ACCT exam #3

A company purchased a delivery truck on January 1, 2024, for $65,000. The truck has an estimated life of 10 years and an estimated residual value of $5,000. If the company uses straight-line depreciation, what would be the book value after four years?

41,000

Kansas Enterprises purchased equipment for $74,500 on January 1, 2024. The equipment is expected to have a ten-year service life, with a residual value of $7,650 at the end of ten years. Using the straight-line method, depreciation expense for 2024 would be:

6,685

The balance sheet of Cattleman's Steakhouse shows assets of $85,900 and liabilities of $15,300. The fair value of the assets is $89,700 and the fair value of its liabilities is $15,300. Longhorn paid Cattleman's $82,820 to acquire all of its assets and liabilities. Longhorn should report goodwill on this purchase of:

8420

Which of the following amortization methods is most commonly used?

Straight-line

With the straight-line depreciation method, we allocate an equal amount of the depreciable cost to each year of the asset's service life

True

What is impairment loss?

Tthe amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount

Which of the following subsequent expenditures would not be capitalized?

Unsuccessful legal defense of intangible assets

Which of the following intangible assets is not amortized?

Goodwill

Which of the following is true concerning goodwill?

Goodwill is reported by the acquiring company for the amount that the purchase price exceeds the fair value of the acquired company's identifiable net assets

Accounting for impairment losses:

Involves a two-step process to first test for impairment and then record the loss

Which one of the following statements regarding the book value of an asset is correct?

It reflects the original cost of the asset less accumulated depreciation

Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000. What is the amount of the gain or loss to be recorded on the sale of equipment?

Loss of 5k

The cost of an engine tune-up is an example of which of the following expenditures after acquisition?

Ordinary repairs and maintenance

Which of the following subsequent expenditures would not be capitalized?

Ordinary repairs and maintenance

What is the straight line method?

Purchase cost - Salvage cost / Useful life assumption

Impairment occurs when:

A long-term asset's book value exceeds the expected future cash flows generated for that asset

Which of the following is a contra asset account?

Accumulated depreciation

The purchase of a new cooling system for $150,000 to upgrade an office building owned by the company would be accounted for as:

An addition in the Buildings account

Which of the following subsequent expenditures would be capitalized?

Costs that increase the service life of an asset

Nearly all research and development costs should be:

Expensed in the period incurred

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation, while maintaining the original cost of each asset in the accounting records

True

The depreciable cost used in calculating depreciation expense is:

The asset's cost minus its estimated residual value

When a company reports a gain on the sale of a depreciable asset, which of the following is always true?

The company sold the asset for more than its book value

Losses on the sale of long-term assets for cash are:

The excess of the book value over the cash received

Goodwill is:

The value of a company as a whole, over and above the value of its net identifiable assets

Most companies use straight-line amortization for intangibles and credit the amount of amortization to the intangible asset account itself rather than to Accumulated Amortization

True

Straight-line depreciation assumes that the benefits we derive from the use of an asset are the same each year.

True