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All except which of the following will be included in the cost of a fixed asset? |
mistakes in installation |
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If an asset is long lived and is used in a productive manner in a business, it will be classified as |
a fixed asset. |
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If the asset is long lived but not used in a productive manner it will be classified as |
an investment |
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A copy machine was purchased for $35,000. It is estimated that the machine will have a useful life of 4 years with a residual value of $3,000. How much will be depreciated during the first full year using the straight-line method of depreciation? |
$8,000 |
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The Cardinal Industries purchased a generator which cost $11,000. It has an estimated life of 5 years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the first full year using the straight-line method of depreciation. |
$2,000 |
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A copy machine was purchased for $35,000. It is estimated that the machine will have a useful life of 4 years with a residual value of $3,000. It is estimated that the machine will make 2,000,000 copies. Using the units-of-output method to depreciate the copy machine, how much will be depreciated if during the first year 550,000 copies were made? |
$8,800 |
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Which of the following fixed assets is not depreciated? |
land |
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A machine was purchased at a cost of $78,000. The equipment had an estimated useful life of 5 years and a residual value of $3,000. Assuming the equipment was sold at the end of year 4 for $8,000, determine the gain or loss on the sale of equipment. (Assume the straight-line depreciation method.) |
a loss of $10,000 |
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Equipment was purchased at a cost of $78,000. The equipment had an estimated useful life of 5 years and a residual value of $3,000. Assuming the equipment was sold at the end of year 4 for $8,000, which of the following will be included in the journal entry? (Assume the straight-line depreciation method.) |
Accumulated depreciation, debit $60,000 |
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An asset with a net book value of $4,725 was discarded, having no market value. How much will be recorded as a loss or gain on disposal? |
Loss of $4,725 |
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Which of the following is not true with regards to selling fixed assets? |
The cash payment is recorded. |
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Depletion can be compared to which of the following depreciation methods? |
units of production |
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The expensing of a natural resource is called |
depletion. |
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Shale Miner Co. acquired mineral rights for $60,000,000. It is estimated that there are 80,000 total tons of the resource, and during the current year 10,750 tons were mined and sold. What is the rate of depletion? |
$750 per ton |
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The depletion rate is calculated as follows |
Cost of Resource / Estimated Total Units of Resource. |
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The best definition of a trademark is |
a name, term, or symbol used to identify a business or its product. |
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The expensing of intangible assets is called |
amortization. |
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The best definition of a copyright is |
the exclusive right to publish and sell literary, artistic, or musical compositions. |
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All of the following will be found under the caption of "property, plant, and equipment" in the balance sheet except |
trademark. |
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Tangible and intangible assets are normally presented on the balance sheet as |
They will be listed separately as property, plant, and equipment and intangible assets. |
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All of the following assets will be included as intangible assets on the balance sheet except |
investments. |
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An decrease in the fixed asset turnover ratio from 3.0 to 2.2 indicates |
an unfavorable trend in the efficiency of using fixed assets to generate sales. |
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the more efficiently a company is using its assets |
the higher the fixed asset turnover. |
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Companies with smaller fixed asset turnover ratios require |
large fixed asset investments. |
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A gain or loss on the exchange of similar assets will be recorded if the transaction has |
commercial substance. |
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A copy machine was purchased for $35,000 and had accumulated depreciation of $24,000. The machine was traded in for a new one that had a sticker price of $50,000. The vendor agreed to give a trade-in allowance for the old equipment in the amount of $9,000. How much will the company need to pay in cash, and what is the amount of the gain or loss? |
$50,000, loss of $2,000 |
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On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of boot in this transaction? |
$488,000 |
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Which of the following will be classified as a fixed asset in a movie theater? |
A popcorn machine |
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The Cardinal Industries purchased a generator which cost $11,000. It has an estimated life of 5 years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the second year using the double-declining-balance method of depreciation. |
$2,640 |
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A machine was purchased at a cost of $70,000. The equipment had an estimated useful life of 8 years and had a residual value of $6,000. Assuming the equipment was sold at the end of year 6 for $14,000, determine the gain or loss on the sale of the equipment. (Assume the straight-line depreciation method.) |
a loss of $8,000 |
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An asset with a net book value of $1,225 was discarded, having no market value. How much will be recorded as a loss or gain on disposal? |
Loss of $1,225 |
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In regards to discarding fixed assets, which of the following is not true? |
If an asset has not been fully depreciated, depreciation should not be recorded before removing the asset from the accounting records. |
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Gemstones Miner Co. acquired mineral rights for $100,000,000. It is estimated that there are 2,500,000 tons of the resource, and during the current year 500,000 tons were mined and sold. What is the rate of depletion? |
$40 per ton |
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The calculation of depletion expense is |
Depletion Rate × Estimated Useful Life. |
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Which of the following statements is true regarding goodwill? |
In a purchase of a business at a price in excess of the fair value of its net assets, goodwill is recorded as the excess. |
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The best definition of a patent is |
the exclusive right to produce and sell goods with one or more unique features. |
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Intangible assets are reported on the balance sheet |
after the fixed assets. |
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If a company has many classes of fixed assets, which of the following is the most likely financial statement presentation? |
a single amount may be presented in the balance sheet, supported by a note with a separate listing. |
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The fixed asset turnover ratio is calculated as |
Sales / Average Book Value of Fixed Assets. |
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Financial statement data for the year ending December 31 for River Company is shown below: |
3.0 |
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An increase in the fixed asset turnover ratio from 2.0 to 2.7 indicates |
a favorable trend in the efficiency of using fixed assets to generate sales. |
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On December 31, Slugger Batting Cages Company decides to trade in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $12,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction? |
Loss of $18,000 |
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On December 31, Tradewinds Company decides to trade in one of its ships for another one that has a cost of $800,000. The seller of the ship is willing to allow a trade-in amount of $60,000. The initial cost of the old equipment was $600,000 with an accumulated depreciation of $550,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction? |
Gain of $10,000 |
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The Cardinal Industries purchased a generator which cost $11,000. It has an estimated life of 5 years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the first year using the units-of-production method of depreciation if the generator was used for 1,040 hours. |
$2,080 |
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Which of the following is not one of the most common depreciation methods? |
Sum-of-the-years-digits method |
|
Shale Miner Co. acquired mineral rights for $60,000,000. It is estimated that there are 80,000 tons of the resource, and during the current year 10,750 tons were mined and sold. What is the amount of depletion for the current year? |
$8,062,500 |
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Coal Miner Co. acquired coal rights for $100,000,000. It is estimated that there are 2,500,000 tons of the resource, and during the current year 500,000 tons were mined and sold. What is the amount of depletion for the current year? |
$20,000,000 |
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Financial statement data for the year ending December 31 for Sharp Company is shown below: |
3.5 |
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Which of the following is the account that will be used to transfer the fixed asset cost to an expense? |
Depreciation expense |
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The estimated value at the end of its useful life is called all of the following except |
book value. |
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A machine was purchased at a cost of $52,000. The equipment had an estimated useful life of 7 years and had a residual value of $3,000. Assuming the equipment was sold at the end of year 6 for $14,000, which of the following will be included in the journal entry? (Assume the straight-line depreciation method.) |
Accumulated depreciation, debit $42,000 |
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Which of the following is not classified as an intangible asset? |
Investment |
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Amortization and depreciation will be found on the income statement as |
separate expenses. |
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boot refers to |
amount of cash paid or liability incurred when buying a new asset and trading in an old asset. |
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Which of the following is not one of the factors used to determine depreciation expense |
All of these choices are correct. |
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All of the following statements are true regarding the company’s fixed asset turnover ratio except |
Townson’s fixed asset turnover ratio has decreased between Year 1 and Year 2. |
|
A fixed asset should be removed from the accounts except |
when it is fully depreciated. |
|
The journal entry to record depletion includes |
a debit to Depletion Expense. |
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