Question 1

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record
A)the new machinery at $16,700
B)the new machinery at $12,700
C)a gain of $1,500
D)a loss of $1,500

Accepted Answer

The answer of The Bacon Company acquired new machinery with...

Question 2

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

Accepted Answer

A larger fixed asset turnover ratio indicates that a company is using its fixed assets more efficiently to generate revenue. This is usually associated with companies that are more labor intensive and require smaller fixed asset investments, as they rely more on their workforce to generate revenue. Therefore, statement A is true. Statement B is false because the fixed asset turnover ratio can be compared across time to track a company's efficiency in using its fixed assets over time. Statement C is false, as a smaller fixed asset turnover ratio indicates that a company is not using its fixed assets as efficiently and may require larger fixed asset investments for future growth. Statement D is false because the fixed asset turnover ratio is useful for comparing the efficiency of using fixed assets across different companies in the same industry.

Question 3

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)3.7
D)2.5

Accepted Answer

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

Question 4

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 5

When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following:
A)debit Cash and Accumulated Depreciation; credit Machinery
B)debit Machinery; credit Cash and Accumulated Depreciation
C)debit Cash and Machinery; credit Accumulated Depreciation
D)debit Cash and Depreciation Expense; credit Accumulated Depreciation

Accepted Answer

When a company sells machinery at its book value, the entry includes debiting Cash for the amount received (equal to the book value) and Accumulated Depreciation for the total depreciation of the machinery up to the point of sale, and crediting Machinery for its original cost. This reflects the cash inflow, removes the machinery's cost and its accumulated depreciation from the books, and shows no gain or loss on the sale since it was sold at book value.

Question 6

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry
A)debit Accumulated Depreciation; credit Machinery
B)debit Machinery; credit Accumulated Depreciation
C)debit Cash; credit Accumulated Depreciation
D)debit Depreciation Expense; credit Accumulated Depreciation

Accepted Answer

When a company discards fully depreciated machinery, it means that the entire cost of the machinery has already been expensed through the Accumulated Depreciation account. Therefore, the entry to record the disposal of the machinery would be to debit Accumulated Depreciation (to reduce the balance to zero) and credit Machinery (to remove the asset from the balance sheet).

Question 7

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)$7,000
B)$8,000
C)goodwill is not amortized
D)not enough information to calculate amortization

Accepted Answer

Goodwill is not amortized under current accounting standards. Instead, it is tested annually for impairment.

Question 8

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

Accepted Answer

Fixed assets are presented on the balance sheet at cost less accumulated depreciation. This is in accordance with the historical cost principle, which requires companies to record assets at their historical cost when acquired, rather than at current market values or replacement costs. Separating fixed assets into a separate section is not necessary, as they are typically presented alongside other assets on the balance sheet.

Question 9

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)$54,000
B)$45,000
C)$51,000
D)$50,000

Accepted Answer

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

Question 10

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

Accepted Answer

Patents are amortized over their useful life because they have a finite useful life, typically 20 years from the date of application. Trademarks and goodwill are not amortized because they have an indefinite useful life as long as they continue to be used in business.

Question 11

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

Accepted Answer

Timber, metal ores, and minerals are natural resources commonly used by companies involved in industries such as construction, manufacturing, and mining. Equipment, patents, trademarks, copyrights, and supplies are not natural resources, but rather man-made or intellectual property assets. Land could technically be considered a natural resource, but it is not typically categorized as such in this context.

Question 12

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

Accepted Answer

Expenditures for research and development are typically recorded as current operating expenses. This is because the future economic benefits of R&D are uncertain, making it difficult to capitalize these costs as assets under most accounting standards.

Question 13

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)$1,500 loss
C)$3,500 gain
D)$2,000 gain

Accepted Answer

The book value of the asset is calculated as cost minus accumulated depreciation, which is $30,000 - $28,500 = $1,500. Selling it for $3,500 results in a gain of $3,500 - $1,500 = $2,000.

Question 14

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

Accepted Answer

Fixed asset turnover is a ratio that measures how efficiently a company is using its fixed assets to generate sales. A higher fixed asset turnover indicates that a company is generating more sales per dollar invested in fixed assets, which is a sign of efficiency. Therefore, option B is the correct choice.

Question 15

The Weber Company purchased a mining site for $1,600,000 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. During the first year, the company extracted 6,500 tons of ore. The depletion expense is
A)$17,500
B)$16,000
C)$26,000
D)$15,000

Accepted Answer

Depletion expense per ton = ($1,600,000 / 400,000) = $4 per ton 
Depletion expense for the first year = (6,500 tons x $4 per ton) = $26,000 
Therefore, the correct answer is C.

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 process of transferring the cost of an asset to an expense account is called allocation. Depletion is a form of cost allocation specifically used for natural resources. Amortization is a form of cost allocation specifically used for intangible assets. Depreciation is a form of cost allocation specifically used for tangible assets.

Question 17

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

Accepted Answer

A trademark is a recognizable sign, design, or expression which identifies a business and its products. It distinguishes the goods or services of one business from those of other businesses. A trademark may be a combination of words, symbols, logos, or other design elements.

Question 18

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 ratio measuring the number of dollars of sales earned per dollar of fixed assets is known as the fixed asset turnover ratio. This ratio reflects how well a company is utilizing its fixed assets to generate sales. A high ratio indicates that the company is using its fixed assets effectively and efficiently to generate sales, while a low ratio suggests that the company may have excess or underutilized fixed assets.

Question 19

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

Accepted Answer

Amortization is the process of gradually transferring the cost of an intangible asset to expense over its useful life due to a decline in its utility. Depletion is the process of transferring the cost of natural resources to expense as they are consumed. Depreciation is the process of transferring the cost of tangible assets to expense over their useful lives, and allocation is the process of assigning common costs to individual cost objects.

Question 20

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)$54,000
B)$59,500
C)$60,000
D)$60,500

Accepted Answer

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

Quiz 9: Long-Term Assets: Fixed and Intangible

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

Which of the following statements is true?

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 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

When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following:

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry

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?

Fixed assets are ordinarily presented on the balance sheet

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?

Which intangible assets are amortized over their useful life?

The natural resources of some companies include

Expenditures for research and development are generally recorded as

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 higher the fixed asset turnover, the

The Weber Company purchased a mining site for $1,600,000 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. During the first year, the company extracted 6,500 tons of ore. The depletion expense is

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

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

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

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

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?