding an additional 15,000 square feet to the building.This is an example of a(n):

A)addition.
B)betterment.
C)extraordinary repair
D)revenue expenditure.

Question 78

A tractor costing $80,000 is depreciated using MACRS.The tractor qualifies as a 3-year property,and has a scrap value of $20,000.The depreciation rates are: $\begin{array} { | l | l | } \hline \text { Year 1: } & 33.33 \% \\\hline \text { Year 2: } & 44.45 \% \\\hline \text { Year 3: } & 14.81 \% \\\hline \text { Year 4: } & 7.41 \% \\\hline\end{array}$ What is the depreciation expense for year 2?

A)$44,450
B)$35,560
C)$26,670
D)$20,000

Question 79

A company incorrectly records revenue expenditures as capital expenditures on its books.As a result,which of the following will be true?

A)Net income will be understated for the year.
B)Owner's equity will be understated at year-end.
C)Total assets will be understated at year-end.
D)None of the above will occur.

Question 80

Capital expenditures would include:

A)additions.
B)betterments.
C)extraordinary repairs.
D)All of these answers are correct.