Question 1

Xtra Company purchased a business from Argus for $96,000 above the fair value of its net assets. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?
A) not enough information to calculate amortization
B) $7,000
C) $8,000
D) goodwill is not amortized

Accepted Answer

The answer of Xtra Company purchased a business from Argus...

Question 2

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called
A) deferral
B) depreciation
C) amortization
D) depletion

Accepted Answer

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called depletion. Option A (deferral) refers to delaying recording an expense or revenue to a later period. Option B (depreciation) refers to allocating the cost of a tangible asset over its useful life. Option C (amortization) refers to allocating the cost of an intangible asset over its useful life.

Question 3

The natural resources of some companies include
A) metal ores, copyrights, and supplies
B) timber, equipment, and patents
C) minerals, trademarks, and land
D) timber, metal ores, and minerals

Accepted Answer

Among the given options, only choice D includes natural resources such as timber, metal ores, and minerals. The other options include resources such as copyrights, trademarks, and patents, which are not natural resources.

Question 4

Fixed assets are ordinarily presented on the balance sheet
A) at current market values
B) at cost less accumulated depreciation
C) at replacement costs
D) in a separate section along with intangible assets

Accepted Answer

Fixed assets are presented on the balance sheet at cost less accumulated depreciation, as this reflects the historical cost of the assets and the amount that has been consumed over time. This method of presentation also allows for comparability with prior periods and other companies in the same industry. Current market values and replacement costs may be relevant for certain purposes, such as insurance or sale transactions, but are not typically used for financial reporting. Fixed assets are not typically presented in a separate section along with intangible assets, although they may be separately disclosed within the same section.

Question 5

Newport Company has sales of $2,025,000 for the current year. The book value of its fixed assets at the beginning of the year was $550,000 and at the end of the year was $800,000. The fixed asset turnover ratio for Newport is
A) 3.0
B) 3.6
C) 2.5
D) 3.7

Accepted Answer

The answer of Newport Company has sales of $2,025,000 for...

Question 6

The Weber Company purchased a mining site for $1,750,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During the first year, the company extracted 6,500 tons of ore. The depletion expense is
A) $15,000
B) $16,000
C) $17,500
D) $26,000

Accepted Answer

The answer of The Weber Company purchased a mining site...

Question 7

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is
A) allocation
B) depreciation
C) amortization
D) depletion

Accepted Answer

Amortization is the process of allocating the cost of intangible assets over their useful life. The term "intangible assets" refers to assets that lack physical substance, such as copyrights, patents, and trademarks, that provide a benefit to the company over a certain period of time. As these assets lose their value over time, the cost of acquiring them must be gradually expensed through the process of amortization. Allocation is the process of apportioning costs to various departments or products. Depreciation is the process of allocating the cost of tangible assets over their useful life. Depletion is the process of allocating the cost of natural resources over their useful life.

Question 8

The higher the fixed asset turnover, the
A) more efficiently a company is using its fixed assets in generating sales
B) more efficiently a company is using its intangible assets in generating sales
C) less efficiently a company is using its fixed assets in generating sales
D) more efficiently a company is using its current assets in generating sales

Accepted Answer

The fixed asset turnover ratio measures how efficiently a company is using its fixed assets in generating sales. A higher ratio indicates that the company is generating more sales per dollar invested in fixed assets, which means it is using its assets more efficiently in generating revenue. Therefore, option A is the correct answer.

Question 9

The ratio measuring the number of dollars of sales earned per dollar of fixed assets is the
A) fixed asset turnover ratio
B) days' in assets ratio
C) current asset turnover ratio
D) intangible asset ratio

Accepted Answer

The fixed asset turnover ratio measures how efficiently a company is using its fixed assets to generate sales. It is calculated as Sales / Total Fixed Assets. Therefore, the correct answer is A) fixed asset turnover ratio. The other options are not relevant to this ratio.

Question 10

Which intangible assets are amortized over their useful life?
A) goodwill
B) patents
C) trademarks
D) all of the above

Accepted Answer

The answer of Which intangible assets are amortized over their...

Question 11

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
A) $2,000 loss
B) $2,000 gain
C) $1,500 loss
D) $3,500 gain

Accepted Answer

The answer of A fixed asset with a cost of...

Question 12

The name, term, or symbol used to identify a business and its products is called
A) goodwill
B) a trademark
C) a patent
D) a copyright

Accepted Answer

A trademark is the name, symbol or term that is used to identify a business and its products. It is a unique identifier that sets a business apart from its competitors. Trademarks can be registered with the government to protect them from unauthorized use by others. Goodwill is the reputation and customer loyalty that a business has built over time. Patents and copyrights protect inventions and creative works, respectively.

Question 13

Which of the following statements is true?
A) The fixed asset ratio is not useful for comparing different companies.
B) A smaller fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments.
C) The fixed asset ratio cannot be compared across time for an individual company.
D) A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments.

Accepted Answer

The answer of Which of the following statements is true?
A)...

Question 14

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000 fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,000, at what cost will the new equipment be recorded in the books?
A) $50,000
B) $45,000
C) $51,000
D) $54,000

Accepted Answer

The answer of A fixed asset with a cost of...

Question 15

The accumulated depletion of a natural resource is reported on the
A) balance sheet as depreciation from the cost of the resource
B) income statement as a deduction from revenues
C) income statement as an increase in revenue
D) balance sheet as a deduction from the cost of the resource

Accepted Answer

Depletion is a non-cash expense associated with the usage of natural resources. The accumulated depletion is deducted from the cost of the resource on the balance sheet, which reduces the asset value. This indicates the declining amount of the natural resource available for future use. It does not affect the revenue or the income statement directly.

Question 16

The process of transferring the cost of an asset to an expense account is called all of the following except
A) depletion
B) allocation
C) amortization
D) depreciation

Accepted Answer

The answer of The process of transferring the cost of...

Question 17

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books?
A) $60,500
B) $60,000
C) $54,000
D) $59,500

Accepted Answer

The answer of A fixed asset with a cost of...

Question 18

Expenditures for research and development are generally recorded as
A) assets and amortized over their estimated useful life
B) current operating expenses
C) assets and amortized over 40 years
D) current assets

Accepted Answer

Expenditures for research and development are generally considered as current operating expenses as their benefits are uncertain and cannot be reliably measured. They are not recorded as assets and amortized over time because their benefits may not last beyond the year in which they are incurred.

Question 19

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is
A) $3,000
B) $4,500
C) $500
D) $1,500

Accepted Answer

The answer of A fixed asset with a cost of...

Question 20

Sands Company purchased mining rights for $500,000. They expect to harvest 1 million tons of ore over the next five years. During the current year, Sands mined 350,000 tons of ore. The entry to record the depletion would include
A) a credit to Accumulated Depletion for $350,000
B) a debit to Accumulated Depletion for $175,000
C) a debit to Depletion Expense for $175,000
D) a credit to Depletion Expense for $350,000

Accepted Answer

Depletion is the process of allocating the cost of natural resources to expense over the period of its extraction or harvesting. The cost of the mining rights is allocated to depletion expense over the 1 million tons of ore. Therefore, the depletion rate per ton is $0.50 ($500,000/1,000,000 tons). Since 350,000 tons were mined during the current year, the depletion amount for the year would be $175,000 (350,000 tons x $0.50). Thus, the entry to record depletion would include a debit to Depletion Expense for $175,000.

Quiz 9: Fixed Assets and Intangible Assets

Xtra Company purchased a business from Argus for $96,000 above the fair value of its net assets. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called

The natural resources of some companies include

Fixed assets are ordinarily presented on the balance sheet

Newport Company has sales of $2,025,000 for the current year. The book value of its fixed assets at the beginning of the year was $550,000 and at the end of the year was $800,000. The fixed asset turnover ratio for Newport is

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

The higher the fixed asset turnover, the

The ratio measuring the number of dollars of sales earned per dollar of fixed assets is the

Which intangible assets are amortized over their useful life?

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

The name, term, or symbol used to identify a business and its products is called

Which of the following statements is true?

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000 fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,000, at what cost will the new equipment be recorded in the books?

The accumulated depletion of a natural resource is reported on the

The process of transferring the cost of an asset to an expense account is called all of the following except

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books?

Expenditures for research and development are generally recorded as

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is

Sands Company purchased mining rights for $500,000. They expect to harvest 1 million tons of ore over the next five years. During the current year, Sands mined 350,000 tons of ore. The entry to record the depletion would include