Deck 13: Long-Term Andintangible Assets

Question 1

A loss on disposal of a long-term asset can only occur if the cash proceeds received from the asset's sale is less than the asset's book value.

Answer 1

False

Question 2

The Accumulated Depreciation account represents a cash fund available to replace long-term assets.

Answer 2

False

Question 3

Accountants do not attempt to measure the change in a plant asset's market value during ownership because

A)the assets are not held for resale.
B)long-term assets cannot be sold.
C)losses would have to be recognized.
D)it is management's responsibility to determine fair values.

Answer 3

D

Question 4

Ordinary repairs should be recognized when incurred as revenue expenditures.

Question 5

If the proceeds from the sale of a long-term asset exceeds its book value, a gain on disposal occurs.

Question 6

Interest may be included in the acquisition cost of a hotel asset

A)during the construction period of a self-constructed asset.
B)if the asset is purchased on credit.
C)if the asset acquisition is financed by a long-term note payable.
D)if it is a part of a lump-sum purchase.

Question 7

Land improvements should be depreciated over the useful life of the

A)land.
B)buildings on the land.
C)land or land improvements, whichever is longer.
D)land improvements.

Question 8

General Hotel Management is building a new hotel that will take three years to construct.The construction will be financed in part by funds borrowed during the construction period.There are significant architect fees, excavation fees, and building permit fees.Which of the following statements is true?

A)Excavation fees are capitalized but building permit fees are not.
B)Architect fees are capitalized but building permit fees are not.
C)Interest is capitalized during the construction as part of the cost of the building.
D)The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

Question 9

To determine a new depreciation amount after a change in estimate of a long-term asset's useful life, the asset's remaining depreciable cost is divided by its remaining useful life.

Question 10

A restaurant purchased kitchen equipment on April 1, 2008 for $40,000.It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life.Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2008 is

A)$4,000.
B)$3,500.
C)$2,625.
D)$3,000.

Question 11

The four subdivisions for long-term assets are

A)land, land improvements, buildings, and equipment.
B)intangibles, land, buildings, and equipment.
C)furnishings and fixtures, land, buildings, and equipment.
D)property, plant, equipment, and land.

Question 12

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

A)Sales tax
B)Truck license
C)Freight charges
D)Cost of lettering on side of truck

Question 13

The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.

Question 14

The balance in the Accumulated Depreciation account represents the

A)cash fund to be used to replace long-term assets.
B)amount to be deducted from the cost of the long-term asset to arrive at its fair market value.
C)amount charged to expense in the current period.
D)amount charged to expense since the acquisition of the long-term asset.

Question 15

When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

Question 16

Dye Hotels buys land for $40,000 on 12/31/08.As of 3/31/09, the land has appreciated in value to $40,400.On 12/31/04, the land has an appraised value of $40,900.By what amount should the Land account be increased in 2004?

A)$0
B)$400
C)$500
D)$900

Question 17

The depreciable cost of a long-term asset is its original cost minus obsolescence.

Question 18

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which

A)is used for tax purposes.
B)must be used for financial statement purposes.
C)is required by the SEC.
D)expenses an asset over a single year because capital acquisitions must be expensed in the year purchased.

Question 19

When estimating the useful life of an asset, accountants do not consider

A)the cost to replace the asset at the end of its useful life.
B)obsolescence factors.
C)expected repairs and maintenance.
D)the intended use of the asset.

Question 20

The cost of a patent must be amortized over a 20-year period.

Question 21

Shaw Company purchased equipment for $180,000 on January 1, 2008, and will use the double-declining-balance method of depreciation.It is estimated that the equipment will have a 3-year life and an $8,000 salvage value at the end of its useful life.The amount of depreciation expense recognized in the year 2006 will be

A)$20,000.
B)$12,000.
C)$21,776.
D)$13,776.

Question 22

When vacant land is acquired, expenditures for clearing, draining, filling, and grading should be charged to the ______________ account.

Question 23

Intangible assets are rights, privileges, and competitive advantages that result from the ownership of assets that

A)must be generated internally.
B)are depletable natural resources.
C)have been exchanged at a gain.
D)do not possess physical substance.

Question 24

In the case of an exchange of similar long-term assets resulting in a loss on disposal, the cost of the new asset acquired is equal to the ______________ of the asset given up plus any cash paid by the purchaser.

Question 25

A loss on disposal of a long-term asset is reported in the financial statements

A)in the Other Revenues and Gains section of the income statement.
B)in the Other Expenses and Losses section of the income statement.
C)as a direct increase to the capital account on the balance sheet.
D)as a direct decrease to the capital account on the balance sheet.

Question 26

Expenditures that maintain the operating efficiency and expected productive life of a long-term asset are generally

A)expensed when incurred.
B)capitalized as a part of the cost of the asset.
C)debited to the Accumulated Depreciation account.
D)not recorded until they become material in amount.

Question 27

Losses on the exchange of similar assets are

A)not possible.
B)deferred.
C)recognized immediately.
D)deducted from the cost of the new asset acquired.

Question 28

If similar assets are exchanged and a gain results, the

A)recognition of the gain will be immediate.
B)cost basis of the asset received in the exchange will be decreased.
C)cost basis of the asset given in the exchange will be increased.
D)cost basis of the asset received in the exchange will be increased.

Question 29

A company sells a long-term asset that originally cost $180,000 for $60,000 on December 31, 2008.The accumulated depreciation account had a balance of $72,000 after the current year's depreciation of $18,000 had been recorded.The company should recognize a

A)$120,000 loss on disposal.
B)$48,000 gain on disposal.
C)$48,000 loss on disposal.
D)$30,000 loss on disposal.

Question 30

Which of the following statements is not true when a fully depreciated long-term asset is retired?

A)The long-term asset's book value is equal to its estimated salvage value.
B)The accumulated depreciation account is debited.
C)The asset account is credited.
D)The long-term asset's original cost equals its book value.

Question 31

Units of activity is an appropriate depreciation method to use when

A)it is impossible to determine the productivity of the asset.
B)the asset's use will be constant over its useful life.
C)the productivity of the asset varies significantly from one period to another.
D)the company is a manufacturing company.

Question 32

If the proceeds from the sale of a long-term asset exceeds its ______________, a gain on disposal will occur.

Question 33

Ken's Coffee Shop bought equipment for $48,000 on January 1, 2008.Ken estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used.On January 1, 2009, Ken decides that the business will use the equipment for 5 years.What is the revised depreciation expense for 2009?

A)$16,000
B)$6,400
C)$8,000
D)$12,000

Question 34

On July 1, 2008, Morrow Motel Management purchased a patent for $81,000.The patent had a remaining legal life of 12 years.It is estimated that the patent will have a useful life of 5 years with an estimated salvage value of $6,000.The amount of Amortization Expense recognized for the year 2008 would be

A)$16,200.
B)$7,500.
C)$6,750.
D)$3,375.

Question 35

The book value of a long-term asset is the difference between the

A)replacement cost of the asset and its historical cost.
B)cost of the asset and the amount of depreciation expense for the year.
C)cost of the asset and the accumulated depreciation to date.
D)proceeds received from the sale of the asset and its original cost.

Question 36

Three factors that affect the computation of periodic depreciation expense are (1) _______________, (2) _______________, and (3) _________________.

Question 37

If a long-term asset is retired before it is fully depreciated, and no salvage or scrap value is received,

A)a gain on disposal will be recorded.
B)phantom depreciation must be taken as though the asset were still on the books.
C)a loss on disposal will be recorded.
D)no gain or loss on disposal will be recorded.

Question 38

Goodwill

A)is only recorded when generated internally.
B)can be sold individually.
C)can be identified only with the business as a whole.
D)is the excess of cost over the fair market value of total assets.

Question 39

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

A)Legal Expense.
B)an Intangible Loss account.
C)the Patent account.
D)a revenue expenditure account.

Question 40

A patent should

A)be amortized over a period of 20 years.
B)not be amortized.
C)be amortized over its 20-year legal life or its useful life, whichever is longer.
D)be amortized over its 20-year legal life or its useful life, whichever is shorter.