chapter 9 multiple choice accounting

Which one of the following will minimize depreciation expense in the first year of owning an asset? Entry field with correct answer A short estimated life, a high salvage value, and straight-line depreciation A long estimated life, a high salvage value, and straight-line depreciation A short estimated life, a low salvage value, and declining-balance depreciation A long estimated life, a high salvage value, and declining-balance depreciation

A long estimated life, a high salvage value, and straight-line depreciation

When the book value of a piece of equipment is less than the proceeds from the sale of that equipment, the result is a loss on disposal of plant asset. Entry field with correct answer True False

False

Harrington Corporation recently leased a number of trucks from Andre Corporation. In inspecting the books of Harrington Corporation, you notice that the trucks have not correctly been recorded as assets on Harrington's balance sheet. What type of acquisition are the trucks for Harrington? Entry field with correct answer Capital lease Purchase of trucks Operating lease Capital expenditure

Operating lease

Which of the following statements is false? Entry field with incorrect answer Goodwill is recorded only when a business is purchased. Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent. The amortization period of an intangible life can exceed 20 years. If an intangible asset has a finite life, it should be amortized.

Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty? Entry field with incorrect answer The goodwill will generate a lot of positive business for the company for many years to come. The company is a valuable company worth investing in. The company has a well-established brand name. The company purchased another company.

The company purchased another company.

Which one of these statements is true? Entry field with correct answer Goodwill should be reported as a contra account in the stockholders' equity section. Since intangible assets lack physical substance, they need to be disclosed only in the notes to the financial statements. Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements. Intangible assets are typically combined with plant assets and natural resources and then shown in the property, plant, and equipment section.

Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

With respect to plant assets, which of the following need not be disclosed in the financial statements or notes to the financial statements? Entry field with incorrect answer The balances of major classes of assets Accumulated depreciation by major classes of assets Depreciation methods used Useful life of each plant asset

Useful life of each plant asset

What is depreciation? Entry field with correct answer A cost allocation method A cash accumulation approach A valuation approach An adjustment to market value over time

a cost allocation method

A permanent decline in the market value of an asset is called Entry field with correct answer an impairment. a write-down. a disposal. a capital expenditure.

an impairment.

Which one of the following costs will not be included in the cost of equipment? Entry field with correct answer Annual insurance Testing Installation Freight

annual insurance

When using the straight-line depreciation method, which of the following is not a factor affecting the computation of depreciation? Entry field with correct answer Useful life Book value Salvage value Cost

book value

what intangibles are ammortized

copyrights and patents

Which of the following is not a way to express the useful life of a depreciable asset? Entry field with correct answer Cost of acquisition Ten thousand machine hours Five years Thirty thousand units

cost of acquisition

When there is a change in estimated depreciation Entry field with correct answer previous depreciation should be corrected. current and future years' depreciation should be revised. only future years' depreciation should be revised. new plant assets should be acquired to replace the old.

current and future years' depreciation should be revised.

Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year? Entry field with correct answer Salvage method Declining-balance Units-of-activity Straight-line

declining-balance

Book value and market value are synonymous terms as they relate to plant assets. Entry field with correct answer True False

false

Research and development costs are capitalized as intangible assets. Entry field with correct answer True False

false

The contra account to property, plant and equipment is accumulated amortization. Entry field with correct answer True False

false

Which of the following is not a depreciable asset? Entry field with correct answer Equipment Land Land improvements Buildings

land

Which one of the following is not a depreciable asset? Entry field with correct answer Equipment Buildings Driveways Land

land

Which of the following costs should not be included in the cost of a building? Entry field with correct answer Parking lot repaving Closing costs Broker's commission Remodeling of office space prior to use

parking lot repaving

Which of the following gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years? Entry field with correct answer License Patent Copyright Trademark

patent

examples of intagible assets

patents, copyrights, and goodwill

When a plant asset is retired, the difference between original cost and the book value of the asset is Entry field with incorrect answer subtracted from the Accumulated Depreciation account. an increase to cash. recognized on the income statement as a loss on disposal of plant asset. debited to the Sale of Plant Assets account.

recognized on the income statement as a loss on disposal of plant asset.

Which statement is true about additions to plant assets? Entry field with correct answer They are capitalized. They increase the Purchases account. They are revenue expenditures. They increase a Repair Expense account.

they are capitalized

Closing costs incurred to purchase a tract of land are included in the cost of the land. Entry field with correct answer True False

true

Expenditures to maintain the operating efficiency and expected productive life of the unit are expensed as incurred. Entry field with correct answer True False

true

Land improvements are depreciable assets. Entry field with correct answer True False

true