Financial Accounting Canadian 6Th Edition Harrison Test Bank Full Chapter PDF

Financial Accounting Canadian 6th
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Financial Accounting, 6Ce (Harrison)
Chapter 6 Property, Plant, and Equipment, and Intangible Assets
6.1 Measure and account for the cost of property, plant, and equipment
1) Which of the following is not a long-lived asset?

A) supplies
B) furniture
C) buildings
D) land
Answer: A
Diff: 2 Type: MC
L.O.: 6-1
CPA COMPETENCIES: Chapter 6
1.2.2 Evaluates treatment for routine transactions
1.4.4 Interprets financial reporting results for stakeholders (external or internal)
2) All amounts paid to acquire a long lived-asset and to get it ready for its intended use are referred to as:
A) immediate expenses
B) net book value
C) salvage value
D) the cost of an asset
Answer: D
Diff: 1 Type: MC
L.O.: 6-1
3) The cost of land would include all of the following except:

A) purchase price
B) back property taxes
C) clearing the land
D) sidewalks and curbs
Answer: D
Diff: 2 Type: MC
L.O.: 6-1
1
Copyright © 2018 Pearson Education, Inc.
4) The cost of paving a parking lot should be charged to:
A) land
B) land improvements
C) immediate expense
D) repairs and maintenance expense
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
5) Which of the following would not be included in the Land account?

A) brokerage commissions connected with the purchase of the land
B) survey fees connected with the purchase of the land
C) paving costs for a driveway
D) back property taxes paid
Answer: C
Diff: 2 Type: MC
L.O.: 6-1
6) Land, buildings, and equipment are acquired for a lump sum of $950,000. The fair values of the three
assets are respectively, $200,000, $500,000, and $300,000. What is the cost assigned to the building?
A) $190,000
B) $475,000
C) $500,000
D) $555,556
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
7) Land is purchased for $60,000. Back taxes paid by the purchaser were $2,400, clearing and grading
costs were $3,000, fencing costs were $2,500, and lighting costs were $500. What is the cost of the land?
A) $60,000
B) $65,400
C) $66,400
D) $68,400
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
2
8) Which of the following would not be included in the Machinery account?
A) cost of transporting the machinery to its setup location
B) cost of a maintenance insurance plan after the machinery is up and running
C) cost of installing the machinery
D) cost of insurance while the machinery is in transit
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
9) Bavarian Purity Corporation purchased equipment for $32,000. Bavarian Purity also paid $400 for
freight and insurance while the equipment was in transit. Sales tax amounted to $240. Insurance, taxes,
and maintenance the first year of use cost $1,000. How much should Bavarian Purity Corporation
capitalize as the cost of the equipment?
A) $32,000
B) $32,400
C) $32,640
D) $31,640
Answer: C
Diff: 2 Type: MC
L.O.: 6-1
10) The removal of an old building to make land suitable for its intended use is charged to:
A) land
B) land improvements
C) land improvements expense
D) renovation and restoration expense
Answer: A
Diff: 2 Type: MC
L.O.: 6-1
11) Grasshopper Room Company acquired land and buildings for $1,500,000. The land is appraised at
$475,000 and the buildings are appraised at $775,000. The debit to the Buildings account will be:
A) $930,000
B) $775,000
C) $1,025,000
D) $570,000
Answer: A
Diff: 2 Type: MC
L.O.: 6-1
3
12) Which expense below would not be considered part of the cost of a tangible long-lived asset?
A) the price paid for the property, plant, and equipment when purchased from the manufacturer
B) taxes paid on the purchase price of property, plant, and equipment
C) commissions paid to the salesperson that sold the property, plant, and equipment
D) repaving a driveway to the building where the property, plant, and equipment is housed
Answer: D
Diff: 1 Type: MC
L.O.: 6-1
13) The Loft Corporation purchased land and a building for $700,000. An appraisal indicates that the
land's value is $400,000 and the building's value is $350,000. The amount that The Loft Corporation
should debit to the Building account is:
A) $326,667
B) $350,000
C) $373,333
D) $375,000
Answer: A
Diff: 2 Type: MC
L.O.: 6-1
14) The Warthog Company purchased land, buildings, and equipment for $2,400,000. The land has been
appraised at $865,000, the buildings at $1,175,000, and the equipment at $510,000. The equipment account
will be debited for:
A) $525,000
B) $500,000
C) $480,000
D) $410,156
Answer: C
Diff: 2 Type: MC
L.O.: 6-1
4
15) A major expenditure made to equipment that extends its useful life beyond the original estimate is
journalized by:
A) crediting Depreciation Expense
B) debiting Equipment
C) debiting Depreciation Expense
D) debiting Repair Expense
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
16) Expenditures that increase the efficiency of an asset or extend its useful life are referred to as:
A) immediate expenses
B) capital expenditures
C) equity expenditures
D) matching expenditures
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
17) Expenditures of a periodic, routine nature incurred to maintain the asset in its existing condition are
referred to as:
A) capital expenditures
B) equity expenditures
C) matching expenditures
D) immediate expenses
Answer: D
Diff: 2 Type: MC
L.O.: 6-1
18) Repairs made to equipment as part of a yearly maintenance project would be recorded in the journal
by:
A) debiting Equipment
B) debiting Repair Expense
C) debiting Depreciation Expense
D) debiting Accumulated Depreciation
Answer: B
Diff: 2 Type: MC
L.O.: 6-1
5
19) Treating a capital expenditure as an immediate expense:
A) understates expenses and overstates owners' equity
B) understates expenses and understates assets
C) overstates assets and overstates owner's equity
D) overstates expenses and understates net income
Answer: D
Diff: 3 Type: MC
L.O.: 6-1
20) The cost of land would include all of the following except:
A) survey and legal fees incurred
B) costs of removing any unwanted building on the land
C) paving and fencing
D) costs to grade and clear the land
Answer: C
Diff: 1 Type: MC
L.O.: 6-1
21) The cost of a tangible long-lived asset includes the purchase price, applicable taxes, purchase
commissions, and all other amounts paid to acquire the asset and get it ready for its intended use.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 6-1
22) The cost of land does not include the cost of paving to construct a parking lot.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-1
23) Of the tangible long-lived assets, buildings are unique because they are not amortized.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-1
6
24) Land improvements are subject to depreciation.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-1
25) Costs of land improvements are not included in the Land account.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-1
26) Improvements to land are considered part of the cost of land since they are tied directly to the use of
the land itself.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-1
27) Immediate expenses are those that maintain the existing condition of an asset or restore an asset to
good working order.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-1
28) Discuss the type of tangible long-lived assets Canadian Tire owns and controls, and how they are
typically recorded on the balance sheet.
Answer: Canadian Tire's assets include buildings, equipment, furniture and fixtures. Canadian Tire's
property, plant, and equipment are stated at cost less accumulated depreciation.
Diff: 1 Type: ES
L.O.: 6-1
7
29) Rocky Mountain Water Corporation paid $270,000 to purchase equipment for use in its
manufacturing operations. In addition, Rocky Mountain Water Corporation incurred the following
expenditures relating to the equipment:
∙ $1,500 freight to have the equipment shipped to its manufacturing facility

∙ $750 insurance while the equipment was in transit
∙ $3,200 for special steel and concrete reinforcements used to house the equipment in the factory
∙ $1,200 for a one-year insurance policy on the equipment after it has been installed
∙ $300 to test the equipment before it is placed in service
∙ $400 for maintenance costs during the first year of service
Calculate the cost of the equipment.

Answer: $270,000 + $1,500 + $750 + $3,200 + $300 = $275,750
Diff: 2 Type: ES
L.O.: 6-1
30) Thompson Glacier Limited purchased a tract of land and contracted with a commercial developer to
build an office building. Thompson Glacier Limited also engaged other contractors for fencing, paving,
lighting, and landscaping.
Based on the following data, determine the cost of the land, the building, and the land improvements.
∙ Purchased land for $100,000.

∙ Paid $2,000 for seller's back property taxes.
∙ Paid a builder $225,000 to design and build the office building.
∙ Paid an excavation company $6,000 to grade and clear the land to make it suitable for building purposes.
∙ Paid a landscaping company $6,500 for trees and shrubs.
∙ Paid a lighting contractor $10,000 for outside lighting around the parking area and sidewalks.
∙ Paid $15,000 to have the parking lot paved.
∙ Paid a fence builder $12,000 to construct a security fence around the property.
Answer:
Land = $100,000 + $2,000 + $6,000 = $108,000
Building = $225,000
Land improvements = $6,500 + $10,000 + $15,000 + $12,000 = $43,500
Diff: 2 Type: ES
L.O.: 6-1
8
31) Glenmore Reservoir Corporation paid $4,000,000 in a lump-sum purchase of land, a building, and
equipment. The payment consisted of $1,500,000 cash and a note payable for the balance. An appraisal
indicated the following fair values at the time of the purchase:
Land $ 1,600,000
Building 2,500,000
Equipment 500,000
Prepare the journal entry to record this lump-sum purchase (round all percentage calculations to two
decimal places).
Answer:
Asset FV Total FV % Cost Allocated cost
Land 1.6M 4.6M 35% 4.0M $1.4M
Building 2.5 4.6 54% 4.0 2.16
Equipment 0.5 4.6 11% 4.0 0.44
Land 1,400,000
Building 2,160,000
Equipment 440,000
Cash 1,500,000
Note Payable 2,500,000
Diff: 2 Type: ES
L.O.: 6-1
32) On October 15, 2016, Out West Enterprises purchased new factory equipment for its manufacturing
facilities. The new equipment had an invoice price of $16,000, plus a 6% sales tax. In addition, the
purchaser was responsible for $950 of freight charges. The sale was subject to 2/10, n/45 credit terms.
Upon receipt of the new equipment Out West Enterprises paid $1,200 to have the equipment installed. To
finance the purchase, Out West Enterprises borrowed $17,000 from the First Street Bank for 60 days at
12% interest. Out West Enterprises paid the invoice within 9 days.
Calculate the cost of the factory equipment to be capitalized on the books.

Answer: ($16,000 × 1.06) + $950 + $1,200 - ($16,000 × 0.02) = $16,960 + $950 + $1,200 - $320 = $18,790
Diff: 2 Type: ES
L.O.: 6-1
9
6.2 Measure and record depreciation on property, plant, and equipment
1) Which of the following expenses is most closely associated with tangible long-lived assets?
A) accumulation
B) depreciation
C) interest
D) depletion
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
2) The process of allocating property, plant, and equipment's cost to expense over the period the asset is
used is called:
A) accumulation
B) depreciation
C) interest
D) repairs expense
Answer: B
Diff: 1 Type: MC
L.O.: 6-2
3) Which of the following depreciation methods best fits those assets that tend to wear out before they
become obsolete?
A) depletion method
B) straight-line method
C) double-declining-balance method
D) units-of-production method
Answer: D
Diff: 2 Type: MC
L.O.: 6-2
10
4) Which accounting principle directs the depreciation process?
A) historical cost
B) going concern
C) full disclosure
D) matching
Answer: D
Diff: 1 Type: MC
L.O.: 6-2
5) Which of the following statements is true?

A) Depreciation is a process of objective valuation.
B) Depreciation means that a business sets aside cash to replace assets as they become fully amortized.
C) Accumulated depreciation represents a growing amount of cash to be used to replace the existing
asset.
D) Accumulated depreciation is that portion of property, plant, and equipment's cost that has already
been recorded as an expense.
Answer: D
Diff: 3 Type: MC
L.O.: 6-2
6) Which of the following depreciation methods best applies to those assets that generate greater revenue
earlier in their useful lives?
A) depletion method
B) double-declining-balance method
C) units-of-production method
D) straight-line method
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
7) To measure depreciation for a tangible long-lived asset, all of the following must be known except:
A) estimated useful life
B) current market value
C) estimated residual value
D) historical cost
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
11
8) One of several terms can be used to identify the expected cash value of a tangible long-lived asset at the
end of its useful life. Which term below is not used in this sense?
A) residual value
B) scrap value
C) current carrying amount
D) salvage value
Answer: C
Diff: 2 Type: MC
L.O.: 6-2
9) Depreciable cost is defined as:

A) book value
B) salvage value
C) cost minus accumulated depreciation
D) asset's cost minus estimated residual value
Answer: D
Diff: 2 Type: MC
L.O.: 6-2
10) In which of the following depreciation methods is annual depreciation calculated as the difference
between the asset's historical cost and its residual value, divided by the asset's useful life in years?
A) double-declining-balance
B) straight-line
C) units-of-production
D) depletion
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
11) Carrying amount is defined as:

A) cost less salvage value
B) cost less accumulated depreciation
C) current market value less salvage value
D) current market value less accumulated depreciation
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
12
12) On January 2, 2016 McNally's Extra Corporation acquired equipment for $120,000. The estimated life
of the equipment is 5 years or 20,000 hours. The estimated residual value is $20,000. If McNally's Extra
Corporation uses the straight-line method of depreciation, what will be the debit to Depreciation Expense
for the year ended December 31, 2017, during which period the asset was used 4,500 hours?
A) $20,000
B) $22,500
C) $24,000
D) $27,000
Answer: A
Diff: 2 Type: MC
L.O.: 6-2
13) On January 2, 2016, McNally's Extra Corporation acquired equipment for $120,000. The estimated life
of the equipment is 5 years or 20,000 hours. The estimated residual value is $20,000. What is the balance
in Accumulated Depreciation on December 31, 2017, if McNally's Extra Corporation uses the double-
declining-balance method of depreciation?
A) $23,200
B) $36,000
C) $43,200
D) $76,800
Answer: D
Diff: 3 Type: MC
L.O.: 6-2
14) On January 2, 2016 McNally's Extra Corporation acquired equipment for $120,000. The estimated life
of the equipment is 5 years or 20,000 hours. The estimated residual value is $20,000. What is the amount
of depreciation expense for 2017, if McNally's Extra Corporation uses the asset 4,000 hours and uses the
units-of-production method of depreciation?
A) $20,000
B) $24,000
C) $25,000
D) $30,000
Answer: A
Diff: 2 Type: MC
L.O.: 6-2
13
15) The double-declining-balance method of depreciation causes:
A) less depreciation in early years of an asset's use as compared to other depreciation methods
B) more depreciation in early years of an asset's use as compared to other depreciation methods
C) the same amount of depreciation in early years of an asset's use as compared to other depreciation
methods
D) is not an acceptable depreciation method according to GAAP
Answer: B
Diff: 2 Type: MC
L.O.: 6-2
16) At the end of an asset's useful life, the balance in Accumulated Depreciation will:
A) be greater under units-of-production depreciation than under straight-line depreciation
B) be the same amount under all the depreciation methods
C) be a greater amount under straight-line depreciation than under double-declining-balance
depreciation
D) be a lesser amount under double-declining-balance depreciation than under units-of-production
depreciation
Answer: B
Diff: 3 Type: MC
L.O.: 6-2
17) To measure depreciation, all of the following must be known except:

A) the asset's useful life in terms of years, hours, or units
B) the estimated residual value of the asset
C) the cost of the asset
D) the current market value of the asset
Answer: D
Diff: 1 Type: MC
L.O.: 6-2
18) Depreciation computed under double-declining-balance will decrease each year because:
A) the book value used in the computation each year increases
B) the rate used in the computation each year increases
C) the rate used in the computation each year decreases
D) the book value used in the computation each year decreases
Answer: D
Diff: 2 Type: MC
L.O.: 6-2
14
19) The Accumulated Depreciation account represents a source of cash to be used to replace the asset in
the future.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-2
20) In order to calculate depreciation, the cost of the asset, the estimated useful life, and the estimated
residual value of the asset must be known.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 6-2
21) When using the double-declining-balance depreciation method, the asset's residual value is used in
computing the first year of depreciation.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-2
22) Book value is determined by subtracting the salvage value from the cost of an asset.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-2
23) The terms residual value and carrying value are synonymous.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-2
24) Double-declining-balance depreciation computes annual depreciation by multiplying the asset's

carrying value by two times the straight-line rate.
Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-2
15
25) Regardless of the method of depreciation used, accumulated depreciation will be the same when the
asset is fully amortized.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-2
26) Big Valley Ltd. purchased machinery on January 2, 2016, at a total cost of $85,000. The machinery's
estimated useful life is 8 years or 60,000 hours, and its residual value is $5,000. During 2016 and 2017, the
machinery was used 7,000 and 7,500 hours, respectively.
Compute depreciation under straight-line, units-of-production, and double-declining-balance methods

for 2016 and 2017.
2016 2017
Straight-line depreciation ________ ________
Units-of-production depreciation ________ ________
Double-declining-balance
depreciation ________ ________
Answer:
2016 2017
Straight-line depreciation $10,000 $10,000
Units-of-production depreciation $9,333 $10,000
depreciation $21,250 $15,938
Diff: 2 Type: ES
L.O.: 6-2
27) Explain the concept of depreciation. Include in your discussion one common misconception regarding
depreciation and its impact on the finances of a business.
Answer: Depreciation is the process of allocating property, plant, and equipment's cost to expense over
the period the asset is used. This process is designed to match the asset's expense against the revenue
generated over the asset's life. The primary purpose of depreciation is to help measure income properly.
Depreciation is not a process of valuation, and depreciation does not mean that the business sets aside
cash to replace assets as they become fully amortized.
Depreciation is also a noncash expense. Depreciation does not impact cash flows from operations. It is a
tax-deductible expense, thus decreasing the income tax payment.
Diff: 2 Type: ES
L.O.: 6-2
16
28) For each of the independent situations below, determine the age of the asset in question. All assets
were acquired at the beginning of the year.
a. The balance in the Buildings account is $400,000 while the balance sheet shows the book value of the
buildings at $217,600. The notes to the financial statements indicate that straight-line depreciation is used
for all property, plant, and equipment and that residual values are estimated at 5% of cost. The estimated
life of the buildings is 25 years.
b. The book value of the delivery equipment is $51,520. The cost of the delivery equipment was $80,500.
The company uses the straight-line method of depreciation for delivery equipment and estimates life at 5
years or 50,000 units. So far, 27,000 units have been produced. Residual value is 10% of cost.
c. The balance in the Accumulated Depreciation account for furniture is $21,875. The furniture has been
amortized a total of 43.75% of its original cost. The company's notes to the financial statements indicate
that double-declining-balance depreciation is used for all furniture. The company estimates useful life at
8 years and residual value at 20% of cost.
Answer:
a. $400,000 × 0.95 = $380,000 amortizable amount
$380,000/25 = $15,200 annual depreciation
$400,000 - $217,600 = $182,400 balance in accumulated depreciation
$182,400/$15,200 = 12 years old
b. $80,500 × 0.90 = $72,450 amortizable amount
$72,450/5 = $14,490 annual depreciation
$80,500 - $51,520 = $28,980 balance in accumulated depreciation
$28,980/$14,490 = 2 years old
c. $21,875/0.4375 = $50,000 original cost
$50,000 × 0.25 = $12,500 first year's depreciation expense
$37,500 × 0.25 = $9,375 second year's depreciation expense
$12,500 + $9,375 = $21,875 = balance in accumulated depreciation
Furniture is 2 years old
Diff: 3 Type: ES
L.O.: 6-2
17
29) Carleton Corporation purchased machinery on October 1, 2016, at a total cost of $98,000. Estimated
residual value is $8,000, estimated life of the machinery is 6 years or 50,000 hours. During 2016 and 2017,
the machinery was used 1,400 and 8,760 hours, respectively.
Compute depreciation under straight-line, units-of-production, and double-declining-balance methods

for 2016 and 2017.
2016 2017
Straight-line depreciation ________ ________
Units-of-production depreciation ________ ________
depreciation ________ ________
Answer: 2016 2017
Straight-line depreciation $ 3,750 $15,000
Units-of-production depreciation $ 2,520 $15,768
Double-declining-balance depreciation $ 8,167 $29,944
Diff: 3 Type: ES
L.O.: 6-2
30) Seasons Limited paid $135,000 to purchase equipment at the beginning of 2014. Seasons Limited
estimated the useful life of the equipment to be 4 years or 200,000 units. The equipment will be
considered fully amortized when the balance in the Accumulated Depreciation account reaches $120,000.
The equipment produced 52,000 units in 2017.
Required:
a. Determine the estimated residual value of the equipment.
b. What is the amortizable cost of the equipment?
c. Calculate depreciation expense for 2017 under each of the following methods:
i. straight-line
ii. units-of-production
iii. double-declining-balance
Answer:
a. $135,000 - $120,000 = $15,000
b. $120,000
c. i. $120,000/4 = $30,000
ii. $120,000/200,000 = $0.60; $0.60 × 52,000 = $31,200
iii. 2014 $135,000 × 0.5 = $67,500
2015 $67,500 × 0.5 = $33,750
2016 $33,750 × 0.5 = $16,875
2017 $120,000 - 67,500 - 33,750 - 16,875 = $1,875
Diff: 3 Type: ES
L.O.: 6-2
18
31) Explain how a company should decide which depreciation method to use for financial reporting
purposes.
Answer: A company should use the method that best matches depreciation expense against the revenues
produced by the asset.
Diff: 1 Type: ES
L.O.: 6-2
32) Rainier Corporation purchased five automobiles at the beginning of 2016 for a total cost of $125,000.
Rainier Corporation estimates the total residual value of the five automobiles to be $25,000 and their
estimated useful life at 5 years. Use the double declining balance method to calculate the depreciation
expense for 2016 and 2017.
Answer: Estimated life: 5 years, so 20%. Double declining balance = 40% per year.
2016: 0.4 × $125,000 = $50,000
2017: 0.4 × $75,000 = $30,000
Diff: 2 Type: ES
L.O.: 6-2
19
6.3 Explain additional topics in accounting for long-lived tangible assets
1) Rhoundakona Corporation bought property, plant, and equipment on January 1, 2014, at a cost of
$35,000. Estimated residual value is $5,000 and the estimated useful life is 8 years. The company uses
straight-line depreciation. On January 1, 2017, Rhoundakona's management sells the asset for $25,000.
The balance in Accumulated Depreciation on January 1, 2017, is:
A) $3,750
B) $4,375
C) $11,250
D) $13,125
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
2) Hot Wort Ltd. purchased equipment on April 1, 2017, for $140,000. The residual value is $20,000 and
the estimated life is 6 years or 55,000 hours. Compute depreciation expense for the year ending December
31, 2017 if Hot Wort Ltd. uses the straight-line method of depreciation.
A) $15,000
B) $20,000
C) $14,988
D) $19,983
Answer: A
Diff: 2 Type: MC
L.O.: 6-3
3) The Mash Tun Corp. purchased equipment on September 1, 2016 for $200,000. The residual value is
$20,000 and the estimated life is 5 years or 60,000 hours. Compute depreciation expense for the year
ending December 31, 2017, if the Mash Tun Corp. uses the double-declining-balance method of
depreciation.
A) $69,333
B) $48,000
C) $43,200
D) $62,400
Answer: A
Diff: 3 Type: MC
L.O.: 6-3
20
4) Kegging & Canning Inc. acquired equipment on June 30, 2013, for $175,000. The residual value is
$35,000 and the estimated life is 5 years or 40,000 hours. Compute the balance in Accumulated
Depreciation as of December 31, 2015, if Kegging & Canning Inc. uses the double-declining-balance
method of depreciation.
A) $99,680
B) $105,840
C) $124,600
D) $117,600
Answer: C
Diff: 3 Type: MC
L.O.: 6-3
5) Lauter Tun Corporation acquired equipment on January 1, 2012, for $300,000. The equipment had an
estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2015, Lauter
Tun Corporation revised the total useful life of the equipment to 8 years and the estimated salvage value
to be $10,000. Compute depreciation expense for the year ending December 31, 2015, if Lauter Tun
Corporation uses straight-line depreciation.
A) $25,938
B) $38,500
C) $41,500
D) $43,500
Answer: C
Diff: 3 Type: MC
L.O.: 6-3
6) Big Rock Times Corporation (BRT) acquired equipment on January 1, 2014, for $300,000. The
equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January
1, 2017, BRT Corporation revised the total useful life of the equipment to 6 years and the estimated
salvage value to be $10,000. Compute the book value of the equipment as of December 31, 2017, if BRT
Corporation uses straight-line depreciation.
A) $148,333
B) $151,667
C) $155,000
D) $190,000
Answer: A
Diff: 3 Type: MC
L.O.: 6-3
21
7) A revision of an estimate which extends the asset's useful life:
A) is ignored until the last year of the asset's life
B) requires restatement of prior years' financial statements
C) increases depreciation expense and decreases owners' equity
D) decreases depreciation expense and increases owners' equity
Answer: D
Diff: 3 Type: MC
L.O.: 6-3
8) A fully amortized asset is an asset:

A) whose book value has reached zero, and therefore has no market value
B) whose amortizable cost has reached its salvage value, and therefore is of no further use to the company
C) that has reached the end of its estimated useful life
D) that has reached the end of its actual useful life
Answer: C
Diff: 3 Type: MC
L.O.: 6-3
9) Barlow Trail Corporation purchased office equipment on September 30, 2015, for a total cost of $50,500.
Management estimated useful life at 15 years and residual value at $5,500. Straight-line depreciation is
used and computed to the nearest whole month. Barlow Trail Corporation's year end is December 31.
Required:
a. Prepare the adjusting entry for depreciation on December 31, 2015.
b. Early in 2017, management revised its estimates of useful life and residual value for the office
equipment. Useful life was reduced to a total of 10 years, and residual value was reduced to $2,000.
Prepare the adjusting entry for depreciation on December 31, 2017, using the revised estimate.
Answer:
a. Depreciation Expense 750
Accumulated Depreciation
-Office Equipment 750
b. Depreciation Expense 5,114
Accumulated Depreciation
-Office Equipment 5,114
Diff: 3 Type: ES
L.O.: 6-3
22
10) Victory Stables purchased new equipment for their barn on January 1, 2016. The new equipment had
a cost of $100,000, estimated salvage of $20,000 and an expected useful life of 10 years. On January 1, 2017
the equipment is not working out to be as durable as first thought so management has now revised its
useful life down to 5 years. Prepare the journal entry for the December 31, 2017 amortization.
Answer:
a. Depreciation Expense $18,000
Accumulated Depreciation-Barn Equipment $18,000
Diff: 3 Type: ES
L.O.: 6-3
11) Victory Stables purchased new equipment for their barn on July 1, 2016. The new equipment had a
cost of $100,000, estimated salvage of $20,000 and an expected useful life of 10 years. Prepare the journal
entry for the December 31, 2016 and 2017 amortization. Note: Victory Stables uses the straight-line
method of depreciation.
Answer:
2013 Depreciation Expense $4,000
2014 Depreciation Expense $8,000

Diff: 3 Type: ES
L.O.: 6-3
12) Blockware Corporation has selected to use the revaluation model for its assets. Recently it had its
building appraised. The appraiser placed a $5.0 M value on the building. Back in 2012 this building was
purchased for $4.0M. This increases in value over cost requires a:
A) Dr. to accumulated depreciation
B) Cr. to the building account
C) Cr. to revaluation surplus
D) Dr. to revaluation surplus
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
23
13) When an organization has determined that a piece of equipment is impaired the journal entry to
record an impair of $1,000 would require:
A) a cr to the equipment account
B) a dr to accumulated depreciation
C) a cr to accumulated depreciation
D) a cr to impairment loss
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
14) Rhoundakona Corporation bought property, plant, and equipment on January 1, 2014, at a cost of
$35,000. Estimated residual value is $5,000 and the estimated useful life is 8 years. The company uses
straight-line depreciation. On January 1, 2017, Rhoundakona's management sells the asset for $25,000.
The gain or loss on disposal is:
A) $1,250 loss
B) $1,250 gain
C) $10,000 loss
D) $25,000 gain
Answer: B
Diff: 2 Type: MC
L.O.: 6-3
15) When property, plant, and equipment is sold:

A) depreciation should be recorded through the date of sale
B) the book value of the asset should be credited to the asset account
C) no gain or loss should be recognized if depreciation was taken on the asset
D) a loss should be recognized but not a gain if depreciation was taken on the asset
Answer: A
Diff: 2 Type: MC
L.O.: 6-3
16) A loss is recorded on the sale of property, plant, and equipment when:
A) the asset is sold for a price greater than the asset's book value
B) the asset's book value is less than the balance in Accumulated Depreciation
C) the asset's book value is greater than the amount of cash received from the sale
D) a loss on the sale of property, plant, and equipment is not allowed according to GAAP
Answer: C
Diff: 1 Type: MC
L.O.: 6-3
24
17) Sowthoveer Company sold some office furniture for $4,500 cash. The furniture cost $24,000 and had
accumulated depreciation through the date of sale totaling $21,700. The journal entry to record the sale of
the furniture will include a:
A) credit to Office Furniture for $2,300
B) debit to Gain on Sale of Furniture for $2,200
C) credit to Gain on Sale of Furniture for $2,200
D) credit to Accumulated Depreciation for $21,700
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
18) Bock Corporation sold equipment costing $30,000 with $28,000 of accumulated depreciation for $5,000
cash. Bock's journal entry to record this sale will involve a:
A) credit to Equipment for $2,000
B) debit to Depreciation Expense for $28,000
C) debit to Gain on Sale of Equipment for $3,000
D) debit to Accumulated Depreciation for $28,000
Answer: D
Diff: 2 Type: MC
L.O.: 6-3
19) Equipment costing $35,000 with a book value of $12,000 is sold for $11,500. The journal entry will
involve:
A) credit to Accumulated Depreciation for $23,000
B) debit to Accumulated Depreciation for $12,000
C) debit to Accumulated Depreciation for $23,000
D) credit to Equipment for $12,000
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
25
20) Equipment acquired on January 1, 2014, is sold on June 30, 2017, for $4,500. The equipment cost
$10,000, had an estimated residual value of $3,000, and an estimated useful life of 5 years. The equipment
has been amortized using the straight-line method. The journal entry to record the sale of the equipment
involves a:
A) credit to Accumulated Depreciation for $4,900
B) credit to Gain on Sale of Asset for $600
C) debit to Accumulated Depreciation for $4,900
Answer: C
Diff: 3 Type: MC
L.O.: 6-3
21) Stout Corp. sold some fully amortized equipment for $2,600 cash. The equipment had been purchased
for $26,500 and Stout Corp. had estimated the useful life at 8 years and residual value at $3,500. The
journal entry to record the sale of the equipment will include a:
A) debit to Loss on Sale of Equipment for $900
B) credit to Accumulated Depreciation for $23,000
C) credit to Equipment for $2,700
Answer: A
Diff: 2 Type: MC
L.O.: 6-3
22) Rooster Ltd. trades in a printing press for a newer model. The cost of the old printing press was
$45,000, and accumulated depreciation up to the date of the trade-in amounts to $33,000. Rooster Ltd. also
pays $38,500 cash for the newer printing press. The journal entry to acquire the new printing press will
require a:
A) debit to Equipment for $39,000
B) debit to Equipment for $45,000
C) debit to Equipment for $50,500
D) credit to Accumulated Depreciation for $33,000
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
26
23) The journal entry to sell property, plant, and equipment for cash will always include a:
A) debit to Accumulated Depreciation and a debit to property, plant, and equipment
B) debit to Accumulated Depreciation and a credit to Cash
C) debit to Cash and a debit to Accumulated Depreciation
D) debit to property, plant, and equipment and a credit to Cash
Answer: C
Diff: 2 Type: MC
L.O.: 6-3
24) Most companies use an accelerated depreciation method for income tax and financial statement
purposes.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-3
25) Depreciation is calculated using full years only.

Answer: FALSE
Diff: 3 Type: TF
L.O.: 6-3
26) An assets useful life can be subsequently revised requiring a recalculation of depreciation.
Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-3
27) A change in useful life estimate is very common in Canada.

Answer: FALSE
Diff: 3 Type: TF
L.O.: 6-3
28) IFRS requires significant components of a building to be depreciated separately.

Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-3
27
29) The capital cost allowance form of depreciation is used for income tax purposes.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 6-3
30) GAAP require that companies use the same depreciation method for financial reporting purposes that
they use for income tax purposes.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-3
31) The sale of a property, plant and equipment item may result in a gain but not a loss.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-3
32) If an organization selects the revaluation model, it should revise its depreciation amount with each
new carrying amount.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-3
33) When recording the sale of property, plant, and equipment, the balance in the related accumulated
depreciation account is not removed from the accounting records.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-3
34) A gain will result when the cash received on the sale of property, plant, and equipment exceeds the
book value of the asset.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-3
28
35) A loss will result on the sale of property, plant, and equipment when the book value of the asset
exceeds the cash received.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-3
36) Foothills Industries gathered the following data for the year ended December 31, 2017, related to its
equipment.
Accumulated
Equipment Depreciation
January 1, 2013, balance $88,000 $40,000
Total debits to the account 55,000 ?
Total credits to the account ? 56,000
December 31, 2013, balance 92,000 57,000
Based on the above data, prepare the journal entry to record the sale of equipment during the year for
$9,000 cash.
Answer:
Cash 9,000
Loss on Sale of Equipment 3,000
Accumulated Depreciation-Equipment 39,000
Equipment 51,000
Diff: 2 Type: ES
L.O.: 6-3
29
37) Prepare journal entries for the following independent transactions.
a. Erratic Corp. traded in several old computers for two new computers at the beginning of April. After
updating depreciation prior to the trade-in, the Accumulated Depreciation account had a balance of
$5,300 and the original cost of the computers was $10,900. In addition, Erratic Corp. paid $5,000 to acquire
the new computers.
b. Terrain Corporation sold office equipment for $10,000 cash. The original cost of the equipment was
$15,000; accumulated depreciation up to the date of sale had a balance of $6,900.
c. Glacial Limited disposed of fully amortized office furniture. The office furniture had a cost of $10,200
and no residual value.
Answer:
a. Office Equipment 10,600
Accumulated Depreciation-Office Equipment 5,300
Office Equipment 10,900
Cash 5,000
b. Cash 10,000
Accumulated Depreciation-Office Equipment 6,900
Office Equipment 15,000
Gain on Sale of Office Equipment 1,900
c. Accumulated Depreciation-Office Furniture 10,200
Office Furniture 10,200
Diff: 2 Type: ES
L.O.: 6-3
38) On January 1, 2015, Kamloops Corporation purchased equipment for $15,500. Kamloops Corporation
expected the equipment to remain in service for 4 years and have a residual value of $1,500. Kamloops
Corporation amortized the equipment using double-declining-balance depreciation. On June 30, 2017,
Kamloops Corporation sold the equipment for $3,750 cash.
Prepare journal entries on June 30, 2014, to record depreciation expense for the six months ended June 30,
2017, and to sell the equipment.
Answer:
June 30 Depreciation Expense 969
Accumulated Depreciation-Equipment 969
June 30 Cash 3,750
Accumulated Depreciation-Equipment 12,594
Equipment 15,500
Gain on Sale of Equipment 844
Diff: 3 Type: ES
L.O.: 6-3
30
39) Most companies use straight-line depreciation for their books but an accelerated method (CCA
depreciation) for the tax return. Explain why companies use these two different methods that result in the
need for two sets of records.
Answer: The straight-line method is easy to compute and usually results in proper matching of revenues
and expenses according to GAAP. Therefore, many businesses use it to report to creditors and
shareholders.
For income tax purposes, a company desires to decrease its income tax payments as quickly as possible.
The accelerated method of depreciation does just that. By recording depreciation expense as quickly as
possible, a company is able to decrease its immediate tax payments. This conserves the cash for use in the
business.
Regardless of which method is used to amortize property, plant, and equipment, over the life of the asset,
depreciation expense in total is the same under all methods.
Diff: 3 Type: ES
L.O.: 6-3
40) Explain how a company should decide which depreciation method to use for income tax purposes.
Answer: A company should use the method that produces the fastest tax deduction. CCA, or Capital Cost
Allowance, is the method which produces the fastest tax deductions.
A company can use different depreciation methods for financial reporting purposes and for income tax
reporting purposes. In Canada, this is considered ethical and is allowed by federal law.
Diff: 2 Type: ES
L.O.: 6-3
41) At year end the Carleton Corporation reviewed all of its property, plant and equipment assets for
impairment. It discovered that its boiler's recoverable amount exceeded its carrying value by $5,500.
Another one of its assets, a warehouse building previously written down for an impairment of $12,750
experienced a financial recovery. Prepare the required adjustments. Note Carleton Corporation is a
publicly traded corporation.
Answer:
Dr. Loss on Impairment $5,500
Cr. Accumulated Depreciation $5,500
An entry is not required on the building as IFRS does not permit a company to reverse the impairment
loss.
Diff: 3 Type: ES
L.O.: 6-3
31
42) Key West Corporation, a public company determined its plant has experience an impairment due to a
loss in market value. The impairment amount calculated by the controller totals $22,650. Prepare the
required journal entry.
Answer:
Dr. Loss on Impairment $22,650
Cr. Accumulated Depreciation - Plant $22,650
Diff: 3 Type: ES
L.O.: 6-3
43) Key West Corporation, a public company purchased its plant at a cost of $10.7 million, with no
residual value. The plant is to be depreciated over 20 years. At this time the company selected the
revaluation method.
December 31, 2016 a real estate expert determined this building is now worth $18.6 million.
Prepare the required journal entry if any.
Answer:
Dr. Building $7,900,000
Cr. Revaluation Surplus $7,900,000
Diff: 3 Type: ES
L.O.: 6-3
32
6.4 Account for intangible assets
1) Which of the following is not an intangible asset?

A) accounts receivable
B) patent
C) copyright
D) goodwill
Answer: A
Diff: 2 Type: MC
L.O.: 6-4
2) Which of the following is not an intangible asset?

A) Copyright
B) Patent
C) Leasehold improvement
D) Trademark
Answer: C
Explanation: A) A copyright is an intangible asset
B) A patent is an intangible asset
C) Leasehold improvements are tangible assets
D) A trademark is an intangible asset
Diff: 2 Type: MC
L.O.: 6-4
3) All of the following are intangible assets except:

A) trademarks
B) natural gas
C) goodwill
D) copyrights
Answer: B
Diff: 1 Type: MC
L.O.: 6-4
33
4) Copyrights are granted for the life of the author plus:
A) 10 years
B) 40 years
C) 50 years
D) 100 years
Answer: C
Diff: 2 Type: MC
L.O.: 6-4
5) Goodwill is equal to the excess of the cost of an acquired company over the sum of the:
A) book value of its assets
B) market value of its assets
C) book value of its net assets
D) market value of its net assets
Answer: D
Diff: 2 Type: MC
L.O.: 6-4
6) The cost of a trademark should be amortized over its useful life. The maximum time period for
trademark amortization is:
A) 20 years
B) 30 years
C) 40 years
D) The maximum amortization period is whatever the useful life of the trademark is itself.
Answer: D
Diff: 2 Type: MC
L.O.: 6-4
7) The cost of a patent should be amortized over:

A) the lesser of 20 years or its economic useful life
B) the greater of 20 years or its economic useful life
C) the lesser of 40 years or its economic useful life
D) the greater of 40 years or its economic useful life
Answer: A
Diff: 2 Type: MC
L.O.: 6-4
34
8) Research costs incurred by a company should be:
A) capitalized and amortized over a period greater than 25 years
B) capitalized and amortized over 20 years or less
C) expensed on the current year's income statement
D) either capitalized and amortized or expensed immediately at the option of the accountant
Answer: C
Diff: 2 Type: MC
L.O.: 6-4
9) Yeast Corporation purchased Bitter Ltd. on August 31, 2017. Yeast Corporation recorded goodwill in
the purchase of Bitter. Yeast has determined that the Bitter goodwill will have an indefinite life. How will
Yeast account for the Bitter goodwill in future accounting periods?
A) Yeast will amortize the Bitter goodwill over a 50-year life.
B) If the value of the Bitter goodwill increases in subsequent years, Yeast will increase the value in the
Bitter Goodwill account.
C) If the value of the Bitter goodwill decreases in subsequent years, Yeast will decrease the value in the
Bitter Goodwill account.
D) Yeast is not allowed to change the value of the Bitter Goodwill account regardless of any future
increase or decrease in the value of Bitter Goodwill.
Answer: C
Diff: 3 Type: MC
L.O.: 6-4
10) Goodwill is an intangible asset that has special features. Which statement below is true regarding the
special nature of goodwill?
A) Goodwill is recorded in the books of a company as the company creates it.
B) Goodwill is amortized over a period not to exceed 40 years.
C) Goodwill is recorded only when it is purchased in the acquisition of another company.
D) Goodwill is amortized over a period not to exceed 20 years.
Answer: C
Diff: 3 Type: MC
L.O.: 6-4
35
11) Amortization of an intangible asset is similar to which amortization method?
A) CCA amortization
B) units-of-production
C) double-declining-balance
D) straight-line
Answer: D
Diff: 1 Type: MC
L.O.: 6-4
12) Except for goodwill, the accounting for intangibles is similar to accounting for tangible long-lived
assets.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 6-4
13) Under federal law a patent is granted to the holder for 25 years.
Answer: FALSE
Diff: 3 Type: TF
L.O.: 6-4
14) Amortization is not recorded on intangible assets.

Answer: FALSE
Diff: 3 Type: TF
L.O.: 6-4
15) Intangibles with finite lives are amortized.

Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-4
16) Intangibles with indefinite lives are never amortized.

Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-4
36
17) Amortization for intangibles decreases both assets and liabilities.
Answer: FALSE
Diff: 3 Type: TF
L.O.: 6-4
18) Intangibles are considered long-lived assets even though they do not have a physical form.
Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-4
19) All intangibles must be written down when their recognizable amount is less than their carrying
amount.
Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-4
20) An example of an intangible asset is a franchise.

Answer: TRUE
Diff: 3 Type: TF
L.O.: 6-4
21) Prepare adjusting journal entries dated December 31 of the current year for the following independent
situations.
a. Hops Corporation acquired several patents on March 1 of the current year for a total price of $48,000.
The patents have an estimated remaining legal life of 15 years and an estimated useful, economic life of 8
years.
b. Goodwill amounting to $180,000 was purchased in a company acquisition on July 1 of the current
year. The goodwill is believed to have an indefinite benefit.
Answer:
a. Amortization Expense-Patents 5,000
Patents 5,000
b. No entry required
Diff: 2 Type: ES
L.O.: 6-4
37
22) Prepare journal entries for 2017 for the following independent situations. Assume each organization
has a December 31 year end.
a. Keepers Inc. purchases a patent for $225,000 on January 1st. Keepers estimates this patent to have a 5
year useful life.
b. Blue Bat Corporation purchases one of their main competitors on March 31, 2017. Blue Bat paid
$160,000 for this purchase which included assets of $120,000 and liabilities of $10,000. The goodwill is
believed to have an indefinite benefit.
Answer:
a. Jan 1. Patent $225,000
Cash $225,000
Dec. 31 Amortization Expense-Patents 45,000

Accum. Amort. Patents 45,000
b. Mar 31
Assets $120,000
Goodwill 50,000
Cash 160,000
Liabilities 10,000
Diff: 2 Type: ES
L.O.: 6-4
38
6.5 Analyze a company's return on assets
1) Calculate Company Y's total asset turnover based on the following information for the current year:
(Round your final answer to two decimal places.)
Net income $800,000

Assets at the beginning of the year $100,000
Assets at the end of the year $120,000
Net sales $900,000
A) 7.50
B) 7.27
C) 8.18
D) 9.00
Answer: C
Explanation: C) ($100,000 + $120,000) ÷ 2 = $110,000
$900,000 ÷ $110,000 = 8.18
Diff: 2 Type: MC
L.O.: 6-5
2) Return on assets measures:

A) how much the entity earned for each dollar of assets invested by both shareholders and creditors
B) how much every sales dollar generates in profit
C) profitability of a company's core business operations
D) measures how many sales dollars are generated for each dollar of assets invested
Answer: A
Diff: 2 Type: MC
L.O.: 6-5
3) Return on assets measures how profitably management has used its assets.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 6-5
39
4) Select financial information for Fried Banana's Inc. appears below:
2016 2017
Net sales $1,000,000 $1,200,000
Net income 100,000 130,000
Net assets 2,000,000 2,500,000
What is the company's net profit margin, total asset turnover, and return on assets for 2017?
Answer:
Net profit margin = net income / net sales = $130,000 / $1,200,000 = 10.8% (rounded)
Average assets = $2,250,000 [($2,000,000 + $2,500,000 )/2]; total asset turnover = net sales / average total
assets = $1,200,000 / $2,250,000 = 53.3% (rounded
Return on assets = net income / average total assets = $130,000 / $2,250,000 = 5.8% (rounded). Alternatively
ROA = net profit margin × total asset turnover = 10.8% × 53.3% = 5.8% (rounded)
Diff: 2 Type: ES
L.O.: 6-5
6.6 Analyze the cash flow impact of long-lived asset transactions
1) Equipment is acquired by issuing a note payable for $50,000 and a making a down payment of
$20,000. The statement of cash flows will report a:
A) $20,000 outflow in the operating activities section
B) $70,000 outflow in the investing activities section
C) $50,000 inflow in the financing activities section
D) $20,000 outflow in the investing activities section
Answer: D
Diff: 3 Type: MC
L.O.: 6-6
2) Equipment with a book value of $8,000 is sold for $1,000 cash. The statement of cash flows will report
a:
A) $1,000 cash inflow in the operating activities section
B) $1,000 cash inflow in the investing activities section
C) $7,000 cash outflow in the operating activities section
D) $7,000 cash outflow in the financing activities section
Answer: B
Diff: 2 Type: MC
L.O.: 6-6
40
3) The disposition of a plant asset is reported on the statement of cash flows as a financing activity.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 6-6
4) Acquisitions and sales of long-term assets are reported as investing activities on the statement of cash
flows.
Answer: TRUE
Diff: 2 Type: TF
L.O.: 6-6
41
Another random document with
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Fig. 2. Union Railway Station, Springfield, Massachusetts
The first roads that improved on the Indian trails were, of course,
made for wagons. The gorge of the Westfield was so rugged that a
hundred years ago it seemed almost impossible to make a good
wagon road through it. There were some people, however, who
thought that it could be done and who determined to do it. Their
courage won, and before long there was a good highway all along
the roaring river. The bowlders were rolled out of the way, the trees
were cut, the roadbed was made, and people could go east and west
in the stages without risk of losing their lives or even of breaking their
bones. This was accomplished soon after 1825, but it did not solve
all the problems of the Massachusetts people, for, as we shall soon
learn fully, the Erie canal was finished in that year, and a long string
of canal boats began to carry produce from the West to New York.
The good people of Boston watched all this going on. Every load
of grain was headed straight eastward as if it were coming to
Massachusetts bay, thence to go by vessel to Europe. But when it
reached the Hudson it was sure to turn off down that river to help
load ships at the piers of New York. And New England had only a
wagon road across the mountains! A wagon road will never draw
trade away from a tidal river, and thus we can understand why a
prominent Massachusetts man, Charles Francis Adams, spoke of
the Hudson as “a river so fatal to Boston.” Boston might have all the
ships she wanted, but if she could not get cargoes for them they
would be of no use. Shipowners, seeing that there was plenty of
western freight in New York, sent their boats there. It was indeed
time that Boston people began to ask themselves what they could
do.
They still had ships, but these were usually “down East”
coasters, and the noble vessels from far eastern ports, laden with
spices and teas, silks, and all the spoils of Europe and Asia, rarely
came to Boston, but brought more and greater loads to New York
and Baltimore, where they could lay in corn and wheat for the return
voyage. Even the Cunards transferred most of their boats and finally
all their mail steamers to New York.
Fig. 3. The Valley of Deerfield River at Charlemont,
Massachusetts, on the Line of the Boston and Maine
Railroad
The people of Boston first said, “We will build another canal, up
the Hoosick and down the Deerfield valley, and then the canal boats
will keep on to the east.” As states often do, they appointed a
commission to see if the canal could be built, and what it would cost.
But what were they to do about Hoosac mountain, which stood a
thousand feet high, of solid rock, between the Hoosick valley on the
west and the Deerfield valley on the east?
They decided that they would tunnel it for the water way. Rather
strangely they thought it could be done for a little less than a million
dollars. A wise engineer made the survey for the canal, and when he
remarked, “It seems as if the finger of Providence had pointed out
this route from the east to the west,” some one who stood near
replied, “It’s a great pity that the same finger wasn’t thrust through
the mountain.” The plans for the canal were finally given up, and
though many years later such a tunnel was made, it was not for a
canal, nor was the work done for a million dollars.
Every one was talking now of railways, but few thought that rails
could be laid across the Berkshires. It was even said in a Boston
paper that such a road could never be built to Albany; that it would
cost as much to do it as all Massachusetts would sell for; and that if
it should be finished, everybody with common sense knew it would
be as useless as a railroad from Boston to the moon. We need not
be too hard on this writer, for it was five years later when the De Witt
Clinton train climbed the hill from Albany and carried its handful of
passengers to Schenectady.
One of the friends of the railway scheme was Abner Phelps.
When he was a senior at Williams College, in 1806, he had thought
of it, for he had heard about the tram cars in the English coal
regions. In 1826 he became a member of the legislature of
Massachusetts, and the second day he was there he proposed that
the road should be built.
In time the project went through, but at first it was planned to pull
the cars with horses, and on the down grades to take the horses on
the cars and let them ride. We do not know how it was intended that
the cars should be held back, for it was long before the invention of
air brakes. The line was built to its western end on the Hudson in
1842, and thus Boston, Worcester, Springfield, and Albany were
bound together by iron rails.
There was only a single track and the grades were heavy. The
road brought little trade to Boston, and most of the goods from the
West still went by way of the Hudson to New York. It was, however, a
beginning, and it showed that the mountain wall could be crossed.
The subject of a Hoosac tunnel now came up again. It would
take a long time to tell how the tunnel was made; indeed, it was a
long time in making. It was begun in 1850 or soon afterwards, and
the work went slowly, with many stops and misfortunes, so that the
hole through the mountain was not finished until November 27, 1873.
On that day the last blast was set off, which made the opening from
the east to the west side; and the first regular passenger train ran
through July 8, 1875, fifty years after it had been planned to make a
canal under the mountain.
In order to help on the work the engineers sunk a shaft a
thousand feet deep from the top of the mountain to the level of the
tunnel, and from the bottom worked east and west. This gave them
four faces, or “headings,” on which to work, instead of two, and
hastened the finishing. The whole cost was about fourteen million
dollars.
Fig. 4. Eastern Portal of the Hoosac Tunnel, Boston and

Maine Railroad
It took great skill to sink the shaft on just the right line, and to
make the parts of the tunnel exactly meet, as the men worked in
from opposite directions. They brought the ends together under the
mountain with a difference of only five sixteenths of an inch! You can
measure this on a finger nail and see how much it is. The
tremendous task was successfully accomplished, and Boston was
no longer shut off from the rest of the country by the mountains.
Fig. 5. The South Station, Boston
The end of it all is not that Boston has won all the ships away
from New York, but that gradually she has been getting her share.
Now she has great Cunarders, White Star Liners, and the Leyland
boats,—all giant ships sailing for Liverpool,—and many other stately
vessels bound for southern ports or foreign lands. Now you may see
in Boston harbor not a forest of masts but great funnels painted to
show the lines to which the boats belong, and marking a grander
commerce than that which put out for the Indies long years ago; for
to-day Boston is the second American port. The great freight yards
of the railways are close upon the docks, and travelers from the
West may come into either of two great stations, one of which is the
largest railway terminal in the world. In and about Boston are more
than a million people, reaching out with one hand for the riches of
the great land to the west, and with the other passing them over the
seas to the nations on the farther side.
Man has taken a land of dense forests, stony hills, and wild
valleys, and subdued it. It is dotted with cities, crossed by roads, and
is one of the great gateways of North America.
CHAPTER II
PIONEERS OF THE MOHAWK AND THE
HUDSON
If a stranger from a distant land should come to New York, he

might take an elevated train at the Battery and ride to the upper end
of Harlem. He would then have seen Manhattan island, so named by
the Indians, who but three hundred years ago built their wigwams
there and paddled their canoes in the waters where great ships now
wait for their cargoes. If the visitor should stay for a time, he might
find that Harlem used to be spelled Haarlem, from a famous old town
in Holland. He might walk through Bleecker street, or Cortlandt
street, or see Stuyvesant square, and learn that these hard names
belonged to old Dutch families; and if he studied history, he would
find that the town was once called New Amsterdam and was settled
by Dutchmen from Holland. They named the river on the west of the
island the Great North river, to distinguish it from the Delaware, or
Great South river, and they planned to keep all the land about these
two streams and to call it New Netherland.
Rocks and trees covered most of Manhattan island at that time,
but the Dutch had a small village at its south end, where they built a
fort and set up windmills, which ground the corn and made the place
look like a town in Holland. The Indians did not like the windmills with
their “big teeth biting the corn in pieces,” but they were usually
friendly with the settlers, sometimes sitting before the fireplaces in
the houses and eating supawn, or mush and milk, with their white
friends. Little did the Indian dream what a bargain he offered to the
white man when he consented to sell the whole island for a sum
equal to twenty-four dollars; and the Dutchman, to do him justice,
was equally ignorant.
All this came about because Henry Hudson with a Dutch vessel,
the Half Moon, had sailed into the harbor in 1609, and had explored
the river for a long distance from its mouth. Hudson was an
Englishman, but with most people he has had to pass for a
Dutchman. He has come down in stories as Hendrick instead of
Henry, no doubt because he commanded a ship belonging to a
Dutch company, and because a Dutch colony was soon planted at
the mouth of the river which he discovered.
Hudson spent a month of early autumn about Manhattan and on
the river which afterwards took his name. Sailing was easy, for the
channel is cut so deep into the land that the tides, which rise and fall
on the ocean border by day and night, push far up the Hudson and
make it like an inland sea. In what we call the Highlands Hudson
found the river narrow, with rocky cliffs rising far above him. Beyond
he saw lowlands covered with trees, and stretching west to the foot
of the Catskill mountains. He went at least as far as the place where
Albany now stands, but there he found the water shallow and turned
his ship about, giving up the idea of reaching the Indies by going that
way. He did not know that a few miles to the west a deep valley lies
open through the mountains, a valley which is now full of busy
people and is more important for travel and trade than a dozen
northwest passages to China would be.
Fig. 6. Henry Hudson
It was not long before this valley which leads to the west was
found, and by a real Dutchman. Only five years after Hudson’s
voyage Dutch traders built a fort near the spot where Albany now
stands. Shortly afterwards, in 1624, the first settlers came and
founded Fort Orange, which is now Albany. Arent Van Curler came
over from Holland in 1630 and made his home near Fort Orange. He
was an able man and became friendly with the Indians. They called
him “Brother Corlear” and spoke of him as their “good friend.” A few
years ago a diary kept by Van Curler was found in an old Dutch
garret, where it had lain for two hundred and sixty years. It told the
story of a journey that he made in 1634, only four years after he
came to America. Setting out on December 11, he traveled up the
valley of the Mohawk until he reached the home of the Oneida
Indians in central New York. He stayed with them nearly two weeks,
and then returned to Fort Orange, where he arrived on January 19.
This is the earliest record of a white man’s journey through a region
which now contains large towns and is traversed by many railway
trains every day in the year.
No one knows how long there had been Indians and Indian trails
in the Mohawk valley. These trails Van Curler followed, often coming
upon some of the red men themselves, and visiting them in a friendly
way. They, as well as the white settlers who followed them, chose
the flat, rich lands along the river, for here it was easy to beat a path,
and with their bark canoes they could travel and fish. The Indians
entertained Van Curler with baked pumpkins, turkey, bear meat, and
venison. As the turkey is an American bird, we may be sure that it
was new to the Dutch explorer.
These Indians, with whom Van Curler and all the New York
colonists had much to do, were of several tribes,—the Mohawks,
Oneidas, Onondagas, Cayugas, and Senecas. All together they
were known as the Iroquois (ĭr-ṓ-kwoi´), or Iroquois Nation, a kind of
confederation which met in council and went forth together to war.
They called their five-fold league The Long House, from the style of
dwelling which was common among them,—a long house in which
as many as twenty families sometimes lived. The Iroquois built
villages, cultivated plots of land, and sometimes planted apple
orchards. They were often eloquent orators and always fierce
fighters. Among the surrounding tribes they were greatly feared.
They sailed on lake Ontario and lake Erie in their birch-bark canoes,
and they followed the trails far eastward down the Mohawk valley.
Before the white men came these fierce warriors occasionally
invaded New England, to the terror of the weaker tribes. Sometimes
they followed up their conquests by exacting a tribute of wampum.
After Fort Orange was founded they went there with their packs of
beaver skins and other furs to trade for clothes and trinkets.
In fact the white man’s principal interest for many years was to
barter for furs. The Dutch, and soon afterwards the English, bid for
the trade from their settlements on the Hudson, and the French did
the same from their forts on the St. Lawrence and the Great Lakes.
Thus there was much letter writing and much fighting among the
colonists, while each side tried to make friends of the Indians and get
the whole of the fur trade. The result was that either in war or in
trade the white men and the savages were always going up and
down the Mohawk valley, which thus was a well-traveled path long
before there were turnpike roads, canals, or steam cars.
When Van Curler made his journey into the Indian country, he
did not reach the Mohawk river at once on leaving Fort Orange, but
traveled for about sixteen miles across a sandy and half-barren
stretch of scrubby pine woods. He came down to the river where its
rich bottom lands spread out widely and where several large islands
are inclosed by parts of the stream. South and east of these flats are
the sand barrens, and on the west are high hills through which, by a
deep, narrow gap, the Mohawk flows. The Indians called this place
“Schonowe,” or “gateway.” It was well named, for entering by this
gate one can go to the foot of the Rocky mountains without climbing
any heights.
A few years before his death Van Curler led a small band of
colonists from Fort Orange, bought the “great flats” from the Mohawk
Indians, and founded a town, calling it Schenectady, which is the old
Indian name changed in its spelling. No easy time did these settlers
have, for theirs was for many years the frontier town and they never
knew when hostile savages might come down upon them to burn
their houses and take their scalps. In 1690, twenty-eight years after
the town was founded, a company of French and Indians from
Montreal surprised Schenectady in the night, burned most of the
houses, and killed about sixty of the people, taking others captive.
But Dutchmen rarely give up an undertaking, and they soon rebuilt
their town. It was an important place, for here was the end of the
“carry” over the pine barrens from the Hudson, and here began the
navigation of the river, which for a hundred years was the best
means of carrying supplies up the valley and into central New York.
The traveler of to-day on the New York Central Railway sees on
Van Curler’s “great flats” the flourishing city of Schenectady, with its
shops and houses, its college, and its vast factories for the
manufacture of locomotives and electrical supplies.
Fig. 7. Sir William
Johnson
See Fort Johnson, Fig. 9
It is true that the Dutch pioneers played an important part in the

early history of the state and are still widely represented by their
descendants in the Mohawk valley, but the leading spirit of colonial
days on the river was a native of Ireland who came when a young
man to manage his uncle’s estates in America. This was in 1738,
nearly fifty years after the Schenectady massacre. The young man,
who was in the confidence of the governor of New York and of the
king as well, is known to all readers of American history as Sir
William Johnson.
He built a fine stone mansion a short distance west of the
present city of Amsterdam and lived there many years. He also
founded Johnstown, a few miles to the north, now a thriving little city.
He dealt honestly with the Indians, when many tried to get their lands
by fraud, and he served as a high officer in the French and Indian
wars.
As the Dutch settled the lower Mohawk valley, so the upper parts
were taken up and the forests cleared by Yankees from New
England. One of these was Hugh White, a sturdy man with several
grown children. He left Middletown, Connecticut, in 1784, and came
by water to Albany, sending one of his sons overland to drive two
pair of oxen. Father and son met in Albany and went together across
the sands to Schenectady, where they bought a boat to take some of
the goods up the river. Four miles west of where Utica now stands
they stopped, cut a few trees, and built a hut to shelter them until
they could raise crops and have a better home. Thus the ancient
village of Whitesboro was founded. White was one of many hardy
and brave men who settled in central New York at that time, and they
doubtless thought that they had gone a long way “out West.”
Certainly their journey took more time than the emigrant would now
need to reach California or Oregon.
To cut the trees, build cabins, guard against the savages, and
get enough to eat and wear gave the settlers plenty to do. Only the
simplest ways of living were possible. Until a grist mill was built they
often used samp mortars, such as the Indians made. They took a
section of white ash log three feet long, and putting coals of fire on
one end, kept them burning with a hand bellows until the hole was
deep enough to hold the corn, which was then pounded for their
meals of hominy. By and by a mill was built, and here settlers often
came from a distance of many miles, sometimes carrying their grists
on their backs. A dozen years after White came, General William
Floyd set up another mill in the northern part of what is now Oneida
county. He was one of the signers of the Declaration of
Independence.
One settler cleared several acres and planted corn with pumpkin
seeds sprinkled in. The pigeons pulled up all the corn, but hundreds
of great pumpkins grew and ripened. Since the crop was hardly
enough, however, for either men or beasts, the latter had to be fed
the next winter on the small top boughs of the elm, maple, and
basswood.
Much use was made of the river, for the only roads were Indian
paths through the woods on the river flats. People and freight were
carried in long, light boats suited to river traffic and known as
bateaux (bȧ-tō̟ s´). These could be propelled with oars, but poles
were necessary going upstream against a stiff current. It was
impossible to go up the Mohawk from the Hudson above Albany, on
account of the great falls at Cohoes; hence the long carry to
Schenectady. From that place, by hard work, the boatmen could
make their way up to Little Falls, where the water descends forty feet
in roaring rapids. Here the loads and the bateaux had to be carried
along the banks to the still water above, where, with many windings
and doublings on their course, the voyagers could reach the Oneida
Carrying Place, or Fort Stanwix. There they unloaded again, and for
a mile or more tramped across low ground to Wood creek, a little
stream flowing into Oneida lake, and thence into Oswego river and
lake Ontario. The city of Rome stands exactly on the road followed
by the “carry.” This was an important place, and was called by the
Dutch Trow Plat, while to the Indians it was De-o-wain-sta, “the place
where canoes are carried across.” Several forts were built there, of
which the most famous was Fort Stanwix. We should think Wood
creek a difficult bit of navigation. It was a small stream, very crooked,
and often interrupted by fallen trees. In times of low water the boats
were dragged up and even down the creek by horses walking in the
water.
Fig. 8. Genesee Street, Utica

Part of the old Genesee road
The first merchant of old Fort Schuyler (Utica) was John Post,
who had served his country well through the Revolution. In 1790 he
brought hither his wife, three little children, and a carpenter from
Schenectady, after a voyage of about nine days up the river. Near
the long-used fording place he built a store, at the foot of what is now
Genesee street. Here he supplied the simple needs of the few
families in the new hamlet, and bought furs and ginseng of the
Indians, giving in exchange paint, powder, shot, cloth, beads,
mirrors, and, it must be added, rum also. Thus the fact that the river
was shallow at this point and could be passed without a bridge or a
boat led to the founding of the city of Utica.
The first regular mail reached the settlement in 1793, the post
rider being allowed twenty-eight hours to come up from Canajoharie,
a distance of about forty miles, now traversed by many trains in
much less than an hour. On one occasion the Fort Schuyler
settlement received six letters in one mail. The people would hardly
believe this astonishing fact until John Post, who had been made
postmaster, assured them that it was true. Post established stages
and lines of boats to Schenectady, and soon had a large business,
for people were pouring into western New York to settle upon its
fertile lands.
All the boats did not go down to Oswego and lake Ontario. Some
turned and entered the Seneca river, following its slow and winding
waters to the country now lying between Syracuse and Rochester.
But these boats were not equal to the traffic, for the new farms were
producing grain to be transported, and the people needed many
articles from the older towns on the Atlantic coast. Hence about a
dozen years after Hugh White built his first cabin by the river, the
state legislature took up the question of transportation and built a
great road, a hundred miles long, from Fort Schuyler, or the future
Utica, to Geneva, at the foot of Seneca lake.
The road as laid out was six rods wide. It was improved for a
width of four rods by the use of gravel and logs where the ground
was soft and swampy, as much of it was in those days, being flat and
shaded by trees. Over the famous Genesee road, as it was called,
thousands of people went not only to the rich valley of the Genesee
in western New York but also on to Ohio, and even to the prairies of
the Mississippi river. Genesee street in Utica and Genesee street in
Syracuse are parts of this road. The historian tells of it as a triumph,
for it was an Indian path in June, and before September was over a
stage had started at Fort Schuyler, and on the afternoon of the third
day had deposited its four passengers at the hotel in Geneva. After
this wagons and stages began to run frequently between Albany and
Geneva. A wagon could carry fourteen barrels of flour eastward, and
in about a month could return to Geneva from Albany with a load of
needed supplies. In five weeks, one winter, five hundred and seventy
sleighs carrying families passed through Geneva to lands farther
west.
Geneva was quite a metropolis in those days, when there was
nothing but woods where Syracuse and Rochester now are. Regular
markets were held there, for there were fine farms and orchards
about the beautiful shores of Seneca lake. It is recorded as
remarkable that one settler had “dressed up” an old Indian orchard
and made “one hundred barrels of cyder.”
We might think that the founders of the city of Rochester would
have come in by the Genesee road, but they did not. Far to the
south, at Hagerstown in Maryland, a country already old, lived
Colonel Rochester. He heard of the Genesee lands and at last
bought, with his partners, a hundred acres by the falls, where the city
now stands. When the little family procession passed down the
street and entered upon the long journey up the Susquehanna valley
to western New York, Rochester’s friends in Hagerstown wept to see
him go. They thought that he had thrown his money away in buying
swamp lands where only mosquitoes, rattlesnakes, and bears could
live, but he saw farther than they did. If he had been unwilling to take
any risk, he would never have laid out the first streets of the
prosperous city which now bears his name.
Fig. 9. Old Fort Johnson, Amsterdam, New York
Built by Sir William Johnson, 1742
Syracuse, like Utica and Rochester, had its own way of
beginning. We can truly say that at first salt made the city. The beds
of salt are not directly under Syracuse, but are in the hills not far
away. The water from the rains and springs dissolves some of this
salt, and as it flows down it fills the gravels in and around the town.
While all was yet forest the Indian women had made salt from the
brine which oozed up in the springs. So long ago as 1770, five years
before the Revolution, the Delaware Indians went after Onondaga
salt, and a little of it was now and then brought down to Albany.
Sometimes it was sold far down the St. Lawrence in Quebec.
New York
New York, Lake Erie and Western Railroad —————
Delaware, Lackawanna and Western Railroad .....................
New York Central and Hudson River Railroad ---------
New York, Ontario and Western Railroad -·-·-·-·-·-·-·-
Delaware and Hudson Railroad +-+-+-+-+-+
Erie Canal (old location) =========
The pioneers first made salt there in 1788. This was several
years before the Genesee road was cut through the woods. One of
these men, a Mr. Danforth, whose name a suburb of Syracuse now
bears, used to put his coat on his head for a cushion and on that
carry out a large kettle to the springs. He would put a pole across
crotched sticks, hang up the kettle, and go to work to make salt.
When he had made enough for the time he would hide his kettle in
the bushes and bring home his salt. By and by so many hundreds of
bushels were made by the settlers that the government of the state
framed laws to regulate the making and selling of the salt, and as
time went on a town arose and grew into a city. Many years later
rock salt was found deep down under the surface farther west, and
since that discovery the business of Syracuse has become more and
more varied in character.
The history of the state of New York shows well how the New
World was settled along the whole Atlantic coast. The white men
from Europe found first Manhattan island and the harbor. Then they
followed the lead of a river and made a settlement that was to be
Albany. Still they let a river guide them, this time the Mohawk, and it
led them westward. They pushed their boats up the stream, and on
land they widened the trails of the red men. Near its head the
Mohawk valley led out into the wide, rich plains south and east of
lake Ontario. Soon there were so many people that a good road
became necessary. When the good road was made it brought more
people, and thus the foundations of the Empire State were laid.
CHAPTER III
ORISKANY, A BATTLE OF THE REVOLUTION
About halfway between old Fort Schuyler, or Utica, and Fort

Stanwix, which is now Rome, is the village of Oriskany. A mile or two
west of this small town, in a field south of the Mohawk river, stands a
monument raised in memory of a fierce battle fought on that slope in
the year following the Declaration of Independence. On the pedestal
are four tablets in bronze, one of which shows a wounded general
sitting on the ground in the woods, with his hand raised, giving
orders to his men. The time was 1777, the strife was the battle of
Oriskany, and the brave and suffering general was Nicholas
Herkimer.
On another of the tablets is this inscription:
Here was fought
The battle of Oriskany
On the 6th day of August, 1777.
Here British invasion was checked and thwarted.
Here General Nicholas Herkimer,
Intrepid leader of the American forces,
Though mortally wounded kept his command of the fight
Till the enemy had fled.
The life blood of more than
Two hundred patriot heroes
Made this battle ground
Sacred forever.
After the battle Herkimer was carried down the valley to his
home, where a few days later he died. On the field he had calmly
lighted his pipe and smoked it as he gave his orders, refusing to be

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Financial Accounting Canadian 6th

Edition Harrison Test Bank

1) Which of the following is not a long-lived asset?

3) The cost of land would include all of the following except:

5) Which of the following would not be included in the Land account?

∙ $1,500 freight to have the equipment shipped to its manufacturing facility

Calculate the cost of the equipment.

∙ Purchased land for $100,000.

Calculate the cost of the factory equipment to be capitalized on the books.

5) Which of the following statements is true?

9) Depreciable cost is defined as:

11) Carrying amount is defined as:

17) To measure depreciation, all of the following must be known except:

24) Double-declining-balance depreciation computes annual depreciation by multiplying the asset's

Compute depreciation under straight-line, units-of-production, and double-declining-balance methods

Compute depreciation under straight-line, units-of-production, and double-declining-balance methods

8) A fully amortized asset is an asset:

2014 Depreciation Expense $8,000

15) When property, plant, and equipment is sold:

25) Depreciation is calculated using full years only.

27) A change in useful life estimate is very common in Canada.

28) IFRS requires significant components of a building to be depreciated separately.

1) Which of the following is not an intangible asset?

2) Which of the following is not an intangible asset?

3) All of the following are intangible assets except:

7) The cost of a patent should be amortized over:

14) Amortization is not recorded on intangible assets.

15) Intangibles with finite lives are amortized.

16) Intangibles with indefinite lives are never amortized.

20) An example of an intangible asset is a franchise.

Dec. 31 Amortization Expense-Patents 45,000

Net income $800,000

2) Return on assets measures:

6.6 Analyze the cash flow impact of long-lived asset transactions

Fig. 4. Eastern Portal of the Hoosac Tunnel, Boston and

If a stranger from a distant land should come to New York, he

It is true that the Dutch pioneers played an important part in the

Fig. 8. Genesee Street, Utica

About halfway between old Fort Schuyler, or Utica, and Fort

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