- Description
ACC 291 Week 2 Practice Quiz
Practice Question 03
| Correct! All costs necessary to get the asset ready to use should be included as part of the cost of the equipment because these are the costs that are necessary to acquire, safely transport, and prepare it for its intended use ($24,000 + $1,200 + $200 = $25,400). The annual maintenance costs are expensed, not capitalized. | |
Corristan Company purchased equipment and incurred these costs:
| Cash price | $24,000 | |
| Sales taxes | 1,200 | |
| Insurance during transit | 200 | |
| Annual maintenance costs | ____400 | |
| Total costs | $25,800 |
What amount should be recorded as the cost of the equipment?
| $25,800 |
| $25,400 |
| $24,000 |
| $25,200 |
Practice Question 05
| Correct! Land is not a depreciable asset. Land improvements, equipment, and buildings are depreciated to allocate their costs to the fiscal periods in which they render a benefit. | |
Which of the following is not a depreciable asset?
| Land |
| Buildings |
| Equipment |
| Land improvements |
Practice Question 09
| Correct! Parking lot repaving costs are considered to be land improvements and are capitalized in an account separate from buildings. | |
Which of the following costs should not be included in the cost of a building?
| Parking lot repaving |
| Remodeling of office space prior to use |
| Closing costs |
| Broker’s commission |
Practice Question 16
| Correct! Book value is equal to acquisition cost less accumulated depreciation. The factors affecting the computation of depreciation include acquisition cost, useful life, and salvage value. | |
When using the straight-line depreciation method, which of the following is not a factor affecting the computation of depreciation?
| Salvage value |
| Book value |
| Cost |
| Useful life |
Practice Question 17
| Correct! All declining-balance methods are affected by the beginning of the year book value. | |
Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?
| Straight-line |
| Units-of-activity |
| Declining-balance |
| Salvage method |
Practice Question 22
| Correct! Since the asset has been in use for two years, the accumulated depreciation at December 31, 2017, is equal to two times the annual depreciation expense: ($400,000 – $10,000)/5 = $78,000 per year. Total accumulated depreciation = $78,000 per year × 2 years = $156,000. | |
Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?
| $80,000 |
| $156,000 |
| $78,000 |
| $160,000 |
Practice Question 29
| Correct! When estimated depreciation changes, the changes should be reflected in the current and future years, not in prior years. | |
When there is a change in estimated depreciation
| new plant assets should be acquired to replace the old. |
| current and future years’ depreciation should be revised. |
| only future years’ depreciation should be revised. |
| previous depreciation should be corrected. |
Practice Question 36
| Correct! The book value at the date of sale is the salvage value since the asset is fully depreciated. The gain or loss is the selling price less the book value: $22,000 – $8,000 = $14,000 gain. | |
On June 1, 2017, Brislin Company sold some equipment for $22,000. The original cost was $80,000, the estimated salvage value was $8,000, and the expected useful life was 8 years. The equipment was fully depreciated. How much is the gain or loss on the sale?
| $50,000 loss |
| $14,000 gain |
| $850 loss |
| $5,400 gain |
Practice Question 40
| Correct! Research and development costs are expensed when incurred whether they produce a patent or not. | |
Which of the following statements is false?
| The amortization period of an intangible life can exceed 20 years. |
| If an intangible asset has a finite life, it should be amortized. |
| Goodwill is recorded only when a business is purchased. |
| Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent. |
Practice Question 42
| Correct! The intangibles are trademarks ($1,000,000) and goodwill ($4,500,000) totaling $5,500,000. | |
Given the following account balances at year-end, how much are total intangible assets on the balance sheet of Alisha Enterprises?
| Sales revenue | $45,000,000 |
| Cash | 1,500,000 |
| Accounts receivable | 4,000,000 |
| Land | 15,000,000 |
| Equipment | 25,000,000 |
| Trademarks | 1,000,000 |
| Goodwill | 4,500,000 |
| Research & development | 2,000,000 |
| $9,500,000 |
| $7,500,000 |
| $11,500,000 |
| $5,500,000 |
Practice Question 01
Land improvements are depreciable assets.
| True |
| False |
Practice Question 05
Which of the following is not a depreciable asset?
| Land improvements |
| Equipment |
| Buildings |
| Land |
Practice Question 10
Expenditures to maintain the operating efficiency and expected productive life of the unit are expensed as incurred.
| True |
| False |
Practice Question 15
What is depreciation?
| A valuation approach |
| A cash accumulation approach |
| A cost allocation method |
| An adjustment to market value over time |
Practice Question 22
Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?
| $156,000 |
| $78,000 |
| $80,000 |
| $160,000 |
Practice Question 29
When there is a change in estimated depreciation
| current and future years’ depreciation should be revised. |
| new plant assets should be acquired to replace the old. |
| only future years’ depreciation should be revised. |
| previous depreciation should be corrected. |
Practice Question 36
On June 1, 2017, Brislin Company sold some equipment for $22,000. The original cost was $80,000, the estimated salvage value was $8,000, and the expected useful life was 8 years. The equipment was fully depreciated. How much is the gain or loss on the sale?
| $50,000 loss |
| $5,400 gain |
| $14,000 gain |
| $850 loss |
Practice Question 44
Given the following account balances at year end, how much is amortization expense on Anisha Enterprises income statement for the current year if Anisha thinks all of its intangibles should be amortized over ten years?
| Sales revenue | $45,000,000 |
| Patents | 1,500,000 |
| Accounts receivable | 4,000,000 |
| Land | 15,000,000 |
| Equipment | 25,000,000 |
| Trademarks | 1,000,000 |
| Goodwill | 4,500,000 |
| Research & development | 2,000,000 |
| $250,000 |
| $700,000 |
| $900,000 |
| Some other answer |
Practice Question 51
Walk Co’s average total assets are $200,000, net sales total to $100,000, and net income is $40,000. How much net income did Walk Co generate for each dollar of assets invested?
| $0.50 |
| $0.20 |
| $5.00 |
| $2.00 |
Practice Question 58
Schneider Trucking Inc. purchased a new semi-truck on January 1, 2016 for $200,000. Its useful life is expected to be 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at double the straight-line rate?
| $50,000 |
| $100,000 |
| $43,750 |
| $87,500 |