Question 1

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Accepted Answer

This deduction reflects the total amount of depreciation taken so far on the company's fixed assets.

Question 2

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.

Accepted Answer

The straight-line method of depreciation assumes that usage of the asset is consistent throughout its useful life, so it is not appropriate if usage varies considerably from year to year. Other methods, such as the units-of-production method or accelerated depreciation methods, may be more appropriate in these situations.

Question 3

The acquisition costs of property,plant,and equipment should include all costs necessary to get the asset in place and ready for use.

Accepted Answer

According to accounting standards, the acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and ready for use, such as purchase price, shipping costs, installation costs, and other related expenses.

Question 4

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

Accepted Answer

The estimated amount that an asset can be sold for at the end of its useful life is called its salvage value. The book value is the value of an asset on a company's balance sheet, calculated as the original cost minus accumulated depreciation.

Question 5

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

Accepted Answer

The double-declining-balance method of depreciation is an accelerated depreciation method because it depreciates assets at a faster rate than other methods.

Question 6

A current asset account must be increased for revenue expenditures since they benefit only the current period.

Accepted Answer

Current asset accounts are used to record assets that are expected to be converted to cash within one year, such as cash, inventory, and accounts receivable. Revenue expenditures are costs incurred to generate revenue in the current period, but they do not result in the acquisition of a long-term asset. Therefore, they are expensed in the current period, and the related current asset account is not increased. Instead, the expense account is increased, reducing net income for the period.

Question 7

Intangible assets do not exist physically.

Accepted Answer

Intangible assets are non-physical assets such as patents, copyrights, trademarks, intellectual property, and goodwill. They cannot be touched or seen but hold value for a company.

Question 8

Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.

Accepted Answer

Goodwill is the difference between the purchase price of a business and the fair value of its net assets.

Question 9

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Accepted Answer

The definition given in the statement pertains to intangible assets, which are a subset of fixed assets. Therefore, the statement is false as it conflates the two terms.

Question 10

Expenditures made to extend an asset's life are called revenue expenditures.

Accepted Answer

Expenditures made to extend an asset's life are called capital expenditures. Revenue expenditures are made for routine maintenance or repairs to keep the asset in working order and are typically expensed immediately rather than being capitalized.

Question 11

If an asset is discarded,a loss is recognized equal to its salvage value.

Accepted Answer

If an asset is discarded, a loss is recognized equal to its carrying value (original cost minus accumulated depreciation), not its salvage value.

Question 12

If a company sells a fixed asset for an amount which is less than its book value,a gain must be recognized.

Accepted Answer

If a company sells a fixed asset for an amount which is less than its book value, a loss must be recognized, not a gain.

Question 13

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

Accepted Answer

The difference between a fixed asset's initial cost and its current market value is called the asset's book value, not its depreciable cost. Depreciable cost refers to the portion of the asset's initial cost that can be depreciated over its useful life.

Question 14

Depletion is the process of transferring the cost of intangible assets to an expense account.

Accepted Answer

Depletion is the process of allocating the cost of natural resources (like minerals, oil, and gas) over their productive life, not intangible assets. Intangible assets are amortized, not depleted.

Question 15

Companies usually compute depletion by using the double-declining-balance method.

Accepted Answer

The double-declining-balance method is actually used for calculating depreciation, not depletion. Depletion is typically calculated using the units-of-production method or the cost depletion method.

Question 16

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale,a loss is recorded.

Accepted Answer

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale, a gain is recorded. A loss is recorded when the proceeds from a sale of equipment are less than the book value.

Question 17

The total depreciation across the years of an asset's life is the same under the double­declining­balance method or the straight-line method.

Accepted Answer

The answer of The total depreciation across the years of...

Question 18

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

Accepted Answer

Physical depreciation refers to the wear and tear or aging of a fixed asset over time, not changes in customer needs. Changes in customer needs leading to an asset no longer providing the intended services would be considered economic or functional obsolescence.

Question 19

Under the straight-line method,the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000,and a useful life of 5 years,will be $18,000.

Accepted Answer

Straight-line method is calculated by subtracting the estimated residual value from the cost of the asset and then dividing that figure by the useful life of the asset. 
In this case, the depreciable cost of the asset is $90,000 ($95,000 - $5,000). 
Dividing $90,000 by 5 years results in an annual depreciation expense of $18,000. Therefore, the statement is true.

Question 20

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

Accepted Answer

The answer of Amortization refers to systematic periodic transfer of...

Quiz 7: Fixed Assets and Intangible Assets

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.

The acquisition costs of property,plant,and equipment should include all costs necessary to get the asset in place and ready for use.

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

A current asset account must be increased for revenue expenditures since they benefit only the current period.

Intangible assets do not exist physically.

Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Expenditures made to extend an asset's life are called revenue expenditures.

If an asset is discarded,a loss is recognized equal to its salvage value.

If a company sells a fixed asset for an amount which is less than its book value,a gain must be recognized.

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

Depletion is the process of transferring the cost of intangible assets to an expense account.

Companies usually compute depletion by using the double-declining-balance method.

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale,a loss is recorded.

The total depreciation across the years of an asset's life is the same under the doubledecliningbalance method or the straight-line method.

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

Under the straight-line method,the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000,and a useful life of 5 years,will be $18,000.

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

Quiz 7: Fixed Assets and Intangible Assets

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.

The acquisition costs of property,plant,and equipment should include all costs necessary to get the asset in place and ready for use.

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

A current asset account must be increased for revenue expenditures since they benefit only the current period.

Intangible assets do not exist physically.

Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Expenditures made to extend an asset's life are called revenue expenditures.

If an asset is discarded,a loss is recognized equal to its salvage value.

If a company sells a fixed asset for an amount which is less than its book value,a gain must be recognized.

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

Depletion is the process of transferring the cost of intangible assets to an expense account.

Companies usually compute depletion by using the double-declining-balance method.

If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale,a loss is recorded.

The total depreciation across the years of an asset's life is the same under the double­declining­balance method or the straight-line method.

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

Under the straight-line method,the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000,and a useful life of 5 years,will be $18,000.

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

The total depreciation across the years of an asset's life is the same under the doubledecliningbalance method or the straight-line method.