Question 1

Machinery having a four-year useful life and a salvage value of $5,000 was acquired for $45,000 cash on June 28. Using the Nearest Whole Month method, calculate depreciation expense at the end of the first year, December 31.

$10,000, using the straight-line method

$22,500, using the double declining-balance method

$7,000, using the straight-line method

$11,250, using the double declining-balance method

Question 2

A _______________ gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 50 years

Copyright

Patent

Trademark

License

Question 3

What is the primary financial accounting purpose that underlies the recording of depreciation expense?

To record the decline in the asset's market value

To record the actual wear and tear on the asset

To assign a largely arbitrary amount of the asset's depreciable cost to depreciation expense just so the matching principle may be satisfied

To assign an amount of the asset's cost to depreciation expense based on a logically defensible rationale so as to satisfy the matching principle.

Question 4

A company has purchased a parcel of land on which a small dilapidated building has been situated for years. The purpose of the purchase is to tear down the building to make the land suitable to build a new warehouse. Which of the following costs incurred is not part of the cost of the building?

The cost of obtaining a building permit

The cost of installing temporary electric service on the site so the construction crews have access to electricity to operate their tools

The cost of tearing down the old building

The cost of materials for building the new building

Question 5

A company buys an automobile for use in the business. The car's manufacturer says that with proper maintenance the car should last at least 15 years before it has to be scrapped. A popular newsstand magazine has conducted a survey which says that most people who own this car trade it in on a new car after 6 years. If the company leased this car, the standard industry lease period is 4 years. The company has a policy of replacing its cars every 3 years. Which number represents the estimated useful life of the vehicle for depreciation purposes?

15 years

6 years

3 years

4 years

Question 6

A building costing $350,000 was sold for $500,000 cash. If the book value of the building was $200,000 less than its cost, what is the journal entry to record the disposal of the building?

Debit Cash $500,000; Debit Accumulated Depreciation., Building $200,000; Credit Building $350,000; Credit Gain on Disposal of Building $350,000

Debit Cash $500,000; Debit Accumulated Depreciation., Building $350,000; Credit Building $350,000; Credit Gain on Disposal of Building $500,000

Debit Cash $500,000; Credit Building $350,000; Credit Gain on Disposal of Building $150,000

Debit Cash $500,000; Debit Building $350,000; Credit Gain on Disposal of Building $850,000

Question 7

1 Point

Which of the following is subject to depreciation because it is considered a land improvement?

The construction of new sidewalks where there were none previously

Paving over a gravel parking lot with concrete or macadam

Installing outside security lights

All of the above are land improvements

Question 8

1 Point

On January 1, ABC Co purchased a patent for $20,000 with a legal life of 8 years. ABC Co. estimates that the patent will have a useful life of 5 years. Amortization for the year is:

$2,500

$4,000

$2,000

$8,000

Question 9

1 Point

The cost of equipment was $22,800. The book value of the equipment is $750. The equipment is sold for $900. Which of the following is correct?

There was a loss on disposal of $22,050

There was a loss on disposal of $150

There was a gain on disposal of $150

There was a gain on disposal of $900

Question 10

1 Point

An asset having a five-year service life and a salvage value of $15,000 was acquired for $135,000 cash on April 5. Using straight-line depreciation, what will be the depreciation expense at the end of the first year and for the entire second year? The accounting period ends on December 31st

$18,000 and $24,000

$24,000 and $24,000

$16,000 and $24,000

$20,000 and $424,000

Question 11

1 Point

Assume that on December 31st, 2010 adjusted trial balance, ABC Company showed equipment with a cost of $60,000 and accumulated depreciation of $30,000. As point of its year end procedures, ABC Company found that the equipment had a recoverable value of $22,000. What accounting treatment is required?

None

Credit equipment for $8,000

Debt impairment loss for $10,000

Credit accumulated depreciation for $8,000

Question 12

1 Point

A large newspaper publisher decides to buy a large printing press. This press is so large that it will occupy one-half of a city block when it is fully assembled. The company pays $1,000,000 for the press, $20,000 to have it trucked to its permanent location, and $30,000 to have it assembled and test run. All three of these dollar amounts are debited to the Machinery account. As it applies to any fixed asset, this procedure is an application of which of the following principles?

Monetary unit principle

Going-concern principle

Entity principle

Cost principle

Question 13

1 Point

A unique symbol used by a company in marketing its products or services is called a trade name

True

False

Question 14

1 Point

An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and will have a salvage value of $400. Using the straight-line method, the revised depreciation will be $500 per year.

True

False