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Exam 10: Fixed Assets and Intangible Assets

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Question 21

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Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same.

A) True
B) False

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Question 22

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The cost of replacing an engine in a truck is an example of ordinary maintenance.

A) True
B) False

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Question 23

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An operating lease is accounted for as if the lessee has purchased the asset.

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, the cost basis of the new asset is

On the first day of the fiscal year, a new walk-in cooler with a list price of $58,000 was acquired in exchange for an old cooler and $44,000 cash. The old cooler had a cost of $25,000 and accumulated depreciation of $16,000. Assume the transaction has commercial substance.

If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, and a trade-in allowance of $15,000 is granted by the seller, if the transaction is deemed to have commercial substance, the buyer would report a gain on disposal of fixed assets of $5,000.

Expenditures for research and development are generally recorded as

A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated useful life of 4 years. Assuming that it will have a residual value of $125, determine the depreciation for the first year by the double-declining-balance method. First year depreciation = $293.75 [$352.50 x (10 /12)]

The depreciable cost of a building is the same as its acquisition cost.

The method used to calculate the depletion of a natural resource is the straight line method.

Identify each of the following expenditures as chargeable to (a) Land, (b) Land Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) other account.

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance) :

Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500.

Expected useful life is

Which of the following below is an example of a capital expenditure?

The cost of repairing damage to a machine during installation is debited to a fixed asset account.

Minerals removed from the earth are classified as intangible assets.

When land is purchased to construct a new building, the cost of removing any structures on the land should be charged to the building account.

Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been depreciated for 6 years by the straight-line method. Assume a fiscal year ending December 31.

When a company establishes an outstanding reputation and has a competitive advantage because of it, the company should record goodwill on its financial statements.