MODULE 8
1.
A company purchased equipment valued at $200,000 on January 1. The equipment
has an estimated useful life of six years or five million units. The
equipment is estimated to have a salvage value of $13,400. Assuming the
straight-line method of depreciation, what is the book value at the end of
the second year if 1.5 million units were produced?
A) $96,416.25
B) $88,977.80
C) $166,667.00
D) $137,800.00
E) $168,900.00
2.
A company sold a machine that originally cost $100,000 for $60,000 cash. The
accumulated depreciation on the machine was $40,000. The company should
recognize a:
A) $0 gain or loss
B) $20,000 loss
C) $20,000 gain
D) $40,000 loss
E) $60,000 gain
3.
A plant asset's useful life might not be the same as its productive life.
A) True
B) False
4.
Gain or loss on the disposal of an asset is determined by comparing "value
given" (book value) to "value received".
A) True
B) False
5.
A company had average total assets of $897,000. Its gross sales were
$1,090,000 and its net sales were $1,000,000. The company's total asset
turnover is equal to:
A) 1.26
B) 1.11
C) 0.82
D) 1.09
E) 0.90
6.
A company purchased a delivery van for $23,000 with a salvage value of
$3,000 on September 1, 2010. It has an estimated useful life of 5 years.
Using the straight-line method, how much depreciation expense should the
company recognize on December 31, 2010?
A) $4,600
B) $1,533
C) $4,000
D) $1,333
E) $1,000
7.
A company purchased equipment valued at $200,000 on January 1. The equipment
has an estimated useful life of six years or five million units. The
equipment is estimated to have a salvage value of $13,400. Assuming the
double declining balance method of depreciation, what is the book value at
the end of the second year if 1.5 million units were produced?
A) $137,800.00
B) $168,900.00
C) $96,416.25
D) $166,667.00
E) $88,977.80
8.
Goodwill is the amount by which the value of a company's the value of its
individual assets and liabilities.
A) True
B) False
9.
Depreciation is the process of allocating the cost of a plant asset to an
expense account in the accounting periods benefiting from its use.
A) True
B) False
10.
An assets' cost includes all normal and reasonable expenditures necessary to
get the asset in place and ready for its intended use.
A) True
B) False
11.
Endor Fishing Company exchanged an old boat for a new one. The old boat had
a cost of $260,000 and accumulated depreciation of $200,000. The new boat
had an invoice price of $400,000. Endor received a trade in allowance of
$100,000 on the old boat, which meant they paid $300,000 in addition to the
old boat to acquire the new boat. What amount of gain or loss should be
recorded on this exchange?
A) $40,000 gain
B) $60,000 loss
C) $100,000 loss
D) $0 gain or loss
E) $40,000 loss
12.
A company purchased a tract of land for its natural resources at a cost of
$1,500,000. It expects to mine 2,000,000 tons of ore from this land. The
salvage value of the land is expected to be $250,000. The depletion expense
per ton of ore is:
A) $0.75
B) $0.875
C) $0.625
D) $6.00
E) $8.00
13.
A company sold equipment for $50,000. Total accumulated depreciation at the
time of the sale was $20,000 and a loss of $10,000 was recognized on the
sale. What was the original cost of the asset?
A) $30,000
B) $80,000
C) $60,000
D) $40,000
E) $70,000
14.
Plant assets are:
A) Held for sale
B) Tangible assets used in the operation of
a business that have a useful life of more than one accounting period
C) Current assets
D) Intangible assets used in the operations of a business that have a useful
life of more than one accounting period
E) Tangible assets used in the operation of business that have a useful life
of less than one accounting period
15.
A depreciable asset currently has a $24,500 book value. The company owning
the asset uses straight-line depreciation. They paid $37,000 for this asset
and consider it to have a $2,000 salvage value with a seven year useful
life. How long has the company owned this asset?
A) 2.1 years
B) Cannot be determined from the given information
C) 2.36 years
D) 7 years
E) 2.5 years
16.
A patent:
A) Is the amount by which the value of a company exceeds the fair market
value of a company's net assets if purchased separately
B) Is an exclusive right granted to its owner to manufacture and sell a
device or to use a process for 50 years
C) Gives its owner the exclusive right to publish and sell a musical or
literary work during the life of the creator plus 50 years
D) Gives its owner the exclusive right to publish and sell a musical or
literary work during the life of the creator plus 17 years
E) Is an exclusive right granted to its
owner to manufacture and sell a device or to use a process for 20 years
17.
Extraordinary repairs:
A) Are expensed as incurred
B) Extend an asset's useful life beyond its
original estimate
C) Are credited to accumulated depreciation
D) Are additional costs of plant assets that do not materially increase the
asset's life
E) Are revenue expenditures
18.
The total cost of an asset less its accumulated depreciation is called:
A) Book value
B) Replacement cost
C) Current (market) value
D) Present value
E) Historical cost
19.
The useful life of a plant asset is:
A) Determined by law
B) Never related to its physical life
C) Its productive life, but not to exceed one year
D) The length of time it is used
productively in a company's operations
E) Determined by the FASB
20.
Cobb Corn Company purchases a large lot on which a building is located. The
negotiated purchase price is $2,500,000 for the lot and the building. The
company pays $71,500 in commissions and taxes. The appraisal values of each
items is as follows: Land $650,000, Building $1,750,000, Land Improvements
$120,000. What is the appropriate amount to be entered into the general
journal for the building?
A) $1,784,621
B) $1,735,000
C) $1,685,379
D) $1,750,000
E) $1,730,000
