ACC 201 Chapter 9 LearnSmart

Construction in progress is reported as a(n) _____.

asset on the balance sheet

Accountants say costs have been _____ when they are recorded as assets rather than expense.

capitalized

Sunny Skys, Inc. bought a derelict hunting lodge, which it tore down at a cost of $45,000 and replaced with a new lodge. The demolition cost should be _____.

capitalized

When recording losses on the sale of fixed assets, the account, Loss on Disposal, is increased with a

debit

The journal entry to record the amortization of an intangible asset includes a _____.

debit to amortization expense

An asset's useful life _____.

may be expressed in terms of time of units of capacity

The declining-balance depreciation method assigns _____ depreciation expense to the early years of asset ownership.

more

Mia Hero Shop sold its table with a book value of $1,000 for $800. Mia Hero will record:

a loss on the sale

Similar to depreciation, _____ is the expensing of intangible asset's usefulness used during the accounting period.

amortization

If a cost is capitalized it is recorded as an _____, not an expense.

asset

GAAP requires that assets be reviewed for impairment _____.

at least once a year

Another term for long lived assets is _____ assents and is found on the financial statement called the _____.

fixed; balance sheet

A company may make an exception to the accounting rules and not capitalize on a long-lived asset if its cost is _____.

immaterial

Morris Inc, sold its delivery truck for $500 more than its book value. The sale will result in an _____.

increase in Net Income on the Income Statement

In the case of basket purchases, the cost of the land and building is _____.

split in proportion to the market value of the assets as a whole

(Cost-residual value)x(1/useful life) is the formula for calculating the

straight-line method of depreciation

There are two major types of long lived assets:

tangible and intangible

Deferred Income Tax reports the amount of taxes _____.

that will eventually be paid

Which of the following costs associated with long-lived assets are expensed, not capitalized?

-Ordinary repairs and maintenance -Immaterial repairs and maintenance

if an intangible asset is being self-constructed or internally developed its costs are generally debited to _____.

Research and Development Expense

Why can depreciation expense be a different amount each year using the units-of-production method?

The method calculates expense based on the relationship between each year's output and total estimated output.

Which of these are natural resources that are depleted over time?

Timber; Natural gas wells

The entry to record annual straight-line depreciation will increase a company's _____ and _____.

Total expenses; Accumulated depreciation

An asset's useful life is based on the _____.

professional judgement

Which of these depreciation methods are allowed by GAAP?

-Straight-Line -Units-of-production -Declining-balance

The notes in the annual report, which follow the financial statements, should be reviewed to determine whether a company that follows IFRS chose to record its tangible and intangible assets at historical _____ or _____ value.

cost; fair

X circle company purchased a computer system Black Box, Inc. with a list price of $100,000 plus 5% sales tax. The cost to deliver and install the computer was $10,000. The debit to Equipment equals _____.

$115,000

Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. The cash register's depreciable cost equals _____.

$2,300

On January 1, 2018, Busy Beaver bought a new industrial lathe for $210,000. It expects to use the lathe for 10,000 hours over the next 5 years and then sell it for $10,000. Busy Beaver used the lathe for 2,000 hours in 2018 and 2,500 hours in 2019. Accumulated Depreciation at December 31, 2019, using units-of-production, equals _____.

$90,000

What is the formula for calculating double-declining-balance depreciation?

(Cost- Accumulated depreciation) x (2/useful life)

On January 1, 2018, We-Haul sold its truck for $40,000. The truck's cost was $110,000 and its Accumulated Depreciation was $60,000. The effect the sale of the truck on the accounting equation includes a _____.

-$10,000 decrease to stockholders equity -$10,000 decrease to total assets

Busy Beaver, Inc. signed a $315,000, 5-year note payable to buy a new industrial veneer cutter. Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs. The journal entry to record this transaction will include a ____.

-$320,750 debit to Machinery -$315,000 credit to Note Payable -$5,750 credit to Cash

Shenandoah Skies bought land to be used for a new ski resort. Which of the following of expenditures made by Shenandoah Skies should be capitalized?

-$5,000 paid to Jack Mogul for a title search -$50,000 paid to cut down timber to make way for ski runs -$5,000,000 to purchase the land

Vango, Inc. bought a new delivery van during the year. which of these costs should be expensed as ordinary repairs and maintenance.

-$900 for cleaning the van during the year -$100 oil change on van

Which of the following result in an increase to intangible assets?

-A company purchased a franchise for $100,000 -A company purchased another company for $10,000 more than its net assets -$10,000 was spent to purchase a patent

If management was to unethically capitalize costs that should not have been, which of the following would be misstated?

-Assets would be overstated -Stockholders' equity equity would be overstated

Potients, Inc. amortizes its patents over ten years. The entry to record the amortization of its patent may include a _____.

-Debit to Amortization Expense -Credit to Patents (or Accumulated Amortization)

Lox, Stock and Bagel, Inc. buys Cream Cheesery, Inc. for $1,000,000 cash. Cream Cheesery's net assets are valued at $800,000 at the time of the sale. Lox, Stock, Bagel, Inc. should record a(n) _____.

-Decrease to Cash of $1,000,000 -Increase to Goodwill of $200,000

Executives at WorldCom committed an $11 billion fraud by capitalizing costs that should have been expensed. What was the effect of this fraud on WorldCom's income statement?

-Expenses were too low -Net income was too high

Which of the following may lead to a revision of an estimate of a company's depreciation expense?

-Extraordinary repairs that significantly extend the asset's usefulness -A change in the estimated useful life -A change in the estimated residual value

Which of the following financial statement totals are reduced by the adjusting entry to record amortization?

-Net income on the income statement -Total assets on the balance sheet -Total stockholder's equity on the balance sheet

Why might a company dispose of a long-lived tangible asset?

-The asset was seriously damaged -The asset is replaced with a newer, more efficient model -The asset has reached the end of its useful life -The company doesn't need the asset anymore

Land improvements reported on a company's balance sheet might include _____.

-Trees planted for shade -Sidewalks outside -The fence

The asset's book value (or cost minus accumulated depreciation) must equal its residual value at the end of its useful life using which depreciation methods?

-Units-of-production -Straight-line -Double-declining-balance

Technology assets include _____.

-Web development work -Software

Which of the following statements are true? At the end of an assets useful life its _____.

-book (or carrying) value will equal the asset's residual value -Accumulated Depreciation will equal the asset's depreciable cost

Which account is credited in a journal entry to record depreciation on machinery?

Accumulated depreciation

On which financial statement are the line items reported?

Depreciation Expense - Income Statement Accumulated Depreciation - Balance Sheet

Which of the following is a long lived asset?

Land on which to build a new store

Which of these assets are not depreciated?

Land; cash; inventory

On October 21,2018, x it company bought a new delivery truck for 30,000. in calculating depreciation

November 1

Match each depreciation method with the applicable description.

Straight-line depreciation - does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life. Units-of-production depreciation - is the best method to use when the amount of an asset's use varies significantly from one accounting period to another. Declining-balance depreciation - is the best method to use when an asset is productive in its earliest years but quickly loses its usefulness.

An asset's cost minus accumulated depreciation is its _____ value.

book

Extraordinary repairs to long-lived assets are _____ because they are large expenditures and increase the useful life of the asset.

capitalized

Depreciation Expense of a long-lived asset calculated using the straight-line depreciation method will be a _____ amount each year.

constant

Recording depreciation is an application of the _____.

expense recognition (matching) principle

Intangible assets are _____.

long-lived assets with no physical substance

The estimated amount a long-lived asset is expected to be sold for at the end of its useful life is the _____ value.

residual