Chap 7 - Acc 2., Chapter 7, Accounting Ch 7 Quiz

When assets are purchased in a group for a single sum, it is referred to as a ______________. group asset divestiture. business consolidation. composite purchase. basket purchase.

Basket purchase

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold. book net present net realizable fair

Book

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. expensed accrued capitalized

capitalized

Costs that produce future benefits are ______, but costs that produce benefits only in the current period are ______. a. capitalized; expensed b. current assets; noncurrent assets c.expensed; capitalized d.operating activities; investing activities

capitalized ; expensed

A(n) ______________ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years.

copyright

a ____________ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years. trademark copyright franchise

copyright

The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______.

current-year activity or production

The allocation of the cost of a tangible fixed asset is referred to as _________ , whereas the allocation of the cost of an intangible asset is referred to as _________.

depreciation, amortization

Machines used in manufacturing, computers, printers, vehicles, furniture, and fixtures generally are classified as__________. a. Property b. equipment c. land

equipment

Ling Corporation's long-term asset has a book value of $200,000 and an estimated fair value of $195,000. Ling estimates that the future cash flows associated with the asset are $198,000. To determine whether the asset may be impaired, Ling should compare the asset's book value to its Multiple choice question. estimated future cash flows. estimated fair value. estimated residual value.

estimated future cash flows.

An accelerated depreciation method is appropriate when the asset will provide

greater benefits in the earlier years of the asset's life.

The issues that are important for tangible and intangible assets, include determining:

how to record the disposal of the asset what amounts to include in the cost how to expense the cost of the asset over its life

Goodwill may only be recognized Multiple choice question . when assets are impaired. when intangible assets are undervalued. when a company pays less than fair value for an intangible. in a business acquisition.

in a business acquisition.

An asset that has no physical substance is called a(n) _____________ asset. intangible tangible

intangible

Amortization refers to the allocation of the cost of ___________ assets to expense. non-intangible intangible

intangible .

An asset that has no physical substance is referred to as a(n) ________. current asset. intangible asset. finite asset. depreciable asset.

intangible asset

An asset that has no physical substance is referred to as a(n)

intangible asset.

An asset that has no physical substance is referred to as a(n) Multiple choice question. finite asset. intangible asset. current asset. depreciable asset.

intangible asset.

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the

straight-line method.

T OR F: Goodwill is an intangible asset that can only be recognized if a company acquires another company. It is valued at the purchase price less the fair value of net assets acquired.

True

True or false: Repairs and maintenance expenditures related to an asset do not increase future benefits.

True

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

True

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______.

capitalized

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. Multiple choice question. capitalized expensed accrued

capitalized

In accounting, expenditures recorded as assets are said to be _____. Multiple choice question. accrued recognized capitalized expensed

capitalized

Machines used in manufacturing, computers, printers, vehicles, furniture, and fixtures generally are classified as __________.

equipment

Long-term tangible assets include patents. equipment. buildings. land. goodwill.

equipment. buildings. land.

A(n) _________ is the exclusive right to manufacture a product or use a process granted for a period of _______ years.

patent; 20

________ value is the amount the company expects to receive for the asset at the end of its service life.

residual

Because the future benefits of research and development costs are uncertain, FASB requires that research and development costs be treated as

an expense on the income statement.

The first step in determining whether an impairment loss should be recorded is to determine if the sum of estimated future cash flows from an asset is less than the asset's Multiple choice question. book value. net present value. net realizable value. fair value.

book value

The original cost of an asset minus accumulated depreciation is disposal value. book value. goodwill. residual value.

book value

The original cost of the asset less the accumulated depreciation is the ________ ________ of the asset.

book value

The service life or useful life of an asset is ____________. determined by MACRS tables. the estimated use that the company expects to obtain from the asset before disposing of it. the time period from the purchase of the asset until it becomes impaired.

the estimated use that the company expects to obtain from the asset before disposing of it.

A(n) ____________ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service.

trademark

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a Multiple choice question. trademark. franchise. patent. copyright.

trademark.

Intangible assets that are acquired from other entities are referred to as purchased intangibles, whereas intangibles that are created by a company are referred to as Multiple choice question. goodwill. internally developed intangibles. indefinite intangibles. finite intangibles.

internally developed intangibles.

The FASB requires research and development costs to be expensed because

it is difficult to determine whether costs will result in future benefits.

The exclusive legal right to manufacture a product or to use a process is called a(n) ________________. interbrand patent Copyright trademark franchises

patent

a _________ is the exclusive right to manufacture a product or use a process granted for a period of 20 Years. copyright trademark patent goodwill

patent

he exclusive legal right to manufacture a product or to use a process is called a(n) __________.

patent

The types of expenditures that can occur subsequent to an asset's acquisition are

repairs and maintenance. additions. improvements.

An asset that has no physical substance is called a(n) __________ asset.

intangible

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the Multiple choice question. MACRS double-declining-balance method. straight-line method. units-of-output method.

straight-line method.

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a ________. copyright. patent. trademark. franchise.

Trademark

The formula for calculating the double-declining-balance method is

book value at beginning of year x 2/estimated service life

Which of the following items should be capitalized as land improvements? Cost of fences Cost of land Cost of parking lots Cost of sidewalks

cost of fences cost of parking lots cost of sidewalks

Which of the following items are expensed? Major repair that increases future benefits Successful legal defense of a patent Costs related to maintaining equipment Replacing a major component

cost related to maintaining equipment.

When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as ______. identified intangible assets goodwill restricted intangible assets unidentifiable assets

Goodwill

On January 1, year 1, Paisley Corp. purchases equipment for $200,000. Paisley uses the double-declining-balance method of depreciation. The asset has a 10-year service life and a $10,000 residual value. What is the book value at the end of year 1?

$160,000

On January 1, year 1, London Corp. purchases equipment for $400,000. The equipment has a 5-year service life and a $50,000 residual value. London uses the double-declining-balance method of depreciation. What is the book value at the end of year 1?

$240,000

On January 1, year 1, Mark Corp. purchases equipment for $300,000. The equipment has a 10-year service life and a $50,000 residual value. Mark uses the double-declining-balance method of depreciation. What is depreciation expense for year 1?

$60,000

The formula to calculate an activity-based depreciation rate is:

(cost - residual value)/estimated total production.

Compute the asset turnover ratio using the following information: net sales is $100,000 for the year, last year's assets in place were $900,000 and this year's assets in place are $1,100,000. Receivables for both years are $50,000.

10% Reason: Net sales/average total assets = $100,000/[($900,000 + $1,100,000)/2] = 10%

Which item qualifies as an addition and should be capitalized? a. Performing tasks such as oiling and calibrating to an existing machine. b. Adding a new computer-aided cutting device to an existing machine. c. Replacing the cutting blades on a machine.

Adding a new computer-aided cutting device to an existing machine.

Depreciation Depletion Amortization

Allocation of the cost of a tangible fixed asset Allocation of the cost of natural resources Allocation of the cost of an intangible asset

_______________ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book. Trademark Franchises Copyright Patent Goodwill

Copyright

Select all that apply Clarion purchases land and prepares it for use. Which of the following items should be capitalized as land improvements? Cost of land Cost of driveways Cost of sidewalks Legal fees to acquire land Cost of lawn sprinkler system

Cost of driveways Cost of sidewalks Cost of lawn sprinkler system

Select all that apply Which of the following items should be capitalized as land improvements? Cost of sidewalks Cost of fences Cost of parking lots Cost of land

Cost of sidewalks Cost of fences Cost of parking lots

Which of the following items are expensed?

Costs related to maintaining equipment

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries?

Credit equipment $120,000 Debit loss on exchange $30,000 Debit equipment $50,000 Debit accumulated depreciation $40,000

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?

Credit equipment $90,000 Debit loss on exchange $10,000 Debit accumulated depreciation $40,000 Debit equipment $40,000

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries? Credit accumulated depreciation $40,000 Credit equipment $90,000 Debit loss on exchange $10,000 Debit equipment $40,000 Debit accumulated depreciation $40,000 Debit equipment $35,000 Debit loss on equipment $15,000

Credit equipment $90,000 Debit loss on exchange $10,000 Debit equipment $40,000 Debit accumulated depreciation $40,000

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?

Credit gain on exchange of asset $30,000 Credit equipment $90,000 Debit equipment $50,000 Debit accumulated depreciation $70,000

Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Debit equipment $80,000 Credit equipment $100,000

Krasel

Debit accumulated depreciation $70,000 Credit equipment $90,000 Debit equipment $50,000 Credit gain on exchange of asset $30,000

Which of the following are commonly used depreciation methods? Multiple select question. Declining-balance Activity-based Value-based Increasing-balance Straight-line

Declining-balance Activity-based Straight-line

If a company generates its own goodwill through advertising or training, how should these costs be treated? Multiple choice question. Capitalize the costs and test for impairment. Expense the costs as incurred. Capitalize the costs and amortize them over the expected life of the goodwill. Record as an extraordinary loss in the current year.

Expense the costs as incurred.

True or false: Internally developed goodwill should be capitalized as an asset.

False Reason: Costs of internally developed goodwill should be expensed as incurred.

True or false: Goodwill is the intangible value of a company's employees, management team, and business location that is recorded by the company.

False Reason: Goodwill is an intangible asset that can only be recognized if a company acquires another company. It is valued at the purchase price less the fair value of net assets acquired.

Select all that apply Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land? Grading the land Current year's property taxes Legal fees to secure title Costs to remove an old building Title insurance

Grading the land Legal fees to secure title Costs to remove an old building Title insurance

Select all that apply Which of the following are expenditures for assets subsequent to acquisition? Multiple select question. Improvements Repairs and maintenance Freight charges Additions

Improvements Repairs and maintenance Additions

Select all that apply Which of the following items should be capitalized in the cost of equipment? Multiple select question. Insurance on equipment during shipping Repair costs for first year of operations Freight to deliver the equipment to its location Installation and testing of equipment Purchase price

Insurance on equipment during shipping Freight to deliver the equipment to its location Installation and testing of equipment Purchase price

Select all that apply Which of the following items should be capitalized in the cost of equipment? Multiple select question. Insurance on equipment during shipping Freight to deliver the equipment to its location Purchase price Installation and testing of equipment Repair costs for first year of operations

Insurance on equipment during shipping Freight to deliver the equipment to its location Purchase price Installation and testing of equipment

Which statement is true about the straight-line method of depreciation?

It allocates an equal amount of depreciation to each year the asset is used.

Which statement is true about the straight-line method of depreciation? a. It is the preferred method for companies expecting to use the asset more in its early years of life. b. It recognizes expense proportionately with the amount of use of the asset. c. It allocates an equal amount of depreciation to each year the asset is used. d. It is an accelerated method of depreciation.

It allocates an equal amount of depreciation to each year the asset is used.

Property, land, equipment? a.Land is used in company's operations b. land is purchased and held until price rises.

Land is used in company's operations

Select all that apply Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land? Legal fees to secure title Current year's property taxes Costs to remove an old building Commissions

Legal fees to secure title Costs to remove an old building Commissions

What is the formula for the profit margin ratio? Multiple choice question. Gross profit divided by sales. Net income divided by average total assets. Net income divided by average shareholders' equity. Net income divided by net sales.

Net income divided by net sales.

Select all that apply Which of the following are classified as natural resources? Multiple select question. Building Equipment Patents Oil deposits Timber forests

Oil deposits Timber forests

Land used in a company's _________ is classified as property, plant and equipment, while land held solely for the expected increase in value is classified as an ___________. Operation ; Investment Capitalized ; Expense

Operation ; Investment

Purchased intangible asset Internally developed intangible asset

Patents, copyrights, trademarks, or franchise rights acquired from other companies. Product or process created internally for which patent may be obtained.

Select all that apply Which of the following are long-term tangible assets? Accounts receivable Trademark Property Copyright Equipment

Property Equipment

Select all that apply Which of the following costs should be capitalized in the costs of acquiring a building? Current year property taxes Realtor commissions Insurance on the building Legal fees to obtain title Remodeling building

Realtor commissions Legal fees to obtain title Remodeling building

Which of the following are expenditures for assets subsequent to acquisition?

Repairs and maintenance Improvements Additions

Expensed Capitalized

Research and development costs Purchase price plus costs necessary to get asset ready for use

The term used to describe the amount the company expects to receive for an asset at the end of its service life is ____________. historical cost. residual value. lower of cost or market value. impairment value.

Residual Value

____ value is the amount the company expects to receive for the asset at the end of its service life. (Enter one word per blank)

Residual or Salvage

A basket purchase or lump-sum acquisition of assets requires that an allocation is made to each individual asset based on the asset's ______. book values relative fair value residual values depreciable values

Residual value

Select all that apply Which of the following items should be capitalized in the cost of equipment? Sales tax Freight to deliver the equipment Insurance paid in advance for the first year of use Legal fees to establish title Installation and testing of equipment

Sales tax Freight to deliver the equipment Legal fees to establish title Installation and testing of equipment

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the______. straight-line method. MACRS units-of-output method. double-declining-balance method.

Straight line method

Which of the following are commonly used depreciation methods?

Straight-line Declining-balance Activity-based

The declining balance method of depreciation is a multiple of the____. straight-line rate of depreciation. earnings rate of the asset. units-of-output depreciation. MACRS depreciation tax rate.

Straight-line rate of depreciation.

The service life or useful life of an asset is ___________. determined by MACRS tables. the estimated use that the company expects to obtain from the asset before disposing of it. the time period from the purchase of the asset until it becomes impaired.

The estimated use that the company expects to obtain from the asset before disposing of it.

Which of the following are classified as natural resources? Timber tracts Land and land improvements Building Mineral deposits

Timber & mineral deposits

Select all that apply Which of the following are classified as natural resources? Timber tracts Land and land improvements Building Mineral deposits

Timber tracts Mineral deposits

Which of the following does not differ among the different depreciation methods?

Total depreciation recognized over the asset's service life.

Which of the following does not differ among the different depreciation methods? Multiple choice question. Depreciation recognized during the earlier years. Depreciation recognized during the last year of the asset's service life. Total depreciation recognized over the asset's service life.

Total depreciation recognized over the asset's service life.

True or false: Repairs and maintenance expenditures related to an asset do not increase future benefits.

True ; it keeps the asset in working order

Part C A retirement or abandonment of an asset is different from a sale of an asset because Select All Applied a loss must be recognized for the remaining book value. no cash is received. the residual value is included as a gain. a gain is recognized for the undepreciated portion of the equipment.

a loss must be recognized for the remaining book value. no cash is received.

If a company replaces a major component of an asset with a new component with the same characteristics of an old component, it is classified as ___________. an addition. repairs and maintenance. a rearrangement. an improvement.

a rearrangement

A new major component that is added to an existing asset is considered a(n) ________ and should be capitalized. improvements repairs & maintenance addition

addition

Select all that apply The types of expenditures that can occur subsequent to an asset's acquisition are Multiple select question. goodwill. additions. repairs and maintenance. improvements.

additions. repairs and maintenance. improvements.

The gain or loss on disposal of an asset is calculated as:

amount received less the book value of asset sold

The gain or loss on disposal of an asset is calculated as: Multiple choice question. the fair value of the asset less the accumulated depreciation the cost of the asset less the accumulated depreciation amount received less the book value of asset sold consideration received less the fair value of the asset sold

amount received less the book value of asset sold

For accounting purposes, depreciation is

an allocation of a cost of an asset.

For accounting purposes, depreciation is Multiple choice question. an allocation of a cost of an asset. a decline in value of an asset. the selling price of an asset.

an allocation of a cost of an asset.

For accounting purposes, depreciation is ___________. the selling price of an asset. an allocation of a cost of an asset. a decline in value of an asset.

an allocation of a cost of an asset.

In accounting, the term impairment refers to Multiple choice question. allocation of an asset over its service life. an asset's significant decline in value. offsetting liabilities against the related assets. cost recovery of an asset for investment purposes.

an asset's significant decline in value.

In a basket purchase of assets, the cost must be allocated to the individual assets because the assets have different useful lives. goodwill must be expensed immediately. intangible assets must be identified and expensed. some assets must be expensed upon acquisition.

assets have different useful lives

Asset turnover ratio is net sales divided by ___________. average total assets. average accounts receivable. average noncurrent assets. average current assets.

average total assets.

When assets are purchased in a group for a single sum, it is referred to as a Multiple choice question. composite purchase. basket purchase. business consolidation. group asset divestiture.

basket purchase.

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides _________ .

benefits or revenues

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides __________ .

benefits or revenues

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.

book

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold. Multiple choice question. net realizable fair net present book

book

The original cost of an asset minus accumulated depreciation is

book value

The formula for calculating the double-declining-balance method is________. book value at beginning of year x 2/estimated service life historical cost less residual value x 2/estimated service life. book value at beginning of the year less residual value x 2/ estimated service life. historical cost x 1/service life.

book value at beginning of year x 2/estimated service life.

The formula for calculating the double-declining-balance method is_________. book value at beginning of the year less residual value x 2/ estimated service life. historical cost less residual value x 2/estimated service life. historical cost x 1/service life. book value at beginning of year x 2/estimated service life

book value at beginning of year x 2/estimated service life.

The original cost of an asset minus accumulated depreciation is

book value.

The original cost of an asset minus accumulated depreciation is Multiple choice question. disposal value. goodwill. residual value. book value.

book value.

The original cost of the asset less the accumulated depreciation is the ______ ________ of asset

book; value

Long-term tangible assets include

buildings. land. equipment.

The key factor in classifying items as repairs and maintenance is that__________. a. the asset must be a current asset used in the normal course of business. b. the invoice must be less than $1,000 for productive assets. c. future benefits are not provided beyond those originally anticipated from the asset.

c. future benefits are not provided beyond those originally anticipated from the asset.

The term _______ means to record an expenditure as an asset.

capitalize

The term ________ means to record the expenditure as an asset. capitalize accured

capitalize

In accounting, expenditures recorded as assets are said to be _____. a. expensed b. capitalized c. recognized d. accured

capitalized

The journal entry to retire old equipment that is not fully depreciated includes a: Multiple select question. debit to loss credit to equipment debit to accumulated depreciation credit to loss debit to cash

debit to loss credit to equipment debit to accumulated depreciation

The journal entry to retire old equipment that is not fully depreciated includes a:

debit to loss debit to accumulated depreciation credit to equipment

Straight-line, declining-balance, and activity-based refer to methods commonly used to ________

depreciate

Straight-line, declining-balance, and activity-based refer to methods commonly used to __________ property, plant, and equipment.

depreciate

The allocation of the cost of a tangible asset over its service life is referred to as ________ . (Enter one word per blank)

depreciation

The allocation of the cost of a tangible asset over its service life is referred to as __________.

depreciation

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a ________. Multiple choice question. patent. franchise. trademark. copyright.

franchise

A(n) __________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time.

franchise

_________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time. franchise trademark goodwill

franchise

The distinction between land and land improvements is that: Multiple choice question. land has an indefinite life land is depreciated and land improvements are not land has a definite life there is no distinction, they are treated the same for accounting purposes

land has an indefinite life

investment? a.Land is used in company's operations b. land is purchased and held until price rises.

land is purchased and held until price rises.

A long-lived asset is assumed to be impaired if its estimated future cash flows are _________ than its book value.

less

Use of MACRS for tax purposes usually results in __________ ___________income tax in the earlier years of an asset's life.

less

The cost of land improvements are capitalized separately from land because land improvements tend to have a __________ useful life.

limited

Which of the following items typically are classified as equipment? Machinery used in manufacturing Computers and printers used in office Office supplies Machinery held for resale furniture & fixtures

machinery used in manufacturing computers & printers furniture & fixtures

The profit margin ratio is defined as _______ _______ divided by net sales.

net; income

A retirement or abandonment of an asset is different from a sale of an asset because

no cash is received. a loss must be recognized for the remaining book value.

When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset

provides benefits to the company.

Goodwill is recognized only when one company _______ another company.

purchase

Select all that apply Which of the following costs should be capitalized in the costs of acquiring a building? purchase price interest on the loan realtor commissions utilities for the building legal fees to obtain title

purchase price realtor commissions legal fees to obtain title

Otto Inc. retires old equipment with a book value of $2,400. Otto should

recognize a loss of $2,400

Otto Inc. retires old equipment with a book value of $2,400. Otto should Multiple choice question. debit cash for $2,400 not make a journal entry recognize a gain of $2,400 recognize a loss of $2,400

recognize a loss of $2,400

When an asset's fair value falls below its book value, the difference between fair value and book value is Multiple choice question. recorded in a revaluation account in OCI. recognized as a gain. recognized as an impairment loss. recognized as an extraordinary loss.

recognized as an impairment loss.

Costs of periodically servicing equipment is an example of:

repair and maintenance

The term used to describe the amount the company expects to receive for an asset at the end of its service life is Multiple choice question. historical cost. residual value. impairment value. lower of cost or market value.

residual value.

The depreciable cost of an asset is the asset's cost minus its estimated _______ value

residualF

When an asset is no longer useful, but cannot be sold, it is called an asset __________.

retirement

When an asset is no longer useful, but cannot be sold, we have a ________.

retirement

When an asset is no longer useful, but cannot be sold, we have a____________. sale. repairs. retirement.

retirement.

The estimated use the company expects to obtain from an asset before disposing of it is referred to as the life of the asset. (Enter one word per blank)

service

The estimated use the company expects to obtain from an asset before disposing of it is referred to as the _______ life of the asset.

service (depreciable)

The measurement of an impairment loss in step 2 is the difference between Multiple choice question. the asset's book value and its fair value. the asset's fair value and its lower-of-cost-or-market value. the asset's estimated future cash flows and its fair value. the asset's book value and its net present value.

the asset's book value and its fair value.

In a basket purchase of assets, the cost must be allocated to the individual assets because Multiple choice question. intangible assets must be identified and expensed. goodwill must be expensed immediately. the assets have different useful lives. some assets must be expensed upon acquisition.

the assets have different useful lives.

The formula for calculating declining balance depreciation is the depreciation rate per year times

the book value at the beginning of the year.

The formula for calculating declining balance depreciation is the depreciation rate per year times ___________. the cost less the residual value. the book value at the beginning of the year. the cost less the residual value less the accumulated depreciation.

the book value at the beginning of the year.

The formula for calculating declining balance depreciation is the depreciation rate per year times _____________. the book value at the beginning of the year. the cost less the residual value. the cost less the residual value less the accumulated depreciation.

the book value at the beginning of the year.

**** The depreciable cost is Multiple choice question. cost of the asset plus the residual value. cost of the asset minus depreciation expense. the cost of the asset minus the residual value. historical cost less accumulated depreciation.

the cost of the asset minus the residual value.

The depreciable cost is Multiple choice question. historical cost less accumulated depreciation. cost of the asset minus depreciation expense. cost of the asset plus the residual value. the cost of the asset minus the residual value.

the cost of the asset minus the residual value.

The depreciable cost is __________. the cost of the asset minus the residual value. cost of the asset minus depreciation expense. cost of the asset plus the residual value. historical cost less accumulated depreciation.

the cost of the asset minus the residual value.

The depreciable cost is___________. cost of the asset plus the residual value. cost of the asset minus depreciation expense. historical cost less accumulated depreciation. the cost of the asset minus the residual value.

the cost of the asset minus the residual value.

Straight-line deprecation is calculated as the depreciable cost divided by

the estimated service life of the asset.

Straight-line deprecation is calculated as the depreciable cost divided by __________. the cost of the asset. the estimated service life of the asset. the residual value of the asset.

the estimated service life of the asset.

The service life or useful life of an asset is

the estimated use that the company expects to obtain from the asset before disposing of it.

The service life or useful life of an asset is Multiple choice question. the time period from the purchase of the asset until it becomes impaired. the estimated use that the company expects to obtain from the asset before disposing of it. determined by MACRS tables.

the estimated use that the company expects to obtain from the asset before disposing of it.

In a basket or lump-sum purchase of assets, the total acquisition cost is allocated to the individual assets by multiplying the lump-sum purchase price times the relative book value percentages of each asset. the relative fair value percentages of each asset.

the relative fair value percentages of each asset.

Total depreciation recorded over an asset's service life is:

the same regardless of the depreciation method used

Total depreciation recorded over an asset's service life is: Multiple choice question. lowest when the straight-line method is used lowest when the activity-based method is used the same regardless of the depreciation method used highest when the double-declining balance method is used

the same regardless of the depreciation method used

Which of the following expenditures are classified as repairs and maintenance for a vehicle owned by the company? (Select all that apply.)

Engine tune-up Routine oil change

Which of the following items are intangible assets?

Trademarks Goodwill

On January 1, year 1, LaRose Corp. purchases equipment for $100,000. LaRose uses the double-declining-balance method of depreciation. The asset has a 5-year service life and a $10,000 residual value. What is depreciation expense for year 1?

$40,000

The formula to calculate an activity-based depreciation rate is: cost/estimated total production. (cost - residual value)/estimated total production. (cost - residual value)/actual production during the year. cost/actual production during the year.

(cost - residual value)/estimated total production.

The formula for straight-line depreciation is

(cost - residual value)/service life.

The formula for straight-line depreciation is Multiple choice question. (cost + residual value)/service life. cost/service life. service life/(cost + residual value). (cost - residual value)/service life.

(cost - residual value)/service life.

The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______. total activity or production current-year activity or production gross profit percentage historical cost

Current-year activity or production.

What is the first issue that needs to be addressed in order to properly report tangible and intangible assets?

Determining the amounts to be included in the assets' initial cost

Which of the following are long-term tangible assets?

Equipment Property

Under what circumstances are accelerated depreciation methods most appropriate?

For an asset that will provide greater benefits in earlier years of its life. For an asset that will be used less in the later years of its life.

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a ____________. copyright. patent. franchise. trademark.

Franchise

Which of the following items are capitalized?

Successful legal defense of a patent Replacing a major component Major repair that increases future benefits

A(n) ________ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book.

copyright

The key factor in classifying items as repairs and maintenance is that

future benefits are not provided beyond those originally anticipated from the asset.

**** When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as ______. Multiple choice question. goodwill unidentifiable assets identified intangible assets restricted intangible assets

goodwill

Select all that apply What are the two steps in the two-step process of measuring impairments? Multiple select question. Timing test on when the cash flows are received. Test for impairment using the future cash flows. Measurement of the impairment and record the loss. Percentage of assets test for total impaired assets.

Test for impairment using the future cash flows. Measurement of the impairment and record the loss.

Which statement is true about the straight-line method of depreciation? Multiple choice question. It allocates an equal amount of depreciation to each year the asset is used. It is an accelerated method of depreciation. It is the preferred method for companies expecting to use the asset more in its early years of life. It recognizes expense proportionately with the amount of use of the asset.

It allocates an equal amount of depreciation to each year the asset is used.

Which of the following items are intangible assets?

patents. trademarks. goodwill.

Where is the account accumulated depreciation on equipment found on the financial statements? As an asset account on the balance sheet As a liability account on the balance sheet As a contra account to equipment on the balance sheet As an expense account on the income statement

As a contra account to equipment on the balance sheet.

The formula for straight-line depreciation is ___________. (cost + residual value)/service life. service life/(cost + residual value). cost/service life. (cost - residual value)/service life.

(cost - residual value)/service life.

Companies use accelerated depreciation for tax purposes because

it reduces taxable income in the early years of the asset's life and provides better cash flows.

The term used to describe the amount the company expects to receive for an asset at the end of its service life is

residual value.

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries? Debit equipment $50,000 Debit equipment $32,000 Debit accumulated depreciation $40,000 Credit equipment $120,000 Debit loss on exchange $30,000 Credit accumulated depreciation $40,000

Debit equipment $50,000 Debit accumulated depreciation $40,000 Credit equipment $120,000 Debit loss on exchange $30,000

When an asset has a significant decline in value and is written down, this is called __________.

impairment

Select all that apply Which of the following items typically are classified as equipment? Furniture and fixtures Office supplies Machinery held for resale Computers and printers used in office Machinery used in manufacturing

Furniture and fixtures Computers and printers used in office Machinery used in manufacturing

The first step in determining whether an impairment loss should be recorded is to determine if the sum of estimated future cash flows from an asset is less than the asset's Multiple choice question. net present value. fair value. book value. net realizable value.

book value.