ACC 201 Ch 7 Quiz

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2019?

double-declining-balance

Depreciation is

an effort to achieve proper matching of the cost of operating assets with related revenues

Research and development costs are

treated as an expense when incurred

Land is not depreciated because i

will provide future benefits for a company for an unlimited period of time.

Operating assets with no physical properties are called

intangible assets

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

accumulated depreciation

Which of the following is not a reason to revise the amount of depreciation expense?

permanent decline of an asset's fair market value below book value

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets, and therefore does not need to be considered in selecting an appropriate depreciation method?

current replacement cost

Assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition

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

not be amortized, but should be reviewed annually for impairment

Plant assets are depreciated because

the accrual basis of accounting requires matching of costs to revenues

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment?

$10000

A company purchased a patent for $100,000 at the beginning of the current year which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in the current year?

$20,000

A company purchased a building for $900,000 on January 1. The building is being depreciated over 40 years with an estimated residual value of $100,000. What will be the book value of the building in 10 years (assuming a December 31 year end)?

$700,000

This company purchased new excavating equipment at the beginning of 2019. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2019. The equipment was used 20,000 hours during 2019 and 24,000 hours during 2020. The number of expected hours over 5 years is 100,000.Refer to Falling Leaves Lawn Care. The company is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2019?

Double-declining-balance depreciation creates both the larger expense and the larger tax savings

This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

depreciation expense--buildings

This company purchased new excavating equipment at the beginning of 2019. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2019. The equipment was used 20,000 hours during 2019 and 24,000 hours during 2020. The number of expected hours over 5 years is 100,000.Refer to Falling Leaves Lawn Care. The company wants to use the depreciation method that will result in the highest depreciation expense for 2019. Which method should be used?

double-declining-balance

Which of the following is an intangible asset?

goodwill