Question 1

Equipment with a cost of $22,000 and accumulated depreciation of $15,000 was retired with a gain of $1,000.The cash received from the disposition of equipment is
A) $7,000.
B) $8,000.
C) $6,000.
D) $14,000.

Accepted Answer

The book value of the equipment is calculated as the cost minus accumulated depreciation, which is $22,000 - $15,000 = $7,000. Since there was a gain of $1,000 on the disposal, this means the cash received was $1,000 more than the book value, making it $7,000 + $1,000 = $8,000.

Question 2

The balance in accumulated depreciation on January 1 and December 31 is $15,000 and $18,000, respectively, during a year in which no assets were disposed.Depreciation expense during the year is
A) $18,000.
B) $15,000.
C) $3,000.
D) $33,000.

Accepted Answer

Depreciation expense for the year is the difference between the ending and beginning balances of accumulated depreciation when no assets are disposed of. Thus, $18,000 - $15,000 = $3,000.

Question 3

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000.Data from the comparative balance sheets are:    Equipment purchased during 2009 cost
A) $120,000.
B) $110,000.
C) $145,000.
D) $10,000.

Accepted Answer

A

Question 4

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.
-Using the equity method the market price of the investment increases above its cost.
A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Accepted Answer

Under the equity method, increases in the market price of the investment above its cost do not affect the financial statements directly. The equity method recognizes income from the investee and adjusts the investment's carrying amount accordingly, but unrealized holding gains or losses (like an increase in market price) are not recognized in the financial statements.

Question 5

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.
-Using the cost method the market price of the investment increases above its cost.
A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Accepted Answer

Under the cost method, increases in the market price of equity securities above their cost are not recognized in the financial statements. Therefore, there is no impact on the balance sheet or income statement until the securities are sold.

Question 6

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.
-Using the equity method, the investee company recognizes a net loss for the year.
A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Accepted Answer

The answer of Each transaction listed in below relates to...

Question 7

Each transaction listed in below relates to a long-term investment is equity securities.Select the letters of the accounting effects (a through h) and place them in the space provided.Transactions may have more than one answer.
-An investment in a 40%-owned subsidiary is sold for more than its carrying value.
A) Increase assets
B) Increase shareholders' equity (Contributed Capital)
C) Increase shareholders' equity (Retained Earnings)
D) Decrease liabilities
E) Decrease shareholders' equity (Retained Earnings)
F) Decrease assets
G) Increase liabilities
H) The event is not communicated on financial statements.

Accepted Answer

The answer of Each transaction listed in below relates to...

Question 8

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Depreciation expense
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Depreciation expense is recorded on the income statement as it reflects the cost allocated for the use of fixed assets over a specific period, impacting the company's net income.

Question 9

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Betterments
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Betterments are improvements made to property, plant, and equipment (PPE) to extend their useful life, increase their capacity, or improve their efficiency. Therefore, they are reported on the balance sheet under property, plant, and equipment.

Question 10

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Oil reserve
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

The answer of For each account listed in below, identify...

Question 11

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Land
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Land is considered a tangible asset and is reported under property, plant, and equipment on a company's balance sheet.

Question 12

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Organizational costs
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

The answer of For each account listed in below, identify...

Question 13

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Amortization expense
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Amortization expense is reported on the income statement as it reflects the cost of using intangible assets over their useful life.

Question 14

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Gain on sale of patent
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Gain on sale of patent would appear on the income statement as it reflects a transaction that impacts the company's profitability during the period in which the sale occurred, rather than representing an asset owned by the company.

Question 15

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Copyright
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Copyrights are considered intangible assets because they represent a legal right to use, produce, and sell creative works, and they do not have a physical form. They are reported on the balance sheet under intangible assets.

Question 16

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Patents
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Patents are considered intangible assets because they represent a legal right to exclude others from duplicating a product or process. They do not have a physical presence like property, plant, and equipment, but they do have value for a company and are thus listed on the balance sheet under intangible assets.

Question 17

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all.
-Goodwill
A) Balance sheet-property, plant, and equipment
B) Balance sheet-intangible assets
C) Balance sheet-other
D) Income statement

Accepted Answer

Goodwill is an intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets. Therefore, it is reported on the balance sheet under intangible assets.

Question 18

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.
-Freight costs on production equipment in transit
A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Accepted Answer

Freight costs on production equipment in transit are capitalized as part of the cost of the new asset because they are necessary expenses to bring the asset to its intended use.

Question 19

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.
-Sales tax on equipment purchase
A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Accepted Answer

Sales tax on equipment purchase is capitalized as part of the cost of the new asset because it is a necessary and direct cost associated with acquiring the asset and preparing it for its intended use.

Question 20

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all.
-Damaged during installation and repair costs
A) Expensed immediately
B) Capitalized as part of the cost of the new asset

Accepted Answer

Damaged during installation and repair costs are typically expensed immediately because they do not extend the useful life of the asset but are considered incidental costs associated with getting the asset ready for its intended use.

Quiz 7: Long-Term Producing Assets and Investments in Equity Securities

Equipment with a cost of $22,000 and accumulated depreciation of $15,000 was retired with a gain of $1,000.The cash received from the disposition of equipment is

The balance in accumulated depreciation on January 1 and December 31 is $15,000 and $18,000, respectively, during a year in which no assets were disposed.Depreciation expense during the year is

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000.Data from the comparative balance sheets are: Equipment purchased during 2009 cost

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Depreciation expense

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Betterments

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Oil reserve

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Land

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Organizational costs

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Amortization expense

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Gain on sale of patent

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Copyright

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Patents

For each account listed in below, identify which reporting section (a through d) each would appear on a company's financial statements.You may use each letter more than once or not at all. -Goodwill

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all. -Freight costs on production equipment in transit

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all. -Sales tax on equipment purchase

For each transaction numbered 1 through 6 below, identify which accounting treatment-capitalized or expensed-should be used to properly account for the transactions.You may use each letter more than once or not at all. -Damaged during installation and repair costs