Long-Term Assets – Reporting | Test Bank 10e

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Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Plant assets refer to nonphysical assets that are used in the operations of a business.

⊚ true
⊚ false

2) Plant assets are tangible assets used in a company’s operations that have a useful life of more than one accounting period.

⊚ true
⊚ false

3) If land is purchased as a building site, the cost of removing existing structures, less amounts recovered through the sale of salvaged materials, is recorded on the income statement as an expense.

⊚ true
⊚ false

4) Examples of land improvements include parking lots and walkways.

⊚ true
⊚ false

5) The process of allocating the cost of a building to expense while it is in use is called depletion.

⊚ true
⊚ false

6) Salvage value is an estimate of an asset’s value at the end of its useful life.

⊚ true
⊚ false

7) When plant assets are purchased as a group in a single transaction for a lump-sum price, the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

⊚ true
⊚ false

8) Obsolescence refers to plant assets that typically have longer useful lives and higher salvage values.

⊚ true
⊚ false

9) Depreciation does not measure an asset’s physical deterioration.

⊚ true
⊚ false

10) A plant asset's useful life is the length of time it is used in a company's operations.

⊚ true
⊚ false

11) Companies report both the cost and the accumulated depreciation of plant assets in the financial statements.

⊚ true
⊚ false

12) Depreciation expense using the straight-line method is calculated by using a plant asset’s cost, an estimate of its salvage value, and its estimated useful life.

⊚ true
⊚ false

13) A building’s book value is its total cost minus any accumulated depreciation.

⊚ true
⊚ false

14) When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

⊚ true
⊚ false

15) Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and only affects current and future financial statements.

⊚ true
⊚ false

16) Depreciation measures the decline in an asset’s market value.

⊚ true
⊚ false

17) Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

⊚ true
⊚ false

18) The Modified Accelerated Cost Recovery System (MACRS) is not acceptable for financial reporting because it does not consider an asset’s useful life or salvage value.

⊚ true
⊚ false

19) Depreciation is higher in earlier years and income is lower in the later years when using straight-line versus accelerated methods.

⊚ true
⊚ false

20) The book value of an asset when using double-declining-balance depreciation is always greater than the book value from using straight-line depreciation, except at the beginning and the end of the asset's useful life, when it is the same.

⊚ true
⊚ false

21) If a company engages in a lawsuit to successfully defend a patent, the cost of the lawsuit is debited to the Patents account.

⊚ true
⊚ false

22) The Modified Accelerated Cost Recovery System (MACRS) is part of the U.S. tax laws and may be used for financial reporting.

⊚ true
⊚ false

23) Total asset turnover is a measure of a company’s ability to use its assets efficiently and effectively

⊚ true
⊚ false

24) Total asset turnover is computed by dividing net income by average total assets.

⊚ true
⊚ false

25) Companies that have a relatively large amount invested in plant assets to generate a given level of sales are considered capital-intensive.

⊚ true
⊚ false

26) Duncan reported net sales of $2,520 million and average total assets of $1,400 million. Its total asset turnover equals 1.8.

⊚ true
⊚ false

27) Total asset turnover is calculated by dividing net sales by average total assets.

⊚ true
⊚ false

28) Total asset turnover is calculated by dividing average current assets by net sales.

⊚ true
⊚ false

29) Edmond reported average total assets of $9,600 million and net sales of $10,000 million. Its total asset turnover equals 0.96.

⊚ true
⊚ false

30) A plant asset’s cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

⊚ true
⊚ false

31) If a machine is damaged during unpacking, the repairs are added to its cost.

⊚ true
⊚ false

32) The purchase of a property that included land, a building, and related improvements is called a lump-sum or basket purchase.

⊚ true
⊚ false

33) When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

⊚ true
⊚ false

34) Land improvements such as parking lots, driveways, and lighting systems have limited useful lives but are not subject to depreciation.

⊚ true
⊚ false

35) Title insurance fees and any accrued property taxes paid by the purchaser are included in the cost of land.

⊚ true
⊚ false

36) Total asset cost plus depreciation expense equals book value.

⊚ true
⊚ false

37) The units-of-production method of depreciation charges a varying amount of depreciation expense for each period of an asset's useful life depending on its usage.

⊚ true
⊚ false

38) An accelerated depreciation method yields more depreciation expense in the early years of an asset's life and less depreciation expense in later years.

⊚ true
⊚ false

39) The double-declining balance method is applied by (1) computing the asset's straight-line depreciation rate, (2) doubling it, (3) subtracting salvage value from cost, and (4) multiplying the rate times the net value.

⊚ true
⊚ false

40) A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year.

⊚ true
⊚ false

41) Revenue expenditures, also called income statement expenditures, are costs that do not materially increase a plant asset’s life or capabilities.

⊚ true
⊚ false

42) Capital expenditures, also called balance sheet expenditures, are costs of plant assets that provide benefits for longer than the current period.

⊚ true
⊚ false

43) Extraordinary repairs are expenditures that extend the asset's useful life beyond its original estimate and are capital expenditures because they benefit future periods.

⊚ true
⊚ false

44) Revenue expenditures are also called balance sheet expenditures.

⊚ true
⊚ false

45) Betterments are a type of capital expenditure.

⊚ true
⊚ false

46) Disposal of plant assets occurs in one of three ways: discarding, sale, or exchange.

⊚ true
⊚ false

47) The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

⊚ true
⊚ false

48) Accounting for the exchange of assets depends on whether the transaction has commercial substance; an exchange has commercial substance if a company’s future cash flows change as a result of the exchange.

⊚ true
⊚ false

49) A gain or loss is recorded for exchanges of plant assets with commercial substance.

⊚ true
⊚ false

50) If an asset is sold above its book value, the selling company records a loss.

⊚ true
⊚ false

51) Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

⊚ true
⊚ false

52) A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale are less than the asset's book value.

⊚ true
⊚ false

53) Natural resources are assets that are physically consumed when used. Examples include standing timber, mineral deposits, and oil and gas fields.

⊚ true
⊚ false

54) Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

⊚ true
⊚ false

55) Depletion is the process of allocating the cost of a natural resource to the period when it is consumed.

⊚ true
⊚ false

56) Natural resources may be reported under either plant assets or their own separate category on the balance sheet.

⊚ true
⊚ false

57) When the usefulness of plant assets is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method in proportion to the depletion of the natural resource.

⊚ true
⊚ false

58) The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

⊚ true
⊚ false

59) A leasehold is the rights the lessor grants to the lessee under the terms of the lease.

⊚ true
⊚ false

60) Intangible assets are nonphysical assets used in operations that give companies long-term rights or competitive advantages.

⊚ true
⊚ false

61) Since goodwill is an intangible asset, it is amortized each year using the straight-line method.

⊚ true
⊚ false

62) A patent is an exclusive right granted to its owner to manufacture and sell a patented item or to use a process for 20 years.

⊚ true
⊚ false

63) A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

⊚ true
⊚ false

64) A trademark is an exclusive right granted to its owner to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
65) Plant assets are defined as:

A) Tangible assets used in a company’s operations that have a useful life of more than one accounting period.
B) Current assets.
C) Held for sale.
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.

66) One characteristic of plant assets is that they are:

A) Current assets.
B) Used in operations.
C) Natural resources.
D) Long-term investments.
E) Intangible.

67) The relevant factors in computing depreciation do not include:

A) Cost.
B) Salvage value.
C) Useful life.
D) Depreciation method.
E) Market value.

68) Salvage value is:

A) Not a factor relevant to determining depletion.
B) A factor relevant to amortizing an intangible asset with an indefinite life.
C) An estimate of an asset's value at the end of its useful life.
D) A factor relevant to determining depreciation under MACRS.
E) A factor relevant to determining an asset’s useful life.

69) Depreciation:

A) Measures the decline in market value of an asset.
B) Measures physical deterioration of an asset.
C) Is the process of allocating the cost of a plant asset to expense while it is in use.
D) Is an outflow of cash from the use of a plant asset.
E) Is applied to land.

70) The useful life of a plant asset is:

A) The length of time it is used in a company’s operations.
B) Never related to its physical life.
C) Its productive life, but not to exceed one year.
D) Determined by the FASB.
E) Determined by law.

71) The term inadequacy refers to:

A) The inability of a plant asset to meet its demands.
B) An asset that is worn out.
C) An asset that is no longer functional.
D) The condition where the salvage value is too small to replace the asset.
E) The condition where the asset's salvage value is less than its cost.

72) The term, obsolescence, as it relates to the useful life of an asset, refers to:

A) The halfway point of an asset’s useful life.
B) The process of becoming outdated and no longer used.
C) The inability of a company’s plant assets to function as designed.
D) An asset's salvage value becoming less than its replacement cost.
E) Intangible assets that have been fully amortized.

73) Once the estimated depreciation expense for an asset is calculated:

A) It cannot be changed.
B) It may be revised to reflect changes in the asset’s estimated salvage value or useful life.
C) Any changes are accumulated and recognized when the asset is sold.
D) The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.
E) It can be changed only if U.S. tax law changes.

74) A machine originally had an estimated useful life of 10 years, but after 2 complete years, it was decided that the original estimate of useful life should have been 13 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

A) 8 years.
B) 10 years.
C) 13 years.
D) 11 years.
E) 5 years.

75) A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

A) 2 years.
B) 4 years.
C) 6 years.
D) 16 years.
E) 10 years.

76) A change in an accounting estimate is:

A) Reflected in past financial statements.
B) Reflected in future financial statements and also requires modification of past statements.
C) Reflected in current and future years' financial statements, not in prior statements.
D) Not allowed under current accounting rules.
E) Considered an error in the financial statements.

77) When originally purchased, a vehicle costing $25,560 had an estimated useful life of 8 years and an estimated salvage value of $3,000. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

A) $5,640.
B) $2,988.
C) $5,808.
D) $11,280.
E) $2,820.

78) When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

A) $5,000.
B) $2,875.
C) $5,750.
D) $11,500.
E) $2,500.

79) A company used straight-line depreciation for an item of equipment that cost $19,300, had a salvage value of $5,200 and a six-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,930 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

A) $4,680.
B) $5,200.
C) $3,440.
D) $1,410.
E) $7,523.

80) A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

A) $1,000.
B) $1,800.
C) $5,400.
D) $2,400.
E) $2,000.

81) Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

A) $21,600
B) $54,000
C) $27,540
D) $18,360
E) $90,000

82) Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

A) $36,000
B) $42,000
C) $54,000
D) $16,000
E) $90,000

83) Peavey Enterprises purchased a depreciable asset for $25,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,600, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

A) $22,400
B) $4,667
C) $18,667
D) $15,400
E) $5,600

84) Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

A) $5,000
B) $15,000
C) $15,125
D) $20,000
E) $13,750

85) Peavey Enterprises purchased a depreciable asset for $26,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,800, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

A) $23,200.00
B) $22,233.33
C) $4,833.33
D) $5,800.00
E) $6,500.00

86) Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

A) $10,000
B) $5,000
C) $5,500
D) $20,000
E) $9,250

87) The following information is available on a depreciable asset owned by Mutual Savings Bank:

The asset's book value is $74,500 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,500 rather than the original estimate of $10,500. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

A) $2,156.25
B) $1,828.13
C) $2,328.13
D) $4,312.50
E) $2,089.29

88) The following information is available on a depreciable asset owned by Mutual Savings Bank:

The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

A) $8,125.00
B) $7,375.00
C) $4,062.50
D) $3,750.00
E) $7,812.50

89) A benefit of using an accelerated depreciation method is that:

A) It is preferred by the tax code.
B) It is the simplest method to calculate.
C) It yields more depreciation expense in the early years of an asset's life, thus reducing taxable income in the early years.
D) It yields a higher taxable income in the early years of the asset's useful life.
E) The results are identical to straight-line depreciation.

90) The modified accelerated cost recovery system (MACRS):

A) Is not acceptable for financial reporting.
B) Is an outdated system that is no longer used by companies.
C) Is required for financial reporting.
D) Is identical to units of production depreciation.
E) Does not allow partial year depreciation.

91) The straight-line depreciation method and the double-declining-balance depreciation method:

A) Produce the same total depreciation over an asset's useful life.
B) Produce the same depreciation expense each year.
C) Produce the same book value each year.
D) Are acceptable for tax purposes only.
E) Are the only acceptable methods of depreciation for financial reporting.

92) Total asset turnover is used to evaluate:

A) The ability to use assets efficiently and effectively to generate sales.
B) The necessity for asset replacement.
C) The number of times operating assets were sold during the year.
D) The cash flows used to acquire assets.
E) The relation between asset cost and book value.

93) A total asset turnover ratio of 3.4 indicates that:

A) For every $1 in net sales, the firm acquired $3.4 in assets during the period.
B) For every $1 in assets, the firm produced $3.4 in net sales during the period.
C) For every $1 in assets, the firm earned gross profit of $3.4 during the period.
D) For every $1 in assets, the firm earned $3.4 in net income.
E) For every $1 in assets, the firm paid $3.4 in expenses during the period.

94) A total asset turnover ratio of 3.5 indicates that:

A) For every $1 in net sales, the firm acquired $3.50 in assets during the period.
B) For every $1 in assets, the firm produced $3.50 in net sales during the period.
C) For every $1 in assets, the firm earned gross profit of $3.50 during the period.
D) For every $1 in assets, the firm earned $3.50 in net income.
E) For every $1 in assets, the firm paid $3.50 in expenses during the period.

95) The calculation of total asset turnover is:

A) Gross profit divided by average total assets.
B) Average total assets divided by gross profit.
C) Net sales divided by average total assets.
D) Average total assets multiplied by net sales.
E) Net assets multiplied by total assets.

96) A company had average total assets of $922,000. Its gross sales were $1,093,000 and its net sales were $975,000. The company's total asset turnover equals:

A) 0.84.
B) 1.12.
C) 0.95.
D) 1.06.
E) 1.21.

97) A company had average total assets of $800,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover equals:

A) 0.81.
B) 0.89.
C) 1.09.
D) 1.25.
E) 1.23.

98) Spears Company had net sales of $38,404 million. Its average total assets for the period were $14,802 million. Spears' total asset turnover equals:

A) 1.48.
B) 0.39.
C) 3.84.
D) 0.38.
E) 2.59.

99) Spears Company had net sales of $36,015 million. Its average total assets for the period were $14,700 million. Spears' total asset turnover equals:

A) 0.42.
B) 0.35.
C) 1.48.
D) 2.45.
E) 3.54.

100) Land improvements are:

A) Additions that increase the usefulness of land and are not depreciated.
B) Additions to land that have limited useful lives.
C) Included in the cost of the land account.
D) Expensed in the period incurred.
E) Also called basket purchases.

101) Which of the following is not classified as a plant asset?

A) Land.
B) Land improvements.
C) Buildings.
D) Machinery and equipment.
E) Patent.

102) The cost of land would not include:

A) Purchase price.
B) Cost of parking lot lighting.
C) Costs of removing existing structures.
D) Title insurance fees.
E) Government assessments.

103) A company paid $150,000, plus a 7% commission and $5,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?

A) Land $75,000; Land Improvements, $30,000; Building, $45,000.
B) Land $75,000; Land Improvements, $30,800; Building, $46,200.
C) Land $82,750; Land Improvements, $33,100; Building, $49,650.
D) Land $80,250; Land Improvements, $32,100; Building, $48,150.
E) Land $77,500; Land Improvements; $31,000; Building; $46,500.

104) Merchant Company purchased property for a building site. The costs associated with the property were:

What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

A) $193,400 to Land; $25,200 to Building.
B) $213,600 to Land; $0 to Building.
C) $216,200 to Land; $0 to Building.
D) $210,000 to Land; $2,600 to Building.
E) $207,600 to Land; $8,600 to Building.

105) Merchant Company purchased property for a building site. The costs associated with the property were:

What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

A) $187,700 to Land; $19,000 to Building.
B) $200,700 to Land; $6,000 to Building.
C) $200,000 to Land; $6,700 to Building.
D) $185,000 to Land; $21,700 to Building.
E) $206,700 to Land; $0 to Building.

106) A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $55,500; the land at $50,200, and the parking lot at $19,300. Land should be recorded in the accounting records with an allocated cost of:

A) $0.
B) $46,160.
C) $100,000.
D) $40,160.
E) $50,200.

107) A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $56,250; the land at $34,000, and the parking lot at $16,000. Land should be recorded in the accounting records with an allocated cost of:

A) $0.
B) $32,000.
C) $34,000.
D) $71,250.
E) $100,000.

108) The formula to compute annual straight-line depreciation is:

A) Depreciable cost divided by useful life in units.
B) (Cost plus salvage value) divided by the useful life in periods.
C) (Cost minus salvage value) divided by the useful life in periods.
D) Cost multiplied by useful life in periods.
E) Cost divided by useful life in units.

109) The total cost of an asset minus accumulated depreciation is called:

A) Historical cost.
B) Book value.
C) Present value.
D) Current (market) value.
E) Replacement cost.

110) The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.

111) The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.

112) The depreciation method which uses a depreciation rate that is a multiple of the straight-line rate is called:

A) Book value depreciation.
B) Declining-balance depreciation.
C) Amortization.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.

113) The depreciation method that produces more depreciation expense during the early years of an asset's life and less expense in the later years is a(n):

A) Accelerated depreciation method.
B) Book value depreciation method.
C) Straight-line depreciation method.
D) Depletion method.
E) Unrealized depreciation method.

114) A company purchased a delivery van for $26,600 with a salvage value of $3,600 on October 1, Year 1. 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, Year 1?

A) $96.
B) $1,773.
C) $4,600.
D) $5,320.
E) $1,150.

115) A company purchased a delivery van for $28,000 with a salvage value of $3,000 on October 1, Year 1. 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, Year 1?

A) $5,000.
B) $1,250.
C) $1,400.
D) $417.
E) $2,067.

116) Marlow Company purchased a point of sale system on January 1 for $5,500. This system has a useful life of 5 years and a salvage value of $450. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

A) $1,010.
B) $2,020.
C) $1,320.
D) $2,200.
E) $1,256.

117) Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

A) $680.
B) $480.
C) $544.
D) $600.
E) $300.

118) Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

A) $680.
B) $2,320.
C) $2,720.
D) $600.
E) $300.

119) Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

A) $2,176.
B) $544.
C) $1,200.
D) $600.
E) $1,224.

120) Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

A) $680.
B) $2,320.
C) $2,720.
D) $600.
E) $300.

121) A company purchased a weaving machine for $315,850. The machine has a useful life of 8 years and a residual value of $17,500. It is estimated that the machine could produce 765,000 bolts of woven fabric over its useful life. In the first year, 112,500 bolts were produced. In the second year, production increased to 116,500 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

A) $45,435.
B) $46,449.
C) $43,875.
D) $48,100.
E) $89,310.

122) A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

A) $48,133.
B) $45,600.
C) $22,500.
D) $23,750.
E) $81,600.

123) A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the second year?

A) $48,133.
B) $45,600.
C) $86,133.
D) $23,750.
E) $81,600.

124) A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the book value of the machine at the end of the second year?

A) $108,400.
B) $144,400.
C) $81,600.
D) $190,000.
E) $180,000.

125) Revenue expenditures:

A) Are costs that do not materially increase a plant asset’s life or capabilities.
B) Are known as balance sheet expenditures because they relate to plant assets.
C) Extend the asset's useful life.
D) Substantially benefit future periods.
E) Are debited to asset accounts when incurred.

126) Another name for a capital expenditure is:

A) Revenue expenditure.
B) Asset expenditure.
C) Long-term expenditure.
D) Contributed capital expenditure.
E) Balance sheet expenditure.

127) To capitalize an expenditure is to:

A) Increase an expense account.
B) Decrease an expense account.
C) Increase the revenue account.
D) Decrease an asset account.
E) Increase an asset account.

128) Extraordinary repairs:

A) Are revenue expenditures.
B) Are expenditures that extend an asset’s useful life beyond its original estimate.
C) Are credited to accumulated depreciation.
D) Are additional costs of plants assets that do not materially increase the asset's life.
E) Are expensed when incurred.

129) Which of the following is an example of an extraordinary repair?

A) An oil change for a truck.
B) Replacement of all florescent light tubes in an office.
C) Carpet cleaning and repair.
D) Replacing the roof on a manufacturing warehouse.
E) Routine machine maintenance.

130) Which of the following pertaining to ordinary repairs is false?

A) They are expenditures to keep an asset in good operating condition.
B) They are reported on the current-period income statement.
C) They extend the useful life of an asset beyond its original estimate by several years.
D) They include activities such as cleaning, lubricating, and changing oil.
E) They are treated as expenses.

131) Betterments:

A) Are expenditures that make a plant asset more efficient or productive.
B) Are also called ordinary repairs.
C) Always increase an asset’s life.
D) Are revenue expenditures.
E) Are credited against the asset account when incurred.

132) An asset's book value is $19,600 on December 31, Year 5. The asset has been depreciated at an annual rate of $4,600 using the straight-line method. Assuming the asset is sold on December 31, Year 5 for $16,600, the company should record:

A) A gain on sale of $3,000.
B) A loss on sale of $3,000.
C) A loss on sale of $3,900.
D) A gain on sale of $3,900.
E) Neither a gain nor a loss is recognized on this transaction.

133) An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 using the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record:

A) A loss on sale of $12,000.
B) A gain on sale of $12,000.
C) A gain on sale of $3,000.
D) A loss on sale of $3,000.
E) Neither a gain nor a loss is recognized on this transaction.

134) Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

A) A gain on sale of $2,000.
B) A loss on sale of $2,000.
C) A loss on sale of $5,000.
D) A gain on sale of $5,000.
E) A loss on sale of $45,000.

135) Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

A) A credit to Accumulated Depreciation of $40,000.
B) A credit to Gain on Sale of $2,000.
C) A credit to Machinery of $47,000.
D) A debit to Cash of $42,000.
E) A debit to Accumulated Depreciation of $47,000.

136) An asset's book value is $43,200 on January 1, Year 6. The asset is being depreciated $600 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $29,400, the company should record:

A) Neither a gain or loss is recognized on this type of transaction.
B) A gain on sale of $3,000.
C) A loss on sale of $1,500.
D) A gain on sale of $1,500.
E) A loss on sale of $3,000.

137) An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

A) Neither a gain or loss is recognized on this type of transaction.
B) A gain on sale of $2,000.
C) A loss on sale of $1,000.
D) A gain on sale of $1,000.
E) A loss on sale of $2,000.

138) Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:

A) Credit to cash for $20,000.
B) Debit to accumulated depreciation for $22,500.
C) Debit to loss on sale for $10,000.
D) Credit to loss on sale for $10,000.
E) Debit to gain on sale for $2,500.

139) A machine costing $75,000 is purchased on September 1, Year 1. The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years. Double-declining-balance depreciation is used. If the machine is sold on December 31, Year 3 for $13,000, the journal entry to record the sale will include:

A) A credit to gain on sale for $8,000.
B) A debit to loss on sale for $2,625.
C) A credit to accumulated depreciation for $59,375.
D) A debit to loss on sale for $3,042.
E) A credit to gain on sale for $4,979.

140) An asset is said to be fully depreciated when:

A) It is unable to meet its productive demands.
B) It is outdated and no longer used.
C) Amortization is nearly complete.
D) Accumulated depreciation is less than the asset’s cost.
E) Accumulated depreciation equals the asset’s cost.

141) A company sold equipment that originally cost $310,000 for $186,000 cash. The accumulated depreciation on the equipment was $124,000. The company should recognize a:

A) $0 gain or loss.
B) $62,000 gain.
C) $62,000 loss.
D) $124,000 loss.
E) $186,000 gain.

142) A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a:

A) $0 gain or loss.
B) $20,000 gain.
C) $20,000 loss.
D) $40,000 loss.
E) $60,000 gain.

143) A company discarded a computer system originally purchased for $8,450. The accumulated depreciation was $6,750. The company should recognize a(an):

A) $0 gain or loss.
B) $1,700 loss.
C) $1,700 gain.
D) $8,450 gain.
E) $6,750 loss.

144) A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):

A) $0 gain or loss.
B) $800 loss.
C) $800 gain.
D) $8,000 loss.
E) $7,200 loss.

145) A company sold a tractor that originally cost $133,000 for $28,000 cash. The accumulated depreciation on the tractor was $67,200. The company should recognize:

A) A loss of $37,800.
B) A gain of $37,800.
C) A loss of $65,800.
D) A gain of $65,800.
E) A gain of $28,000.

146) A company sold a tractor that originally cost $85,000 for $20,000 cash. The accumulated depreciation on the tractor was $60,000. The company should recognize:

A) A loss of $5,000.
B) A gain of $5,000.
C) A loss of $20,000.
D) A gain of $65,000.
E) A gain of $20,000.

147) Natural resources are:

A) Assets that are physically consumed when used such as standing timber, mineral deposits, and oil and gas fields.
B) Tangible assets used in the operations of the business.
C) Current liabilities because they are depleted.
D) Not subject to allocation to expense over their useful lives.
E) Depleted using a straight-line method.

148) Which of the following would be classified as a natural resource?

A) Patent on an oil extraction process.
B) Land held as an investment.
C) Land improvements.
D) Diamond mine.
E) Goodwill.

149) Depletion is:

A) The process of allocating the cost of a natural resource to the period when it is consumed.
B) Calculated using the double-declining balance method.
C) Also called amortization.
D) An increase in the value of a natural resource when incurred.
E) The process of allocating the cost of intangibles to periods when they are used.

150) A company purchased a tract of land for its natural resources at a cost of $2,012,000. It expects to mine 2,180,000 tons of ore from this land. The salvage value of the land is expected to be $268,000. The depletion expense per ton of ore is:

A) $0.923.
B) $8.134.
C) $1.046.
D) $0.800.
E) $7.507.

151) 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) $0.625.
C) $0.875.
D) $6.00.
E) $8.00.

152) 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. If 150,000 tons of ore are mined and sold during the first year, the journal entry to record the depletion is:

A) Debit Depletion Expense $93,750; credit Natural Resources $93,750.
B) Debit Cash $112,500; credit Natural Resources $112,500.
C) Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750.
D) Debit Cash $93,750; credit Accumulated Depletion $93,750.
E) Debit Depletion Expense $112,500; credit Accumulated Depletion $112,500.

153) A company purchased a tract of land for its natural resources at a cost of $1,000,000. It expects to harvest 5,000,000 board feet of timber from this land. The salvage value of the land is expected to be $200,000. The depletion expense per board foot of timber is:

A) $0.75.
B) $0.24.
C) $0.20.
D) $0.16.
E) $0.04.

154) A company purchased a mineral deposit for $800,000. It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000. In the current year, the company mined and sold 9,000 tons of minerals. Its depletion expense for the current period equals:

A) $15,000.
B) $60,000.
C) $150,000.
D) $56,250.
E) $139,500.

155) Intangible assets do not include:

A) Patents.
B) Copyrights.
C) Trademarks.
D) Goodwill.
E) Land held as an investment.

156) Amortization is:

A) The allocation of the cost of an intangible asset to expense over its estimated useful life.
B) The process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use.
C) The process of allocating the cost of natural resources to periods when they are consumed.
D) An accelerated form of expensing an asset's cost.
E) Also called depletion.

157) Owning a patent:

A) Gives the owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years.
B) Gives the owner exclusive rights to manufacture and sell a patented item or to use a process for 20 years.
C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years.
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately.
E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years.

158) Holding a copyright:

A) Gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years.
B) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years.
C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years.
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately.
E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.

159) A leasehold is:

A) A short-term rental agreement.
B) The same as a patent.
C) The rights the lessor grants to the lessee under the terms of a lease.
D) Recorded as revenue expenditure when paid.
E) An asset held as an investment.

160) The meaning of goodwill in accounting is:

A) The amount by which a company's value exceeds the value of its individual assets and liabilities.
B) Long term assets held as investment.
C) The support of the board of directors for the operating decisions of management.
D) The cost of developing, maintaining, or enhancing the value of a trademark.
E) Rights granted to an entity to deliver a product or service under specified conditions.

161) A company's old machine that cost $54,000 and had accumulated depreciation of $42,600 was traded in on a new machine having an estimated 20-year life with an invoice price of $65,400. The company also paid $55,600 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

A) $67,000.
B) $65,400.
C) $54,000.
D) $63,800.
E) $11,400.

162) A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000. The company also paid $33,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

A) $40,000.
B) $33,000.
C) $45,000.
D) $18,000.
E) $51,000.

163) Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $260,000 and accumulated depreciation of $52,000. The new sailboat had an invoice price of $281,000. Hunter received a trade in allowance of $211,000 on the old sailboat, which meant the company paid $70,000 in addition to the old sailboat to acquire the new sailboat. If this transaction has commercial substance, what amount of gain or loss should be recorded on this exchange?

A) $0 gain or loss.
B) $3,000 gain.
C) $3,000 loss.
D) $208,000 loss.
E) $211,000 gain.

164) Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000. The new sailboat had an invoice price of $270,000. Hunter received a trade in allowance of $70,000 on the old sailboat, which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat. If this transaction has commercial substance, what amount of gain or loss should be recorded on this exchange?

A) $0 gain or loss.
B) $10,000 gain.
C) $10,000 loss.
D) $60,000 loss.
E) $70,000 loss.

165) Cliff Company traded in an old truck for a new one. The old truck had a cost of $120,000 and accumulated depreciation of $48,000. The new truck had an invoice price of $107,000. Huffington was given a $68,000 trade-in allowance on the old truck, which meant they paid $39,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?

A) $72,000
B) $120,000
C) $39,000
D) $107,000
E) $111,000

166) Cliff Company traded in an old truck for a new one. The old truck had a cost of $75,000 and accumulated depreciation of $60,000. The new truck had an invoice price of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck, which meant they paid $113,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?

A) $15,000
B) $75,000
C) $113,000
D) $125,000
E) $128,000

167) A company bought a new $56,000 heating system. The company paid $53,400 cash and was given a trade-in of $2,600 on an old heating system. The old system had an original cost of $50,200 and accumulated depreciation of $45,800. If the transaction has commercial substance, the company should record the new heating system at:

A) $2,600.
B) $4,400.
C) $53,400.
D) $56,000.
E) $57,800.

168) A company bought a new $42,000 heating system. The company paid $40,000 cash and was given a trade-in of $2,000 on an old heating system. The old system had an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has commercial substance, the company should record the new heating system at:

A) $2,000.
B) $3,000.
C) $40,000.
D) $42,000.
E) $43,000.

169) A company purchased equipment valued at $259,000. It traded in old equipment for a $114,000 trade-in allowance and the company paid $145,000 cash with the trade-in. The old equipment cost $240,000 and had accumulated depreciation of $144,000. This transaction has commercial substance. What is the recorded value of the new equipment?

A) $96,000.
B) $114,000.
C) $145,000.
D) $241,000.
E) $259,000.

170) A company purchased equipment valued at $66,000. It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in. The old equipment cost $44,000 and had accumulated depreciation of $36,000. This transaction has commercial substance. What is the recorded value of the new equipment?

A) $8,000.
B) $9,000.
C) $57,000.
D) $65,000.
E) $66,000.

171) Which of the following is not part of the cost of equipment?

A) Assembling cost.
B) Invoice cost.
C) Testing cost.
D) Repair costs due to damage from unpacking.
E) Installing cost.

172) Granite Company purchased a machine costing $136,000, terms 2/10, n/30. The machine was shipped FOB shipping point and freight charges were $3,600. The machine requires special mounting and wiring connections costing $11,600. When installing the machine, $3,100 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.

A) $148,480.
B) $148,680.
C) $154,480.
D) $147,980.
E) $157,200.

173) Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,000. The machine requires special mounting and wiring connections costing $10,000. When installing the machine, $1,300 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.

A) $129,800.
B) $132,100.
C) $130,800.
D) $118,800.
E) $120,100.

174) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $151,000. The machine's useful life is estimated to be 4 years, or 130,000 units of product, with a $2,000 salvage value. During its second year, the machine produces 26,000 units of product. Determine the machines' second year depreciation under the straight-line method.

A) $29,800.
B) $37,250.
C) $37,750.
D) $30,200.
E) $38,250.

175) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the straight-line method.

A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

176) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the double-declining-balance method.

A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

177) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $156,000. The machine's useful life is estimated to be 5 years, or 160,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 25,600 units of product. Determine the machines' second year depreciation under the units-of-production method. (Do not round intermediate calculations.)

A) $24,320.
B) $30,400.
C) $31,200.
D) $24,960.
E) $32,000.

178) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the units-of-production method.

A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

179) Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

A) Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900.
B) Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000.
C) Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900.
D) Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.
E) Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900.

180) Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machine's first year depreciation under the straight-line method.

A) $27,000.
B) $29,025.
C) $25,800.
D) $23,779.
E) $24,000.

181) Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machine's first year depreciation under the double-declining-balance method.

A) $66,000.
B) $54,000.
C) $24,000.
D) $25,800.
E) $48,000.

182) Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machine's first year depreciation under the units-of-production method.

A) $27,000.
B) $54,000.
C) $24,000.
D) $25,800.
E) $48,000.

183) Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. What journal entry would be needed to record the machine's first year depreciation under the units-of-production method?

A) Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800.
B) Debit Depletion Expense $29,025; credit Accumulated Depletion $29,025.
C) Debit Depreciation Expense $29,025; credit Accumulated Depreciation $29,025.
D) Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800.
E) Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000.

184) Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. Compute the depletion expense for the first year assuming 418,000 tons were mined and sold.

A) $1,233,100.
B) $1,358,500.
C) $1,300,000.
D) $1,180,000.
E) $1,280,000.

185) Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined and sold?

A) Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.
B) Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500.
C) Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500.
D) Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.
E) Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.

186) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. Compute the depletion expense for the first year assuming 38,000 tons were removed and sold.

A) $98,333.
B) $93,158.
C) $38,000.
D) $12,881.
E) $112,100.

187) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

A) Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.
B) Debit Amortization Expense $112,100; credit Natural Resources $112,100.
C) Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.
D) Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.
E) Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.

188) Phoenix Agency leases office space. On January 3, Phoenix incurs $69,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 6 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

A) $14,625.
B) $17,500.
C) $6,000.
D) $11,500.
E) $8,625.

189) Phoenix Agency leases office space. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

A) $20,000.
B) $6,000.
C) $13,000.
D) $65,000.
E) $8,125.

190) Crestfield leases office space. On January 3, the company incurs $35,000 to improve the leased office space. These improvements are expected to yield benefits for 20 years. Crestfield has 10 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

A) Debit Amortization Expense $1,750; credit Accumulated Amortization-Leasehold Improvements $1,750.
B) Debit Depletion Expense $3,500; credit Accumulated Depletion $3,500.
C) Debit Depreciation Expense $1,750; credit Accumulated Depreciation $1,750.
D) Debit Depletion Expense $35,000; credit Accumulated Depletion $35,000.
E) Debit Amortization Expense $3,500; credit Accumulated Amortization-Leasehold Improvements $3,500.

191) Crestfield leases office space. On January 3, the company incurs $12,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

A) Debit Amortization Expense $1,200; credit Accumulated Amortization-Leasehold Improvements $1,200.
B) Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000.
C) Debit Depreciation Expense $1,200; credit Accumulated Depreciation $1,200.
D) Debit Depletion Expense $12,000; credit Accumulated Depletion $12,000.
E) Debit Amortization Expense $3,000; credit Accumulated Amortization-Leasehold Improvements $3,000.

192) Ngu owns equipment that cost $104,900 with accumulated depreciation of $71,600. Ngu asks $37,850 for the equipment but sells the equipment for $34,900. Compute the amount of gain or loss on the sale.

A) $2,950 gain.
B) $1,600 gain.
C) $4,550 loss.
D) $1,600 loss.
E) $4,550 gain.

193) Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount of gain or loss on the sale.

A) $3,500 loss.
B) $5,500 gain.
C) $5,500 loss.
D) $3,000 gain.
E) $3,500 gain.

194) Gaston owns equipment that cost $31,000 with accumulated depreciation of $18,600. Gaston sells the equipment for $11,200. Which of the following would not be part of the journal entry to record the disposal of the equipment?

A) Debit Accumulated Depreciation $18,600.
B) Credit Equipment $31,000.
C) Debit Loss on Disposal of Equipment $1,200.
D) Credit Gain on Disposal of Equipment $1,200.
E) Debit Cash $11,200.

195) Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000. Gaston sells the equipment for $26,000. Which of the following would not be part of the journal entry to record the disposal of the equipment?

A) Debit Accumulated Depreciation $61,000.
B) Credit Equipment $90,500.
C) Debit Loss on Disposal of Equipment $3,500.
D) Credit Gain on Disposal of Equipment $3,500.
E) Debit Cash $26,000.

196) Flask Company reports net sales of $2,730 million; cost of goods sold of $2,270 million; net income of $450 million; and average total assets of $2,120 million. Compute its total asset turnover.

A) 1.07.
B) 1.29.
C) 1.20.
D) 0.78.
E) 0.93.

197) Flask Company reports net sales of $4,343 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,150 million. Compute its total asset turnover.

A) 1.31.
B) 2.02.
C) 0.13.
D) 0.76.
E) 0.50.

198) Riverboat Adventures pays $390,000 plus $11,000 in closing costs to purchase real estate. The real estate consists of land appraised at $64,500, a building appraised at $137,600, and paddleboats appraised at $227,900. Compute the cost that should be allocated to the building.

A) $128,320.
B) $124,800.
C) $137,600.
D) $201,248.
E) $64,672.

199) Riverboat Adventures pays $310,000 plus $15,000 in closing costs to purchase real estate. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the building.

A) $97,500.
B) $105,000.
C) $89,178.
D) $140,000.
E) $93,000.

200) Riverboat Adventures pays $310,000 plus $15,000 in closing costs to purchase real estate. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.

A) $93,000.
B) $140,000.
C) $32,500.
D) $31,000.
E) $97,500.

201) Victory Company purchases equipment at the beginning of the year at a cost of $15,000. The equipment is depreciated using the straight-line method and has a useful life estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year’s depreciation is:

A) Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143.
B) Debit Depreciation Expense $2,000, credit Office Equipment $2,000.
C) Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000.
D) Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.
E) Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000.

202) Victory Company purchases equipment at the beginning of the year at a cost of $15,000. The equipment is depreciated using the straight-line method and has a useful life estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:

A) $2,143.
B) $1,000.
C) $2,000.
D) $14,000.
E) $0.

203) Mohr Company purchases a machine at the beginning of the year at a cost of $32,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 8 years with a $8,000 salvage value. Depreciation expense in year 2 is:

A) $4,000.
B) $3,000.
C) $8,000.
D) $24,000.
E) $0.

204) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

A) $4,800.
B) $4,000.
C) $9,600.
D) $20,000.
E) $0.

205) Mohr Company purchases a machine at the beginning of the year at a cost of $28,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $2,000 salvage value. The book value of the machine at the end of year 2 is:

A) $5,200.
B) $10,400.
C) $15,600.
D) $17,600.
E) $26,000.

206) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 2 is:

A) $4,000.
B) $8,000.
C) $12,000.
D) $16,000.
E) $20,000.

207) Mohr Company purchases a machine at the beginning of the year at a cost of $34,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 8 years with a $8,000 salvage value. Depreciation expense in year 2 is:

A) $4,250.
B) $6,500.
C) $8,500.
D) $6,375.
E) $25,500.

208) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

A) $4,800.
B) $8,000.
C) $9,600.
D) $5,760.
E) $14,400.

209) Mohr Company purchases a machine at the beginning of the year at a cost of $46,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The machine’s book value at the end of year 2 is:

A) $25,200.
B) $11,600.
C) $18,400.
D) $16,560.
E) $27,600.

210) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The machine’s book value at the end of year 2 is:

A) $12,000.
B) $7,200.
C) $9,600.
D) $8,640.
E) $14,400.

211) Mohr Company purchases a machine at the beginning of the year at a cost of $36,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 80,000 units. The machine is estimated to have a $4,000 salvage value. The company produces 10,000 units in year 1 and 7,000 units in year 2. Depreciation expense in year 2 is:

A) $4,000.
B) $6,400.
C) $14,400.
D) $2,800.
E) $21,600.

212) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 40,000 units. The machine is estimated to have a $4,000 salvage value. The company produces 9,000 units in year 1 and 6,000 units in year 2. Depreciation expense in year 2 is:

A) $4,000.
B) $4,500.
C) $9,600.
D) $3,000.
E) $14,400.

213) Martin Company purchases a machine at the beginning of the year at a cost of $76,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 4 years with a $9,000 salvage value. Depreciation expense in year 4 is:

A) $19,000.
B) $16,750.
C) $67,000.
D) $76,000.
E) $0.

214) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

A) $15,000.
B) $13,750.
C) $55,000.
D) $60,000.
E) $0.

215) Martin Company purchases a machine at the beginning of the year at a cost of $62,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 4 years with a $5,000 salvage value. The book value of the machine at the end of year 4 is:

A) $14,250.
B) $57,000.
C) $31,000.
D) $5,000.
E) $0.

216) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 4 years with a $5,000 salvage value. The book value of the machine at the end of year 4 is:

A) $13,750.
B) $55,000.
C) $30,000.
D) $5,000.
E) $0.

217) Martin Company purchases a machine at the beginning of the year at a cost of $80,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $6,600 salvage value. Depreciation expense in year 4 is:

A) $18,600.
B) $5,000.
C) $40,000.
D) $3,400.
E) $6,800.

218) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

A) $13,750.
B) $3,750.
C) $30,000.
D) $2,500.
E) $5,000.

219) Martin Company purchases a machine at the beginning of the year at a cost of $105,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $8,750 salvage value. The machine’s book value at the end of year 3 is:

A) $52,500.
B) $78,750.
C) $91,875.
D) $13,125.
E) $12,031.

220) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $5,000 salvage value. The machine’s book value at the end of year 3 is:

A) $30,000.
B) $45,000.
C) $52,500.
D) $7,500.
E) $6,875.

Answer Key

Test name: John Wild Ch08 Algorithmic and Static

1) FALSE

2) TRUE

3) FALSE

4) TRUE

5) FALSE

6) TRUE

7) TRUE

8) FALSE

9) TRUE

10) TRUE

11) TRUE

12) TRUE

13) TRUE

14) TRUE

15) TRUE

16) FALSE

17) TRUE

18) TRUE

19) FALSE

20) FALSE

21) TRUE

22) FALSE

23) TRUE

24) FALSE

25) TRUE

26) TRUE

27) TRUE

28) FALSE

29) FALSE

30) TRUE

31) FALSE

32) TRUE

33) FALSE

34) FALSE

35) TRUE

36) FALSE

37) TRUE

38) TRUE

39) FALSE

40) FALSE

41) TRUE

42) TRUE

43) TRUE

44) FALSE

45) TRUE

46) TRUE

47) FALSE

48) TRUE

49) TRUE

50) FALSE

51) TRUE

52) TRUE

53) TRUE

54) FALSE

55) TRUE

56) TRUE

57) TRUE

58) FALSE

59) TRUE

60) TRUE

61) FALSE

62) TRUE

63) FALSE

64) FALSE

65) A

66) B

67) E

68) C

69) C

70) A

71) A

72) B

73) B

74) D

75) C

76) C

77) A

78) A

79) C

80) D

81) B

82) C

83) D

84) E

85) D

86) B

87) D

88) C

89) C

90) A

91) A

92) A

93) B

94) B

95) C

96) D

97) D

98) E

99) D

100) B

101) E

102) B

103) C

104) C

105) E

106) D

107) B

108) C

109) B

110) C

111) D

112) B

113) A

114) E

115) B

116) C

117) C

118) A

119) E

120) C

121) A

122) B

123) E

124) A

125) A

126) E

127) E

128) B

129) D

130) C

131) A

132) B

133) D

134) C

135) D

136) E

137) E

138) B

139) B

140) E

141) A

142) A

143) B

144) B

145) A

146) A

147) A

148) D

149) A

150) D

151) B

152) C

153) D

154) D

155) E

156) A

157) B

158) A

159) C

160) A

161) B

162) C

163) B

164) B

165) D

166) D

167) D

168) D

169) E

170) E

171) D

172) A

173) C

174) B

175) B

176) E

177) A

178) A

179) C

180) E

181) B

182) D

183) D

184) B

185) D

186) E

187) A

188) D

189) C

190) E

191) E

192) B

193) E

194) D

195) D

196) B

197) B

198) A

199) A

200) C

201) E

202) B

203) B

204) B

205) D

206) D

207) D

208) D

209) D

210) D

211) D

212) D

213) B

214) B

215) D

216) D

217) D

218) D

219) D

220) D