Question 1

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
-This method minimizes taxable income

Accepted Answer

MACRS (Modified Accelerated Cost Recovery System) is a method of depreciation that is used for tax purposes in the United States. This method allows for the greatest amount of depreciation in the earlier years of an asset's life, which minimizes taxable income.

Question 2

A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-The company financed the equipment purchase with a bank loan. Interest of $3,000 was paid on the loan during the year.

Accepted Answer

The interest paid on the loan is a revenue expenditure because it is a cost incurred during the normal operations of the business and not directly attributable to the acquisition of the equipment.

Question 3

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Loss on disposal of plant asset

Accepted Answer

Loss on disposal of plant assets is reported in the income statement under the "Other Revenue and Expense" section because it is considered an incidental or peripheral activity, not directly related to the primary operations of the business.

Question 4

Match these terms with their correct definition.
-Any expenditure necessary to acquire an asset and to prepare it for use

Accepted Answer

Cost refers to any expenditure necessary to acquire an asset and to prepare it for use.

A) Book value: The value of an asset as shown in the company's accounting records, calculated as the original cost of the asset minus any accumulated depreciation or impairment charges.

C) Depletion: The process of allocating the cost of natural resources, such as oil and gas reserves, over the period of time that the resources are used.

D) Depreciable cost: The part of an asset's cost that can be depreciated over its useful life.

E) Depreciation: The process of allocating the cost of a tangible asset over its useful life.

F) Impairment: A decrease in the value of an asset, such as goodwill or a long-lived asset, that exceeds the expected decline in value over time.

G) Involuntary disposal: The sale, loss, or destruction of an asset that occurs beyond the control of the company, such as due to theft or a natural disaster.

H) Residual value: The estimated value of an asset at the end of its useful life, which can be used to calculate depreciation expense.

Question 5

Match these terms with their correct definition.
-The amount of cash or trade-in consideration that is expected when an asset is retired from service

Accepted Answer

Residual value is the amount of cash or trade-in consideration that is expected when an asset is retired from service.

Answer: A 
 Book value is the value of an asset as it appears on a balance sheet, calculated by subtracting accumulated depreciation from the original cost of the asset.

Answer: B 
 Cost is the original price paid for an asset.

Answer: D 
 Depreciable cost is the cost of an asset that can be depreciated over its useful life.

Answer: E 
 Depreciation is the systematic reduction in the value of an asset over its useful life.

Answer: F 
 Impairment is the decrease in the value of an asset due to unexpected events such as damage or changes in market conditions.

Answer: G 
 Involuntary disposal is the unplanned, forced sale or retirement of an asset due to events such as theft or natural disaster.

Answer: C 
 Depletion is the decrease in the value of a natural resource through use or extraction.

Question 6

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Research and development costs

Accepted Answer

Research and development costs are typically expensed as incurred and reported in the operating section of the income statement, reflecting the costs associated with the research and development activities of a company during a specific period.

Question 7

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
-This method is the easiest to use.

Accepted Answer

If the main concern is simplicity and ease of use, straight-line depreciation is the best choice. It is easy to calculate and understand, with a consistent amount of depreciation being charged each year.

Question 8

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Gain on disposal of plant asset

Accepted Answer

The gain on disposal of a plant asset would be reported in the Other Revenue and Expense section of the Income Statement, which includes non-operating gains and losses. It would not be reported on the Balance Sheet, as it is not an asset or liability account.

Question 9

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
-This method maximizes net income.

Accepted Answer

The straight-line method evenly allocates the cost of the asset over its useful life, resulting in a consistent amount of depreciation each year. This method does not front-load depreciation expense, therefore maximizing net income.

Question 10

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Patents

Accepted Answer

Patents are intangible assets and would be reported on the balance sheet under the category of intangible assets.

Question 11

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Accumulated depreciation

Accepted Answer

Accumulated depreciation is reported on the balance sheet under the property, plant, and equipment section as a deduction from its original cost. It is not reported on the income statement.

Question 12

Match these terms with their correct definition.
-The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

Accepted Answer

Depreciation is the process of allocating the cost of a tangible fixed asset to expense over the asset's useful life.

Answer: B
 Cost refers to the original purchase price of the asset.

Answer: C
 Depletion is the process of allocating the cost of natural resources to expense over the period of extraction or use.

Answer: D
 Depreciable cost refers to the portion of the asset's cost that can be depreciated over its useful life. This excludes any residual value.

Answer: F
 Impairment refers to a permanent decrease in the value of an asset. This may require a write-down of the asset's value on the balance sheet.

Answer: G
 Involuntary disposal refers to the loss of an asset due to factors outside of the company's control, such as theft or natural disaster.

Answer: H
 Residual value refers to the estimated value of an asset at the end of its useful life. This is used in calculating depreciation expense.

Question 13

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Goodwill

Accepted Answer

Goodwill is an intangible asset and will be reported on the balance sheet under the category of intangible assets.

Question 14

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Copyright

Accepted Answer

Copyright is an intangible asset and would be reported on the balance sheet under the Intangible Assets section.

Question 15

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
-This method is used in situations where technological advances are rapid.

Accepted Answer

The double-declining-balance method accelerates depreciation in the early years of an asset's life, which is appropriate for situations where technological advances are rapid and newer assets may quickly become outdated.

Question 16

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Depreciation expense

Accepted Answer

Depreciation expense is a non-cash operating expense and is reported on the income statement under the operating section. It is not reported on the balance sheet as an asset or liability.

Question 17

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Land improvements

Accepted Answer

Land improvements would be reported under the Property, Plant, and Equipment section of Coca-Cola's balance sheet. This section includes all long-term assets that are used in the production of goods or services. Land improvements are physical enhancements made to the company's land, such as constructing a building or installing a fence, and therefore they would fall under this category.

Question 18

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Building

Accepted Answer

Buildings are considered a part of Property, Plant, and Equipment, which is reported under the Balance Sheet.

Question 19

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.)
-This method is the best for management bonus plans.

Accepted Answer

The straight-line method of depreciation is best for management bonus plans because it results in a consistent expense amount each year. This predictability helps in planning and budgeting for bonuses, as the depreciation expense does not fluctuate dramatically from year to year.

Question 20

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.)
-Amortization expense

Accepted Answer

Amortization expense is reported in the Income Statement in the Operating Section as it relates to the cost allocation of intangible assets. It is not reported on the Balance Sheet.

Quiz 7: Operating Assets

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method minimizes taxable income

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Loss on disposal of plant asset

Match these terms with their correct definition. -Any expenditure necessary to acquire an asset and to prepare it for use

Match these terms with their correct definition. -The amount of cash or trade-in consideration that is expected when an asset is retired from service

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Research and development costs

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method is the easiest to use.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Gain on disposal of plant asset

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method maximizes net income.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Patents

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Accumulated depreciation

Match these terms with their correct definition. -The process of allocating the cost of a tangible fixed asset to expense over the asset's useful life

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Goodwill

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Copyright

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method is used in situations where technological advances are rapid.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Depreciation expense

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Land improvements

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Building

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method is the best for management bonus plans.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Amortization expense