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| 1 | |
Land with a price of $60,000 is acquired for future use in operations. Accrued taxes of $1,500 on the parcel were paid to clear the title. Legal fees to complete the purchase total $2,500. A small building on the parcel will not be used and is demolished at a net cost of $4,000. What will be the recorded cost of the land? |
| | A) | $64,000 |
| | B) | $68,000 |
| | C) | $65,000 |
| | D) | $67,000 |
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| 2 | |
A company purchased for cash a machine with a list price of $90,000. The machine was shipped FOB shipping point at a cost of $5,000. Installation and test runs of the machine cost $3,000. The recorded acquisition cost of the machine is which amount? |
| | A) | $98,000 |
| | B) | $128,000 |
| | C) | $90,000 |
| | D) | $93,000 |
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| 3 | |
A machine is purchased for $5,000 plus additional freight costs of $500. Major modifications and installation costs will be $1,200. What is the amount of the recorded cost this asset? |
| | A) | $5,000 |
| | B) | $6,700 |
| | C) | $6,200 |
| | D) | $5,500 |
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| 4 | |
A machine costing $50,000 was purchased with credit terms of 2/10, n/ 30. The freight charges were $800 and the assembly costs were $600. What will be the total amount debited to the Machine account when it is placed into service, assuming the invoice was paid within 10 days of the invoice date? |
| | A) | $50,800 |
| | B) | $50,400 |
| | C) | $51,400 |
| | D) | $51,800 |
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| 5 | |
A printing press was purchased for $100,000, with credit terms of 2/10, n/30. Freight charges were $2,000, installation charges were $1,000, and insurance while in transit was $150. Paper valued at $200 was used to check font sizes, alignment, and print quality of the new printing press. An electrician charged $1,200 to make the proper electrical connections to the press. What is the total recorded cost of the printing press, assuming the invoice was paid within the discount period? |
| | A) | $98,000 |
| | B) | $102,250 |
| | C) | $102,550 |
| | D) | $101,050 |
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| 6 | |
A business acquired land and two buildings for a single, lump-sum purchase price of $240,000. The land was assessed for tax purposes at $50,000 and the buildings at $30,000 and $20,000, respectively, for a total assessed value of $100,000. Which of the following is the recorded cost of the land? |
| | A) | $ 50,000 |
| | B) | $120,000 |
| | C) | $ 60,000 |
| | D) | $190,000 |
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| 7 | |
A business acquired land and two buildings for a lump-sum purchase price of $140,000. The land was assessed for tax purposes at $40,000 and the buildings at $35,000 and $25,000, respectively, for a total assessed value of $100,000. The land would be recorded at which cost? |
| | A) | $ 50,000 |
| | B) | $ 55,000 |
| | C) | $ 56,000 |
| | D) | $ 70,000 |
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| 8 | |
A business acquired land and three buildings for a lump-sum purchase price of $1,090,000. The assessed value of the items was $410,000, $80,100, $149,900, and $250,000, respectively, for a total assessed value of $890,000. What is the recorded cost of the building with the lowest assessed value? |
| | A) | $80,100 |
| | B) | $98,100 |
| | C) | $109,000 |
| | D) | $96,400 |
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| 9 | |
The cost of providing a parking lot for employee parking would be charged to which account? |
| | A) | Land |
| | B) | Buildings |
| | C) | Equipment |
| | D) | Land Improvements |
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| 10 | |
Small, ordinary repairs made to keep a truck running over its useful life have been debited to the Vehicles account. As a result of this, which of the following occurred? |
| | A) | The balance in the Vehicles account was correctly stated. |
| | B) | The balance in the Vehicles account was overstated. |
| | C) | The expenses for the period were overstated. |
| | D) | The net income for the period was understated. |
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| 11 | |
A material expenditure that will benefit only the current period is called which of the following? |
| | A) | Capital expenditure |
| | B) | Liability |
| | C) | Revenue expenditure |
| | D) | Tax expenditure |
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| 12 | |
Which of the following statements is false? |
| | A) | Depreciation is not a process of valuation. |
| | B) | Book value is an asset's historical cost minus the related accumulated depreciation. |
| | C) | Depreciation is a noncash expense. |
| | D) | The term obsolescencerefers to the physical deterioration of an asset. |
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| 13 | |
Which of the following assets are not depreciated? |
| | A) | Factory buildings |
| | B) | Office equipment |
| | C) | Land |
| | D) | Delivery equipment |
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| 14 | |
Which term is used to refer to a plant asset that is no longer useful in producing goods or services because of factors other than physical deterioration? |
| | A) | Obsolescence. |
| | B) | Negative cash flow. |
| | C) | Inadequacy. |
| | D) | Amortization. |
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| 15 | |
What must be known or estimated in order to calculate depreciation? |
| | A) | The estimated useful life of the asset to the company |
| | B) | The acquisition cost of the asset. |
| | C) | The estimated residual value of the asset. |
| | D) | All of the above |
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| 16 | |
What is the annual straight-line depreciation for an asset that cost $34,600, has an estimated service life of 8 years, and an estimated salvage value of $1,400? |
| | A) | $4,150 |
| | B) | $1,450 |
| | C) | $4,325 |
| | D) | $4,500 |
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| 17 | |
An asset cost $50,000, has an estimated salvage value of $1,500, and an estimated useful life of 8 years. What is the double-declining-balance depreciation rate? |
| | A) | 20.0% |
| | B) | 25.0% |
| | C) | 16.0% |
| | D) | 32.5% |
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| 18 | |
On April 28th of this year, an asset is purchased and placed into service for a cost of $37,500. The estimated service life of the asset is 6 years and the estimated salvage value is $1,800. What is the amount of the first-year depreciation, using straight-line depreciation, when the half-year convention is applied? |
| | A) | $2,975 |
| | B) | $3,125 |
| | C) | $3,275 |
| | D) | $3,471 |
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| 19 | |
An asset having a four-year service life and a salvage value of $5,000 was acquired for $45,000 cash on June 20. Ignore the half-year convention and calculate the depreciation expense at the end of the first year, December 31? |
| | A) | $10,000, under the straight-line method |
| | B) | $22,500, under the double-declining-balance method |
| | C) | $7,000, under the straight-line method |
| | D) | $11,250, under the double-declining-balance method |
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| 20 | |
An asset with an estimated 5-year useful life and an estimated residual value of $5,000 was purchased for $20,000 cash on the first day of the fiscal year. Use the double-declining-balance method and calculate the depreciation expense for the second fiscal year? |
| | A) | $3,600 |
| | B) | $8,000 |
| | C) | $4,800 |
| | D) | $4,000 |
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| 21 | |
An asset with an estimated 5-year useful life and an estimated residual value of $5,000 was purchased for $40,000 cash on the first day of the fiscal year. Use the double-declining-balance method and calculate the depreciation expense for the fifth fiscal year? |
| | A) | $207.36 |
| | B) | $2,073.60 |
| | C) | $184.00 |
| | D) | $00.00 |
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| 22 | |
Production equipment that cost $20,000, with a salvage value of $5,000 and an estimated service life of five years, was purchased on the 10th day of the first month of the fiscal year. What will be the depreciation expense for the second year using the double-declining-balance method? |
| | A) | $4,000 |
| | B) | $8,000 |
| | C) | $4,800 |
| | D) | $4,400 |
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| 23 | |
A fixed asset that cost $6,000 and has an estimated salvage value of $400, had been depreciated a total of $5,000, under the double-declining-balance method of calculating depreciation expense. What will be the maximum amount of depreciation that can be recognized at the end of this year? |
| | A) | $600 |
| | B) | $1,000 |
| | C) | $400 |
| | D) | $200 |
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| 24 | |
A fixed asset that cost $6,000 and has an estimated salvage value of $400, and an estimate useful life of 5 years. Use the 150 percent declining-balance method of calculating depreciation expense and calculate the amount of depreciation recognized at the end of the first year. |
| | A) | $1,620 |
| | B) | $1,800 |
| | C) | $2,400 |
| | D) | $1,710 |
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| 25 | |
A fixed asset that cost $6,000 and has an estimated salvage value of $400, and an estimate useful life of 5 years. Use the 150 percent declining-balance method of calculating depreciation expense and calculate the book value at the end of the third year. |
| | A) | $1,800 |
| | B) | $1,260 |
| | C) | $2,058 |
| | D) | $882 |
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| 26 | |
Failing to record the year-end adjustment for depreciation will result in which of the following? |
| | A) | An overstatement of income and an understatement of owners' equity |
| | B) | An overstatement of income and an understatement of assets |
| | C) | An overstatement of income and an overstatement of assets |
| | D) | An understatement of income and an overstatement of owners' equity |
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| 27 | |
An asset being depreciated by the straight-line method has a current book value of $10,000, a remaining useful life of two years, and no salvage value. New information indicates a remaining useful life of four years and no change in salvage value. What should be the amount of annual depreciation expense for each of the next four years? |
| | A) | $5,000 |
| | B) | $7,500 |
| | C) | $2,000 |
| | D) | $2,500 |
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| 28 | |
Recording, in error, the year-end adjustment for depreciation twice will result in which of the following? |
| | A) | An overstatement of income and an understatement of owners' equity |
| | B) | An overstatement of income and an understatement of assets |
| | C) | An overstatement of income and an overstatement of assets |
| | D) | An understatement of income and an understatement of owners' equity |
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| 29 | |
The term used to describe the situation where an asset is written down to its net realizable value because technology renders equipment obsolete and worth far less than its cost, is called which of the following? |
| | A) | Impairment of plant assets |
| | B) | Depletion |
| | C) | Amortization |
| | D) | Accelerated depreciation |
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| 30 | |
What is the depreciation method called in which the actual use of the asset is the determinate factor in the deterioration and reduced capacity of the asset to provide services? |
| | A) | Units-of-output method |
| | B) | Double-declining-balance method |
| | C) | Straight-line method |
| | D) | Accelerated Cost Recovery System method |
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| 31 | |
Publicly traded companies can use a depreciation method that does not conform to generally accepted accounting principles but is based on a declining-balance method. What is the name of this accelerated depreciation method? |
| | A) | Asset Cost Recovery Statement |
| | B) | Asset Cost Recognition System |
| | C) | Modified Accelerated Cost Recovery System |
| | D) | Accelerated Cost Recovery System |
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| 32 | |
Which of the following depreciation methods is rarely used today? |
| | A) | Units-of-output |
| | B) | MACRS |
| | C) | Sum-of-the-years' digits |
| | D) | Double-declining-balance |
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| 33 | |
Consider the following schedule:
| Depreciation Method | Book Value at End of Useful Life | | A | Straight-line | Equal to salvage value | | B | Sum-of-the-years' digits | Equal to salvage value | | C | Declining-balance | Less than salvage value | | D | Units-of-output | Equal to salvage value |
Which line of the schedule is incorrect? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 34 | |
On June 28, 2005, a business sold for $1,500 a plant asset that cost $5,000. The asset had a 5-year useful life, no salvage value, and had been used by the business since January 1, 2002. Straight-line depreciation was used. The fiscal year ends on December 31. What was the result of selling the plant asset? |
| | A) | No gain or loss on the disposal of plant assets |
| | B) | A $1,000 gain on the disposal of plant assets |
| | C) | A $500 loss on the disposal of plant assets |
| | D) | A $500 unrecognized gain on the sale of a plant asset. |
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| 35 | |
On January 1, a business exchanged a plant asset with a cost of $18,000 and accumulated depreciation of $16,500 for a similar asset that had a list price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset and paid the balance in cash. What was the result of the exchange? |
| | A) | A $600 gain on the disposal of a plant asset. |
| | B) | A $1,000 unrecognized gain on the exchange of a plant asset. |
| | C) | A cost basis of $22,400 for the new plant asset. |
| | D) | A cost basis of $23,600 for the new plant asset. |
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| 36 | |
Consider the following schedule, and assume asset exchanges are for similar assets:
| Asset Disposal | Income Tax Reporting | | A | Loss on discard | Loss recognized | | B | Loss on sale | Loss recognized | | C | Loss on exchange | Loss recognized | | D | Gain on sale | Gain recognized |
Which line of the schedule is not the proper income tax reporting of a gain or loss on the disposal of the asset? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 37 | |
Which of the following items is an intangible asset? |
| | A) | Patents |
| | B) | Copyrights |
| | C) | Franchises |
| | D) | All of the above |
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| 38 | |
Your company currently is generating normal earnings that are equal to a 12% return on net identifiable assets of $450,000. A comparable company is generating normal earnings that are equal to 10% return on net identifiable assets of $450,000. What is the estimated goodwill of your company, when compared to the other company? |
| | A) | $90,000 |
| | B) | $45,000 |
| | C) | $9,000 |
| | D) | $15,000 |
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| 39 | |
Which is not true of the accounting procedures or the accounting rules applied to intangible assets? |
| | A) | Patents have a legal life of 20 years. |
| | B) | The maximum length of amortization should not exceed the period of expected revenue generation. |
| | C) | Generally, the straight-line method of amortization is used on intangible assets. |
| | D) | Accumulated amortization accounts are maintained for intangibles. |
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| 40 | |
Which of the following statements is false? |
| | A) | The costs of developing a trade name are usually treated as an expense. |
| | B) | The cost of purchasing a copyright seldom warrants being capitalized. |
| | C) | If the cost of a franchise is material, the cost usually amortized over the life of the franchise. |
| | D) | Some types of intangible assets are grouped in the balance sheet as Deferred Charges. |
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| 41 | |
Consider the following:
| Line | Company | R&D Costs | Net Sales | | A | Mankamp Chemical | $2,450,000 | $45,000,000 | | B | Edling Computers | $1,450,000 | $36,000,000 | | C | Warren Pharmaceuticals | $ 900,000 | $12,800,000 | | D | PKL Software | $1,300,000 | $26,500,000 |
Which company has the highest Research and Development (R&D) percentage? |
| | A) | Mankamp Chemical |
| | B) | Edling Computers |
| | C) | Warren Pharmaceuticals |
| | D) | PKL Software |
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| 42 | |
The Baker Mining Company acquired an iron ore deposit for $2,000,000. The company's geologist estimated the deposit to contain 1,500,000 tons of iron ore. At the end of the first year, 60,000 tons had been extracted. The end-of-year journal entry to record the depletion of the iron ore would include which of the following? |
| | A) | A credit to Iron Ore Inventory of $45,000 |
| | B) | A credit to Accumulated Depletion of $80,000 |
| | C) | A debit to Iron Ore Inventory of $50,000 |
| | D) | None the above, until all of the ore is extracted |
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| 43 | |
A mining company estimates that it will remove the iron ore deposits within 5 years or sooner, if the size of the ore deposit has been correctly estimated. The company will abandon all of its under-ground extracting equipment when the ore deposit is depleted. The extracting equipment has a normal life of 8 years. This extracting equipment should be depreciated for which period of time? |
| | A) | Over the life of the natural resource if shorter than the normal useful life of the equipment |
| | B) | Eight (8) years |
| | C) | Five (5) years |
| | D) | None of the above |
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| 44 | |
Which of the following are investing activities? |
| | A) | Selling a plant asset |
| | B) | Exchanging an old asset and cash for a new plant asset |
| | C) | Depreciating or amortizing an asset |
| | D) | Both (A) and (B) |
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