Survey of Accounting 8th Edition Warren Test Bank

Survey of Accounting 8th Edition
Warren Test Bank

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Chapter 7
1. The acquisition costs of property, plant, and equipment should include all costs necessary to get the asset in place and
ready for use.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: SACC.WARR.18.7-1 - LO: 07.01
NATIONAL STANDARDS: United States - BUSPROG: Analytic
STATE STANDARDS: United States - DISC: - ACBSP: APC-13 - Long-term Assets Reporting
United States - AK - DISC: AICPA: FN-Measurement
KEYWORDS: Bloom's: Understanding
DATE CREATED: 7/19/2016 9:51 AM
DATE MODIFIED: 7/19/2016 9:51 AM
QUESTION ID: JFND-GO3A-EW4R-KO33
QUESTION GLOBAL ID: GCID-E7BW-1TBP-GBTD-KQMB-CCAS-CCMF-8R51-43J3-GPTN-43MF-CR4N-4A3S-
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMR-8B1D-KCB1-8BTU-CC5B-GASU-
QQBS-8YSS-CQDD-GOSS-E3JS-GOSU-YP5R-8FOU-Y3BO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
2. Long-lived assets that are intangible in nature, used in the operations of the business, and not held for sale in the
ordinary course of business are called fixed assets.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Remembering
QUESTION ID: JFND-GO3A-EW4R-KO4G
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-GE4D-G3BI-G7TD-RA5R-GYSU-
GA5R-8YSS-C3B3-GOSS-EPMF-CASS-CCJ1-GPTU-CPBO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
3. Expenditures made to extend an asset's life are called revenue expenditures.

a. True
Copyright Cengage Learning. Powered by Cognero. Page 1
Chapter 7
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
STATE STANDARDS: United States - DISC: - ACBSP: APC-06 - Recording Transactions
QUESTION ID: JFND-GO3A-EW4R-KO3A
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-GE3U-G3DG-GH5U-QP5G-
CCSU-NPT1-8RSS-ECMD-GOSS-C3UD-CRSU-CPUG-G71G-EPJZ-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
4. Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO4F
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-8B1U-G3JZ-GYHU-YQMB-
GWSS-N3DG-8YSS-GAUN-GOSU-YPUG-8RSS-NAUR-CTTD-YCTZ-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
5. The estimated amount that an asset can be sold for at the end of its useful life is called its book value.
a. True
b. False
ANSWER: False
POINTS: 1
Chapter 7
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO4R
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-CE3D-QQJW-CE3D-RQBI-
CASU-C3UD-CRSS-ECUR-GOSU-R3DN-CCSS-NCTA-GE3U-YQDD-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
6. Under the straight-line method, the amount of depreciation expense for the first full year of use of a fixed asset costing
$95,000, with an estimated residual value of $5,000, and a useful life of 5 years, will be $18,000.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
United States - AK - DISC: AICPA: FN- Measurement
KEYWORDS: Bloom's: Applying
QUESTION ID: JFND-GO3A-EW4R-KO4D
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-GI1U-QPTI-CI1U-KCJW-CASU-
13DD-8YSS-NPTU-GOSU-OC3I-GWSS-GCTO-CFUD-1CMF-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
7. Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for
which it was intended.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KO3U
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMR-CR4D-QC3W-8BTU-QATS-
CCSU-NC3W-8RSU-1QBZ-GOSU-GAUG-CESU-RC3O-CRAG-GQJ3-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
8. The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO31
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-GE4U-KA3T-CTTS-NAJ1-GESU-
O3TZ-CRSU-RA3A-GOSU-13BU-GESS-CAJT-8YHD-RC3I-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
9. The total depreciation across the years of an asset's life is the same under the double-declining-balance method or the
straight-line method.
a. True
b. False
ANSWER: True
POINTS: 1

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KO3T
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CPTU-QCB3-8R5S-CA5G-CASU-
EP5B-CRSU-QPTS-GOSS-EC3T-CESS-KATZ-GPTG-ECUN-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
10. The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO3O
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-GTOU-E3BS-CR3S-ECJW-GYSU-
QA3U-8YSU-GP3W-GOSS-RPJ1-GYSU-KPUG-GCHU-GC3I-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
11. The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KO3Z
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJW-GPUG-EAJ3-GRHG-RPBI-CESS-
NQBU-8RSS-GAJU-GOSS-CATI-GYSU-CQDN-GY4D-C3JW-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
12. Companies usually compute depletion by using the double-declining-balance method.

a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO3W
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-GBTS-KCTA-8Y4U-QAMR-
GRSS-NCTA-CESU-YAUB-GOSS-N3DB-CASU-N3TO-GYHD-KA5F-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
13. A current asset account must be increased for revenue expenditures since they benefit only the current period.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KTB3
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CTOS-CCT3-GO5D-OPMG-GYSU-
KPT1-8YSU-K3JO-GOSU-ECBU-GHSU-EAJT-G71G-KCDR-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
14. If the proceeds from a sale of equipment is greater than the book value of the equipment as on the date of sale, a loss is
recorded.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO3I
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-GO3U-RCBZ-8BTU-KATT-CASS-
NC33-8RSS-RPJT-GOSU-NQDG-GESS-R3UB-GYHU-G3JW-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
15. If an asset is discarded, a loss is recognized equal to its salvage value.

a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KTNN
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMG-CJ1U-YPTS-GOHD-GCTO-
GOSU-YCUD-CESU-1QBW-GOSS-NPTT-CCSS-NPJI-CO5D-RPUF-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
16. If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTNB
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-G3TD-GC3U-GIUD-QPMB-COSS-
CCJA-CRSU-GP3Z-GOSU-Q3JW-CASU-ECUN-GBUG-KCTZ-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
17. Depletion is the process of transferring the cost of intangible assets to an expense account.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KO3S
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ1-CFTD-KCMN-GPOU-RA3A-

Chapter 7
GWSU-NQDG-CRSU-NAJ1-GOSU-GPDB-GYSU-O3J3-GO3S-CATU-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
18. Intangible assets do not exist physically.

a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTBA
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-CR4U-OP3U-8Y3D-OCBO-CASU-
R3MG-CRSU-NCBW-GOSU-NCB3-GYSU-13UB-GEAS-NCMG-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
19. Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTNG
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMF-GE4S-NAJA-8FTU-GQJT-GESS-
CPBS-8RSS-RQMG-GOSS-EQJU-8RSU-RA5R-CEHU-EAJI-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
20. The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.
Chapter 7
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
United States - AK - DISC: AICPA: FN-Reporting
QUESTION ID: JFND-GO3A-EW4R-KTNF
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-CI1D-GP33-8RHG-KCBT-GCSU-
QPT1-CESU-CATZ-GOSS-EATZ-GCSU-EAUR-G7TD-1C5R-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
21. Fixed assets are reported at their book value on the balance sheet.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTNR
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-CFOU-EC5B-CTTD-1CMD-
GASU-NP31-CRSS-K3BA-GOSU-CPBT-CCSU-EATW-GWAD-Y3BO-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
22. The inventory turnover measures how efficiently a company is using its operating assets to generate sales.
a. True
b. False
ANSWER: False
Chapter 7
POINTS: 1
DIFFICULTY: Easy
STATE STANDARDS: United States - DISC: - ACBSP: APC-23 - Financial Statement Analysis
QUESTION ID: JFND-GO3A-EW4R-KTND
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-CWHD-NCMR-CEAS-EPBW-
COSU-YQBA-8YSS-CPDN-GOSS-EPJZ-CESS-KCT1-CO3U-GPBW-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
23. Which of the following is a characteristic of fixed assets?

a. Fixed assets are offered for sale as part of normal operations.
b. Fixed assets do not exist physically.
c. Fixed assets are long-term or relatively permanent assets.
d. Fixed assets that are no longer used in operations are still classified as fixed assets.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
QUESTION ID: JFND-GO3A-EW4R-KTBU
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-CW5U-NPTA-CC3U-EPJ1-GCSS-
GP3W-CRSU-QA3S-GOSS-GA3T-COSS-EQBS-GYAG-ECMD-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
24. Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of
equipment?
a. Its free cash flow decreases.
b. Its free cash flow increases.
c. Its asset turnover increases.

Chapter 7
d. Its asset turnover remains unaffected.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO33-G7NU-OP1R
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-GA3S-GAMD-GFTU-KPJ3-GYSU-
QCTT-8RSU-EQBO-GOSU-YP5F-COSU-CCT3-GO4U-Y3T1-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
25. Which of the following expenditures would be included in the cost of a fixed asset?
a. Uninsured theft
b. Vandalism
c. Sales taxes
d. Mistakes in installation
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTBZ
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-G7OU-KQDG-C31G-RC3O-
GRSU-1AMD-8YSS-RA33-GOSU-Q3BZ-CASU-Y3TZ-CR3D-OCMB-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
26. A company acquired some land for $75,000 to construct a new office complex. Legal fees paid were $2,750,
delinquent taxes assumed were $3,250, and $6,350 was paid to remove an old building. Materials salvaged from the
demolition of the building were sold for $2,300. Determine the cost of the land to be reported on the balance sheet.

Chapter 7
a. $85,050
b. $89,650
c. $84,100
d. $87,350
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KTBS
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-8Y3D-KCBZ-GFTU-RCDB-
CWSU-CAT3-8YSU-O3B3-GOSU-Q3TU-8RSU-YCJU-8R3U-KCBZ-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
27. A(n) _____ is a contract for the use of an asset for a period of time without having to buy the asset.
a. indenture
b. depreciation hedge
c. revenue option
d. lease
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTBI
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-COHS-NCDD-GWHD-YPUN-
CASS-ECB1-CESS-ECBU-GOSU-EQJA-8RSU-EQDN-CEAU-1A3O-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE

Chapter 7
28. The cost of removal of an old building to make the land ready for its intended use is charged to:
a. land.
b. land improvements.
c. buildings.
d. operating expenses.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTBW
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-GO5S-KPBZ-8Y5U-OCUN-CRSS-
KA5F-CESS-R3TW-GOSS-NQDR-CASU-EA5R-GWAG-GPJT-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
29. Which of the following should be included in the acquisition cost of a piece of equipment?
a. Uninsured theft
b. Mistakes in installation
c. Vandalism
d. Installation costs
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC1B
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJS-8RAU-CAMN-CITD-RQDR-
GASU-EPMD-8RSS-RA5N-GOSU-1QMF-COSU-OPMB-GA3S-KQB1-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
Chapter 7
30. _____ is an example of a fixed asset.

a. A machine
b. A prepaid expense
c. Land held for investment
d. An accrued revenue
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC1G
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-G3TD-Y3T3-GO4D-NCUN-GASU-
QQBS-CESU-YPUG-GOSU-CATO-GRSU-QP3A-CW4D-QCJT-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
31. Land improvements include:

a. freight.
b. surveying fees.
c. sales tax.
d. outdoor lighting.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCTA
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJS-GW5U-OP3I-GC4U-EP3U-CESS-

Chapter 7
NATT-8RSU-C3JU-GOSU-RQJZ-GWSS-RCJU-CA3U-RPJO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
32. Capital expenditure is reported on the:

a. income statement under operating expenses.
b. balance sheet under fixed assets.
c. statement of retained earnings under contributed capital.
d. cash flow statement under cash flow from financing activities.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KTB1
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-GW4U-RA3I-GWAS-EQJO-COSU-
QP5F-CRSU-GAMB-GOSU-KCTO-COSU-RQDB-CE3D-NCMG-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
33. If a revenue expenditure is treated as a capital expenditure, then:

a. expenses are overstated and owners' equity is understated.
b. expenses are overstated and assets are overstated.
c. expenses are understated and owners' equity is overstated.
d. net income is overstated and owners' equity is understated.
ANSWER: c
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KTBT

Chapter 7
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-CWHU-Y3B3-CFTD-Y3B3-8RSU-
O3TZ-CESU-EPDG-GOSS-NQMN-GYSS-R3UN-CE4S-GCT3-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
34. The effect of recording a capital expenditure as a revenue expenditure is that:

a. expenses are overstated, and owners' equity is understated.
b. net profit is understated, and owners' equity is overstated.
c. expenses are understated, and accumulated depreciation is overstated..
d. assets are overstated, and expenses are understated.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KTBO
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-8Y3U-YA3U-CT1D-NPBZ-GRSU-
K3JT-CESU-KCJO-GOSS-RQJ3-CASU-YC5D-CP1U-YA3O-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
35. The cost incurred to extend an asset's useful life is recorded as:
a. accrued expenditures.
b. maintenance expenditures.
c. routine expenditures.
d. capital expenditures.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC1N
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CE5D-C3MD-GW4D-NPTS-COSU-
O3UD-CESU-KCTW-GOSU-KCBA-CRSS-CC3W-8Y3U-RPUG-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
36. Which of the following is an example of a capital expenditure?

a. Cleaning the carpet in the front-office room
b. Regular tune-up for a company truck
c. Replacing an engine in a company car
d. Replacing all burned-out light bulbs in the factory
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCT3
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CC3G-RCJI-8YHD-ECTU-COSU-
YQDG-8RSU-1ATO-GOSS-R3UB-GHSU-GPT1-GWAU-CCDD-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
37. The book value of an asset is computed as the asset's:

a. current market value less tax expense.
b. fair value less residual value.
c. discounted value plus accumulated depreciation.
d. cost less accumulated depreciation.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC1F
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-GCHG-NQBZ-8RHD-EPMR-
CWSU-KAJZ-CESU-QCJZ-GOSU-KQB3-CCSU-OAJA-CPTU-E3BI-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
38. _____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended.
a. Physical depreciation
b. Effective depreciation
c. Accelerated depreciation
d. Functional depreciation
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC1R
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMF-CR5D-YPT3-GYAD-KPMB-
GRSU-OC5F-8RSS-KA5G-GOSS-RATZ-CESS-NCMF-CJTD-GPBS-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
39. Which of the following is considered under the straight-line method but not under double-declining-balance method?
a. The asset's book value
b. The asset's salvage value
c. The asset's expected useful life
d. The asset's initial cost
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC1D
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJO-GRHD-1QJW-GYAG-C3DB-
GWSU-RAUF-CESU-Y3JZ-GOSU-1A5R-GCSU-RPMB-CPOU-GPT1-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
40. Depreciable cost is computed as:

a. cost less accumulated depreciation.
b. book value less residual value.
c. cost less residual value.
d. market value less residual value.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCTU
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJS-COAS-NQJ1-GCHG-C3UG-COSU-
RQJT-CESS-G3B1-GOSU-CC5G-COSS-RPMF-8R3U-G3JU-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
41. Which of the following is a characteristic of accumulated depreciation account?

a. Accumulated depreciation represents cash reserved for asset replacement.
b. Accumulated depreciation account is a contra-liability account.
c. Accumulated depreciation may be disclosed in the notes to the income statement.
d. Accumulated depreciation is reported on the balance sheet as a deduction from the cost of the asset.
ANSWER: d
POINTS: 1
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCT1
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMR-G3UG-E3JI-CA3U-EC3W-
GWSU-CPMR-CRSU-Y3TU-GOSS-EQDB-GRSS-GAUF-CR5D-GATA-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
42. Which method of depreciation considers residual value in computing the normal periodic depreciation?
a. Straight-line
b. MACRS
c. Double-declining-balance
d. Accelerated
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCTT
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMG-GCAD-1AT1-G7TD-RA5D-
GCSS-EPTZ-8RSU-CCMB-GOSS-EQDG-CWSS-RQJS-8YAD-EC3U-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
43. The accounting term depreciation measures:

a. the decline in an asset's market value.
b. the amount of cash a company sets aside for asset replacement.
c. the amount of asset cost allocated to expense over periods benefited.
d. the anticipated loss if asset is sold in the used-asset market.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCTO
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJS-GY3S-GP3A-CEAU-NA5G-GASS-
GCUD-8RSS-RPT3-GOSU-OQDD-CCSU-Q3JO-GW4U-EC5N-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
44. The Modified Accelerated Cost Recovery System is used to:

a. compute income for audit reporting.
b. compute depreciation for tax purposes.
c. report liabilities.
d. ascertain break-even point.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCTZ
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMF-GOAD-ECUD-CWHU-RP33-
GWSU-OC3O-CRSU-ECBW-GOSS-GQJA-GASU-YAJI-8B1S-GQDB-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
45. Recording depreciation:

a. decreases liability and cash flow.
b. decreases net income but has no effect on cash flows.
c. decreases capital and operating expense.
d. decreases retained earning but has no effect on fixed assets.
ANSWER: b
POINTS: 1
Chapter 7
STATE STANDARDS: Isle of Man - DISC: - ACBSP: APC-09 - Financial Statements
QUESTION ID: JFND-GO3A-EW4R-KCTS
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-CF1S-C3JZ-CC4G-NPTU-8YSU-
1QJ3-8YSU-OQMF-GOSS-CQBW-CCSU-YPUD-GO3S-G3DF-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
46. To measure depreciation, which of the following must be known?

a. market value of asset.
b. fixed asset turnover
c. cost of asset.
d. the amount of cash to replace fixed asset
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCTI
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-C31D-Y3JA-GJTG-RCDR-CASU-
Y3B3-CRSS-CPJT-GOSS-EP3S-GHSS-KP5B-GO4S-N3JS-E7JI-YT4D-JFNN-4OTI-GO4W-
NQNBEE
47. A machine was purchased for $68,000. It has a useful life of 5 years and a residual value of $8,000. Determine the
annual depreciation expense using the straight-line method?
a. $20,000
b. $12,000
c. $60,000
d. $16,000
ANSWER: b
POINTS: 1

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCTW
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-GF1U-QC3S-GRHD-GAT1-
CASU-K3J1-8YSS-KPTZ-GOSS-NCUG-8YSS-RP5D-GA5D-CC5G-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
48. An equipment was purchased for $15,000. It has a useful life of 5 years and a residual value of $4,000. Determine the
depreciation expense for the first year using the double-declining-balance method?
a. $5,400
b. $6,000
c. $2,200
d. $2,600
ANSWER: b
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC4N
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-CIUD-QAUG-CFTS-CA5G-
CRSS-E3TI-CRSU-KPDB-GOSU-NQDN-GWSS-RCUB-GRHU-NA5B-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
49. A computer equipment was acquired at the beginning of the year at a cost of $56,000 with an estimated residual value
of $5,000, and an estimated useful life of 5 years. Determine the second year's depreciation expense using the straight-line
method.
a. $10,200
b. $22,400
c. $11,200
d. $12,200
ANSWER: a
Chapter 7
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC4B
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-CPTD-QCBI-CITD-E3TS-GOSS-
CPB1-CRSU-1QJZ-GOSU-1QJO-GASU-KATW-8R5D-1QDD-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
50. An equipment was purchased for $30,000. It has a useful life of 5 years, and a residual value of $4,000. Compute the
depreciation expense for the second year using the double-declining-balance method.
a. $5,200
b. $6,000
c. $6,240
d. $7,200
ANSWER: d
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC33
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-CITD-OA5R-CW3D-N3UF-GWSS-
RA5F-CRSU-GCJ1-GOSU-1QBO-COSU-1AMG-GB1U-R3J1-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
51. On September 1, a machine was purchased for $47,000 with a useful life of 8 years, and a residual value of $3,000.
What is the depreciation expense in the year of purchase under straight-line method, assuming a December 31 year-end?
a. $3,917
b. $3,667

Chapter 7
c. $1,958
d. $1,833
ANSWER: d
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC3A
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-COAU-1CUD-GE4U-O3T3-GCSU-
OAUN-CESU-GC5G-GOSU-RQBA-CASS-CCJW-GHAD-1CTS-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
52. Which of the following is the effect on the transaction metrics of a company when it records depreciation?
a. Its profitability decreases.
b. Its profitability and liquidity remain unaffected.
c. Its profitability increases.
d. Its liquidity increases.
ANSWER: c
POINTS: 1
QUESTION ID: JFND-GO33-G7NU-OPTU
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMF-GRHU-EQJA-8FTS-NQBW-
GESU-OPJT-8YSU-C3BI-GOSS-R3BZ-CWSU-Q3DG-CE4U-KCTI-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
53. A machine was purchased for $35,500, having a useful life of 10 years, and a residual value of $6,000. Compute the
annual depreciation expense using the straight-line method.
Chapter 7
a. $3,550
b. $4,150
c. $5,800
d. $2,950
ANSWER: d
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC4G
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJO-GOHU-1P3A-GFOU-EP3W-
CWSU-NCBW-8YSU-NPMD-GOSU-Y3MD-CWSU-OAMR-GITU-OQBT-E7JI-YT4D-
JFNN-4OTI-GO4W-NQNBEE
54. If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the
company must:
a. recognize a loss on the income statement under other expenses.
b. recognize a loss on the income statement under operating expenses.
c. recognize a gain on the income statement under other revenues.
d. recognize a gain on the income statement under revenues.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC4F
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMG-GWHD-OQBT-GCHG-RPMB-
GCSS-N3MN-8YSS-NAJZ-GOSU-C3BT-GASS-KPJI-GWHU-O3DR-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
Chapter 7
55. Losses on discarding fixed assets are _____.

a. opportunity costs
b. non-operating items
c. capital expenditures
d. accumulated depreciation
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC4R
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-8YHS-GQJT-G3TU-G3JO-8RSS-
E3T3-8YSU-QPUD-GOSU-RCTU-8YSU-GAJW-CPTG-RAJ3-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
56. A fixed asset with a cost of $15,000 and accumulated depreciation of $12,500 is sold for $1,750. What is the amount
of gain or loss on disposal of the fixed asset?
a. $750 loss
b. $2,500 loss
c. $2,500 gain
d. $750 gain
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC4D
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-CRAS-G3TA-8R4G-KPTS-GESS-
Chapter 7
EA5G-CESU-KQJS-GOSS-G3J1-GASS-E3MR-COHU-NCDF-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
57. A gain is recorded on the sale of fixed assets when:

a. the asset is sold for a price less than its book value.
b. the asset is sold for a price more than its book value.
c. accumulated depreciation on asset is less than its selling price.
d. accumulated depreciation on asset is more than its selling price.
ANSWER: b
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC3U
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMD-CR5D-QCBU-GI1U-KCMD-
GCSU-CQJZ-8RSS-GPBA-GOSU-1C5N-CRSU-YCUR-8Y4G-GP5F-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
58. A fully depreciated asset must be:

a. removed from the books.
b. kept on the books until sold or discarded.
c. disclosed only in the notes to the financial statements.
d. recognized on the income statement as a loss.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC31

Chapter 7
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMG-GOHD-NQJO-CT1U-13DB-
GWSU-OAMR-8RSU-OP3I-GOSU-RP3T-CWSU-1C3T-GI1U-C3JW-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
59. A company sold a delivery truck for $22,000 cash. The truck costs $45,800 and had accumulated depreciation of
$32,000 as of the date of sale. The entry to record the sale would include:
a. an increase in accumulated depreciation for $32,000.
b. a total decrease in delivery truck for $13,800.
c. a gain for $8,200.
d. a loss for $10,000.
ANSWER: c
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KC3T
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-G7TU-Q3DG-CJUG-EC33-CESU-
GCJ3-CESU-ECTO-GOSS-CAUB-GWSS-EQMR-GITD-YCT3-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
60. A company sold office furniture costing $15,800 with accumulated depreciation of $13,000 for $1,500 cash. The entry
to record the sale would include:
a. an increase in accumulated depreciation for $15,800.
b. a loss for $1300.
c. a total decrease in office furniture for $2,800.
d. a decrease in cash for $1,300.
ANSWER: b
POINTS: 1

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC3O
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-GC3G-CQJ3-CAHG-EQJW-GWSS-
EAUR-CRSS-N3BW-GOSS-KC3Z-GESU-Q3J1-GJTG-GCBA-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
61. Which of the following transactions will have no effect on the liquidity metric of a company?
a. Purchasing an asset
b. Selling an asset for no loss and no gain
c. Selling an asset for loss
d. Discarding a fully depreciated asset
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO33-G7NU-OPTZ
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-CAHD-KQJW-CF1U-EPMD-
CESU-Y3UB-8RSS-G3BW-GOSU-OC5R-CWSS-KPT3-GJ1G-RCB1-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
62. A company purchased an oil well for $10 million. It is estimated that 5 million barrels can be extracted from the well.
Determine depletion expense assuming 4 million barrels are extracted and sold during the year.
a. $1,250,000
b. $8,000,000
c. $12,500,000
d. $8,750,000
ANSWER: b
POINTS: 1

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC3Z
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJS-GR4D-EAJI-GIUG-R3DG-GRSU-
RPBA-8YSS-ECTO-GOSU-GC31-GASU-NC5F-CE3D-YQJO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
63. When natural resources are used, the _____ expense account is increased for a portion of the cost of resources
removed.
a. depletion.
b. deferral.
c. prepaid
d. amortization.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC3S
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJW-GB1U-1ATI-CA5G-G3UG-GCSS-
RQJI-8RSU-QPTO-GOSU-RCTZ-8RSS-ECTI-CFTU-1CJA-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
64. A drilling company purchased a mining site for $450,000 on July 1, 2016. The company expects to mine ore for the
next 10 years and anticipates that a total of 80,000 tons will be recovered. During 2016, the company extracted 5,800 tons
of ore. The depletion expense for the year 2016 is:
a. $45,000.
b. $50,800.
c. $5,860.
d. $32,625.
ANSWER: d
POINTS: 1
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KC3I
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-CF1U-OATT-GCHS-CPUN-8RSS-
GCBW-8YSS-G3TO-GOSU-QQMB-GOSU-GPTA-GA5U-YAUR-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
65. Which of the following is the effect of recording a depletion expense on the profitability and liquidity metrics of a
company?
a. Its free cash flow and asset turnover remains unaffected.
b. Its asset turnover decreases.
c. Its asset turnover increases.
d. Its free cash flow decreases.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO33-G7NU-OPTW
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-CW4G-RCUG-GW4U-KQBZ-
GOSS-KCMG-CRSS-NPMG-GOSU-CPUB-GCSS-C3UD-CFOU-CPBA-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
66. Goodwill is:

a. amortized in a manner similar to other intangibles.
b. written down only if an impairment in value occurs.
c. charged to expense immediately.
d. amortized over 40 years or its economic life, whichever is shorter.
ANSWER: b
POINTS: 1

Chapter 7
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KC3W
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMD-GHHU-NA3T-GO4G-EA3Z-
GASU-1CBS-8YSU-GC5F-GOSU-QA3W-GHSU-GA5B-GJOU-OATW-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
67. Which of the following is not an intangible asset?

a. Goodwill
b. Trademark
c. Copyright
d. Long-term receivable
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCNN
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJO-CO3U-NCB1-CR4D-EC3A-CWSS-
KCBZ-8RSU-NPB1-GOSU-1A5F-CESU-KCBW-CO4U-C3UF-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
68. Which of the following intangible assets are amortized over their useful life?
a. Trademarks
b. Goodwill
c. Patents
d. All of the above
ANSWER: c
Chapter 7
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCNB
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-GC5G-NPTZ-8RHG-NCMF-
GASU-K3JZ-8RSU-N3BW-GOSS-ECT1-GRSU-YC5R-CE5D-K3B1-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
69. Which of the following statement is true about intangible assets?

a. They are usually presented in the balance sheet as fixed assets.
b. They are short-lived assets.
c. They are not held for resale.
d. They have physical existence.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCB3
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ1-CE3S-NATU-GW4U-RCUF-8RSS-
NCMG-8RSU-1PMB-GOSU-O3DN-GHSS-CCB1-8YHU-NP3U-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
70. The exclusive right to use a certain name or symbol is called a:

a. franchise.
b. patent.
c. trademark.
d. copyright.
Chapter 7
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCBA
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CAAU-CATW-GF1U-KP31-CASU-
1CBA-CRSU-E3JZ-GOSU-1QJZ-CCSU-OPMB-CF1G-NCBI-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
71. Paleota Company purchased a patent from Finise for $234,000. At the time of purchase, the patent had a remaining
useful life of 10 years. Determine the patent amortization expense for the first year.
a. $23,400
b. $23,000
c. $14,000
d. $9,800
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCNG
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-CO4D-EAMB-GF1S-CA5R-8RSS-
KA3Z-8RSU-N3TZ-GOSU-QQBA-GHSU-C3BW-GAHU-KP3S-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
72. Research and development costs incurred for developing patents are recorded as:
a. current operating expenses.
b. long-term operating assets.

Chapter 7
c. accrued expenses.
d. working capital.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCNF
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMG-CWAS-RPJT-GY5U-QAUN-
GWSU-KQBO-8RSU-GCB3-GOSU-KQJT-GWSS-C3TT-GTTD-QCMB-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
73. The cost of a patent should be amortized :

a. over 10 years.
b. over its economic life.
c. over 20 years or its economic life, whichever is shorter.
d. only if an impairment occurs.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCNR
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-8Y4S-N3UG-CO5D-YP3S-COSU-
1QJ3-CRSS-KAJI-GOSU-RQJT-GYSU-YQBO-CEAD-GAJO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
74. Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?
a. Both profitability and liquidity will remain unaffected.
Chapter 7
b. Both profitability and liquidity will decrease.
c. Profitability will increase, whereas liquidity will remain unaffected.
d. Liquidity will decrease, whereas profitability will increase.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO33-G7NU-OP4B
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-GA4U-GATT-GHAD-KCBI-
GHSU-YCJW-CRSU-NA3Z-GOSU-KCMR-GYSU-13UD-GW4S-NQBT-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
75. A patent was purchased for $585,000 with a legal life of 20 years. Management estimates that the patent has a 12-year
economic life. The entry to record amortization would include:
a. an increase in amortization expense for $29,250.
b. an increase in research and development expense for $585,000.
c. a decrease in patent for $48,750.
d. an increase in accumulated amortization for $585,000.
ANSWER: c
POINTS: 1
DIFFICULTY: Challenging
QUESTION ID: JFND-GO3A-EW4R-KCND
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMB-8Y5S-RQJ3-GOHU-KCDN-
CCSU-Q3MN-8RSS-RA3A-GOSS-ECB3-CCSU-EQDR-GFTG-K3DF-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE

Chapter 7
76. Fixed assets are ordinarily presented on the balance sheet:
a. at its current market value.
b. at its replacement cost.
c. at its cost less accumulated depreciation.
d. under intangible assets.
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCBU
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-GPUD-GA3T-CC3G-EQJ3-
GYSU-Y3UD-8RSU-OCUR-GOSS-KAJT-GOSS-EATU-GE5U-RPB1-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
77. Which of the following is true of asset turnover?

a. It measures the efficiency with which a company uses its operating assets to generate sales.
b. It measures the proportion of operating assets to total assets.
c. It uses net purchases as a denominator in its calculation.
d. It measures the profits generated by the fixed and current assets of the company.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCB1
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-GR4U-CAT3-GA5D-CC3U-GESS-
GC5G-8RSU-OPJW-GOSU-CCMN-CRSU-C3T1-GH4S-RPJT-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
Chapter 7
78. The asset turnover is calculated as _____.

a. net income divided by average long-term operating assets
b. net sales divided by cost of the assets
c. average long-term operating assets divided by net sales
d. net sales divided by average long-term operating assets
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION ID: JFND-GO3A-EW4R-KCBT
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CPOS-NQDR-GC5U-YPMF-
GASU-OAJU-8RSS-R3UN-GOSS-NCBZ-GCSS-R3J1-C3TD-KQBI-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
79. An asset turnover ratio of 1.87 for a company indicates that:

a. the company is generating $1.87 of sales revenue for each dollar of long-term operating assets invested.
b. the company is generating $1.87 of net income for each dollar of retained earnings.
c. the company has $1.87 of long-term debt for each dollar of operating revenue earned.
d. the company has $1.87 of current assets for each dollar of fixed assets invested.
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCBO
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-CFUD-C3UB-CR3D-QA31-GOSS-

Chapter 7
NAT3-8YSU-KATS-GOSS-EA5N-8YSU-NCT1-GC3S-CPJA-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
80. Aquablue Roadways Corporation operates throughout the United States. The following data (in millions) were adapted
from recent financial statements of Aquablue.
Year 2 Year 1
Sales $47,250 $49,675
Beginning of year property, plant, and equipment 18,620 15,730
End of year property, plant, and equipment 22,360 18,540
From the above data, what would be the asset turnover for Year 2? (Round the answer to two decimal places.)
a. 1.15
b. 1.22
c. 2.01
d. 2.18
ANSWER: a
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCBZ
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-COAD-YAT3-CEAS-NCDG-CRSS-
N3BZ-8RSU-GA3I-GOSS-G3MR-GWSS-KCTO-GJTS-KCTZ-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
81. Identify each of the following expenditures as chargeable to (a) Land, (b) Land Improvements, (c) Buildings, (d)
Machinery and Equipment, or (e) Other accounts.
(1) Cost of paving parking area for employees and customers.
(2) Insurance during construction of building.
(3) Interest incurred on money borrowed for construction of building.
(4) Fee paid for installation of equipment.
(5) Special foundation for new equipment acquired.
(6) Transit insurance on new equipment.
(7) Freight charges on new equipment.
(8) Cost of repairing vandalism damage to equipment during installation.
(9) Sales tax on new equipment.
(10) Cost incurred in repairing damage resulting from installation of new equipment.
(11) Cost of landfill for building site.
(12) Cost of lubricating oil purchased for periodic oil changes for equipment.
Chapter 7
(13) Parking lot lighting.
(14) Installing a fence around the parking lot.
(15) Repainting the trim on a building.
(16) Special assessment paid to city for extension of water main to the property.
(17) Cost of razing and removing the old building on property acquired for a building site.
(18) Delinquent real estate taxes assumed by purchaser on property acquired for a building site.
(19) Attorney's fee for title search.
(20) Architect's fee for building plans and supervision of construction.
ANSWER: (a) 11, 16, 17, 18, 19
(b) 1, 13, 14
(c) 2, 3, 20
(d) 4, 5, 6, 7, 9
(e) 8, 10, 12, 15
POINTS: 1
QUESTION TYPE: Subjective Short Answer
QUESTION ID: JFND-GO3A-EW4R-KCBI
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMF-8F1U-G3MG-GPUG-C3TZ-
GRSU-OQBI-8RSU-GPBS-GOSS-KCJO-GHSS-E3MG-GWAU-N3DR-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
82. Determine the cost of the land, based on the following data.
Land purchase price $90,000
Broker's commission 7,500
Payment for the demolition and removal of existing building 2,500
Cash received from the sale of materials salvaged from the demolished building 500
ANSWER: $99,500; ($90,000 + $7,500 + $2,500 – $500)
POINTS: 1
DIFFICULTY: Easy

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCJZ
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-C31D-NC5D-8RAU-1C3Z-GYSS-
CCDB-8YSS-C3TO-GOSS-K3JS-CCSU-CAJO-G7TD-RC33-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
83. A company made some expensive repairs to equipment and buildings during the past year. (a) What criteria is used in
determining whether the repairs are capital expenditures or revenue expenditures, and (b) what is the effect on the
company's financial statements if they are incorrectly recorded as capital expenditures?
ANSWER: Expenditures made to improve the asset or extend its useful life are characterized as
(a) capital expenditures. Whereas costs that benefit only the current period are called
revenue expenditures.
If a cost is incorrectly capitalized, it will be recorded as an increase to assets and not be
(b) recorded as an expense. Therefore, assets will be overstated and expenses will be
understated, causing net income to be overstated.
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCBS
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJA-CWAG-NA5G-CFUG-NA33-
GYSU-YAUR-CRSU-1PJ1-GOSS-GPUG-CASU-Y3J3-GT1D-RCTI-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
84. Cook Co. incurred the following costs related to the office building used in operating its sports supply company:
(a) Replaced a broken window.
(b) Replaced the roof that had been on the building for 23 years.
(c) Serviced all the air conditioners before summer started.
Replaced the air conditioners with refrigerated air conditioners in the customer service
(d)
areas.
(e) Added a warehouse to the back of the building.
(f) Repainted the interior walls.
(g) Installed window shutters on all windows.
Classify each of the costs as a capital expenditure or a revenue expenditure.
ANSWER: (a) Revenue expenditure
(b) Capital expenditure
(c) Revenue expenditure
(d) Capital expenditure
(e) Capital expenditure
(f) Revenue expenditure

Chapter 7
(g) Capital expenditure
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCBW
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-GBUG-RCT1-CITD-QATU-
GASS-KPUN-8RSS-RPMR-GOSU-EAJS-CCSU-Y3UD-8F1U-QP3A-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
85. A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900. It has a useful life of 4 years and a
residual value of $300. Determine depreciation expense for the first two years, assuming a fiscal year end of December 31
and using (a) the straight-line method and (b) the double-declining-balance method.
ANSWER:
Straight-line method
(a)
Year 1: $675; ($3,900 – $300) / 4 × 9 / 12)
Year 2: $900; ($3,600 / 4)
Double-declining-balance method
(b)
Year 1: $1,462.50; ($3,900 × .5 × 9/12)
Year 2: $1,218.75; ($3,900 – $1,462.50) × .5
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCKN
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-CE4D-N3J3-GE3U-NC5R-CRSU-
QA3S-CESU-NAJ1-GOSU-EAUR-8RSU-RQJZ-8Y5U-NAUN-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE

Chapter 7
86. A company purchased a photocopy machine for $16,000. It has a useful life of 4 years and a residual value of $1,000.
Compute depreciation for the second year under each of the following methods: (a) straight-line and (b) double-declining-
balance.
ANSWER: a. $3,750 ($16,000 – $1,000) / 4
b. $4,000 ($16,000 – $8,000) × .5
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCKB
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-CFOS-N3TA-8RAD-1QJ1-CESU-
CQB3-CRSS-KAJU-GOSU-KPJZ-GESU-EPDF-CJTD-CCBO-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
87. You have been hired by a high-growth startup company to assist in the determination of what depreciation method to
employ for financial reporting. The company's fixed assets are equally divided among buildings and high-tech equipment
(heavily used in the initial years).
Can the company select different methods of depreciation for financial reporting?
(a)
Explain.
Explain to company management which method of depreciation would be suitable for
(b)
each type of fixed assets the company employs. Also, state why.
(c) Which method of depreciation would the company choose for taxes? Explain why.
ANSWER: Yes, generally accepted accounting principles do allow usage of different methods as
(a)
long as costs are allocated on a rational and consistent basis.
Straight-line depreciation would be most suitable for buildings since usage and wear
and tear are about the same each year. The double-declining-balance method would be
(b)
most suitable for the high-tech equipment since it recognizes the greatest loss of
services through higher depreciation charges in the initial years.
The company would select Modified Accelerated Cost Recovery System since the
(c)
Internal Revenue Code uses this method to compute depreciation for tax purposes.
POINTS: 1
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
KEYWORDS: Bloom's: Analyzing
Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCJA
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJO-CAAD-CQBU-CEHD-CAJU-
GWSU-G3JU-CRSS-GPMN-GOSS-GAUF-GESS-KP33-COHS-KAMF-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
88. A company acquired a truck for $79,000 at the beginning of the fiscal year. It has a useful life of 5 years and a residual
value of $9,000. The company uses the straight-line method of depreciation. After owning the truck for two years, the
company sold it for $34,000. (a) Determine depreciation expense for each of the first two years, and (b) determine the
gain or loss resulting from the sale.
ANSWER: (a) $14,000 each year; ($79,000 – $9,000 / 5)
(b) Loss of $17,000; [$34,000 – ($79,000 – $28,000)]
POINTS: 1
SACC.WARR.18.7-3 - LO: 07.03
QUESTION ID: JFND-GO3A-EW4R-KCJ3
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ3-GF1D-EA5N-CW3G-RQDN-CASS-
K3BT-CESU-E3T1-GOSU-N3JO-GCSS-NC3Z-CRHD-CPTZ-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
89. A machine with a useful life of 6 years and a residual value of $3,000 was purchased at the beginning of year 1 for
$30,000. The machine was sold for $15,000 on April 1 in year 4.
What was the book value of the machine at the end of year 3 assuming the straight-line
(a)
method of depreciation is used?
Illustrate the effects on the accounts and financial statements of the depreciation from
(b)
January 1 to April 1 of year 4.
Illustrate the effects on the accounts and financial statements of the sale of the machine on
(c)
April 1.
ANSWER:
(a) $16,500 = ($30,000 – $13,500)
Assets = Liabilities + Stockholders' Equity

Accumulated Retained
Cash Machine Capital Stock
Depreciation Earnings
(b) 1,125 –1,125
(c) 15,000 –30,000 –14,625 –375
Statement of Cash Flows Income Statement

(b) Depreciation expense –1,125
Chapter 7
(c) Investing 15,000 (c) Loss on sale of machine –375
POINTS: 1
SACC.WARR.18.7-3 - LO: 07.03
QUESTION ID: JFND-GO3A-EW4R-KCKG
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMMN-CO4D-CC5F-8Y5G-KA3W-
8YSU-N3BI-8RSU-RPT1-GOSU-RQMF-GOSU-NP3O-C31D-EC3Z-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
90. Machine with a useful life of 5 years and a residual value of $6,000 was purchased on January 3, 2016, for $48,500.
The machine was sold on January 5, 2021, for $13,000.
What is the book value of the machine on January 5, 2021, assuming straight-line
(a)
depreciation is used?
Illustrate the effects on the accounts and the financial statements of the sale of the machine
(b)
on January 5, 2021.
Illustrate the effects on the accounts and the financial statements of the sale of the machine if
(c)
it had been sold for $18,000 instead.
ANSWER:
(a) $6,000 = ($48,500 – $42,500)

Accumulated Retained
Cash Machine Capital Stock
Depreciation Earnings
(b) 13,000 –48,500 –42,500 7,000
(c) 18,000 –48,500 –42,500 12,000

(b) Investing 13,000 (b) Gain on sale of machine 7,000
(c) Investing 18,000 (c) Gain on sale of machine 12,000
POINTS: 1
LEARNING OBJECTIVES:SACC.WARR.18.7-2 - LO: 07.02
SACC.WARR.18.7-3 - LO: 07.03

Chapter 7
QUESTION ID: JFND-GO3A-EW4R-KCKF
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-GC4U-NQJS-CCHD-RPTS-GHSU-
GC3U-8RSU-N3UD-GOSS-GPJ3-GHSS-RCTO-GFUD-EQDB-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
91. A company acquired mineral rights for $7,500,000. The mineral deposit is estimated at 600,000 tons and during the
year 100,000 tons were extracted and sold.
(a) Calculate depletion expense for the year.
(b) Show the effects of (a) on the accounts and the financial statements of the company.
(c) What is the book value of the mineral rights at the end of the current year?
ANSWER:
(a) $1,250,000 = 100,000 × ($7,500,000 / 600,000)
(b)

Mineral Accumulated Retained
Cash Capital Stock
Rights Depletion Earnings
1,250,000 –1,250,000

NA Depletion expense –1,250,000
(c) $6,250,000 = $7,500,000 – $1,250,000
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCKR
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJ1-CRAU-E3MN-GBTG-NPTO-
CWSU-RA3U-CESS-RA3W-GOSU-NAMB-GOSS-KC5D-CE5D-KCBW-E7JI-YT4D-
JFNN-4OTI-GO4W-NQNBEE

Chapter 7
92. During 2016, Lexie, Inc. acquired Lena, Inc. for $10,000,000. The fair market value of the net assets of Lena, Inc. was
$8,500,000 on the date of purchase. During 2019, Lexie, Inc. determined the goodwill resulting from the Lena acquisition
was impaired and had a value of $1,000,000.
(a) Determine the amount of goodwill implied during 2016.
Illustrate the effects on the accounts and the financial statements of the December 31,
(b)
2019, adjustment for the goodwill impairment.
ANSWER:
(a) $10,000,000 – $8,500,000 = $1,500,000 Implied Goodwill
(b)

Cash Goodwill Capital Stock Retained Earnings
–500,000 –500,000
Loss on Impaired Goodwill –500,000
POINTS: 1
QUESTION ID: JFND-GO3A-EW4R-KCKD
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJT-GWHG-N3DF-GFUD-RQBO-
GESS-KPBI-8YSU-YA3I-GOSS-R3DF-CRSU-YA3O-CRHU-EA3W-E7JI-YT4D-JFNN-
4OTI-GO4W-NQNBEE
93. For each of the following items indicate whether the transactions listed below increased (+), decreased (–) or had no
effect (0) by inserting the appropriate symbol.
Net Owners' Cash

Income Assets Liab. Equity Flows
(a) Record depreciation expense
Sold equipment for cash at a
(b)
loss
Recorded loss on impaired
(c)
goodwill
(d) Recorded depletion expense
Recorded a capital
(e) expenditure and issued a note
payable
ANSWER:
Chapter 7
Net Owners' Cash

(a) Record depreciation expense – – 0 – 0
(b) – – 0 – +
loss
Recorded loss on impaired
(c) – – 0 – 0
goodwill
(d) Recorded depletion expense – – 0 – 0
Recorded a capital
(e) expenditure and issued a note 0 + + 0 0
payable
POINTS: 1
SACC.WARR.18.7-3 - LO: 07.03
SACC.WARR.18.7-4 - LO: 07.04
SACC.WARR.18.7-5 - LO: 07.05
QUESTION ID: JFND-GO3A-EW4R-KCJU
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJO-8BTD-O3T3-CR3G-NCDG-CESS-
CA3A-8YSU-EC33-GOSS-G3TS-CWSU-CQMD-CITG-CCB1-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
94. For each of the following items indicate whether the transactions listed below increased (+), decreased (–) or had no
effect (0) by inserting the appropriate symbol.
Net Owners' Cash

(a)
gain
Recorded amortization
(b)
expense on patents
Paid cash for minor repairs to
(c)
an asset
Recorded a revenue
(d) expenditure incurred on
account
Paid cash to remove old
(e) building from land being
prepared for use
Chapter 7
ANSWER:
a. +, +, 0, +, +
b. –, –, 0, –, 0
c. –, –, 0, –, –
d. –, 0, +, –, 0
e. 0, 0, 0, 0, –
Net Owners' Cash

(a) + + 0 + +
gain
Recorded amortization
(b) – – 0 – 0
expense on patents
Paid cash for minor repairs to
(c) – – 0 – –
an asset
Recorded a revenue
(d) expenditure incurred on – 0 + – 0
account
Paid cash to remove old
(e) building from land being 0 0 0 0 –
prepared for use
POINTS: 1
SACC.WARR.18.7-3 - LO: 07.03
SACC.WARR.18.7-5 - LO: 07.05
QUESTION ID: JFND-GO3A-EW4R-KCJ1
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJU-GR4G-GPJO-GOHD-QCJT-CRSU-
OCUN-8YSU-NCJA-GOSU-YCDF-GOSS-GPBO-GHHG-GQMB-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
95. You are examining the financial statements of a company. You observe patent amortization expense of $1.5 million
and a loss on impairment of goodwill for $25 million.
(a) Describe how the accountants arrived at these amounts.
(b) Interpret any information provided by these disclosures.
ANSWER: The patent amortization was arrived at by taking the cost and writing it off over the
patent's legal life or useful life, whichever is shorter. The loss on impaired goodwill
(a)
was determined by comparing goodwill's book value to fair value. In this case, the fair
value of goodwill was lower, and thus goodwill had to be written down.

Chapter 7
The amortization expense for patents simply allocates the asset's cost to periods
benefited and does not measure any market value change. The loss on impaired
(b)
goodwill does reflect a decline in the asset’s market value and is not a cost allocation
process such as amortization.
POINTS: 1
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
KEYWORDS: Bloom's: Analyzing
QUESTION ID: JFND-GO3A-EW4R-KCJT
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJZ-GJTS-RA31-GRHS-RATU-GWSS-
KQBI-8RSU-C3JZ-GOSU-YQJZ-CRSS-C3J1-CPOU-OCJT-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE
96. Identify the following as a Fixed Asset (FA), Intangible Asset (IA), Natural Resource (NR), or None of these (N).
(a) Computer
(b) Patent
(c) Oil reserve
(d) Goodwill
(e) U.S. Treasury note
(f) Land used for employee parking
(g) Gold mine
ANSWER: FA (a) (f)
IA (b) (d)
NR (c) (g)
N (e)
POINTS: 1
DIFFICULTY: Easy
SACC.WARR.18.7-4 - LO: 07.04
SACC.WARR.18.7-5 - LO: 07.05
QUESTION ID: JFND-GO3A-EW4R-KCJO
Chapter 7
CFUN-4AJI-GFUG-NA5D-CTDI-GWN8-EPRW-EMJI-CC3U-OC3A-8YHU-K3MB-CESS-
NCTO-8RSS-K3T3-GOSU-K3BW-GOSU-QC3I-CJOS-RCMD-E7JI-YT4D-JFNN-4OTI-
GO4W-NQNBEE

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3. Expenditures made to extend an asset's life are called revenue expenditures.

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Copyright Cengage Learning. Powered by Cognero. Page 4

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12. Companies usually compute depletion by using the double-declining-balance method.

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15. If an asset is discarded, a loss is recognized equal to its salvage value.

Copyright Cengage Learning. Powered by Cognero. Page 7

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18. Intangible assets do not exist physically.

23. Which of the following is a characteristic of fixed assets?

Copyright Cengage Learning. Powered by Cognero. Page 11

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30. _____ is an example of a fixed asset.

31. Land improvements include:

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32. Capital expenditure is reported on the:

33. If a revenue expenditure is treated as a capital expenditure, then:

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34. The effect of recording a capital expenditure as a revenue expenditure is that:

36. Which of the following is an example of a capital expenditure?

37. The book value of an asset is computed as the asset's:

40. Depreciable cost is computed as:

41. Which of the following is a characteristic of accumulated depreciation account?

43. The accounting term depreciation measures:

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44. The Modified Accelerated Cost Recovery System is used to:

45. Recording depreciation:

46. To measure depreciation, which of the following must be known?

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55. Losses on discarding fixed assets are _____.

57. A gain is recorded on the sale of fixed assets when:

58. A fully depreciated asset must be:

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66. Goodwill is:

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67. Which of the following is not an intangible asset?

69. Which of the following statement is true about intangible assets?

70. The exclusive right to use a certain name or symbol is called a:

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73. The cost of a patent should be amortized :

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77. Which of the following is true of asset turnover?

78. The asset turnover is calculated as _____.

79. An asset turnover ratio of 1.87 for a company indicates that:

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Assets = Liabilities + Stockholders' Equity

Statement of Cash Flows Income Statement

(c) Investing 15,000 (c) Loss on sale of machine –375

Assets = Liabilities + Stockholders' Equity