Reporting and Analyzing Long-Lived Assets
135. Expenditures that maintain the operating efficiency and expected productive life of a plant
asset are generally
a. expensed when incurred.
b. capitalized as a part of the cost of the asset.
c. debited to the Accumulated Depreciation account.
d. not recorded until they become material in amount.
136. Which of the following is not true of ordinary repairs?
a. They primarily benefit the current accounting period.
b. They can be referred to as revenue expenditures.
c. They maintain the expected productive life of the asset.
d. They increase the productive capacity of the asset.
137. Additions and improvements
a. occur frequently during the ownership of a plant asset.
b. normally involve immaterial expenditures.
c. increase the company’s investment in productive facilities.
d. typically only benefit the current accounting period.
138. All of the following statements regarding impairments are true except
a. an impairment is a permanent decline in an asset's market value.
b. after an impairment write-down, depreciation is generally lower in a subsequent periods.
c. immediate recognition of impairment write-downs is now required.
d. impairments are generally recorded when the book value falls below the market value.
139. Compton Inc. made a $500 ordinary repair to a piece of equipment. Compton's
accountant debited this amount to the asset account, Equipment and credited Cash. Was
this the correct entry and if not, why not?
a. Yes, this was the correct entry.
b. No, the correct entry would be a debit to Maintenance and Repairs Expense and a
credit to Cash.
c. No, the correct entry would be a debit to Cash and a credit to Maintenance and
d. No, the correct entry would be a debit to Service Revenue and a credit to Cash.
140. Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one
of its airplanes. If Jamison's accountant expensed this amount, which of the following
statements is true?
a. The entry will improperly understate net income for the year.
b. The entry will improperly overstate net income for the year.
c. The entry is the correct treatment.
d. The entry will overstate the balance sheet for the year.