Accounting Quiz ch 7-8

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet

Deprecation Expense - Buildings

Depreciation is process by which

The cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset

Refer to the information for Norewood, Inc. If Norewood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2017

$15,000

Refer to the information for Norewood, Inc. Based on this information, if Norewood uses the straight-line method, what is the book value at December 31, 2018

$51,875

Refer to the information for Norewood, Inc. If Norewood uses the units-of-production method, what is the depreciation rate per hour for the equipment

$6.00

Refer to the information for Norewood, Inc. Based on this information, what amount will Norwood, Inc. report as depreciation expense over the 8-year life of the equipment?

$75,000

All of the following are characteristics of current liabilities except

All three of the below are characteristics of current liabilities - They may be replaced with a new short-term liability rather than being paid in cash - they may involve estimated amounts - they are due within one year or within the operating cycle, whichever is longer

Management should select the depreciation method that

Best measures the plant asset's contribution to revenues over its useful life

Which one of the following is not a consideration when recording period depreciation expense on plant assets

Cash needed to replace the plant assets

Which of the following statements is true of liabilities

Classification of current liabilities is important because of the liquidity concept

Which of the following statements regarding contingencies is true

Contingencies that are probable and estimable must be recorded before the outcome of future events

Fall Corp. uses plant assets that are subject to rapid decrease in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets

Double-declining-balance

Refer to the information for Norewood, Inc. Based on this information, what method of depreciation will produce the maximum depreciation expense in 2016

Double-declining-balance

Which of the following assets does not decline in service potential over the course off its useful life

Land

Norewood, Inc question info

Norewood, Inc. Purchases a crane of $80,000. The crane has an estimated residual value of $5,000 and as estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017

Which of the following below is ab example of a capital expenditure

Replacing an engine in a company car

Borden Company incurred the following cost to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, lighting for the parking lot, and landscaping for the parking lot. How should the company determine which cost should be recorded as Land Improvements and which cost should be record as Land?

The cost with an unlimited life will increase Land, and the cost with limited useful life will increase Land improvements

To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or received an equal amount over a period of years, you would use which type of time value of money calculation

The present value of an annuity

The accounting life of intangible assets is determined by

Their legal lives or useful lives, whichever is shorter

Blanket Airlines acquires a new aircraft. It has estimated life of 15 years and should be used for 15,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

Units-of-production

Refer to the information for Norewood, Inc. Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017

Units-of-production

Which of the following is an example of a contingent liability

a lawsuit pending against a restaurant chain for improper preparation of food

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

allocate the $500,000 acquisition cost to separate Land and Building accounts based on their respective fair market values

which of the following is not considered an intangible asset

an oil well

Interest payable on a loan becomes a liability

as it accrues

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

If technology changes rapidly, a firm should

consider an accelerated rate of depreciation

which of the following statements regarding contingencies is true

contingencies that are probable and not estimable are disclosed in the notes to the financial statements

the book value of a plant asset is the difference between the

cost of the assets and the accumulated depreciation to date

A firm is required to estimate a liability for repairs for products sold with a warranty. If the firm's accountants later find that the estimated amount for repairs has been overstated, the correct accounting procedure is to

do nothing for the year in question and modify the next year's estimate

Interest may be included in the acquisition cost of a plant asset

during the construction period of self-constructed assets

Assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition

An example of a current liability that must be accrued is

income taxes payable

operating assets with no physical properties are called

intangible assets

The modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

is used for tax purposes

The four subdivisions for plant assets are

land, land improvement, buildings, and equipment

The landlord records the security deposit she collects from the tenant as a(n)

liability

When an asset is sold, a gain occurs when the

sale price exceeds the books value of the asset sold

Many companies use MACRS (Modified Accelerated Cost Recovery Systems) depreciation for

tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes

Plant assets are depreciated because

the accrual basis of accounting requires matching of costs to revenues