Multiple Choice Questions
1. An asset can be disposed of by:
A) Discarding it.
B) Selling it.
C) Exchanging it for another asset.
D) Donating it to charity.
E) All of the above.
2. Natural resources:
A) Include standing timber, mineral deposits, and oil and gas fields.
B) Are also called wasting assets.
C) Are long-term assets.
D) Are depleted.
E) All of the above.
3. Depletion:
A) Is the process of allocating the cost of natural resources to periods in which they are consumed.
B) Is also called depreciation.
C) Is also called amortization.
D) Is an unrealized expense reported in equity.
E) Is the process of allocating the cost of intangibles to periods in which they are used.
4. Intangible assets include:
A) Patents.
B) Copyrights.
C) Trademarks.
D) Goodwill.
E) All of the above.
5. Amortization:
A) Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.
B) Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use.
C) Is the process of allocating the cost of natural resources to periods when they are consumed.
D) Is an accelerated form of expensing an asset's cost.
E) Is also called depletion.
6. Obligations due to be paid within one year or the company's operating cycle, whichever is longer, are:
A) Current assets.
B) Current liabilities.
C) Earned revenues.
D) Operating cycle liabilities.
E) Bills.
7. Liabilities involve addressing issues of:
A) When to pay.
B) Whom to pay.
C) How much to pay.
D) All of the above.
E) Both (A) and (C) only.
8. Liabilities:
A) Must be certain.
B) Must sometimes be estimated.
C) Must be for a specific amount.
D) Must always have a definite date for payment.
E) Must involve an outflow of cash.
9. Amounts received in advance from customers for future products or services:
A) Are revenues.
B) Increase income.
C) Are liabilities.
D) Are not allowed under GAAP.
E) Require an outlay of cash in the future.
10. A contingent liability:
A) Is always of a specific amount.
B) Is a potential obligation that depends on a future event arising out of a past transaction or event.
C) Is an obligation not requiring future payment.
D) Is an obligation arising from the purchase of goods or services on credit.
E) Is an obligation arising from a future event.