A company has the following information: Net property, plant, and equipment, beginning of year: $100,000; accumulated depreciation, end of year: $50,000; net property, plant, and equipment, end of year: $150,000; net sales: $250,000; and depreciation expense: $6,000. The average age of the fixed assets is O a. 1.6 years. Ob. 2.5 years. O c. 4 years. O d. 8.3 years. Which of the following statements about intangible assets is true? O a. The right to the exclusive use of a distinctive name, phrase, or symbol is called a franchise. b. A patent expires after 15 years. OC. Goodwill is considered to have an indefinite life unless it is found to be impaired. Od. The legal life of a copyright is 20 years. An impairment of an asset may be due to which of the following? O a. The FASB determining that the asset is impaired b. The maintenance expense of the asset being higher than expected c. Too little depreciation expense being recorded in previous years Od. The replacement cost of the asset increasing American Mining purchased a gold mine in Nevada for $2,500,000. The estimated residual value is $200,000. It is estimated that there are 2,300,000 ounces of gold in the mine. What will the amount of depletion be in March if it extracts 1,000 ounces of gold from the mine? a $108.70 b. $1,087 c. $1,000 Od $100 On January 1, Tomcat Enterprises bought a building for $300,000, estimating that it would have a residual value of $0 and a useful life of 40 years. Tomcat uses the straight-line depreciation method, and the book value of the asset on December 31 of the same year was $292,500. Tomcat then decided that the building would have a remaining useful life of 20 years. What is the revised depreciation expense for the upcoming year? O a $15,000 O b. $14,625 c. $7,500 Od. $14,000 A patent has a legal life of 20 years. On January 1, Alpha Company acquires a patent for $100,000 that has a remaining legal life of 15 years. The company expects to receive economic benefits from the patent for only 5 years, but it may decide to sell the patent after 3 years. How much amortization expense will the company have the first year? a. $20,000 Ob. $16,667 O c. $5,000 O d. $6,667 If a company did NOT correctly record all the costs necessary to acquire an asset and prepare it for use, what affect could this have on the financial statements? a. The costs would be expensed, so income would be lower in the current period. Ob. The costs would be expensed, so income would be higher in the current period. c. Revenues would be higher so income would be higher in the current period. Od. The costs would be reported on the balance sheet, so income would be higher in the current period. Accounting for natural resources is similar to accounting for fixed assets. Which of the following accounts is debited when recording the entry for the depletion of a coal mine? a. Intangibles b. Natural Resources OC. Inventory Od. Accumulated Depletion A patent has a legal life of 20 years. On January 1, Alpha Company acquires a patent that has a remaining legal life of 15 years. The company expects to receive economic benefits from the patent for only 5 years. How many years of amortization expense will the company have? O a. 15 years Ob. 20 years O c. 5 years O d. Number of years cannot be determined. A patent has a legal life of 20 years. On January 1, Alpha Company acquires a patent that has a remaining legal life of 15 years. The company expects to receive economic benefits from the patent for only 5 years. How many years of amortization expense will the company have? a. 15 years Ob. 20 years c. 5 years d. Number of years cannot be determined. The declining balance depreciation method is used by Famous Company. Assume an asset costs $100,000 and has an expected useful life of 10 years, a residual value of zero, a current book value of $80,000, a straight-line rate of 10%, and a double- declining-balance rate of 20%. Using double-declining-balance depreciation, how much depreciation expense will be recognized for the current year? O a $10,000 O b. $16,000 C. $80,000 O d. $20,000 As the service potential of operating assets declines, the costs of these assets are allocated to an expense for the accounting periods in which the assets are used and benefits received. This process is called for intangible assets and for natural resources a. depletion; depreciation b. allocation; depreciation O c. amortization; depletion O d. amortization; allocation Accounting for natural resources is similar to accounting for fixed assets. Which of the following is one of the ways natural resources are different from fixed assets? a. Natural resources are intangibles. b. Natural resources are accounted for using the straight-line depreciation method. C. None of the types of natural resources has a residual value. Od. Most natural resources can generally be replaced or restored only by an act of nature. An extraordinary repair is an expenditure that a. increases efficiency or productivity of an asset. b. adds a new or major component to the asset. O c. keeps an asset in normal operating condition. O d. extends the asset's useful life