Question 1

Which of the following should be included in the cost of equipment?

Accepted Answer

A)  Freight costs to deliver the equipment
B)  Installation costs for the equipment
C)  Testing costs to get the equipment ready for use
D)  All of the aboveE) A) and B)
F) None of the above D

Question 2

1.method of depreciation?

Accepted Answer

A)  $112,500
B)  $87,500
C)  $50,000
D)  $30,000E) A) and B)
F) A) and C)

Question 3

It is neither legal nor ethical to use one method of depreciation for financial purposes and another method for tax purposes.

Accepted Answer

A) True 
 B)False

Question 4

Research and development costs are expensed over their useful or legal life.

Accepted Answer

A) True 
 B)False

Question 5

The normal balance of the accumulated depreciation account is a debit.

Accepted Answer

A) True 
 B)False

Question 6

To account for the disposal of a plant asset, the cost of the asset and its related accumulated depreciation are removed from the books.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is TRUE?

Accepted Answer

A)  Depreciation expense and accumulated depreciation are both reported on the income statement.
B)  Depreciation expense and accumulated depreciation are both reported on the balance sheet.
C)  Depreciation expense is reported on the income statement and accumulated depreciation is reported on the balance sheet.
D)  Depreciation expense is reported on the balance sheet and accumulated depreciation is reported on the income statement.E) None of the above
F) C) and D)

Question 8

The cost of assets acquired in a lump-sum purchase must be allocated using which method?

Accepted Answer

A)  Book-value method 
B)   Cost method
C)   Per capita method
D)   Relative-sales-value-methodE) A) and B)
F) B) and C)

Question 9

Buildings depreciate, natural resources are amortized and intangible assets deplete.

Accepted Answer

A) True 
 B)False

Question 10

Treating a capital expenditure as an immediate expense:

Accepted Answer

A)  overstates assets and overstates owners' equity.
B)  overstates expenses and understates net income.
C)  understates expenses and overstates owners' equity.
D)  understates expenses and understates assets.E) B) and C)
F) A) and D) B

Question 11

Capital expenditures are not immediately expensed because these items:

Accepted Answer

A)  do not extend the life of an asset.
B)  return an asset to its prior condition.
C)  increase the asset's capacity.
D)  do all of the above.E) A) and C)
F) A) and D) C

Question 12

1.method of depreciation?

Accepted Answer

A)  $128,000
B)  $150,000
C)  $87,500
D)  $72,000E) None of the above
F) B) and C)

Question 13

Costs of land improvements are included in the Land account.

Accepted Answer

A) True 
 B)False

Question 14

In a lump-sum purchase of assets, the relative-sales-value is defined as the:

Accepted Answer

A)  total price paid less the value of the most valuable asset.
B)  total price paid compared to the total market value.
C)  ratio of each asset's market value to the total market value.
D)  ratio of each asset's market value to the total book value.E) A) and B)
F) None of the above

Question 15

Intangible assets with indefinite lives:

Accepted Answer

A)  are not amortized.
B)  are checked annually for any loss in value.
C)  include goodwill.
D)  are all of the above.E) A) and B)
F) B) and C)

Question 16

A company recently purchased a building that it plans to renovate to get ready for use in its operations. All expenditures to repair and renovate the existing building for its intended use are charged to:

Accepted Answer

A)  land.
B)  land improvements.
C)  land improvements expense.
D)  building.E) A) and B)
F) None of the above

Question 17

When an asset is fully depreciated:

Accepted Answer

A)  the total depreciation is equal to the accumulated depreciation, and the asset has reached the end of its actual useful life.
B)  the book value is equal to the salvage value, and the asset has reached the end of its estimated useful life.
C)  the depreciable cost is equal to the salvage value, and the asset is of no further use to the company.
D)  the book value is zero, and the asset has no market value.E) B) and C)
F) A) and D)

Question 18

The Accumulated Depreciation account represents a contra-revenue account.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?

Accepted Answer

A)  Straight-line method
B)  Depletion method
C)  Double-declining-balance method
D)  Units-of-production methodE) A) and D)
F) All of the above

Question 20

On January 2, 2010, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. If KJ Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2011-assuming that during this period, the asset was used 8,250 hours?

Accepted Answer

A)  $48,000
B)  $49,500
C)  $51,500
D)  $53,625E) B) and D)
F) A) and B)

Exam 7: Plant Assets Intangibles

Which of the following should be included in the cost of equipment?

Correct Answer
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D

1.method of depreciation?

Correct Answer
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It is neither legal nor ethical to use one method of depreciation for financial purposes and another method for tax purposes.

Correct Answer
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Research and development costs are expensed over their useful or legal life.

Correct Answer
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The normal balance of the accumulated depreciation account is a debit.

Correct Answer
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To account for the disposal of a plant asset, the cost of the asset and its related accumulated depreciation are removed from the books.

Correct Answer
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Which of the following statements is TRUE?

Correct Answer
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The cost of assets acquired in a lump-sum purchase must be allocated using which method?

Correct Answer
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Buildings depreciate, natural resources are amortized and intangible assets deplete.

Correct Answer
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Treating a capital expenditure as an immediate expense:

Correct Answer
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B

Capital expenditures are not immediately expensed because these items:

Correct Answer
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C

1.method of depreciation?

Correct Answer
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Costs of land improvements are included in the Land account.

Correct Answer
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In a lump-sum purchase of assets, the relative-sales-value is defined as the:

Correct Answer
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Intangible assets with indefinite lives:

Correct Answer
verified

A company recently purchased a building that it plans to renovate to get ready for use in its operations. All expenditures to repair and renovate the existing building for its intended use are charged to:

Correct Answer
verified

When an asset is fully depreciated:

Correct Answer
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The Accumulated Depreciation account represents a contra-revenue account.

Correct Answer
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Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?

Correct Answer
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Correct Answer
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Exam 7: Plant Assets Intangibles

Which of the following should be included in the cost of equipment?

Correct AnswerverifiedD

1.method of depreciation?

Correct AnswerverifiedShow Answer

It is neither legal nor ethical to use one method of depreciation for financial purposes and another method for tax purposes.

Correct AnswerverifiedShow Answer

Research and development costs are expensed over their useful or legal life.

Correct AnswerverifiedShow Answer

The normal balance of the accumulated depreciation account is a debit.

Correct AnswerverifiedShow Answer

To account for the disposal of a plant asset, the cost of the asset and its related accumulated depreciation are removed from the books.

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

The cost of assets acquired in a lump-sum purchase must be allocated using which method?

Correct AnswerverifiedShow Answer

Buildings depreciate, natural resources are amortized and intangible assets deplete.

Correct AnswerverifiedShow Answer

Treating a capital expenditure as an immediate expense:

Correct AnswerverifiedB

Capital expenditures are not immediately expensed because these items:

Correct AnswerverifiedC

1.method of depreciation?

Correct AnswerverifiedShow Answer

Costs of land improvements are included in the Land account.

Correct AnswerverifiedShow Answer

In a lump-sum purchase of assets, the relative-sales-value is defined as the:

Correct AnswerverifiedShow Answer

Intangible assets with indefinite lives:

Correct AnswerverifiedShow Answer

A company recently purchased a building that it plans to renovate to get ready for use in its operations. All expenditures to repair and renovate the existing building for its intended use are charged to:

Correct AnswerverifiedShow Answer

When an asset is fully depreciated:

Correct AnswerverifiedShow Answer

The Accumulated Depreciation account represents a contra-revenue account.

Correct AnswerverifiedShow Answer

Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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D

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B

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C

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