.

Question 1

If a company chooses to use time as its basis for a depreciation method, an item should be depreciated over:

1 point

Its economic life. That is, the time period over which the item will provide value to some party.

Its useful life. That is, the time period the company will actually use the item.

2.

Question 2

CVN corp purchases a new machine. The machine costs $10,000. They incur another $1,000 to bolt the machine into the floor and connect it to their electrical system. The machine will last for 8 years, but CVN plans to use it for 4 years and then upgrade to a more efficient item (energy standards continue to get better for these machines). At the end of the 4 years, CVN believes they will be able to sell the item for $3,000. CNN uses straight-line deprecation for all items. How much depreciation should they recognize in the first year?

(Note - for all questions asking for numerical answers, write the number only, no dollar sign ($))

3 points

3.

Question 3

CVN corp also has an automated shelf storage system. They paid $100,000 for the system completely installed. It will be used for 20 years and then scrapped. CVN does not anticipate receiving payment for it at the time of scrapping, but the raw materials are worth enough that the installer will remove it for free. What amount would show up on the face of CVN's balance sheet at the end of the 4th year of use?

2 points

4.

Question 4

CVN purchased a truck three years ago. They paid $20,000 and expected to use the truck for five years, then sell it for $5,000. At the beginning of year three, they decide the truck is still running well, so they will use it for 8 years and sell it for $2,000. How much will the truck depreciate in year three?

2 points

5.

Question 5

CVN corp. has a car they have used for two years for their supervisor to drive. They paid $32,000 for the car with the plan of driving it for 8 years and then donating it to charity (that is, scrapping it with no expected salvage value). However, at the beginning of the third year the supervisor has told them she hates the car and it makes her back hurt. They have asked her to drive it for one more year, they they will sell it. They expect to be able to sell it for $15,000. How much depreciation will they recognize for year 3?

2 points

6.

Question 6

CVN sold a forklift that was purchased for $40,000 and had accumulated depreciation of $26,000. They sold it for $16,000 in cash. How much gain or loss should they recognize?

1 point

None of the above

$2,000 Loss

$16,000 Gain

$14,000 Loss

$2,000 Gain

7.

Question 7

CVN sold an industrial oven. They had paid $60,000 for the oven and depreciated it in total by $32,000. When they sold it they recorded a loss of $5,000. For how much did they sell the oven?

2 points

8.

Question 8

When compared to long-lived tangible assets, long-lived intangible assets generally are:

1 point

About the same for accountants who want to capture the economics in any given period.

More difficult for accountants who want to capture the economics in any given period.

Less difficult for accountants who want to capture the economics in any given period.

9.

Question 9

When accountants use the term "amortization" it is:

1 point

A way to communicate that the related assets are less important than long-lived tangible assets.

An admission that the measurement error is so large the number may not be meaningful.

A mistake. That term is no longer allowed in financial statements.

Conceptually similar to the term depreciation.

10.

Question 10

Goodwill is the accounting term for "synergy"

1 point

False

True

11.

Question 11

CVN corp purchased CK corp for $200,000 cash. As part of the deal, CVN agreed to assume CK's debt, which CK had recorded with a bookvalue of $30,000. CVN received all of CK's assets, which CV had recorded with a total bookvalue $165,000. CVN had hired valuation experts who said the fairvalue of the debt was $32,000 and the fairvalue of the assets was $180,000. How much (if any) goodwill would CVN place on their books for this transaction?

2 points

12.

Question 12

CVN corp had also acquired SC corp. They recognized $18,000 of goodwill on the CVN books. They had given the SC corp owners $50,000 of cash and assumed debt with a bookvalue of $20,000 (which was also its fair value). How much identifiable asset did CVN receive in the transaction?

1 point

13.

Question 13

CVN corp had recently learned that two of their most popular products were no longer demanded in the market place. They have decided to stop making the products and repurpose all of the raw materials into more demanded products. Unfortunately, they have a reasonable amount of finished product. For Product A, the market price has dropped from $50 per unit to $20 per unit. They have 100 units with a bookvalue of $25 per unit. For Product B, the market price has also dropped from $50 per unit to $20 per unit. They have 50 of these items with a bookvalue of $18 per unit. How much (if any) of an impairment should they recognize in this periods financial statement?

1 point

14.

Question 14

Your friends Zach and Adam are arguing. They own a company together, which Zach manages. Zach has pointed out that every piece of equipment he has sold in the last three years has resulted in a gain for the firm. He says this shows he is a great bargainer. Adam argues Zach is just a bad accountant. Who is correct?

1 point

Zach

Adam