Question 1

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 typically presented on the balance sheet at cost less accumulated depreciation, which provides a more accurate representation of the economic value of the assets. This is known as the historical cost principle, which is a widely accepted accounting standard. Options A, B, and D are not generally used for valuation of fixed assets on the balance sheet.

Question 2

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) $17,500
B) $16,000
C) $26,000
D) $15,000

Accepted Answer

Depletion expense can be calculated using the following formula:

Depletion expense per unit = (Cost of mining site - Estimated residual value) / Total estimated units of mineral

Depletion expense for the year = Depletion expense per unit * Number of units extracted during the year

Depletion expense per unit = ($1,750,000 - $150,000) / 400,000 tons = $4.25 per ton

Depletion expense for the first year = $4.25 per ton * 6,500 tons = $27,625

However, the question asks for the depletion expense, not the total depletion. Therefore, the answer would be:

Depletion expense for the first year = ($1,750,000 - $150,000) / 400,000 tons * 6,500 tons = $26,000

Therefore, the best choice is C.

Question 3

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 4

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 5

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 the asset for $3,500 results in a gain of $3,500 - $1,500 = $2,000.

Question 6

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 can be used by companies for production and manufacturing purposes. Equipment, patents, trademarks, and copyrights are not natural resources. Land can be considered a natural resource, but it is not included in the same category as timber, metal ores, and minerals.

Question 7

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 book value of the old asset is calculated as its cost ($41,000) minus accumulated depreciation ($36,500), which equals $4,500. The trade-in allowance is $3,000, which is less than the book value by $1,500. This difference is recognized as a loss on the trade.

Question 8

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 9

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 symbol, word or words legally registered or established by use as representing a company or product. It helps to distinguish the products of one company from another. A patent is a grant made by the government that gives an inventor the exclusive right to make, use and sell an invention for a set period of time. Goodwill refers to the reputation and intangible assets of a business that contributes to its value. Copyright protects original works of authorship such as books, music, and artwork. None of these specifically relate to the identification of a business and its products like a trademark does.

Question 10

​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 commonly referred to as depreciation, depletion or amortization depending on the type of asset. Allocation refers to the process of assigning a portion of a cost to a specific account or project. Therefore, B is the only option that does not accurately describe this process.

Question 11

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 12

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 measures how efficiently a company is using its fixed assets in generating sales. Therefore, the higher the fixed asset turnover, the more efficiently a company is using its fixed assets in generating sales.

Question 13

​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 debit to Depletion Expense for $175,000
B) ​a credit to Depletion Expense for $350,000
C) ​a debit to Accumulated Depletion for $175,000
D) ​a credit to Accumulated Depletion for $350,000

Accepted Answer

CThe correct depletion expense is calculated based on the amount of resource extracted during the period. With a total cost of $500,000 and 1 million tons expected to be extracted, the cost per ton is $0.50. For 350,000 tons mined, the depletion expense is 350,000 tons * $0.50/ton = $175,000. This amount is debited to Depletion Expense (A) to reflect the expense on the income statement and credited to Accumulated Depletion (C) to reduce the book value of the mining rights on the balance sheet.

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

​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 16

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 able to generate more revenue per dollar of fixed assets, which is often the case for firms that are more labor intensive and require smaller fixed asset investments. This is because they rely less on expensive machinery and equipment, and more on human labor.

Question 17

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 correct term used to describe the process of transferring the cost of intangible assets, such as patents or trademarks, to expense over their useful lives. Depreciation is used for tangible assets, while depletion is used for natural resources. Allocation is a broader term that can refer to the process of assigning costs to different cost centers or products, but it is not specific to intangible assets.

Question 18

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 19

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 the number of dollars of sales earned per dollar of fixed assets. It shows how efficiently a company is using its fixed assets to generate revenue.

Question 20

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 definite legal or economic life. Trademarks and goodwill are not amortized because they have an indefinite life; instead, they are tested annually for impairment.

Quiz 9: Long-Term Assets: Fixed and Intangible

Fixed assets are ordinarily presented on the balance sheet

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?

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

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 natural resources of some companies include

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 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

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

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?

The higher the fixed asset turnover, the

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 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?

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

Which of the following statements is true?

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

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

Which intangible assets are amortized over their useful life?