Question 1

EFG Transportation Company uses the straight-line method to depreciate its delivery truck.Which of the following reflects how recognizing depreciation expense would affect the elements of the financial statements?

Accepted Answer

Depreciation expense is an asset use transaction that decreases assets and stockholders' equity (retained earnings). It increases expenses, which decreases net income. It does not affect the statement of cash flows.

Question 2

Match between columns
                        Premises: The recognition of an impairment loss involves a cash outflow classified as a financing activity.
A patent with a useful life of 5 years and a legal life of 10 years is amortized over 5 years.
To recognize an impairment loss on goodwill,Amortization Expense will be increased and the Goodwill account will be decreased.
If it is determined that the original value recorded for goodwill is too high,then the income statement account,impairment loss,will be increased.
Intangible assets with indefinite useful lives must be tested each year for impairment.

Accepted Answer

The Answer of False and True is...

Question 3

Intangible assets include patents,copyrights,and franchises.

Accepted Answer

Intangible assets are, in fact, rights or privileges. They cannot be seen or touched.

Question 4

Match between columns
                        Premises: Recording this transaction will increase assets by $700,000 on Ernies books.
The goodwill will be amortized in the same manner as patents.
Recording this transaction will decrease liabilities by $250,000 on Ernies books.
Ernie will recognize $100,000 of goodwill in recording the acquisition of Bert.
It is impossible for Ernie to estimate the length of life for goodwill.

Accepted Answer

The Answer of False and True is...

Question 5

Match between columns
                        Premises: Recording the amortization of a patent includes increasing Amortization Expense and decreasing the Patent account.
A trademark has an identifiable legal lifetime.
U.S.GAAP requires that research and development costs be capitalized as assets and then expensed over a reasonable period of time.
A patent is amortized over the longer of its legal or useful life.
The capitalized cost of a trademark includes the cost to develop the trademark and to defend it.

Accepted Answer

The Answer of True and False is...

Question 6

Match between columns
                        Premises: MACRS requires that the taxpayer estimate the salvage value of assets.
MACRS is an accelerated depreciation method commonly used for tax purposes.
The use of MACRS provides tax benefits in the early years of an asset's life,compared to use of the straight-line method.
Most companies use the same depreciation method for both financial reporting and tax reporting.
The half-year convention is a semiannual meeting of accountants and educators.

Accepted Answer

The Answer of False and True is...

Question 7

How is depreciation expense reported in the financial statements?

Accepted Answer

Generally, depreciation expense is reported as an operating expense on the income statement.

Question 8

Match between columns
                        Premises: Annual depreciation for Ruperts equipment was $9,000.
On the date of the sale,Rupert will record a loss of $2,400.
Accumulated depreciation at end of Year 2 was $14,400.
Book value at end of Year 2 was $30,600.
A gain or loss on the sale of a plant asset is reported on the balance sheet.

Accepted Answer

The Answer of True and False is...

Question 9

Match between columns
                        Premises: The sale would increase Schuberts stockholders' equity by $2,000.
The sale will increase Schuberts net income,but it will not affect the company's operating income.
Schubert would show a $16,000 cash inflow in the operating activities section of the cash flow statement.
The sale would result in a decrease in total assets.
The sale would increase cash by $16,000,increase gain on sale of equipment by $2,000,and decrease equipment by $14,000.

Accepted Answer

The Answer of False and True is...

Question 10

The term used to recognize expense for property,plant,and equipment assets is depletion.

Accepted Answer

The term used to recognize expense for property, plant, and equipment is depreciation. The term used to recognize expense for natural resources is depletion.

Question 11

Match between columns
                        Premises: The units-of-production method allocates the cost of a plant asset in proportion to the asset's usage.
Straight-line depreciation is the most widely used method in the U.S.
Recording depreciation expense affects the income statement and the statement of cash flows but neither the balance sheet nor the statement of changes in stockholders' equity.
Total depreciation expense recognized over the asset's life is not affected by the choice of depreciation methods.
An accelerated depreciation method provides a lower depreciation charge in the early years of an asset's life cycle than does the straight-line method.

Accepted Answer

The Answer of False and True is...

Question 12

When a building is purchased simultaneously with land,the purchase price must be allocated between the building and the land.

Accepted Answer

Acquiring a group of assets in a single transaction is known as a basket purchase. The total price of a basket purchase must be allocated among the assets acquired.

Question 13

Match between columns
                        Premises: The book value of an asset is the amount a company believes it is worth (its fair value)as of the date of the balance sheet.
Depreciation expense is an example of a "non-cash" expense.
Other things being equal,the lower a company estimates the salvage value of a plant asset to be,the higher the company's net income will be.
A company that uses the straight-line method for financial statement reporting and MACRS for tax reporting will show a deferred tax liability in an assets early life.
For tax purposes,the most desirable depreciation method is the one that produces the lowest amount of depreciation expense.

Accepted Answer

The Answer of False and True is...

Question 14

Match between columns
                        Premises: Depreciation expense for Year 1 under the straight-line method would be $12,000.
The accumulated depreciation at the end of Year 2 under the straight-line method would be $20,000.
The book value of the machine under both the double declining method and the straight-line method at the end of 10 years would be $20,000.
Depreciation expense for Year 1 under the double declining method would be $24,000.
The accumulated depreciation at the end of Year 2 under the double declining method would be $48,000.

Accepted Answer

The Answer of True and False is...

Question 15

Match between columns
                        Premises: The matching concept requires that plant assets be recorded at the amount paid for the assets.
Sales taxes paid on the purchase of equipment would be expensed in the year of the purchase.
Delivery charges on equipment would be expensed in the year of the purchase.
Real estate fees and attorney's fees related to the purchase of a building would be added to the cost of the building.
Payment of a fine for improper burning of a demolished building would be added to the land account.

Accepted Answer

The Answer of True and False is...

Question 16

Match between columns
                        Premises: The reason that land is classified separately from other tangible assets is because the cost is normally much higher.
Goodwill is classified as Property,Plant and Equipment.
Trademarks are examples of an intangible asset.
Long-term assets having no physical substance are called intangible assets.
Natural resources are examples of tangible long-term assets.

Accepted Answer

The Answer of False and True is...

Question 17

Land differs from other property because it is not subject to depreciation.

Accepted Answer

The answer of Land differs from other property because it...

Question 18

Tangible assets include land,equipment,and goodwill.

Accepted Answer

The answer of Tangible assets include land,equipment,and goodwill....

Question 19

A copyright is an intangible asset with an indefinite useful life.

Accepted Answer

The answer of A copyright is an intangible asset with...

Question 20

Match between columns
                        Premises: Intangible assets with indefinite useful lives will be not be amortized.
The cost of a natural resource should be expensed (depleted) over its useful life.
Plant assets are classified as long-term assets,while intangible assets are treated as current assets.
Intangible assets include patents,copyrights,and natural resources.
The cost of land should be depleted over its useful life.

Accepted Answer

The Answer of False and True is...

Quiz 8: Accounting for Long-Term Operational Assets

EFG Transportation Company uses the straight-line method to depreciate its delivery truck.Which of the following reflects how recognizing depreciation expense would affect the elements of the financial statements?

Indicate whether each of the following statements is true or false.

Intangible assets include patents,copyrights,and franchises.

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

How is depreciation expense reported in the financial statements?

Schubert Co.owned equipment that originally cost $48,000.On January 1,Year 6,the company sold the equipment for $16,000 cash.Accumulated depreciation on the day of sale amounted to $34,000.Based on this information,indicate whether each of the following statements is true or false.

The term used to recognize expense for property,plant,and equipment assets is depletion.

Indicate whether each of the following statements is true or false.

When a building is purchased simultaneously with land,the purchase price must be allocated between the building and the land.

Indicate whether each of the following statements regarding accounting for long-term assets is true or false.

On January 1,Year 1,Warren Co.purchased a machine for $120,000.Warren estimated the useful life of the machine to be 10 years and the salvage value to be $20,000.Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

Land differs from other property because it is not subject to depreciation.

Tangible assets include land,equipment,and goodwill.

A copyright is an intangible asset with an indefinite useful life.

Indicate whether each of the following statements is true or false.