Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 41
ANSWER:
c
RATIONALE:
Depletion Rate = Cost of Resource / Estimated Total Units of Resource = $1,600,000 /
400,000 = $4
Depletion Expense = Depletion Rate × Quantity Extracted = $4 × 6,500 tons =
$26,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
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
103. Expenditures for research and development are generally recorded as
a.
current operating expenses
b.
assets and amortized over their estimated useful life
c.
assets and amortized over 40 years
d.
current assets
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–05 – LO: 09–05
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
104. The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible
assets is
a.
b.
c.
d.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 43
a.
goodwill
b.
a patent
c.
a trademark
d.
a copyright
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–05 – LO: 09–05
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
108. The process of transferring the cost of an asset to an expense account is called all of the following except
a.
b.
c.
d.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–02 – LO: 09–02
FNMN.WAJO.19.09–04 – LO: 09–04
FNMN.WAJO.19.09–05 – LO: 09–05
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
109. Fixed assets are ordinarily presented on the balance sheet
a.
at current market values
b.
at replacement costs
c.
at cost less accumulated depreciation
d.
in a separate section along with intangible assets
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Copyright Cengage Learning. Powered by Cognero.
Page 45
112. Which of the following statements is true?
a.
A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller
fixed asset investments.
b.
The fixed asset ratio cannot be compared across time for an individual company.
c.
A smaller fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller
fixed asset investments.
d.
The fixed asset ratio is not useful for comparing different companies.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–07 – LO: 09–07
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
113. Newport Company has sales of $2,025,000 for the current year. The book value of its fixed assets at the beginning of
the year was $550,000 and at the end of the year was $800,000. The fixed asset turnover ratio for Newport is
a.
3.0
b.
3.6
c.
3.7
d.
2.5
ANSWER:
a
RATIONALE:
Fixed Asset Turnover Ratio = Sales / Average Book Value of Fixed Assets =
$2,025,000 / [($550,000 + $800,000) / 2)] = 3
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–07 – LO: 09–07
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
114. A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at
$60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at
what cost will the new equipment be recorded in the books?
a.
$54,000
b.
$59,500
Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 46
c.
$60,000
d.
$60,500
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Applying
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09-APP – LO: 09-APP
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
115. A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at
$50,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,000,at what
cost will the new equipment be recorded in the books?
a.
$54,000
b.
$45,000
c.
$51,000
d.
$50,000
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Applying
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09-APP – LO: 09-APP
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
116. A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at
$60,000. Assuming a trade–in allowance of $3,000, the recognized loss on the trade is
a.
$3,000
b.
$4,500
c.
$500
d.
$1,500
ANSWER:
d
RATIONALE:
Loss on exchange = Trade-in allowance – Book value of asset = $3,000 – ($41,000 –
$36,500) = $1,500
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 49
transaction would be recorded with which of the following entries (assuming the exchange was considered to have
commercial substance)?
a.
debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Exchange of Machinery
b.
debit Machinery and Accumulated Depreciation; credit Machinery and Cash
c.
debit Cash and Machinery; credit Accumulated Depreciation
d.
debit Cash and Machinery; credit Accumulated Depreciation and Machinery
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09-APP – LO: 09-APP
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
122. When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction
would be recorded with which of the following entries?
a.
debit Machinery and Accumulated Depreciation; credit Machinery and Cash
b.
debit Cash and Machinery; credit Accumulated Depreciation
c.
debit Cash and Machinery; credit Accumulated Depreciation and Machinery
d.
debit Machinery, Accumulated Depreciation, and Loss on Exchange of Machinery; credit Machinery and Cash
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09-APP – LO: 09-APP
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
123. On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost
of $310,000 and has accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year.
Which of the following will be included in the entry to record the disposal?
a.
Accumulated Depreciation, debit, $310,000
b.
Loss on Disposal of Asset; debit, $260,000
c.
Equipment, credit, $310,000
d.
Gain on Disposal of Asset, credit, $50,000
ANSWER:
c