Question 1

If a company capitalizes costs that should be expensed,how is its income statement for the current period impacted?

Accepted Answer

A)  Net income will be lower than it should be.
B)  Revenues will be lower than they should be.
C)  Expenses will be lower than they should be.
D)  Assets will be lower than they should be.E) A) and B)
F) C) and D)

Question 2

A book manufacturing company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Accepted Answer

A)  a gain,increasing net income and stockholders' equity.
B)  revenue,increasing net income and stockholders' equity.
C)  expenses,decreasing net income and stockholders' equity.
D)  a loss,decreasing net income and stockholders' equity.E) All of the above
F) A) and C)

Question 3

Which of the following statements regarding capitalization is correct?

Accepted Answer

A)  Capitalizing costs refers to the process of converting assets to expenses.
B)  All costs incurred to acquire an asset may be capitalized.
C)  Capitalizing a cost means to record it as an asset.
D)  Capitalization results in an immediate decrease in net income.E) A) and D)
F) C) and D)

Question 4

Which of McGraw-Hill's intangible assets gives it the legal right to prevent you from borrowing a textbook from a friend and photocopying all of it?

Accepted Answer

A)  Patent
B)  Trademark
C)  Franchise agreement
D)  CopyrightE) B) and C)
F) None of the above

Question 5

Goodwill:

Accepted Answer

A)  should be treated like most other intangible assets and amortized over a useful life of not more than 40 years.
B)  is an accounting measurement of how well a company's employees behave towards the company's customers.
C)  should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets.
D)  is recorded when the purchasers of a business pay more than the fair value of the assets purchased.E) B) and C)
F) All of the above

Question 6

Which of the following statements is not true?

Accepted Answer

A)  At the end of an asset's life,its book value should equal its residual value.
B)  At the end of an asset's life,the accumulated depreciation should equal the depreciable cost.
C)  At the end of an assets life,the book value would equal zero if there is no residual value.
D)  Assets area not to be depreciated below residual value,except under the double-declining balance method.E) B) and C)
F) None of the above

Question 7

The intangible asset most frequently reported by U.S.businesses is:

Accepted Answer

A)  goodwill.
B)  trademarks.
C)  patents.
D)  licensing rights.E) All of the above
F) C) and D)

Question 8

Use the information above to answer the following question.If the units-of-production method is used,the depreciation expense for this period is:

Accepted Answer

A)  $80,000.
B)  $400,000.
C)  $76,000.
D)  $380,000.E) A) and B)
F) A) and C)

Question 9

In recording the acquisition cost of an entire business:

Accepted Answer

A)  goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
B)  assets are recorded at the seller's book values.
C)  goodwill,if it exists,is never recorded.
D)  goodwill is recorded as the excess of cost over the book value of identifiable net assets.E) B) and D)
F) B) and C)

Question 10

A company paid $17,000 for a vehicle that had an estimated useful life of 4 years,total capacity of 100,000 miles,and a residual value of $1,000.After 2 full years of using the vehicle (20,000 miles in year 1 and 27,000 miles in year 2) ,the company sold the vehicle for $6,000 and reported a loss on disposal of $3,480.What method of depreciation did the company use?

Accepted Answer

A)  Units-of-production method.
B)  Double-declining-balance method.
C)  Straight-line method.
D)  Units-of-production method in year 1 and straight-line in year 2.E) None of the above
F) All of the above

Question 11

A fixed asset turnover ratio of 4.3 indicates that for every

Accepted Answer

A)  $1 in sales revenue,the firm acquired $4.30 of assets.
B)  $1 in fixed assets,the firm earned $4.30 of net income.
C)  $1 in assets,the firm paid $4.30 of expenses.
D)  $1 in fixed assets,the firm generated $4.30 of net sales.E) C) and D)
F) B) and C)

Question 12

The company has net sales revenue of $3.6 million during 2014.The company's records also included the following information:  What is the company's fixed asset turnover ratio for 2014?

Accepted Answer

A)  18.00
B)  1.33
C)  1.00
D)  1.50E) A) and B)
F) A) and C)

Question 13

When a company records depletion on natural resources,it will have which of the following effects?

Accepted Answer

A)  Expenses increase.
B)  Net income decreases.
C)  Inventory increases.
D)  Cash flow decreases.E) All of the above
F) None of the above

Question 14

A piece of equipment was acquired on January 1,2013,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2014?

Accepted Answer

A)  $5,500.
B)  $10,000.
C)  $11,000.
D)  $12,000.E) A) and C)
F) B) and C)

Question 15

Many companies use accelerated depreciation in computing taxable income because

Accepted Answer

A)  it reports higher net income in the early years as compared to other methods.
B)  it is required by IFRS.
C)  it is easier than straight-line deprecation.
D)  it postpones tax payments until later years because it lowers taxable income in the early years.E) B) and D)
F) All of the above

Question 16

Which of the following terms does not mean the same as the others?

Accepted Answer

A)  Tangible assets.
B)  Fixed assets.
C)  Property,plant,and equipment.
D)  Long-lived assets.E) A) and B)
F) A) and C)

Question 17

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected salvage value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Accepted Answer

A)  gain of $6,000.
B)  gain of $4,000.
C)  loss of $4,000.
D)  loss of $6,000.E) A) and C)
F) B) and C)

Question 18

Which of the following statements regarding straight-line depreciation is correct?

Accepted Answer

A)  Straight-line depreciation is the most common method of depreciation used in the U.S.for financial reporting,but is not commonly used for taxes.
B)  When the straight-line method is used to compute depreciation,an asset's carrying value remains constant over the life of the asset.
C)  Straight-line depreciation is an approved method to allocate the cost of an asset to expense and it serves as a measure of the physical decline in the asset.
D)  The straight line method of depreciation results in a straight-line increase of depreciation expense over the life of an asset.E) A) and C)
F) C) and D)

Question 19

There are no differences between GAAP and IFRS rules of accounting for tangible and intangible assets.

Accepted Answer

A) True 
 B)False

Question 20

Goodwill may be attributable to all of the following except which one?

Accepted Answer

A)  A large amount of charitable contributions
B)  A good reputation
C)  A well-trained work force
D)  A superior locationE) All of the above
F) C) and D)

Exam 9: Long-Lived Tangible and Intangible Assets

Which of the following statements regarding capitalization is correct?

Correct Answer
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Goodwill may be attributable to all of the following except which one?

Correct Answer
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The company has net sales revenue of $3.6 million during 2014.The company's records also included the following information: What is the company's fixed asset turnover ratio for 2014?

Correct Answer
verified

Which of the following statements is not true?

Correct Answer
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The intangible asset most frequently reported by U.S.businesses is:

Correct Answer
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A piece of equipment was acquired on January 1,2013,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2014?

Correct Answer
verified

In recording the acquisition cost of an entire business:

Correct Answer
verified

A book manufacturing company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Correct Answer
verified

A fixed asset turnover ratio of 4.3 indicates that for every

Correct Answer
verified

There are no differences between GAAP and IFRS rules of accounting for tangible and intangible assets.

Correct Answer
verified

Correct Answer
verified

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected salvage value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Correct Answer
verified

When a company records depletion on natural resources,it will have which of the following effects?

Correct Answer
verified

Which of the following statements regarding straight-line depreciation is correct?

Correct Answer
verified

Which of the following terms does not mean the same as the others?

Correct Answer
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Goodwill:

Correct Answer
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Use the information above to answer the following question.If the units-of-production method is used,the depreciation expense for this period is:

Correct Answer
verified

Which of McGraw-Hill's intangible assets gives it the legal right to prevent you from borrowing a textbook from a friend and photocopying all of it?

Correct Answer
verified

Many companies use accelerated depreciation in computing taxable income because

Correct Answer
verified

If a company capitalizes costs that should be expensed,how is its income statement for the current period impacted?

Correct Answer
verified

Exam 9: Long-Lived Tangible and Intangible Assets

Which of the following statements regarding capitalization is correct?

Correct AnswerverifiedShow Answer

Goodwill may be attributable to all of the following except which one?

Correct AnswerverifiedShow Answer

The company has net sales revenue of $3.6 million during 2014.The company's records also included the following information: What is the company's fixed asset turnover ratio for 2014?

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

The intangible asset most frequently reported by U.S.businesses is:

Correct AnswerverifiedShow Answer

A piece of equipment was acquired on January 1,2013,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2014?

Correct AnswerverifiedShow Answer

In recording the acquisition cost of an entire business:

Correct AnswerverifiedShow Answer

A book manufacturing company sells equipment for $450,000 when the book value of the equipment is $400,000.The company would record the extra $50,000 as:

Correct AnswerverifiedShow Answer

A fixed asset turnover ratio of 4.3 indicates that for every

Correct AnswerverifiedShow Answer

There are no differences between GAAP and IFRS rules of accounting for tangible and intangible assets.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An asset is purchased on January 1 for $40,000.It is expected to have a useful life of five years after which it will have an expected salvage value of $5,000.The company uses the straight-line method.If it is sold for $30,000 exactly two years after it is purchased,the company will record a:

Correct AnswerverifiedShow Answer

When a company records depletion on natural resources,it will have which of the following effects?

Correct AnswerverifiedShow Answer

Which of the following statements regarding straight-line depreciation is correct?

Correct AnswerverifiedShow Answer

Which of the following terms does not mean the same as the others?

Correct AnswerverifiedShow Answer

Goodwill:

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.If the units-of-production method is used,the depreciation expense for this period is:

Correct AnswerverifiedShow Answer

Which of McGraw-Hill's intangible assets gives it the legal right to prevent you from borrowing a textbook from a friend and photocopying all of it?

Correct AnswerverifiedShow Answer

Many companies use accelerated depreciation in computing taxable income because

Correct AnswerverifiedShow Answer

If a company capitalizes costs that should be expensed,how is its income statement for the current period impacted?

Correct AnswerverifiedShow Answer

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