Deck 8: Long-Term Assets

Question 1

What do "other long-term assets" typically consist of?

Answer 1

Long-term investments

Question 2

Neither land nor land improvements are depreciated.

Answer 2

False

Question 3

What is another name for assets that cannot be seen, touched, or held?

Answer 3

Intangible assets

Question 4

Costs of testing machinery or equipment before it is used would be included in the price of the machinery or the equipment.

Question 5

How are intangible assets different from tangible assets?

Question 6

Which of the following would be considered a natural resource?

A) Corn
B) Livestock
C) Timber
D) Wheat
E) Land

Question 7

Plant assets can be called fixed assets or physical assets.

Question 8

Coal, oil, and timber are:

A) amortized.
B) depleted.
C) depreciated.
D) expensed.
E) written off.

Question 9

Assets that come from the earth and can ultimately be used up are called __________.

Question 10

Whether a building is purchased or constructed, the same items are used to compute the price of the building.

Question 11

Which of the following would NOT be considered an intangible asset?

A) Goodwill
B) Franchise
C) Land
D) Copyright
E) Patent

Question 12

The cost of furniture and fixtures, such as desks, chairs and other items, includes its basic cost plus all other costs to ready the asset for its intended use.

Question 13

Timber, coal, and other minerals are long-term assets called natural resources.

Question 14

The cost of long-term assets must be allocated to an expense as the asset is used up.

Question 15

Patents and copyrights represent the rights conveyed to the owners of these tangible assets.

Question 16

Which of the following would NOT be considered as part of the cost of the land?

A) Survey
B) Realtor commissions
C) Paving
D) Unpaid property taxes on the land
E) Legal fees

Question 17

Patents, goodwill, and trademarks are:

A) amortized.
B) depleted.
C) depreciated.
D) expensed.
E) written off.

Question 18

Buildings, vehicles, and desks are:

A) amortized.
B) depleted.
C) depreciated.
D) expensed.
E) written off.

Question 19

Which of the following would be considered part of land improvements?

A) Removal of unwanted building on the land
B) Title transfer fees
C) Paving of the parking lot
D) Surveying fees
E) Legal fees

Question 20

When determining the cost of a plant asset, both IFRS and Canadian ASPE require the use of the market value principle.

Question 21

Which of the following would NOT be a part of land improvements?

A) Paving of the parking lot
B) Installing fences around the property
C) Putting in sidewalks
D) Grading and leveling the land
E) Underground sprinkler system

Question 22

The cost of removing unwanted buildings from land would be allocated to which account?

Question 23

To which account are repairs and maintenance after start-up recorded?

Question 24

Andy Industries is making a basket purchase of 4 items for $550,000 for cash. The current market values of the items are as follows:
Equipment $133,000
Furniture: $147,000
Trucks: $127,000
Fixtures: $168,000
Calculate to the nearest dollar the amount at which Andy Industries should value each item and write the journal entry for this basket purchase on April 14, 2011.
Equipment: $__________
Furniture: $__________
Trucks: $__________
Fixtures: $__________

Question 25

To which account should the cost of installing fences be recorded?

Question 26

Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. At what amount should item B be recorded?

Question 27

To which account should title transfer fees be recorded?

Question 28

Isaiah Industries reported the following costs for land and land improvements:

Calculate the cost of the land showing details of what is included in the calculation.

Question 29

Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000 and a note was signed. What is the journal entry to record this purchase?

Question 30

Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000 and item C was appraised at $60,000. The purchase price was $125,000. At what percentage of purchase price should item C be recorded? At what amount should item C be recorded at (rounded to the nearest dollar)?

Question 31

Ariana Corporation purchases land for $175,000 by signing a note payable. They paid cash as follows: $3,500 in realtor commission, $1,200 in transfer fees, a $1,700 survey fee, $3,200 to have the land graded and levelled, $6,300 for the installation of a fence, and $2,300 for a sprinkler system.. Prepare the journal entry required.

Question 32

Malinda Enterprises purchases land for $245,000 by signing a note payable for the same amount. The company also pays for the following: $2,500 in realtor commission, $6,400 to remove an old building, $3,300 to have the land fenced, and $2,700 for outdoor lighting. They also purchased machinery for $40,000 cash. Prepare the journal entry required.

Question 33

Depreciation is a process of valuation of an asset.

Question 34

Which of the following would be included in the cost of a constructed building?

A) Purchase price of the building
B) Payments for material, labour, and overhead
C) Survey and legal fees
D) Realtor commissions
E) Cost of tearing down old building

Question 35

Joshua Company made a basket purchase involving four assets. Their market values were A: $45,000;
B: $37,500; C: $41,000; and D: $53,000. The price Joshua paid for the four assets was $160,000. What percentage of the $160,000 price would be allocated to asset C to the nearest one-tenth of a percent? What is the dollar amount recorded to the asset C?

Question 36

Jimmie Company made a basket purchase involving four assets. Their market values were A: $45,000;
B: $37,500; C: $41,000; and D: $53,000. The price Jimmie paid for the four assets was $145,000. To the nearest dollar, what final price will Jimmie record for asset D?

Question 37

Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item A should be recorded (rounded to the nearest dollar) is __________.

Question 38

A company has installed a piece of machinery for a total of $76,000. In its third month of operation, repairs of $1,300 had to be made on the machine. The $1,300 would be allocated to which account?

Question 39

Which of the following would NOT be considered as part of the cost of a constructed building?

A) Building permit fees
B) Contractor charges
C) Survey and legal fees
D) Architectural fees
E) Labour costs for construction of building

Question 40

Do we record the sales taxes on the purchase of machinery to an asset or expense account? Be specific as to which asset or expense account.

Question 41

DDB balance is an accelerated method of calculating depreciation where residual value is not part of the initial computation.

Question 42

The method often used for income tax purposes is the:

A) expense method.
B) units-of-production method.
C) capital cost allowance method.
D) straight-line method.
E) capitalization method.

Question 43

If an asset generates revenue evenly over time, the depreciation method best suited for this asset would be the:

A) double-declining balance method.
B) straight-line method.
C) units-of-production method.
D) expense method.
E) capitalization method.

Question 44

After 4 years, a machine had an accumulated depreciation of $38,000. The machine had an anticipated life of 8 years and a residual value of $5,000. If the current book value after 4 years is $28,000 and the machine has only 2 years of useable life left, how much will be depreciated in Year 5 and in Year 6 using the straight-line method of depreciation, and assuming the residual value is still $5,000?

Question 45

An asset was purchased on January 1, 2012 at a cost of $50,000 . It has a residual value of $10,000 and it has a life of 5 years. Its fourth year of depreciation expense under the double-declining-balance method will be:

A) $7,200.
B) $4,320.
C) $800.
D) $0.
E) $1,000.

Question 46

Book value is depreciable cost minus accumulated depreciation.

Question 47

Jillian Company purchased a set of fixtures on January 1, 2012. The cost was $12,000 and the set had a
residual value of $2,000. The fixtures were given a useful life of 8 years. After the end of three years, it was determined that the fixtures would be obsolete in 2 more years. Assume that the estimated residual value is still $2,000. What will be the depreciation under the straight-line method to the nearest dollar for the fourth year? What is the journal entry in the fourth year to record depreciation?

Question 48

The depreciation method in which the depreciable cost of an asset is apportioned equally over its estimated life in terms of month or years is called the __________.

Question 49

If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the:

A) expense method.
B) units-of-production method.
C) double-declining balance method.
D) straight-line method.
E) capital cost allowance method.

Question 50

Basing depreciation on a base such as kilometres driven per year would be an example of double-declining balance depreciation.

Question 51

A company purchased a computer system on March 1, 2012. Its cost was $35,000 and it had an estimated residual value of $5,000. It was expected to have a useful life for four years. To the nearest dollar, the depreciation for 2012 using straight-line depreciation will be:

A) $8,750.
B) $7,500.
C) $6,250.
D) $5,625.
E) $6,500.

Question 52

After an asset is fully depreciated, at what amount is the asset kept on the book?

Question 53

A company purchased a truck on August 1, 2012 and uses straight-line depreciation. For how many months would the company depreciate the asset in 2012?

Question 54

A plant asset's useful life may be short due to obsolescence.

Question 55

Michele Company purchased a piece of equipment for $65,000 with an estimated residual value of $15,000 on January 1, 2012. Its estimated life is 5 years. To the nearest dollar, what is the equipment's depreciation using the double-declining-balance method for 2013?

A) $26,000
B) $20,000
C) $15,600
D) $12,000
E) $15,700

Question 56

Meranda Corporation purchases a machine for $125,000. It has an estimated residual value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 14,500 units. To the nearest dollar, the depreciation for the first year under the units of production method will be __________.

Question 57

What is the method best suited for depreciating items such as copy machines and vehicles?

Question 58

A building was purchased on August 1, 2012 for $450,000. It has a residual value of $38,000 and a useful life of 35 years. To the nearest dollar, how much will the depreciation expense for the building be for 2012 using the double-declining-balance method?

Question 59

Depreciation is based upon cost, useful life, and salvage value.

Question 60

A company purchased a van at a cost of $42,000 and expects its salvage value to be $6,000 after 120,000 kilometres of service. Using the units-of-production method, what is the first year's depreciation if the van is driven 24,000 kilometres?

Question 61

What is the formula to calculate straight-line depreciation?

Question 62

Expenditures incurred, such as changing the oil and filter on a delivery truck, would be considered ordinary repairs.

Question 63

Replacing the engine of a 3-year-old vehicle would be an example of a(n):

A) extraordinary repair.
B) betterment.
C) ordinary repair.
D) capital expense.
E) revenue expenditure.

Question 64

A vehicle was purchased for $33,000 on January 1, 2009 with an estimated residual value of $4,000 and 5 years of useful life. The company uses the straight-line depreciation method. On July 1, 2011, the engine was overhauled with a cost of $4,000. As a result of the overhaul, it is estimated its residual value would increase by $500 and its useful life would increase by 1.5 years. What is the new depreciation?

Question 65

What is the definition of betterments such as an addition to an existing building?

Question 66

Would adding 30 rooms to an existing hotel be considered a betterment or an extraordinary repair?

Question 67

Lubricating a machine on a regular basis would be considered a(n):

A) betterment.
B) capital expenditure.
C) ordinary repair.
D) capital expense.
E) extraordinary repair.

Question 68

A company replaced tires on a vehicle and debited the amount to "vehicle" instead of repairs expense. What is the effect on the income statement as a result of this error?

Question 69

It is determined that a computer's depreciation expense for the year is $3,500. What is the journal entry to record this?

Question 70

A company replaced an engine on a vehicle and debited the amount to repairs expense, rather than debiting the "vehicle" account. Which of the following would occur because of this error?

A) Repairs Expense would be understated.
B) Net Income would be overstated.
C) The asset "vehicle" would be overstated.
D) The asset "vehicle" would be understated.
E) Shareholders' Equity would be overstated.

Question 71

Ordinary repairs are also called revenue expenditures because the expense is matched against the revenues for the period.

Question 72

Sorine Industries inadvertently debited a $5,000 betterment as an ordinary expense. What is the balance sheet effect of this mistake in the current year?

Question 73

A company expenses the cost of a betterment by debiting Repair and Maintenance Expense, rather
than capitalizing it (debiting an asset). What effect would this error have on the income statement?

Question 74

A company purchased furniture on January 1, 2012. Its cost was $15,600 and it had a residual value of
$1,600. Its useful life is determined to be 3 years. Using double-declining balance depreciation, record the journal entry to record depreciation expense in 2013.

Question 75

Tomisa Company has a machine with a cost of $90,000. It has a salvage value of $11,000 and a useful life of 8 years or 75,000 units of production. It was purchased on January 1, 2011. It produced 8,500 units in 2011. To the nearest dollar, what will be the depreciation expense for 2011 using:
A. straight-line depreciation?
B. double-declining-balance depreciation?
C. units-of-production depreciation?
$__________ Straight-line depreciation
$__________ Double-declining-balance depreciation
$__________ Units-of-production depreciation

Question 76

Dimitri Company has a delivery truck that was purchased for $42,000 and has a residual value of $5,000. It expects the truck to last 125,000 kilometres. During Year 1, the truck traveled 32,500 kilometres and during Year 2, the truck traveled 28,500 kilometres. What is the depreciation expense for Year 2 to the nearest dollar using the units-of-production method? (Round to three decimal places to get the unit rate.) Record the journal entry required in year 2 to record depreciation.

Question 77

A truck was purchased on January 2 at a cost of $60,000. It is expected to be used for 5 years and to have a residual value of $5,000 after 120,000 miles of service. The truck was driven for 23,000 miles the first year and 25,000 miles the second year. Calculate the depreciation expense to the nearest dollar for the first and second years.

Question 78

If an extraordinary repair is incorrectly expensed in the current period, what is the effect on the net income for the current period and for future periods?

Question 79

What is a repair that extends the useful life of an asset?

Question 80

Replacing an engine on a delivery truck would be considered a betterment.