Question 1

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

Loss on exchange = Trade-in allowance - Book value of asset = $3,000 - ($41,000 - $36,500) = $1,500

Question 2

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 all examples of natural resources that some companies may possess. These resources are typically extracted from the earth and can be used in a variety of industries, such as construction, manufacturing, and energy production. Equipment, patents, trademarks, and copyrights are not natural resources, but rather intellectual property or physical assets that a company may own.

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

Fixed Asset Turnover Ratio = Sales / Average Book Value of Fixed Assets = $2,025,000 / [($550,000 + $800,000) / 2)] = 3

Question 4

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 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 removal of the machinery's cost and its accumulated depreciation from the books, with no gain or loss on the sale.

Question 5

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

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

Question 6

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...

Question 7

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 initially recorded at cost and then adjusted for accumulated depreciation over the life of the asset. This is referred to as the cost less accumulated depreciation method of presentation on the balance sheet. Choice A is incorrect because fixed assets are not presented at current market values. Choice B is incorrect because fixed assets are not presented at replacement costs. Choice D is incorrect because fixed assets are usually presented in the same section as other tangible assets, not in a separate section.

Question 8

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 transferring the cost of intangible assets to expense over their useful life. This is done because intangible assets, like patents or trademarks, lose their value over time as they become outdated or expire. As a result, the cost of acquiring these assets must be gradually expensed over their useful life rather than all at once. Depletion is the process of transferring the cost of natural resources (like oil or minerals) to expense as they are extracted from the earth. Depreciation is the process of transferring the cost of tangible assets (like buildings or equipment) to expense over their useful life. Allocation refers to the process of assigning or distributing costs to cost centers or products.

Question 9

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

Loss on exchange = Trade-in allowance - Book value of asset = ($15,200 - $12,700) - ($9,000 - $5,000) = $1,500

Question 10

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 generates more sales from each dollar invested in fixed assets. This is often associated with firms that are more labor intensive and require smaller fixed asset investments, as they rely more on human capital than on machinery or equipment. The fixed asset turnover ratio can be compared across time for an individual company to track changes in efficiency and productivity. It is also useful for comparing different companies within the same industry or sector.

Question 11

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 in the period in which they are incurred, according to accounting standards. This treatment reflects the uncertainty of future economic benefits from these expenditures.

Question 12

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 is calculated by dividing sales by fixed assets. It measures the efficiency of a company's use of its fixed assets to generate sales. Therefore, the fixed asset turnover ratio measures the number of dollars of sales earned per dollar of fixed assets.

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

Gain on sale = Selling price - Book value of asset = $3,500 - ($30,000 - $28,500) = $2,000

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

Accepted Answer

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

Question 15

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

The answer of When a company discards machinery that is...

Question 16

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 Rate = Cost of Resource / Estimated Total Units of Resource = $1,600,000 / 400,000 = $4
Depletion Expense = Depletion Rate × Quantity Extracted = $4 × 6,500 tons = $26,000

Question 17

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

Accepted Answer

Patents are the only assets in the given options that are amortized over their useful life. Trademarks and goodwill are not amortized, but tested for impairment annually.

Question 18

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 that identifies a product or service of a particular source from those of others. It is a type of intellectual property protection that helps consumers distinguish between different brands and products. Goodwill refers to the reputation and customer loyalty earned by a business over time. A patent protects an invention or discovery, giving the holder exclusive rights to make, use, or sell it for a limited time. Copyright protects original artistic or literary works.

Question 19

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 20

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...

Quiz 9: Long-Term Assets: Fixed and Intangible

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

The natural resources of some companies include

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

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:

The higher the fixed asset turnover, the

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?

Fixed assets are ordinarily presented on the balance sheet

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

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?

Expenditures for research and development are generally recorded as

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

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 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?

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

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

Which intangible assets are amortized over their useful life?

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

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 an asset to an expense account is called all of the following except