CHP 9 MCQ

Schneider Trucking Inc. purchased a new semi-truck on January 1, 2016 for $200,000. Its useful life is expected to be 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at double the straight-line rate?

$50,000

Massey Corporation purchased a piece of land for $50,000. Massey paid attorney's fees of $5,000 and brokers' commissions of $4,000 in connection with the purchase. An old building on the land was torn down at a cost of $2,000, and proceeds from the scrap were $500. How much is the total cost of the land?

$60,500

Which one of the following will minimize depreciation expense in the first year of owning an asset?

A long estimated life, a high salvage value, and straight-line depreciation.

Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?

Declining-balance

Given the following account balances at year-end, how much are total intangible assets on the balance sheet of Alisha Enterprises? Sales revenue$45,000,000 Cash1,500,000 Accounts receivable4,000,000 Land15,000,000 Equipment25,000,000 Trademarks1,000,000 Goodwill4,500,000 Research & development2,000,000

$1,000,000 + 4,500,000 = $5,500,000.

Schneider Trucking Inc. purchased a new semi-truck on January 1, 2017 for $200,000. Its expected useful life is 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at a double the straight-line rate?

$100,000

Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?

$156,000. Accumulated depreciation will be the sum of 2 years of depreciation expense. Annual depreciation for this asset is ($400,000−$10,000)/5=$78,000. The sum of 2 years' depreciation is therefore $156,000 ($78,000+$78,000), not (a) $80,000, (b) $160,000, or (c) $78,000.

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2017. The machine was purchased for $80,000 on January 1, 2013, and was depreciated on a straight-line basis over a 10-year life assuming no salvage value. If the machine was sold for $26,000, how much is the gain or loss to be recorded at the time of the sale?

$18,000 loss

If you bought a new truck for $40,000 for your auto parts delivery service, and you estimated that the truck would last you 200,000 miles with a salvage value of $4,000, what would be your depreciation expense for the first year in which you used the truck for 12,500 miles?

$2,250.(The depreciation rate per mile is $0.18, which is ($40,000 - $4,000) divided by 200,000 miles. Depreciation expense = $0.18 × 12,500 miles = $2,250.)

Corristan Company purchased equipment and incurred these costs: Cash price$24,000 Sales taxes1,200 Insurance during transit200 Annual maintenance costs____ 400Total costs$25,800 What amount should be recorded as the cost of the equipment?

$24,000 + $1,200 + $200 = $25,400

A company's average total assets are $200,000, depreciation expense is $10,000, and accumulated depreciation is $60,000. Net sales total $250,000. What is the asset turnover?

$250,000 $200,000 = 1.25

Pierce Company incurred $150,000 of research and development costs in its laboratory to develop a new product. It spent $20,000 in legal fees for a patent granted on January 2, 2017. On July 31, 2017, Pierce paid $15,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2017?

$35,000

A company purchased a dump truck for $25,000. In addition, freight charges were $500, and an additional payment of $800 was made to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively. How much is annual depreciation expense under the straight-line method?

$4,500

Oahu Industries' average total assets for the year are $4,000,000, its net income is $800,000, and its net sales are $10,000,000. What is the return on assets?

$800,000/$4,000,000 = 20%.

A company has the following asset account balances: Buildings and equipment$9,200,000 Accumulated depreciation1,200,000 Patents750,000 Land Improvements1,000,000 Land5,000,000 How much will be reported on the balance sheet under property, plant, & equipment?

$9,200,000 - $1,200,000 + $1,000,000 + $5,000,000 = $14,000,000

On March 1, 2017, Moreno Company purchased a patent from another company for $90,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. How much is amortization expense for 2017?

$90,000 ÷ 10 years × 10/12 = $7,500.

Which one of the following costs will not be included in the cost of equipment?

Annual insurance

Which of the following measures provides an indication of how efficient a company is in employing its assets?

Asset turnover ratio

A company sold for $3,000 a plant asset that had a cost of $10,000 and accumulated depreciation of $7,500. What gain or loss did the company experience?

Gain of $500 $22,000 - $8,000 = $14,000 gain

Which of the following costs should not be included in the cost of a building?

Parking lot repaving

If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?

The company purchased another company.

Which of the following is not a depreciable asset?

land

Which of the following statements is false?

Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent

What is depreciation?

A cost allocation method

Which of the following gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years?

Patent