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chapter 8 acct
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Questions in this quiz (40)
1Amortization:
- AIs the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.
- BIs the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use.
- CIs the process of allocating the cost of natural resources to periods when they are consumed.
- DIs an accelerated form of expensing an asset's cost.
- EIs the same as depletion.
2The total cost of an asset less its accumulated depreciation is called:
- AHistorical cost
- BBook value
- CPresent value
- DCurrent (market) value
- EReplacement cost
3Another name for a capital expenditure is:
- ARevenue expenditure
- BAsset expenditure
- CLong-term expenditure
- DContributed capital expenditure
- EBalance sheet expenditure
4Depletion:
- AIs the process of allocating the cost of natural resources to periods in which they are consumed.
- BIs also called depreciation.
- CIs also called amortization.
- DIs an unrealized expense reported in equity.
- EIs the process of allocating the cost of intangibles to periods in which they are used.
5Depreciation is the process of allocating the cost of a plant asset to an expense account in the accounting periods benefiting from its use.
- ATrue
- BFalse
6A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called:
- ABook value depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
7Modified accelerated cost recovery system (MACRS) depreciation.
- AAccelerated depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
8Plant assets are used in everyday operations of the business and have useful lives that extend over more than one accounting period.
- ATrue
- BFalse
9A copyright:
- AGives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
- BIs an exclusive right granted to its owner to manufacture and sell a device or to use a process for 17 years.
- CIs an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years.
- DIs the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately.
- EGives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years.
10Intangible assets are certain nonphysical assets used in operations that confer on their owners long-term rights, privileges, or competitive advantage.
- ATrue
- BFalse
11A patent:
- AGives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
- BIs an exclusive right granted to its owner to manufacture and sell a device or to use a process for 20 years.
- CIs an exclusive right granted to its owner to manufacture and sell a device or to use a process for 50 years.
- DIs the amount by which the value of a company exceeds the fair market value of a company's net assets if purchased separately.
- EGives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years.
12Total asset turnover is used to evaluate:
- AThe efficiency of management's use of assets to generate sales.
- BThe need for asset replacement.
- CThe number of times operating assets were sold during the year.
- DThe cash flows used to acquire assets.
- EThe relation between asset cost and book value.
13A method that charges the same amount of expense over each period of the asset's useful life is called:
- AAccelerated depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
14Cardco Inc. has an annual accounting period that ends on December 31. During the current year a depreciable asset that cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a five-year life. What is the total depreciation expense for the current year?
- A$1,900.00
- B$7,600.00
- C$2,533.33
- D$2,800.00
- E$3,166.67
15A company purchased property for a building site. The costs associated with the property were:
Purchase price $175,000
real estate commissions $15,000
legal fees $800
expenses of clearing the land $2,000
expenses to remove old building $1,000
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?- A$175,800 to Land; $18,800 to Building
- B$190,000 to Land; $3,800 to Building
- C$190,800 to Land; $1,000 to Building
- D$192,800 to Land; $0 to Building
- E$193,800 to Land; $0 to Building
16A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize:
- AA loss of $25,000.
- BA gain of $25,000
- CA loss of $65,000.
- DA gain of $65,000.
- EA gain of $90,000.
17Gain or loss on the disposal of an asset is determined by comparing "value given" (book value) to "value received."
- ATrue
- BFalse
18A method that charges the same amount of expense over each period of the asset's useful life is called:
- AAccelerated depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
19A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?
- A500
- B800
- C864
- D1000
- E1080
20The total depreciation expense over an asset's useful life will be identical across all methods of depreciation.
- ATrue
- BFalse
21The formula for computing annual straight-line depreciation is:
- ADepreciable cost divided by useful life in units.
- BCost plus salvage value divided by the useful life in years.
- CCost less salvage value divided by the useful life in years.
- DCost divided by useful life in years.
- ECost divided by useful life in units.
22An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.
- ATrue
- BFalse
23A machine originally had an estimated useful life of 5 years, but after 3 complete years it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:
- A2 years
- B5 years
- C7 years
- D8 years
- E10 years
24Once the estimated depreciation expense for an asset is calculated:
- AIt cannot be changed due to the historical cost principle.
- BIt may be revised based on new information.
- CAny changes are accumulated and recognized when the asset is sold.
- DThe estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.
- EIt cannot be changed due to the consistency principle.
25Another name for a capital expenditure is:
- ARevenue expenditure
- BAsset expenditure
- CLong-term expenditure
- DContributed capital expenditure
- EBalance sheet expenditure
26A company's annual accounting period ends on December 31. During the current year, a depreciable asset that cost $24,000 was purchased on October 1. The asset has a $1,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a six-year life. What is the total depreciation expense for the current year?
- A$3,833.33
- B$958.33
- C$4,000.00
- D$1,000.00
- E$1,041.67
27When originally purchased, a vehicle had an estimated useful life of eight years. The vehicle cost $23,000 and its estimated salvage value is $1,500. After four years of straight-line depreciation, the asset's total estimated useful life was revised from eight years to six years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:
- A$5,375.00
- B$2,687.50
- C$5,543.75
- D$10,750.00
- E$2,856.25
28A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:
- A$0.75
- B$0.625
- C$0.875
- D$6.00
- E$8.00
29A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover is equal to:
- A.82
- B.90
- C1.09
- D1.11
- E1.26
30Most companies use accelerated depreciation for tax purposes as it reduces taxable income due to higher depreciation expense in the early years of an asset's life.
- ATrue
- BFalse
31A company purchased a rope-braiding machine for $190,000. The machine has a useful life of eight years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?
- A$25,200
- B$26,160
- C$26,660
- D$27,613
- E$53,160
32A company paid $150,000, plus a 6% commission, and $4,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?
- ALand $75,000; Land Improvements, $30,000; Building, $45,000
- BLand $75,000; Land Improvements, $30,800; Building, $46,200
- CLand $81,500; Land Improvements, $32,600; Building, $48,900
- DLand $79,500; Land Improvements, $32,600; Building, $47,700
- ELand $87,500; Land Improvements; $35,000; Building; $52,500
33A company discarded a display case that it had originally purchased for $8,000. The case had $7,200 worth of accumulated depreciation. The company should recognize a(n):
- A$0 gain or loss
- B$800 loss
- C$800 gain
- D$8,000 loss
- E$7,200 loss
34Revenue expenditures:
- AAre additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
- BAre known as balance sheet expenditures.
- CExtend the asset's useful life.
- DSubstantially benefit future periods.
- EAre debited to asset accounts.
35A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a:
- A$0 gain or loss
- B$20,000 gain
- C$20,000 loss
- D$40,000 loss
- E$60,000 gain
36A company purchased a mineral deposit for $800,000. It expects this property to produce 1,200,000 tons of ore and to have a salvage value of $50,000. In the current year, the company mined and sold 90,000 tons of ore. Its depletion expense for the current period is equal to:
- A$15,000
- B$60,000
- C$150,000
- D$56,250
- E$139,500
37A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called:
- ABook value depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
38A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1, 2010. It has an estimated useful life of five years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2010?
- A$1,000
- B$1,333
- C$1,533
- D$4,000
- E$4,600
39A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:
- AAccelerated depreciation.
- BDeclining-balance depreciation.
- CStraight-line depreciation.
- DUnits-of-production depreciation.
- EModified accelerated cost recovery system (MACRS) depreciation.
40A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the straight-line method of depreciation, what is the book value at the end of the second year?
- A$166,667.00
- B$88,977.80
- C$96,416.25
- D$168,900.00
- E$137,800.00
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- Accounting Quiz on chapter 8 acct, created by Rachel Cascada on 27/03/2018.
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- Rachel Cascada
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