accounting

KPR, Incorporated just purchased a plot of land on which it expects to build a new manufacturing facility. The Land account will not include: closing costs such as attorney fees and recording fees. All of these costs will be included in the Land account the cost to clear, fill, and level the land. appraisal fees.

All of these costs will be included in the Land account

Which of the following is an example of an intangible asset? Natural gas deposits of an energy company Patents of a drug manufacturer Computer inventory of a software company Forest land owned by a furniture company

Patents of a drug manufacturer

On January 1, Year 1, a company purchases a machine for $18,000. The estimated residual value is $6,000, and the estimated service life is 8 years or 30,000 units. After three years of use, the company estimates the remaining service life of the machine to be nine years rather than the original eight. Using the straight-line method, calculate the amount of depreciation for Year 4. $2,250 $1,250 $1,333 $1,500

$1,250

On January 1, Year 1, a company purchases a machine for $18,000. The estimated residual value is $6,000, and the estimated service life is 8 years or 30,000 units. Using the straight-line method, calculate the amount of depreciation for Year 2. $1,500 $750 $2,250 $400

$1,500

A company pays $5,000 for equipment. Annual depreciation on the equipment is $500. What is the book value of the equipment at the end of Year 2? $1,000 $4,000 $4,500 $5,000

$4,000

Windsor Hospital purchases $90,000 in surgical equipment on October 1, Year 1. The useful life is estimated to be 5 years, and the residual value is estimated to be $10,000. What will be the depreciation expense reported for this equipment in Year 1 if the hospital uses the straight-line method? $4,000 $2,667 $8,000 $16,000

$4,000

Cafe Italiano pays $70,000 for the trademark rights to a line of specialty sandwiches. After several years, sales for this line of specialty sandwiches are disappointing, and management estimates the total future cash flows from sales will be only $40,000. The estimated fair value of the trademark is now $20,000. What is the amount of the impairment loss? $50,000 $10,000 $0 $30,000

$50,000

A company purchases a machine for $10,000. The estimated residual value is $4,000, and the estimated service life is 4 years or 10,000 units. The company uses the straight-line method of depreciation. The depreciable cost of the asset is: $1,000 $10,000 $6,000 $1,500

$6,000

Anderson Company acquires Thompson Company by paying $30 million in cash. The fair value of the identifiable assets acquired is $38 million. The fair value of the identifiable liabilities acquired is $6 million. What will be the amount of goodwill that Anderson Company would record as part of this acquisition?

0

Indus Corporation pays $100,000 for the trademark rights to a line of soda equipment. After several years, sales for this line of soda equipment are disappointing, and the company estimates the total future cash flows from sales will be only $110,000. The estimated fair value of the trademark is now $60,000. What is the amount of the impairment loss to be recorded?

0

The legal life of a patent is _____ years. 10 2 20 5

20 years

Prime, Incorporated, purchases $100,000 in construction machinery on January 1, Year 1. The useful life is estimated to be 8 years, and the residual value is estimated to be $20,000. What will be the depreciation rate if the company uses the double-declining-balance method? 12.5% 25% 20% 40%

25%

Light Company acquires Photon Company by paying $25 million in cash. The fair value of the identifiable assets acquired is $30 million. The fair value of the identifiable liabilities acquired is $8 million. What will be the amount of goodwill that Light Company would record as part of this acquisition?

3 million

Industrial Metals purchases land, building, and equipment together for $1.2 million. The estimated fair values of the land, buildings, and equipment are $500,000, $800,000, and $200,000, respectively. What amount should be recorded in the separate account for the land? $500,000 $350,000 $650,000 $400,000

400,000

On January 1, Year 1, Toy Factory purchases a patent for a printing process for $40,000. The original legal life of the patent was 10 years, and there are 8 years remaining. However, due to expected technological obsolescence, the company estimates that the useful life of the patent is only 5 more years. What will be the amortization expense for the patent in Year 1?

8,000

A trademark is: an exclusive right to manufacture a product or to use a process. a word, slogan, or symbol that distinctively identifies a company, product, or service. the difference between the purchase price and fair value of net assets acquired. an exclusive right of protection given to the creator of a published work.

a word, slogan, or symbol that distinctively identifies a company, product, or service.

The owner of an established McDonald's franchise pays fees on a continuing basis to the franchisor. These periodic payments should be capitalized as an intangible asset.

false - the initial fee to establish the franchise is capitalized as a intangible asset while additional periodic payments are expensed as incurred

When a firm develops a trademark internally through advertising, it records the advertising costs as part of the cost of the intangible asset.

false - they expense it

A profit margin of 10% indicates that: for every $1 in net income, the company generates $0.90 in net sales. for every $1 in net sales, the company generates $0.90 in net income. for every $1 in net sales, the company generates $0.10 in net income. for every $1 in net income, the company generates $0.10 in net sales.

for every $1 in net sales, the company generates $0.10 in net income.

Which of the following is not an example of a tangible asset? Manufacturing equipment Franchise rights Copy machine Office building

franchise rights

To maximize profitability, companies seek to achieve: high profit margin and high asset turnover low profit margin and low asset turnover. low profit margin and high asset turnover. high profit margin and low asset turnover.

high profit margin and high asset turnover.

An attorney adds an air purification system to his office building. The addition does not increase future benefits and should be capitalized. increases future benefits and should be capitalized. does not increase future benefits and should be expensed. increases future benefits and should be expensed.

increases future benefits and should be capitalized.

Accumulated Depreciation: is an asset and has a normal debit balance is a contra asset and has a normal debit balance is an asset and has a normal credit balance is a contra asset and has a normal credit balanc

is a contra asset and has a normal credit balance

We record goodwill as an intangible asset in the balance sheet only when _____. we make an acquisition at a price below the fair value of net assets it is internally generated it is part of an acquisition of another business it is more than 50 percent of assets

it is part of an acquisition of another business

Which of the following accounts are affected when recording the expense related to the portion of a patent that expired during the year?

patents and amortization expense

The amount a company expects to receive from selling a long-term asset at the end of its service life is known as: residual value. depreciable cost. accumulated depreciation. book value.

residual value

Prime, Incorporated, purchases $100,000 in construction machinery on January 1, Year 1. The useful life is estimated to be 8 years, and the residual value is estimated to be $20,000. If the company uses the double-declining-balance method, the asset will reach its residual value in the ____ year. seventh eighth sixth fifth

sixth

The method that allocates an equal amount of depreciation to each year of an asset's service life is: declining balance. straight-line. activity-based. double-declining balance.

straight line

The research and development (R&D) team at a pharmaceutical company is developing a drug for colon cancer. Which of the following is true of the R&D costs incurred in developing this drug during the current year? They are expensed directly in the income statement. They are expensed in the period in which benefits from R&D accrue. They are treated in the same manner as intangible assets that are purchased. They are recorded as an intangible asset in the balance sheet.

They are expensed directly in the income statement.

An automobile manufacturer replaces a major component of a machine used in its assembly line. This cost should be expensed in the current period.

false - capitalized

The exclusive right of protection given to the creator of a published work is known as a patent.

false - copyright

The journal entry to record annual depreciation for equipment includes a: credit to Equipment debit to Depreciation Expense debit to Accumulated Depreciation credit to Cash

debit to Depreciation Expense

As natural resources are used, their cost is allocated to an expense through a process known as _____________. depletion amortization depreciation impairment

depletion

Depreciation is the process of allocating the cost of an asset to a(n) _________ over its service life. intangible asset liability expense revenue

expense

A company writes down a particular trademark because of impairment. In future years, it finds that the fair value of the trademark has actually increased to the original book value. The company should write this amount back to the book value.

false

Although the straight-line method of depreciation is the simplest to calculate, it is the least commonly used.

false

Kelly Cakes Bakery purchases a new building to use for its baking operations. In addition to the purchase price, the acquisition requires the company owner to pay a commission to a realtor and fees to an attorney. The realtor commissions and legal fees will be expensed in the current period.

false

On January 1, Year 1, a company purchases a long-term asset having a service life of ten years. In comparing the straight-line and double-declining-balance methods, the method that produces higher depreciation expense in Year 1 of the asset's life is the straight-line method.

false

The cost of ordinary repairs to equipment during the first year of service is added to the Equipment account.

false

The double-declining-balance method produces a higher net income than the straight-line method in the earlier years of an asset's life.

false

When a change in depreciation estimate is required, the company adjusts depreciation in prior periods

false

A company pays $16,000 in property taxes on land that it acquired ten years ago. The property taxes pertain only to the current year. The company should record the property taxes as an expense in its current-year income statement.

true

A long-term asset is reported on the balance sheet at its original cost plus all expenditures necessary to get the asset ready for use.

true

Goodwill has an indefinite useful life.

true

Repairs and maintenance expenditures that benefit future periods are capitalized as an asset.

true

The cost of an oil change for a company's delivery truck is expensed in the current period.

true

The impairment entry reduces both net income in the income statement and total assets in the balance sheet by the amount of the impairment loss.

true

The service life of an asset can be measured in units of time (such as years) or in units of activity (such as miles driven).

true

We record purchased intangible assets at their original cost plus all other costs, such as legal fees, necessary to get the assets ready for use.

true

When an expenditure is not large enough to influence a decision, it is typically recorded as an expense regardless of its expected period of benefit.

true

land has an unlimited useful life. True or false?

true

We do not amortize intangible assets _____. with negligible salvage value with indefinite useful lives that might become obsolete that are acquired from other companies

with indefinite useful lives