Question 1

A loss on disposal of a long-term asset can only occur if the cash proceeds received from the asset's sale is less than the asset's book value.

Accepted Answer

False

Question 2

The Accumulated Depreciation account represents a cash fund available to replace long-term assets.

Accepted Answer

The Accumulated Depreciation account is a contra asset account that reflects the total amount of depreciation expense that has been charged to an asset since it was acquired. It does not represent a cash fund available for replacement of assets.

Question 3

Accountants do not attempt to measure the change in a plant asset's market value during ownership because

Accepted Answer

D

Question 4

Ordinary repairs should be recognized when incurred as revenue expenditures.

Accepted Answer

Ordinary repairs, which are routine and minor expenses incurred to maintain the operating efficiency of fixed assets, are recognized as revenue expenditures in the period when they are incurred. This is because they are necessary to keep the asset in good working order and maintain its value, rather than to improve or enhance its function, productivity or capacity. Revenue expenditures are expensed on the income statement in the period that they are incurred, rather than capitalized and depreciated over the useful life of the asset.

Question 5

If the proceeds from the sale of a long-term asset exceeds its book value, a gain on disposal occurs.

Accepted Answer

The answer of If the proceeds from the sale of...

Question 6

Interest may be included in the acquisition cost of a hotel asset

Accepted Answer

If the asset acquisition is financed by a long-term note payable, interest may be included in the acquisition cost of a hotel asset. This is because the interest expense incurred during the period of time it takes to construct or acquire the asset is considered a necessary cost of acquiring the asset. However, during the construction period of a self-constructed asset or as part of a lump-sum purchase, interest may not be capitalized as a cost of acquiring the asset.

Question 7

Land improvements should be depreciated over the useful life of the

Accepted Answer

Land improvements such as parking lots, sidewalks, and landscaping are separate from the actual land and have a limited useful life. Therefore, they should be depreciated over their useful life, which is typically 15 to 20 years. Depreciation of buildings is a separate matter and should be based on the useful life of the buildings themselves.

Question 8

General Hotel Management is building a new hotel that will take three years to construct.The construction will be financed in part by funds borrowed during the construction period.There are significant architect fees, excavation fees, and building permit fees.Which of the following statements is true?

Accepted Answer

The answer of General Hotel Management is building a new...

Question 9

To determine a new depreciation amount after a change in estimate of a long-term asset's useful life, the asset's remaining depreciable cost is divided by its remaining useful life.

Accepted Answer

The answer of To determine a new depreciation amount after...

Question 10

A restaurant purchased kitchen equipment on April 1, 2008 for $40,000.It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life.Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2008 is

Accepted Answer

The answer of A restaurant purchased kitchen equipment on April...

Question 11

The four subdivisions for long-term assets are

Accepted Answer

Land, land improvements, buildings, and equipment are the typical subdivisions for long-term assets. These categories are used to track depreciation and the overall value of assets that are expected to provide value to the company for a significant period of time. Intangibles may also be included as a subdivision for long-term assets, but they are not as common as the other categories listed in choice A. Furnishings and fixtures may be considered part of buildings or equipment but are not typically stated as their own subdivision. "Property, plant, equipment, and land" is a broader category that encompasses the subdivisions listed in choice A.

Question 12

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

Accepted Answer

Truck license fees are considered an operational expense rather than a part of the initial cost of acquiring the truck. Sales tax, freight charges, and the cost of lettering are all capitalized as part of the truck's cost.

Question 13

The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.

Accepted Answer

The declining-balance method results in higher depreciation expenses in the earlier years of an asset's life, which is why it is referred to as an accelerated method of depreciation. It does not depreciate an asset in a shorter period of time than its useful life.

Question 14

The balance in the Accumulated Depreciation account represents the

Accepted Answer

The answer of The balance in the Accumulated Depreciation account...

Question 15

When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

Accepted Answer

The answer of When purchasing delivery equipment, sales taxes and...

Question 16

Dye Hotels buys land for $40,000 on 12/31/08.As of 3/31/09, the land has appreciated in value to $40,400.On 12/31/04, the land has an appraised value of $40,900.By what amount should the Land account be increased in 2004?

Accepted Answer

Land is recorded at historical cost and is not adjusted for changes in market value under generally accepted accounting principles (GAAP). Therefore, the Land account should not be increased.

Question 17

The depreciable cost of a long-term asset is its original cost minus obsolescence.

Accepted Answer

The depreciable cost of a long-term asset is the original cost minus any salvage value or residual value at the end of its useful life, not obsolescence. Obsolescence refers to the decrease in value or usefulness of an asset due to technological advancements or changes in the market, but it is not directly related to the calculation of depreciation expense.

Question 18

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which

Accepted Answer

MACRS is a method used for tax purposes to depreciate assets over a specified number of years. It is not required for financial statement purposes and is not mandated by the SEC. It also does not expense an asset over a single year, but rather spreads the cost over a specific recovery period.

Question 19

When estimating the useful life of an asset, accountants do not consider

Accepted Answer

When estimating the useful life of an asset, accountants generally do consider obsolescence factors, expected repairs and maintenance, and the intended use of the asset. However, they do not typically consider the cost to replace the asset at the end of its useful life. This is because the useful life represents the period over which the asset is expected to be used and contribute to the company's operations, and does not take into account the cost of acquiring a new asset at the end of that period.

Question 20

The cost of a patent must be amortized over a 20-year period.

Accepted Answer

The cost of a patent must be amortized over a 20-year period, which is the duration of the patent's validity. This means that the cost is spread out evenly over the 20-year period for accounting and tax purposes.

Quiz 13: Long-Term Andintangible Assets