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21.
22.
23.
24.
25.
26.
The cost of land typically includes the purchase price and all of the
following costs except
a.
b.
c.
d.
27.
d. the intention of management for the property when the building was acquired.
28.
The debit for a sales tax properly levied and paid on the purchase of
machinery preferably would be a charge to
a.
b.
c.
d.
29.
30.
current assets.
land improvements.
land.
property and equipment.
31.
32.
33.
34.
35.
36.
the asset is substantially complete and ready for its intended use.
no further interest cost is being incurred.
the asset is abandoned, sold, or fully depreciated.
the activities that are necessary to get the asset ready for its intended use have
begun.
37.
38.
39.
8/8.
8/12.
9/12.
11/12.
When funds are borrowed to pay for construction of assets that qualify
for capitalization of interest, the excess funds not needed to pay for
construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be
a. offset against interest cost incurred during construction.
b. used to reduce the cost of assets being constructed.
40.
41.
42.
43.
45.
a. the fair value of the asset given up, and a gain or loss is recognized.
b. the fair value of the asset given up, and a gain but not a loss may be recognized.
c. the fair value of the asset received if it is equally reliable as the fair value of the asset
given up.
d. either the fair value of the asset given up or the asset received, whichever one
results in the largest gain (smallest loss) to the company.
47.
48.
49.
51.
When a closely held corporation issues preferred stock for land, the
land should be recorded at the
a.
b.
c.
d.
50.
52.
53.
c. one dollar (since the site cost nothing but should be included in the balance sheet).
d. the value assigned to it by the company's directors.
54.
55.
56.
58.
expensed.
debited to accumulated depreciation.
capitalized in the machine account.
allocated between accumulated depreciation and the machine account.
57.
59.
60.
When a plant asset is disposed of, a gain or loss may result. The gain
or loss would be classified as an extraordinary item on the income
statement if it resulted from
a. an involuntary conversion and the conditions of the disposition are unusual and
infrequent in nature.
b. a sale prior to the completion of the estimated useful life of the asset.
c. the sale of a fully depreciated asset.
d. an abandonment of the asset.
61.
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21.
22.
23.
24.
25.
26.
Ans
d.
b
d
c
c
c
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27.
28.
29.
30.
31.
32.
Ans
d.
a
b
b
d
d
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33.
34.
35.
36.
37.
38.
Ans
d.
a
c
a
b
b
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39.
40.
41.
42.
43.
44.
Ans
d.
d
c
a
c
a
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45.
46.
47.
48.
49.
50.
Ans
a.
b
c
d
d
a
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51.
52.
53.
54.
55.
56.
Ans
c.
b
b
d
c
d
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57.
58.
59.
60.
61.
62.
Ans
a.
c
d
a
d
c
CHAPTER 11
21.
22.
23.
Depreciation accounting
a.
b.
c.
d.
provides funds.
funds replacements.
retains funds.
all of these.
24.
25.
The major difference between the service life of an asset and its
physical life is that
a. service life refers to the time an asset will be used by a company and physical life
refers to how long the asset will last.
b. physical life is the life of an asset without consideration of salvage value and service
life requires the use of salvage value.
c. physical life is always longer than service life.
d. service life refers to the length of time an asset is of use to its original owner, while
physical life refers to how long the asset will be used by all owners.
26.
27.
28.
29.
30.
obsolescence.
supersession.
inadequacy.
all of these.
Which of the following is not one of the basic questions that must be
answered before the amount of depreciation charge can be computed?
a.
b.
c.
d.
the total amount to be charged (debited) to expense over an asset's useful life.
the cost of the asset less the related depreciation recorded to date.
the estimated market value of the asset at the end of its useful life.
the acquisition cost of the asset.
31.
32.
33.
37.
36.
35.
be constant.
vary with unit sales.
vary with sales revenue.
vary with production.
34.
units-of-production.
straight-line.
sum-of-the-years'-digits.
declining-balance.
38.
39.
40.
Watkins Truck Rental uses the group depreciation method for its fleet of
trucks. When it retires one of its trucks and receives cash from a
salvage company, the carrying value of property, plant, and equipment
will be decreased by the
a.
b.
c.
d.
company should have been using one of the accelerated methods of depreciation.
estimated average life of the machinery is less than the actual average useful life.
estimated average life of the machinery is greater than the actual average useful life.
company has been retiring fully depreciated machinery that should have remained in
service.
41.
42.
43.
44.
45.
46.
47.
48.
49.
Depletion expense
a.
b.
c.
d.
50.
51.
52.
53.
54.
55.
56.
57.
Cost of asset
Property recovery class
Half-year convention
Salvage value
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21.
22.
23.
24.
25.
26.
Ans
d.
b
c
b
a
a
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27.
28.
29.
30.
31.
32.
Ans
d.
d
d
a
a
d
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33.
34.
35.
36.
37.
38.
Ans
d.
c
c
b
b
d
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39.
40.
41.
42.
43.
44.
Ans
c.
c
b
b
c
b
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45.
46.
47.
48.
49.
50.
Ans
b.
d
d
d
a
d
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51.
52.
53.
54.
55.
56.
Ans
d.
c
b
b
d
d
CHAPTER 12
21.
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57.
*58
*59
*60
Ans
d.
c
d
c
22.
23.
24.
purchase price.
legal fees.
other incidental expenses.
all of these are included.
29.
Sum-of-the-years'-digits
Straight-line
Units of production
Double-declining-balance
28.
27.
capitalized.
capitalized if they have an indefinite life.
expensed as incurred.
expensed only if they have a limited life.
26.
Physical existence.
Short-lived.
Result in future benefits.
Expensed over current and/or future years.
25.
Physical existence.
Claim to a specific amount of cash in the future.
Long-lived.
Held for resale.
b. limited-life or indefinite-life.
c. specifically identifiable or goodwill-type.
d. legally restricted or goodwill-type.
30.
31.
recoverability.
amortization.
impairment.
estimated useful life.
32.
33.
The cost of purchasing patent rights for a product that might otherwise
have seriously competed with one of the purchaser's patented
products should be
a.
b.
c.
d.
34.
35.
Wriglee, Inc. went to court this year and successfully defended its
patent from infringe-ment by a competitor. The cost of this defense
should be charged to
a.
b.
c.
d.
36.
37.
Attorney fees.
Consulting fees.
Research and development fees.
Design costs.
41.
40.
Copyrights
Customer lists
Perpetual franchises
All of these intangible assets should be amortized.
39.
Trade name
Research and development costs
Franchise
Copyrights
38.
other assets.
indirect costs.
goodwill.
direct costs.
42.
43.
44.
A brand name.
A patent.
A customer list.
All of the above.
Patent.
Copyright.
Goodwill.
Brand Name.
45.
46.
a gain.
part of current income in the year of combination.
a deferred credit and amortize it.
paid-in capital.
47.
48.
49.
50.
Recoverability Test
Yes
Yes
No
No
52.
51.
53.
54.
Which of the
development?
a.
b.
c.
d.
56.
be
considered
research
and
58.
would
57.
following
59.
60.
61.
62.
accounted for and reported like the operating losses of any other business.
written off directly against retained earnings.
capitalized as a deferred charge and amortized over five years.
capitalized as an intangible asset and amortized over a period not to exceed 20
years.
63. The costs of organizing a corporation include legal fees, fees paid to
the state of incorporation, fees paid to promoters, and the costs of
meetings for organizing the promoters. These costs are said to benefit
the corporation for the entity's entire life. These costs should be
a.
b.
c.
d.
Goodwill
Franchise
Patent
Trademark
66. The notes to the financial statements should include information about
acquired intangible assets, and aggregate amortization expense for
how many succeeding years?
a.
b.
c.
d.
6
5
4
3
67. Which of the following should be reported under the Other Expenses
and Losses section of the income statement?
a.
b.
c.
d.
Amortization expense.
Impairment losses for intangible assets other than goodwill.
Impairment losses on goodwill.
None of the above.
Amortization expense.
Impairment losses for intangible assets.
Research and development costs.
None of the above.
Evaluation of alternatives.
Coding.
Training.
Maintenance.
Designing.
Coding.
Testing.
None of the above.
a.
b.
c.
d.
percent-of-revenue approach.
percent-of-completion approach.
straight-line approach.
accelerated amortization approach.
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21.
22.
23.
24.
25.
26.
27.
28.
Ans
b.
c
a
c
a
b
d
d
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29.
30.
31.
32.
33.
34.
35.
36.
Ans
b.
c
a
b
d
c
d
b
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37.
38.
39.
40.
41.
42.
43.
44.
Ans
c.
a
c
c
b
d
c
b
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45.
46.
47.
48.
49.
50.
51.
52.
Ans
a.
d
a
b
d
c
b
a
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53.
54.
55.
56.
57.
58.
59.
60.
Ans
d.
d
d
d
b
d
d
c
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61.
62.
63.
64.
65.
66.
67.
68.
Ans
b.
a
d
a
a
b
d
c
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69.
70.
71.
72.
73.
74.
75.
Ans
c.
d
d
b
d
c
d