ACC 300 CH11

On October 1, year 1, Johnson Corp. purchased equipment for $100,000. The equipment has a useful life of 5 years with no residual value. Johnson uses the double-declining-balance method of depreciation. The partial year depreciation for year 1 is Multiple choice question. $5,000 $10,000 $40,000 $20,000

$10,000 Reason: The depreciation rate is 1/5 x 2 = 40%. $100,000 x 40% x 1/4 = $10,000 depreciation expense in year 1.

On October 1, year 1, Kirby Corp. purchased equipment for $100,000. The equipment has a useful life of 5 years with no residual value. Kirby uses the straight-line method of depreciation. The partial year depreciation for year 1 is Multiple choice question. $5,000 $2,500 $10,000 $20,000

$5,000 Reason: $100,000/5 years = $20,000 per year x 1/4 year = $5,000 depreciation expense in year 1.

Which of the following are required when a material error is discovered in a subsequent accounting period that impacts retained earnings? (Select all that apply.) Multiple select question. A prior period adjustment is made to the beginning balance of retained earnings. A disclosure note describing the nature of the error and the impact of the correction on net income and earnings per share. The cumulative effect of the error is corrected in retained earnings and other account balances are unchanged. The error is accounted for on a prospective basis in the current year and future years. Previous financial statements are retrospectively restated.

A prior period adjustment is made to the beginning balance of retained earnings. A disclosure note describing the nature of the error and the impact of the correction on net income and earnings per share. Previous financial statements are retrospectively restated.

Which of the following accounting changes must be justified in the notes to the financial statements? Multiple choice question. Changes in the remaining service life Changes in the estimated residual value Changes in depreciation methods

Changes in depreciation methods

Which of the following would be considered "expenditures subsequent to acquisition" for a building? (Select all that apply.) Multiple select question. Cost of installing solar panels after three months of use of the building Payment of appraisals fees related to purchase of building Real estate fees paid six months after acquisition Repairing a major roof leak three years after use

Cost of installing solar panels after three months of use of the building Repairing a major roof leak three years after use

Which of the following would be considered "expenditures subsequent to acquisition" for a building? (Select all that apply.) Multiple select question. Payment of appraisals fees related to purchase of building Cost of installing solar panels after three months of use of the building Real estate fees paid six months after acquisition Repairing a major roof leak three years after use

Cost of installing solar panels after three months of use of the building Repairing a major roof leak three years after use

Depreciation Depreciation drop zone empty. Depletion Depletion drop zone empty. Amortization Amortization drop zone empty. Allocation of the cost of a tangible fixed asset Allocation of the cost of natural resources Allocation of the cost of an intangible asset

Depreciation = allocation of the cost of tangible fixed asset Depletion = allocation of the cost of natural resources Amortization = allocation of the cost of an intangible asset

Fill in the blank question. The allocation of the cost of a tangible fixed asset over a period of time is referred to as ______, whereas the allocation of the cost of an intangible asset is referred to as _____. (Enter one word per blank.)

Depreciation; amortization

True or false: When accounting for impairments, the two categories for recognizing and measuring the loss are tangible and intangible assets. True false question.TrueFalse

False Reason: The categories for accounting for impairments are assets to be held and used and assets held for sale.

Under what circumstances are accelerated depreciation methods most appropriate? (Select all that apply.) Multiple select question. For an asset that will be used extensively in earlier years of its life. For an asset used evenly throughout its life and the life is measured in years. For an asset that has high repair and maintenance costs early in life. For an asset that has high repair and maintenance costs later in life

For an asset that will be used extensively in earlier years of its life. For an asset that has high repair and maintenance costs later in life.

Select all that apply Which of the following are true regarding costs to defend intangible rights? (Select all that apply.) Multiple select question. If a defense is unsuccessful, the company should reduce the book value of the intangible to net realizable value. If the defense is unsuccessful, the legal costs should be expensed immediately. Costs to defend intangibles should be capitalized, regardless of whether or not they are successful.

If a defense is unsuccessful, the company should reduce the book value of the intangible to net realizable value. If the defense is unsuccessful, the legal costs should be expensed immediately. Need help? Review these concept resources.Read About the Concept Question Feedback Next QuestionReading

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

It allocates an equal amount of depreciation to each year of the asset's service life.

What is the accounting treatment for the discovery of a material error in a previous year? Multiple choice question. Account balances are corrected in the current year with an adjustment made to net income of the period. A gain or loss is recognized in the year the error is discovered. Previous years' financial statements are restated. The error is accounted for on a prospective basis in the current year and future years.

Previous years' financial statements are restated.

Which of the following is an activity-based depreciation method? Multiple choice question. Units-of-production method Double-declining-balance method Sum-of-the-years'-digits method Straight-line method

Units-of-production method

Which of the following are expenditures on assets subsequent to acquisition? (Select all that apply.) Multiple select question. additions improvements freight in and out repairs and maintenance

additions improvements repairs and maintenance

Allocation of the cost of an intangible asset is called Multiple choice question. depreciation. depletion. amortization. accretion.

amortization.

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

an asset's significant decline in value.

When accounting for impairments, the two categories for recognizing and measuring the loss are Multiple choice question. tangible and intangible assets. assets with finite lives and assets with indefinite lives. property and equipment. assets to be held and used and assets held for sale.

assets to be held and used and assets held for sale.

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

book

When an intangible right is successfully defended, the legal costs should be _____; when an intangible right is NOT successfully defended, the legal costs should be _____. Multiple choice question. capitalized; expensed capitalized; capitalized expensed; capitalized expensed; expensed

capitalized; expensed

Which items are considered changes in estimates that would be treated on a prospective basis in the current period and future periods? (Select all that apply.) Multiple select question. incorrectly capitalizing an item when it should be expensed forgetting to record depreciation expense in the previous period change in useful life of an asset increasing the residual value of an asset

change in useful life of an asset increasing the residual value of an asset

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

consideration received less the book value of asset sold.

Select all that apply The useful life of an intangible asset may be limited by what type of provisions? (Select all that apply.) Multiple select question. contractual regulatory financial legal

contractual regulatory legal

For natural resources the depletion base is Multiple choice question. cost plus the value of resources extracted. the value of the resources to be extracted. the cost less the restoration value. cost less any anticipated residual value.

cost less any anticipated residual value.

Which of the following are accelerated methods of depreciation? (Select all that apply.) Multiple select question. declining balance method double-declining-balance method straight-line depreciation sum-of-the-years'-digits method

declining balance method double-declining-balance method sum-of-the-years'-digits method

The cost of a natural resource less its anticipated residual value is called the ____ ____. (Enter one word per blank.)

depletion; base

Which of the following are accelerated methods of depreciation? (Select all that apply.) Multiple select question. straight-line depreciation double-declining-balance method sum-of-the-years'-digits method declining balance method

double-declining-balance method sum-of-the-years'-digits method declining balance method

Amortization is appropriate for intangible assets with Multiple choice question. both finite and indefinite useful lives finite useful lives indefinite useful lives

finite useful lives

When an asset has a significant decline in value and is written down, this is called ______. Multiple choice question. impairment amortization depreciation depletion

impairment

A subsequent expenditure for an asset increases the future benefits of the asset if it (Select all that apply.) Multiple select question. increases the operating efficiency of the asset. extends the asset's useful life. increases the quality of the goods or services produced by the asset. repairs and maintains the asset in working order.

increases the operating efficiency of the asset. extends the asset's useful life. increases the quality of the goods or services produced by the asset.

No amortization is recorded for Multiple choice question. intangible assets used in production. intangible assets with indefinite lives. intangible assets with finite lives. intangible assets valued at fair value.

intangible assets with indefinite lives.

If obsolescence were expected to limit the longevity of a protected product, the useful life of a patent might be _________ its legal life. Multiple choice question. less than the same as more than

less than

Expenditures subsequent to acquisition may be properly capitalized when they increase the asset's useful life or increase its productive capacity. However, most companies set thresholds for capitalizing these expenditures based on Multiple choice question. neutrality. objectivity. relevance. materiality.

materiality.

If there is a change in an intangible asset's estimated useful life, the change is treated Multiple choice question. as a change in accounting principle. as a prior period adjustment. as an extraordinary item. on a prospective basis.

on a prospective basis.

A change in depreciation method is treated as a change in estimate that is achieved by a change in accounting principle, and is accounted for Multiple choice question. by making a prior period adjustment. by making an error correction adjustment in the current year. by restating the previous year's financial statements. prospectively in the current and future periods.

prospectively in the current and future periods.

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

repairs and maintenance. improvements. additions. rearrangements.

Which of the following terms is equivalent to an asset's useful life to a particular company? Multiple choice question. Life expectancy Base life Service life Physical life

service life

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

service, useful, or depreciable

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. units-of-output method. straight-line method. double-declining-balance method. MACRS

straight-line method.

Emil Company expects that its asset will be more useful during early years of its life than during later years. In addition, the company estimates that repair costs will increase over time. Which method(s) may help equalize total expenses recognized over the service life of this asset? (Select all that apply.) Multiple select question. sum-of-the-years digits straight-line declining balance retirement

sum-of-the-years digits declining balance

Which of the following intangible assets are usually considered to have indefinite lives? Multiple choice question. Franchises Trademarks Patents Copyrights

trademarks

True or false: An accelerated method of depreciation might be appropriate if benefits are derived equally over the life of the asset, but repair and maintenance expenses are expected to be higher in later years. True false question.TrueFalse

true Reason:If repair and maintenance are expected to increase significantly over the life of the asset, an accelerated method might be appropriate.

Which of the following are not accelerated methods of depreciation? (Select all that apply.) Multiple select question. sum-of-the-years'-digits method declining balance method units-of-output depreciation straight-line depreciation

units-of-output depreciation straight-line depreciation

If a company bases depreciation expense on the life of a machine in hours, and depreciates the machine for the number of hours used during the year, it is using the ______ method of depreciation. Multiple choice question. double-declining-balance straight-line units-of-production sum-of-the-years'-digits

units-of-production