Chapter 09 – Long-Term Assets: Fixed and Intangible
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DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:33 PM
81. Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or
19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year,
during which the equipment was used 2,100 hours?
a.
$19,000
b.
$21,000
c.
$22,000
d.
$30,000
ANSWER:
a
RATIONALE:
Annual Depreciation = (Cost – Residual Value) / Useful Life = ($220,000 – $30,000) /
10 = $19,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–02 – LO: 09–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:33 PM
82. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000
hours. What is the amount of depreciation for the second full year, using the double-declining-balance method?
a.
$17,500
b.
$37,500
c.
$18,750
d.
$16,667
ANSWER:
c
RATIONALE:
Double-declining-balance rate = (1 / 4) × 2 = 50%
First-year depreciation = $75,000 × 50% = $37,500
Second-year depreciation = ($75,000 – $37,500) × 50% = $18,750
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–02 – LO: 09–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
Copyright Cengage Learning. Powered by Cognero.
Page 33
85. If a fixed asset, such as a computer, were purchased on January 1 for $3,750 with an estimated life of 3 years and a
salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is
a.
Depreciation Expense 100
Accumulated Depreciation 100
b.
Depreciation Expense 1,200
Accumulated Depreciation 1,200
c.
Accumulated Depreciation 1,200
Depreciation Expense 1,200
d.
Accumulated Depreciation 100
Depreciation Expense 100
ANSWER:
a
RATIONALE:
Monthly Depreciation Expense = (Cost – Residual Value) / Useful Life = [($3,750 –
$150) / 3] / 12 = $100
Depreciation Expense $100
Accumulated Depreciation $100
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–02 – LO: 09–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:33 PM
86. The proper journal entry to purchase a computer costing $975 on account to be utilized within the business would be
a.
Office Supplies 975
Accounts Payable 975
b.
Office Equipment 975
Accounts Payable 975
c.
Office Supplies 975
Accounts Receivable 975
d.
Office Equipment 975
Accounts Receivable 975
ANSWER:
b
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–01 – LO: 09–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 40
c.
a debit to Accumulated Depletion for $175,000
d.
a credit to Accumulated Depletion for $350,000
ANSWER:
a
RATIONALE:
Depletion Rate = Cost of Resource / Estimated Total Units of Resource = $500,000 /
1,000,000 tons = $0.50
Depletion Expense = Depletion Rate × Quantity Extracted = $0.50 × 350,000 tons =
$175,000
The entry to record the depletion would include a debit to Depletion Expense for
$175,000.
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–04 – LO: 09–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:24 PM
DATE MODIFIED:
10/16/2017 5:33 PM
101. The natural resources of some companies include
a.
timber, metal ores, and minerals
b.
timber, equipment, and patents
c.
minerals, trademarks, and land
d.
metal ores, copyrights, and supplies
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–04 – LO: 09–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:24 PM
DATE MODIFIED:
10/16/2017 5:33 PM
102. The Weber Company purchased a mining site for $1,600,000 on July 1. The company expects to mine ore for the
next 10 years and anticipates that a total of 400,000 tons will be recovered. During the first year, the company extracted
6,500 tons of ore. The depletion expense is
a.
$17,500
b.
$16,000
c.
$26,000
d.
$15,000