Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
9) A coal mine cost $1,003,000 and is estimated to hold 54,000 tons of coal. There is no residual value.
During the first year of operations, 11,000 tons are extracted and sold. Calculate depletion expense for the
first year. (Round any intermediate calculations to the nearest cent.)
A) $100,300
B) $150,450
C) $200,600
D) $204,270
10) National Mining Corp. purchased a mine, which holds an estimated 36,000 tons of iron ore, on
January 1, 2018, for $526,000. The mine is expected to have zero residual value. The business extracted
and sold 7500 tons of ore in 2018 and 15,800 tons of ore in 2019. What is the depletion expense for 2018?
(Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $230,838
B) $109,575
C) $194,838
D) $416,385
11) Cameron Corp. purchased a mine on January 1, 2018, for $530,000, which is estimated to contain
35,000 tons of iron ore. There is no residual value. The business extracted and sold 7500 tons of ore in
2018 and 10,800 tons of ore in 2019. What is the depletion expense for 2019?(Round any intermediate
calculations to two decimal places, and your final answer to the nearest dollar.)
A) $113,550
B) $277,062
C) $163,512
D) $252,838
12) O'Keith Corp. purchased a mine on January 1, 2018, for $500,000. The mine is estimated to contain
40,000 tons of iron ore. There is no residual value. The business extracted and sold 8500 tons of ore in
2018 and 11,800 tons of ore in 2019. What is the book value of the mine at the end of 2019? (Round any
intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $420,000
B) $246,250
C) $350,000
D) $500,000
13) MacMann Corp. purchased a mine on January 1, 2018, for $500,000. The mine is estimated to contain
30,000 tons of iron ore. There is no residual value. The business has extracted and sold 2,500 tons of ore in
2018. Prepare the journal entry to record depletion expense for 2018. (Round your intermediate
calculations to the nearest cent.) Omit explanation.
14) Brentwood Corp. purchased a mine in 2018 for $500,000 and estimated that 30,000 tons of iron ore
could be extracted from it. There was no residual value. The business extracted and sold 2,500 tons of ore
in 2018. How will the mine be reported on the balance sheet at the end of year 2018? (Round all
intermediate calculations to the nearest cent.) Omit explanation.
54
Copyright © 2018 Pearson Education, Inc.
Learning Objective 9-5
1) An intangible asset is an asset with no physical form that is valuable because of the special rights it
carries.
2) The intellectual property of a business is easy to measure.
3) Intangible assets ______.
A) represent assets for which the market value cannot be determined
B) are not recorded in the books because they have no physical substance
C) convey special rights from patents, copyrights, trademarks, and other creative works
D) All of the statements are correct.
4) Impairment of an intangible asset occurs when the book value of an asset is less than the fair value.
5) Amortization is the process by which businesses spread the allocation of an intangible asset's cost to
expense over its useful life.
6) Intangibles with an indefinite life are tested for impairment annually.
7) Regarding impairment of intangible assets, which of the following statements is incorrect?
A) Impairment occurs when the fair value of an intangible asset is less than the book value.
B) Intangible assets are impaired when there has been a permanent decline in the value of the asset.
C) Intangible assets with an indefinite life are tested for impairment annually.
D) If any impairment occurs, the company records a loss in the period in which the intangible asset was
acquired.
8) Intangible assets ________.
A) always have a definite life
B) are recorded at cost when purchased externally
C) are always expensed through amortization
D) do not include goodwill
9) A patent is an exclusive right to reproduce and sell a book, musical composition, film, other work of
art, or intellectual property.
10) Goodwill is the excess cost of an acquired company over the market value of its net assets.
11) A trademark represents the exclusive right to reproduce and sell a book, musical composition, film,
other work of art, or intellectual property.
12) Franchises are privileges granted by a business to sell goods and services under specified conditions.
13) All intangible assets must be amortized each year.
57
Copyright © 2018 Pearson Education, Inc.
14) According to Generally Accepted Accounting Principles, if the fair value of goodwill decreases below
its book value, an impairment loss must be recorded.
15) A trademark should not be amortized over its useful life.
16) According to Generally Accepted Accounting Principles, goodwill must be amortized.
17) Goodwill is only recorded by an acquiring company when it purchases another company and pays
more for that company than the market value of its net assets.
18) Which of the following is an intangible asset?
A) copyright
B) building
C) land
D) equipment
58
Copyright © 2018 Pearson Education, Inc.
19) Which of the following statements about franchises is correct?
A) Franchises are privileges granted by a government to use public property in performing services.
B) The acquisition cost of a franchise is always amortized over its legal life.
C) Franchises are privileges granted by a business to sell goods or services under specified conditions.
D) The acquisition cost of a franchise cannot be amortized because its useful life cannot be determined.
20) Which of the following represents a privilege granted by a government to use public property in
performing services?
A) goodwill
B) license
C) franchise
D) trademark
21) Which of the following is an asset that represents distinctive identifications of a product or service?
A) license
B) copyright
C) franchise
D) trademark
22) Businesses record goodwill ________.
A) when they enjoy an outstanding reputation and loyalty with customers
B) if they acquire another company at an amount higher than the market value of its net assets
C) when they continue the business of an acquired corporation
D) if their market value has increased significantly in the recent years
23) Which of the following items should be amortized?
A) natural resources
B) goodwill
C) patents, copyrights, trademarks
D) tangible property, plant, and equipment, other than land
24) Which of the following accounting methods is generally used to compute amortization expense?
A) declining-balance
B) units-of-production
C) straight-line
D) first-in, first-out
25) Routing Solutions paid $210,000 to acquire Tabletz, Inc., an electronic gadget-advertising website. At
the time of the acquisition, Tabletz's balance sheet reported total assets of $210,000 and liabilities of
$105,000. The fair market value of Tabletz's assets was $210,000. The fair market value of its liabilities was
$105,000. How much goodwill did Routing Solutions purchase as part of the acquisition of Tabletz?
A) $210,000
B) $52,500
C) $105,000
D) $157,500
26) In 2018, a corporation purchased a small business for $250,000. The market value of the small
business's assets was $400,000, and the market value of the liabilities was $200,000. The corporation
recorded goodwill of $50,000 at the time of acquisition. At the end of 2019, it measured goodwill and
found it had a remaining fair value of only $20,000. At year-end 2019, the corporation will ________.
A) record a loss on sale of assets
B) record an impairment loss
C) record accumulated depletion
D) record a gain in goodwill
27) Which of the following is true of goodwill?
A) Goodwill must be capitalized when acquired and amortized over seven years or less.
B) Both created and acquired goodwill must be recorded in the books.
C) Goodwill must be expensed when acquired.
D) Goodwill is not amortized.
