Accounting exam 4--Chapter 7

on the balance sheet, the cumulative amount of depreciation expense recognized to date on a fixed asset is called:

accumulated depreciation

butler corporation uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. which depreciation method is most appropriate to measure the decline in the usefulness of the company's assets?

double-declining-balance method

the depreciation method that does not use salvage value in calculating the first year's depreciation expense is:

double-declining-balance method

how should intangible assets be disclosed on the balance sheet?

net of the costs already amortized

according to accounting standards, the costs of intangible assets with an indefinite life, such as goodwill, should:

not be amortized, but should be reviewed annually for impairment

cash paid to purchase significant amounts of fixed assets would be reported in the statement of cash flows in:

the cash flows from investing activities section

if a company's fixed asset turnover ratio decreased from 2010 to 2011, what conclusion could be made?

the company produced less sales in 2011 for each dollar invested in fixed assets compare to 2010

depreciation is the process by which:

the cost of plant and equipment is allocated to expense over its useful life

using different depreciation methods for book purposes versus tax purposes for the same asset is:

the direct result of the differing goals of financial and tax accounting

depreciation is:

the process of systematically and rationally allocating the cost of a fixed asset over its useful life

a capital expenditure results in a debit to:

an asset account

a company should choose a depreciation method that:

best allocates the original cost of the asset to the periods benefitted by the use of the asset

goodwill can be recorded as an asset when a(n):

business is purchased and payment is made in excess of the value of the net assets

expenditures that increase the expected useful life or productivity of the assets are:

capital expenditures

resources that are used in operations more than one year with no physical substance are called:

intangible assets

if technology changes rapidly, a firm should:

consider an accelerated rate of depreciation

what are needed for the calculation of straight-line depreciation?

cost useful life salvage value

the effect of recording depreciation for the year is a(n):

decrease in assets and a decrease in net income

Arnold inc. purchased a truck on Janurary 1, 2009, for $40,000. the truck had an estimated salvage value of $5,000. Arnold inc. used the straight line method to depreciate the asset. on july 1, 2012, the truck was sold for $7,000 cash. the journal entry to record the sale of the truck in 2012:

decreases equity

assets classified as property plant and equipment are reported at:

each asset's original cost less depreciation since acquisition

which of the following is an intangible asset? oil goodwill retained earnings land

goodwill

capitalizing an expenditure rather than recording it as a revenue expenditure:

impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period

what is included in the cost of constructing a building?

insurance cost during construction

a company purchases equipment for $32,000 cash. this transaction should be shown on the statement of cash flows under:

investing activities

a disposal of a used delivery truck is a transaction shown on the statement of cash flows under:

investing activities

cash flows from acquiring and disposing of long-term assets are classified as:

investing activities

Fisher apartments purchased an apartment building to rent to university students on December 15, 2011. the tenants moved in on January 1, 2012. on super bowl Sunday, a student punched a hole in the wall when his favorite team fumbled the ball. it cost the landlord $400 to repair the hole. how should this cost be recorded?

it should be recorded as repaid and maintenance expense

land is not depreciated because:

it will provide future benefits for the company for an unlimited period of time

which balance sheet section is most affected by investing activities?

long-term assets

using the straight-line depreciation method will cause a company to incur _____ tax expense in the early years of an asset's life than they would experience an accelerated method of depreciation.

more

fly high airlines acquires a new aircraft. it has an estimated life of 10 years and should be used for 20,000 hours of flight. what is the most appropriate method of depreciation to properly match revenues and expenses?

units-of-activity method

what is an investing activity?

purchase of investments for cash, purchase of equipment for cash, sale of land for cash

sticker company sold equipment for $4,000. this resulted in a $1,500 loss. what is the impact of this sale on the balance sheet?

reduces total assets

what is an example of a capital expenditure?

replacing an engine in a company car

what is not an investing activity?

sale of merchandise for cash

____ refers to the market value of the asset at the end of its useful life.

salvage value

____ is the depreciation method used most frequently. ____ is the depreciation method considered "accelerated".

straight-line double-declining-balance

plant assets are depreciated because:

the accrual basis of accounting requires matching of costs to revenues

if the depreciation method is known, what sets of factors is needed to calculate depreciation on plant and equipment?

the useful life of the asset, its historical cost, and its estimated salvage value

the accounting life of intangible assets is determined by:

their legal lives or useful lives, whichever is shorter

the exclusive right to use a certain name or symbol is called as:

trademark

what should be included in the acquisition cost of a piece of equipment?

transportation cost installation cost testing costs prior to placing the equipment into production