978-0134125053 Chapter 8 Part 3

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7) A piece of equipment that was originally purchased for $33,000, had accumulated

depreciation of $25,000, and was sold for $8,000 would recognize a gain of $1,000.

Question Type: Application

8) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for

$700. The journal entry to record this transaction is to:

A) debit Cash for $700, debit Truck for $50,000, debit Loss on Disposal for $5,300 and credit

Accumulated Depreciation – Truck for $56,000.

B) debit Cash for $700, debit Accumulated Depreciation – Truck for $50,000, debit Loss on

Disposal for $5,300 and credit Truck for $56,000.

C) debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal $6,000, and

credit Truck for $56,000.

D) debit Cash for $700, debit Loss on Disposal for $55,300 and credit Truck for $56,000.

Question Type: Application

9) A truck costing $70,000 has accumulated depreciation of $51,000. The truck is scrapped for

$0. The journal entry to record this transaction is to:

A) debit Truck for $51,000, debit Loss on Disposal for $19,000 and credit Accumulated

Depreciation – Truck for $70,000.

B) debit Accumulated Depreciation – Truck for $51,000, and credit Truck for $51,000.

C) debit Accumulated Depreciation – Truck for $51,000, debit Loss on Disposal $19,000, and

credit Truck for $70,000.

D) debit Truck for $70,000, credit Accumulated Depreciation – Truck for $51,000 and credit

Gain on Disposal for $19,000.

Question Type: Application

10) A truck costing $56,000 has accumulated depreciation of $47,000. The truck is sold for

$8,500. The journal entry to record this transaction is to:

A) debit Cash for $8,500, debit Accumulated Depreciation – Truck for $47,000, credit Truck for

$56,000, and credit Gain on Disposal for $500.

B) debit Accumulated Depreciation – Truck for $47,000, and credit Truck for $47,000.

C) debit Cash for $8,500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for

$47,000 and credit Gain on Disposal for $17,500.

D) debit Cash for $500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for

$47,000, and credit Gain on Disposal for $8,500.

Question Type: Application

11) Which of the following accounts would be debited in a journal entry for an asset exchange

involving vehicles?

A) Accumulated Depreciation–Old Vehicle

B) Old Vehicle

C) Gain on Exchange of Assets

D) Notes Payable

Question Type: Application

12) Which of the following accounts would be credited in a journal entry for an asset exchange

involving vehicles?

A) Accumulated Depreciation–Old Vehicle

B) Vehicle (Old)

C) Loss on Exchange of Assets

D) Vehicle (New)

Question Type: Application

13) Which of the following would be debited as part of what you got in a transaction involving

an exchange of assets?

A) Old machine

B) Equipment (new)

C) Accumulated Depreciation

D) Gain on exchange

Question Type: Application

14) Equipment costing $123,000 has accumulated depreciation of $95,000. The equipment is a

trade-in for new equipment costing $188,000. If the trade-in value received for the old equipment

is $34,000, the journal entry to record this transaction is to:

A) debit Equipment (New) for $188,000, debit Accumulated Depreciation – Equipment for

$95,000, credit Equipment (Old) for $123,000 and credit Cash for $160,000.

B) debit Equipment (New) for $188,000, debit Accumulated Depreciation – Equipment for

$95,000, credit Equipment (Old) for $123,000, credit Cash for $154,000, and credit Gain on

Exchange of Assets for $6,000.

C) debit Equipment (New) for $188,000, debit Accumulated Depreciation – Equipment for

$95,000, debit Loss on Exchange of Assets for $28,000, credit Equipment (Old) for $123,000

and credit Cash for $188,000.

D) debit Equipment (New) for $188,000, and credit Cash for $188,000.

Question Type: Application

15) Equipment costing $120,000 has accumulated depreciation of $97,000. The equipment is a

trade-in for new equipment costing $190,000. If the trade-in value received for the old equipment

is $36,000, the journal entry to record this transaction is to:

A) debit Equipment (New) for $190,000, and credit Cash for $190,000.

B) debit Equipment (New) for $190,000, debit Accumulated Depreciation – Equipment for

$97,000, credit Equipment (Old) for $120,000 and credit Cash for $167,000.

C) debit Equipment (New) for $190,000, debit Accumulated Depreciation – Equipment for

$97,000, debit Loss on Exchange of Assets for $23,000, credit Equipment (Old) for $120,000,

credit Cash for $190,000.

D) debit Equipment (New) for $190,000, debit Accumulated Depreciation – Equipment for

$97,000, credit Gain on Exchange of Assets for $13,000, credit Equipment (Old) for $120,000

and credit Cash for $154,000.

Question Type: Application

16) Equipment costing $73,000 has accumulated depreciation of $54,000. The equipment is a

trade-in for new equipment costing $90,191. If the trade-in value received for the old equipment

is $15,000, the journal entry to record this transaction is to:

A) debit Equipment (new) $90,191, credit Cash $90,191.

B) debit Equipment (New) for $90,191, debit Accumulated Depreciation – Equipment for

$54,000, credit Equipment (Old) for $73,000 and credit Cash for $90,191.

C) debit Equipment (New) for $90,191, debit Accumulated Depreciation – Equipment for

$54,000, debit Loss on Exchange of Assets for $19,000, credit Equipment (Old) for $73,000,

credit Cash for $90,191.

D) debit Equipment (New) for $90,191, debit Accumulated Depreciation – Equipment for

$54,000, debit Loss on Exchange of Assets for $4,000, credit Equipment (Old) for $73,000 and

credit Cash for $75,191.

Question Type: Application

8.6 Account for intangible assets

1) The process of allocating the cost of intangible assets to expense is called amortization.

Question Type: Concept

2) Amortization is computed over the useful life of the intangible asset using the double–

declining-balance method.

Question Type: Concept

3) Instead of using an accumulated amortization account similar to accumulated depreciation, the

expense of amortization is directly credited to the intangible asset itself.

Question Type: Concept

4) Intangible assets have no physical form and therefore are not at risk of becoming obsolete.

Question Type: Concept

5) A patent is the exclusive right to reproduce and sell a book, musical composition, or film.

Question Type: Concept

6) Patents to produce and sell inventions are conveyed by the federal government for a period of:

A) 70 years.

B) 50 years.

C) 20 years.

D) time that is agreed upon by the company.

Question Type: Concept

period of:

A) 70 years beyond the author‘s life.

B) 50 years beyond the author‘s life.

C) 20 years.

D) a useful life that is agreed upon by the company.

Question Type: Concept

8) The slogan “Can you hear me now?” for Verizon is a protected slogan called a:

A) patent.

C) trademark.

D) brand name.

Question Type: Concept

9) Which of the following is often rendered obsolete because of technological advancements?

A) Patent

C) Franchise

D) Goodwill

Question Type: Concept

10) Nike would be an example of a:

A) trademark.

C) brand name.

D) patent.

11) The Miami Dolphins and New York Yankees are examples of:

B) trademarked teams.

C) franchised teams.

D) patented teams.

Question Type: Concept

12) Which intangible asset is recorded only when an acquiring company purchases another

company?

A) Franchise

B) Goodwill

C) Brand name

D) Trademark

Question Type: Concept

13) According to GAAP, goodwill is:

A) amortized every year.

B) recorded as a gain only when the goodwill is gaining value.

C) recorded as a loss only when the goodwill is losing value.

D) amortized like other intangible assets.

Question Type: Concept

14) Research and development costs (R&D) are generally:

A) expensed and become part of the Income Statement.

B) listed as “other intangibles” on the Balance Sheet.

C) listed as “current assets” on the Balance Sheet.

D) listed as “long-term assets” on the Balance Sheet.

Question Type: Concept

15) A patent has amortization this year of $2,300. The journal entry would be to:

A) debit amortization expense-patent, $2,300; credit Accumulated Depreciation-patent, $2,300.

B) debit accumulated amortization-patent, $2,300; credit patent, $2,300.

C) debit amortization expense-patent, $2,300; credit patent, $2,300.

D) debit accumulated amortization-patent, $2,300; credit amortization expense-patent, $2,300.

Question Type: Application

16) A manufacturer may identify its product with a unique symbol and prevent other

manufacturers from using the same symbol by obtaining a:

A) patent.

C) trademark.

D) franchise.

Question Type: Concept

17) Betta Group purchased Danio, Inc. for $960,000. The market value of Danio‘s assets and

liabilities at the time of purchase were $1,300,000 and $360,000 respectively. The journal entry

to record this will include:

A) debit to Asset accounts for $1,300,000, credit to Gain on Investments $340,000 and credit to

Cash $960,000.

B) debit to Investments for $960,000, credit to Cash $960,000.

C) debit to Investments for $1,300,000, credit to Cash $960,000 and credit to Gain on Investment

$340,000.

D) debit to Asset accounts for $1,300,000, debit to Goodwill $20,000, credit to Liabilities

$360,000 and credit to Cash $960,000.

Question Type: Application

18) Caesar Company acquired Illusions, Inc. three years ago, and the purchase included $75,000

of goodwill. Illusion’s goodwill now has a fair value of $60,000 – how would Caesar account for

this difference?

A) Goodwill is amortized – usually on a straight line basis, so the annual amortization will be

adjusted.

B) A journal entry will be made – debiting Loss on Impairment of Goodwill for $15,000 and

crediting Goodwill for $15,000.

C) The difference will be written off using an allowance account.

D) The account Goodwill will be debited for $15,000 and Loss on Goodwill will be credited for

$15,000.

Question Type: Application

19) TLR Productions pays $150,000 on January 1 to acquire a patent on a new production tool. It

is expected that this patent’s useful life will be 6 years. What will the journal entry be to record

the first year‘s amortization?

A) Debit Amortization Expense $150,000, credit Cash $150,000

B) Debit Amortization Expense $25,000, credit Accumulated Amortization $25,000

C) Debit Patents $150,000, credit Amortization $150,000

D) Debit Amortization Expense $25,000, credit Patents $25,000

Question Type: Application

8.7 Account for natural resources

1) The process of allocating the cost of natural resources to an expense is called depletion.

Question Type: Concept

2) Computing depletion expense is much like computing depreciation under the straight-line

method.

Question Type: Concept

3) In computing depletion expense, salvage value is not part of the computation.

Question Type: Concept

4) Items such as precious metals are considered natural resources.

Question Type: Concept

5) The journal entry to record depletion includes a credit to Accumulated Depletion.

Question Type: Concept

6) Juarez Mining purchased a vein of coal ore for $3,800,000. It is estimated that 30,000,000

tons of ore are available to be extracted. The estimated depletion rate for each ton of ore

(rounded to the nearest cent) is:

A) $1.30.

B) $0.13.

C) $0.12.

D) $0.14.

Question Type: Application

7) Aspen Ore purchased a vein of coal ore for $5,300,000. It is estimated that 32,000,000 tons of

ore are available to be extracted. The estimated depletion expense for this year‘s extraction of

2,790,000 tons of ore is: (Round any intermediary calculations to the nearest cent and your final

answer to the nearest dollar.)

A) $502,200.

B) $5,300,000.

C) $474,300.

D) $415,686.

Question Type: Application

8) Spring Creek Mines purchased a vein of mineral ore for $3,260,000. It is estimated that

20,000,000 tons of ore are available to be extracted. The estimated depletion expense for this

year‘s extraction of 1,770,000 tons of ore is: (Round any intermediary calculations to the nearest

cent and your final answer to the nearest dollar.)

A) $318,600.

B) $3,260,000.

C) $1,770,000.

D) $283,200.

Question Type: Application

9) Accumulated depletion is a(n):

A) contra-asset account.

B) contra-liability account.

C) expense account.

D) cash account.

Question Type: Concept

10) Cost divided by the total amount of the natural resource to be removed yields:

A) depletion expense for the period.

B) depletion rate per unit for the period.

C) accumulated rate for the period.

D) depreciation rate per unit for the period.

Question Type: Concept