1. (1) Gemstones Miner Co. acquired mineral rights for $100,000,000. It is estimated that there are 2,500,000 tons, and during the current year 500,000 tons were mined and sold. What is the rate of depletion?

a. $40 per ton

b. $60 per ton

c. $50 per ton

d. $75 per ton

(2) If an asset is long lived and is used in a productive manner in a business, it will be classified as

a. a fixed asset.

b. an intangible asset.

c. an expense.

d. an investment.

(3) Which of the following is the account that will be used to transfer the fixed asset cost to an expense?

a. goodwill

b. improvements

c. depreciation expense

d. accumulated depreciation

(4) 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?

a. gain of $4,725

b. loss of $4,725

c. Answer cannot be determined.

d. No loss or gain will be booked.

(5) Financial statement data for the year ending December 31, 2012, for Dolphin Company is shown below:

Determine the fixed asset turnover ratio for 2012.

a. 3.5

b. 3.9

c. 3.0

d. 3.2

(6) An decrease in the fixed asset turnover ratio from 3.0 to 2.2 indicates

a. an unfavorable trend in the efficiency of using fixed assets to generate sales.

b. a favorable trend in the efficiency of using fixed assets to generate sales.

c. None of these answers is correct.

d. an unfavorable trend in the efficiency of using fixed assets to pay down debt.

(7) 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, determine the gain or loss on the sale of the equipment. (Assume the straight-line depreciation method.)

a. a loss of $14,000

b. a gain of $14,000

c. a gain of $4,000

d. a loss of $4,000

(8) A gain or loss on the exchange of similar assets will be recorded if the transaction has

a. commercial substance.

b. boot.

c. a high value.

d. a trade-in allowance.

(9) A copy machine was purchased for $35,000 and had been depreciated for $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?

a. $41,000, loss of $2,000

b. $50,000, no loss or gain

c. $50,000, loss of $2,000

d. $41,000, gain of $2,000

(10) Gemstones Miner Co. acquired mineral rights for $100,000,000. It is estimated that there are 2,500,000 tons, and during the current year 500,000 tons were mined and sold. What is amount of depletion for the current year?

a. $10,000,000

b. $2,500,000

c. $20,000,000

d. $2,000,000

(11) The best definition of goodwill is

a. the exclusive right to publish and sell literary, artistic, or musical compositions.

b. an asset created from favorable factors such as location, product quality, reputation, and managerial skills.

c. the exclusive right to produce and sell goods with one or more unique features.

d. a name, term, or symbol used to identify a business or its product.

(12) All of the following will be found under the caption of property, plant, and equipment in the balance sheet except

a. computer equipment.

b. parking lot costs.

c. land improvements.

d. trademark.

(13) Which of the following will be classified as a fixed asset in a movie theater?

a. land for sale

b. trademark

c. the latest movie

d. a popcorn machine

(14) Property, plant, and equipment is shown on the balance sheet as all except one of the following:

a. original cost.

b. net book value.

c. a single amount with a separate detailed listing.

d. original cost less accumulated depreciation listed separately.

(15) The estimated value at the end of the useful life of an asset is called all of the following except

a. residual value.

b. scrap value.

c. book value.

d. salvage value.

(16) Tangible and intangible assets are normally presented on the balance sheet as

a. total property, plant, and equipment.

b. tangible and intangible assets.

c. They will be listed separately as property, plant, and equipment and intangible assets.

d. They will not be on the balance sheet.

(17) The fixed asset turnover ratio is calculated as

a. Net Sales / Average Book Value of Fixed Assets.

b. Average Book Value of Fixed Assets / Cash.

c. Average Book Value of Fixed Assets / Accumulated Depreciation.

d. Net Sales / Accumulated Depreciation.

(18) Which of the following is not classified as an intangible asset?

a. goodwill

b. trademark

c. patent

d. investment

(19) The term "boot" refers to the

a. amount of down payment on an asset.

b. total cost of a new asset.

c. amount of the gain or loss on exchange of assets.

d. amount of cash paid or liability incurred when buying a new asset and trading in an old asset.

(20) Depletion can be compared to which of the following depreciation methods?

a. straight line

b. units of production

c. None of these answers is correct.

d. double-declining balance

(21) 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.)

a. Cash, credit $14,000

b. Accumulated depreciation, debit $42,000

c. Gain on sale of asset, debit $4,000

d. Loss on sale of asset, credit $4,000

(22) 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?

a. $8,750

b. $8,000

c. $3,000

d. $32,000

(23) The best definition of a patent is

a. the exclusive right to publish and sell literary, artistic, or musical compositions.

b. an asset created from favorable factors such as location, product quality, reputation and managerial skills.

c. the exclusive right to produce and sell goods with one or more unique features.

d. a name, term, or symbol used to identify a business or its product.

(24) 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. How much will be depreciated if during the first year 550,000 copies were made?

a. $8,750

b. $8,000

c. $8,800

d. $32,000