Accounting 131 Ch 7 Pre-Test

Three items of information are necessary in order to measure depreciation. Which of the following is not one of these three items?

The fair market value of the fixed asset

While a company will choose between the three depreciation methods as it prepares its financial statements, the depreciation method used in preparing the tax return is specified by:

The internal revenue code

Depreciation methods are the standardized calculations required to determine periodic depreciation. Of the following methods, which is the most commonly used depreciation method?

Straight-Line

An example of a natural resource is:

A coal Deposit

The cost principle requires that a company record its Fixed Assets at:

Historical Cost

Expenditures that do not increase the future economic benefits of the fixed asset are called:

Revenue expenditures

Investors are concerned with the condition and age of a company's Fixed Assets. Which of the following would help an investor estimate the average age of a company's Fixed Assets?

Accumulated depreciation expense

The disposal of a Fixed Assets may result in a gain or loss on disposal. Which of the following would be part of the entry to record a gain on the disposal of a fixed asset?

Accunulated depreciation is debited

The cost of an intangible asset with a finite life, like a tangible asset, is allocated to accounting periods over the life of the asset. This process is referred to as:

Amortization

Intangible assets are recorded at:

Any expenditure necessary to acquire the asset and to prepare the asset for use.

Fixed Assets are usually disposed of voluntarily. However, disposition may also be involuntary. Voluntary disposal occurs when:

Assets are sold at auction

The amount of depreciation expense recorded each period is reported on the income statement. Accumulated depreciation represents the total amount of depreciation expense that has been recorded for the asset since the asset was acquired. On which financial statement is accumulated depreciation reported and how is the account classified?

Balance Sheet as a Contra-Asset

Which of the following is an tangible asset?

Building

Which of the following assets is not an intangible asset?

Computer Equipment

Which depreciation method is classified as an accelerated depreciation method?

Declining Balance

As the service potential of operating assets decline, the costs of these assets are allocated to an expense for the accounting periods in which the assets are used. The allocation for property, plant, and equipment assets is called:

Deoreciation

As a natural resources is removed from the earth, the cost of the natural resource is allocated to each unit of natural resource removed. This process of allocation is called:

Depletion

Which of the following ratios measures how efficiently a company is using its Fixed Assets?

Fixed Asset Turnover Ratio

When the fair value of an asset falls significantly below the book value of the asset and this decline is a permanent decline, the asset is said to be

Impaired

Operating assets are long-lived assets. Which of the following is not an operating asset?

Inventory

Which of the following statements is true about accounting for land?

Land has an unlimited life

An impairment of an asset is a permanent decline in the future benefit or service potential of the asset. The impairment may be due to which of the following?

Too Little depreciation expense being recorded in previous years

Companies must decide if an expenditure should be capitalized (added to the asset amount) or expensed (reported on the income statement). Which of the following is a capital expenditure?

an overhaul of a truck engine that will extend the useful life of the truck