Question 1

Which of the following does not properly describe the depreciation process?

Accepted Answer

A)  It is an allocation process.
B)  It is consistent with the matching principle.
C)  It involves the use of estimates.
D)  It attempts to determine an asset's market value.E) B) and C)
F) All of the above

Question 2

Amanda Company purchased a computer that cost $10,000.It had an estimated useful life of five years and a residual value of $1,000.The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,000 cash. How much of a gain or loss should Amanda record?

Accepted Answer

A)  A gain of $1,000.
B)  A loss of $5,000.
C)  A gain of $400.
D)  A loss of $400.E) A) and C)
F) All of the above

Question 3

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Accepted Answer

A) True 
 B)False

Question 4

Lincoln Restaurants reported net income in 2019 of $45.9 million and depreciation expense of $48.8 million.It also reported additions to property and equipment of $162.9 million.Using the indirect method of preparing the statement of cash flows,how will these items impact the 2019 statement of cash flows?

Accepted Answer

A)  Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be added under investing activities.
B)  Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be added under investing activities.
C)  Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be deducted under investing activities.
D)  Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be deducted under investing activities.E) B) and C)
F) C) and D)

Question 5

The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true when a company constructs an asset for its own use?

Accepted Answer

A)  Labor and material expenses for construction will increase.
B)  Capitalized interest on construction loans will increase interest expense.
C)  Assets will increase for labor,material,and interest costs paid for constructing the asset.
D)  Net income will be decreased for capitalized costs of construction.E) A) and C)
F) A) and D)

Question 7

Spa Sources Corporation purchased a machine that had an original cost of $60,000 and an estimated residual value of $10,000.The useful life was expected to be 8 years and straight-line depreciation is used.At the end of 2019,the book value of the machine was $35,000.Spa Sources sold the machine for $32,000 cash on October 1,2020.
A.Prepare the journal entry to record depreciation for 2020 up to the date of sale.
B.Prepare the journal entry to record the sale of the machine.

Accepted Answer

A.

Computations:
($60,000 - $10,000)÷ ...

Question 8

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Accepted Answer

A)  The company has high technology,robotic equipment in its plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets' lives.
B)  The company wants to maximize its net income during the earlier years of the asset's life.
C)  The company wants to maximize the asset's book value in the earlier years of the asset's life.
D)  The company wants to maximize the total depreciation expense over the life of the asset.E) A) and C)
F) A) and D)

Question 9

Smith Company exchanges assets to acquire a building.The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?

Accepted Answer

A)  Total assets increase $350,000.
B)  Stockholders' equity increases $250,000.
C)  Stockholders' equity increases $330,000.
D)  Total assets increase $330,000.E) B) and C)
F) A) and D)

Question 10

Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year estimated useful life with a residual value of $3,000.At the beginning of the eighth year,a major overhaul on it was completed at a cost of $8,000,and the total estimated useful life was changed to 12 years with the residual value unchanged.How much is the year 8 depreciation expense assuming use of the straight-line depreciation method?

Accepted Answer

A)  $2,200.
B)  $2,920.
C)  $3,100.
D)  $8,800.E) A) and B)
F) A) and C)

Question 11

Which of the following statements is incorrect?

Accepted Answer

A)  Replacement of a truck's tires would be a capital expenditure.
B)  Replacement of carpet in an office,damaged by a coffee spill,would be a repairs expense.
C)  Replacement of a roof on a newly purchased building before using it as a store would be a capital expenditure.
D)  The cost of repainting a hallway would be maintenance expense.E) A) and D)
F) B) and D)

Question 12

During 2019,a company purchased a mine at a cost of $3,000,000.The company spent an additional $600,000 getting the mine ready for its intended use.It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000.During 2019,45,000 tons of mineral were removed from the mine and 35,000 tons were sold. Which of the following statements is correct with respect to the accounting for the mine?

Accepted Answer

A)  The 2019 net income decreased $450,000 as a result of the mining during the year.
B)  The book value of the mine decreased $350,000 during 2019.
C)  The inventory of minerals was $450,000 at December 31,2019.
D)  The 2019 cost of goods sold was $350,000.E) A) and C)
F) C) and D)

Exam 8: Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.

Correct Answer
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Correct Answer
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Which of the following statements is incorrect?

Correct Answer
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Which of the following is true when a company constructs an asset for its own use?

Correct Answer
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Correct Answer
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Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Correct Answer
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Which of the following does not properly describe the depreciation process?

Correct Answer
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Correct Answer
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A.
Computations:
($60,000 - $10,000)÷ ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Correct Answer
verified

Exam 8: Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

Which of the following is true when a company constructs an asset for its own use?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Correct AnswerverifiedShow Answer

Which of the following does not properly describe the depreciation process?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. Computations:($60,000 - $10,000)÷ ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A.
Computations:
($60,000 - $10,000)÷ ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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