Ch. 9 Conceptual Questions

11. Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

a. Not be amortized, but should be reviewed annually for impairment

9. United Company recently acquired a new surveillance and security system for its factory. Which of the following costs associated with the system should NOT be debited to the Equipment account?

a. Replacement of several circuit boards damaged during installation

17. Which of the following generally is NOT an intangible asset

a. Research and development costs

5. Which of the following most accurately reflects the concept of depreciation as used in accounting?

a. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset

14. The units of activity method of depreciation is an appropriate method to use when

a. The productivity of the asset varies significantly from one period to another

7. Which of the following statements reflect the similarities between amortization and depreciation

a. They are both application of the matching concept

8. The following costs related to the purchase of production equipment were incurred by Wesam Company. Which of the following items is capitalized?

a. Transportation charges to deliver the equipment to Wesam Company

6. Goodwill can be recorded as an asset when:

a. A business is purchased and payment is made in excess of the fair value of the identifiable net assets

1. The balance in the Accumulated Depreciation account represents the

a. Amount charged to expense since the acquisition of the plant asset

13. When a firm purchases a long-term asset, all of the following costs are considered to be part of the cost of acquisition except

a. Annual insurance costs to protect the asset

15. A gain of loss on disposal of a fixed asset if determined by comparing the

a. Book value of the asset with the cash received for the sale

16. An expenditure made in connection with a machine being used by a company should be

a. Capitalized if it increases the quantity of units produced by the machine

18. Which of the following subsequent expenditures would be capitalized

a. Costs that increase the service life of an asset

2. Which of the following assets is NOT depreciated, depleted or amortized?

a. Goodwill

10. A major objective of Modified Accelerated Cost Recovery System (MACRS) for tax depreciation is to

a. Help companies achieve a faster write-off of their capital assets

12. Capitalizing an expenditure rather than recording it as a revenue expenditure

a. Impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period

3. Fences and parking lots are reported on the balance sheet as

a. Land Improvements

19. Compared to the straight line method, an accelerated depreciation method will cause a company to incur:

a. Less taxes in early years of the asset's use, compared to later years

4. The sale of a depreciable asset resulting in a loss indicates that the cash received from the sale were

a. Less than book value of the asset