Chapter 7 class prep Acct 2110

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? a. $0 b. $100,000 c. $5,000 d. $20,000

d $20,000

Operating assets with no physical properties are called a. intangible assets. b. plant assets. c. current assets. d. property, plant, and equipment.

a intangible assets

All intangible assets are subject to amortization.

False

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called a. depreciation expense. b. accumulated depreciation. c. accumulated amortization. d. amortization expense.

b accumulated depreciation.

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

False

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

False

Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

False

Research and Development costs should be added to the cost of patents.

False

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? a. accumulated depreciation--buildings b. depreciation expense--buildings c. land d. buildings

b depreciation expense--buildings

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure? a. Purchase price of the equipment less the cash discount b. Installation costs for equipment c. Repair and maintenance costs during the equipment's first year of service d. Transportation charges for getting the equipment delivered to the business

c Repair and maintenance costs during the equipment's first year of service