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Another name for a tangible long-lived asset is a fixed asset. BT: Knowledge

A) True
B) False

Correct Answer

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True

Capitalizing costs refers to the process of converting assets to expenses. BT: Comprehension

A) True
B) False

Correct Answer

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Amortization and maintenance are expenses associated with the use of long-lived assets. BT: Knowledge

A) True
B) False

Correct Answer

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When assets are purchased as a group,the total cost must be divided up and allocated to each asset in proportion to the market value of the assets as a whole. BT: Knowledge

A) True
B) False

Correct Answer

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The fixed asset turnover ratio measures the:


A) useful life of long-lived assets.
B) the average difference between book value and disposal value of fixed assets.
C) useful life of intangible assets.
D) efficiency with which the investment in fixed assets produces revenue.

E) A) and D)
F) C) and D)

Correct Answer

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If a fully amortized asset with no residual value is retired without receiving any cash on retirement:


A) a gain on disposal will be recorded.
B) amortization must be recorded as though the asset were still on the books.
C) a loss on disposal will be recorded.
D) no gain or loss on disposal will be recorded.

E) B) and D)
F) A) and B)

Correct Answer

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Which of the following methods would be a typical choice for assets that are most productive when they are new but lose their utility quickly as they get older?


A) Straight line method
B) Double declining method
C) Units of production method
D) Depletion

E) All of the above
F) None of the above

Correct Answer

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When a company determines that estimated future cash flows from an asset are different from the book value of the asset,it records:


A) an asset impairment gain,if the value of the cash flows exceeds the asset's book value.
B) an asset impairment loss,if the value of the cash flows exceeds the asset's book value.
C) an asset impairment gain,if the asset's book value exceeds the value of the cash flows.
D) an asset impairment loss,if the asset's book value exceeds the value of the cash flows.

E) All of the above
F) B) and D)

Correct Answer

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Match the term and the explanation.Not all explanations will be used. _____ Long-lived assets _____ Average net fixed assets _____ Capitalization of cost _____ Units-of-production method _____ Carrying value _____ Asset impairment loss _____ Amortization _____ Net sales revenue _____ Declining-balance method


A) The average proportion of a company's total assets that is long-lived.
B) An amortization method that produces higher amounts of amortization expense in the early years of an asset's life and lower amounts in the later years.
C) The cost of financing an asset.
D) Also known as book value.
E) Assets that will be used for more than three years.
F) The denominator of the fixed asset turnover ratio.
G) Also known as the average total cost of production.
H) How expenses are reported in the income statement.
I) An amortization method that spreads asset cost by production rather than time.
J) Also known as the initial value or balance forward value.
K) Assets that will be used for more than a year.
L) The process of transferring the cost of long-lived tangible assets to expenses.
M) When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated.
N) The numerator of the fixed asset turnover ratio.
O) When costs are recorded as assets rather than expenses.
P) When a company writes down the value of an asset because estimated future cash flows fall below the book value.

Q) D) and N)
R) F) and J)

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Some analysts compare companies by focusing on earnings before interest,taxes,and amortization (EBITDA). BT: Knowledge

A) True
B) False

Correct Answer

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Asset impairment losses are a regular operating expense of most businesses. BT: Comprehension

A) True
B) False

Correct Answer

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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?


A) Patent
B) Trademark
C) Franchise agreement
D) Copyright

E) None of the above
F) C) and D)

Correct Answer

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What would be the amount of amortization expense in year 2 using the straight line amortization method?


A) $6,500.00
B) $5,900.00
C) $10,400.00
D) $6,555.55

E) None of the above
F) All of the above

Correct Answer

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IBM's website is an example of a:


A) patented intangible asset.
B) technology intangible asset.
C) current tangible asset.
D) copyright tangible asset.

E) A) and D)
F) All of the above

Correct Answer

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A truck costing $12,000 and on which $9,000 of accumulated amortization has been recorded was disposed of for $2,000 cash.The entry to record this event would include a:


A) gain of $1,000.
B) loss of $1,000.
C) credit to the Truck account for $3,000.
D) credit to Accumulated amortization for $9,000.

E) A) and B)
F) All of the above

Correct Answer

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Ordinary repairs and maintenance always:


A) are part of the asset cost of equipment and facilities.
B) are recorded as expenses.
C) are recorded as liabilities.
D) improve the asset beyond the current accounting period.

E) B) and D)
F) All of the above

Correct Answer

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Match the term and the explanation.Not all explanations will be used. _____ Long-lived assets _____ Average net fixed assets _____ Capitalization of cost _____ Units-of-production method _____ Carrying value _____ Asset impairment loss _____ Amortization _____ Net sales revenue _____ Declining-balance method A.The average proportion of a company's total assets that is long-lived. B.An amortization method that produces higher amounts of amortization expense in the early years of an asset's life and lower amounts in the later years. C.The cost of financing an asset. D.Also known as book value. E.Assets that will be used for more than three years. F.The denominator of the fixed asset turnover ratio. G.Also known as the average total cost of production. H.How expenses are reported in the income statement. I.An amortization method that spreads asset cost by production rather than time. J.Also known as the initial value or balance forward value. K.Assets that will be used for more than a year. L.The process of transferring the cost of long-lived tangible assets to expenses. M.When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated. N.The numerator of the fixed asset turnover ratio. O.When costs are recorded as assets rather than expenses. P.When a company writes down the value of an asset because estimated future cash flows fall below the book value.

Correct Answer

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The amount of net income will be higher in case of straight line amortization as compared to double declining method. BT: Comprehension

A) True
B) False

Correct Answer

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False

The company has net sales revenue of $3.6 million during 2009.The company's records also included the following information: What is the company's fixed asset turnover ratio for 2009?


A) 18.00
B) 1.33
C) 1.00
D) 1.50

E) B) and D)
F) C) and D)

Correct Answer

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When a company sells equipment for cash on a date other than the last day of the accounting period,it must record:


A) amortization expense for the entire accounting period during which the equipment is sold.
B) the disposal by reducing equipment and increasing revenue; a gain or loss is reported if the decrease and increase are not equal.
C) the disposal by decreasing both equipment and accumulated amortization while increasing cash; a gain is reported if total assets increase.
D) accumulated amortization for the entire current accounting period.

E) B) and C)
F) B) and D)

Correct Answer

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C

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