1. What is interest?

1. Payment for the use of money.
2. An equity investment.
3. Return on capital.
4. A loan.

2. What is not a variable that is considered in interest computations?

1. Principal.
2. Interest rate.
3. Assets.
4. Time.

3. Which of these is not a major characteristic of a plant asset?

1. Possesses physical substance.
2. Acquired for use in operations.
3. Yields services over a number of years.
4. All of these are major characteristics of a plant asset.

4. An improvement made to a machine increased its fair value and its production capacity by 25% without extending the machines useful life. The cost of the improvement should be

1. Expensed.
2. Debited to accumulated depreciation.
3. Capitalized in the machine account.
4. Allocated between accumulated depreciation and the machine account.

5. Which of the following is true of depreciation accounting?

1. It is not a matter of valuation.
2. It is part of the matching of revenues and expenses.
3. It is the process of cost allocation.
4. All of these answers are correct.

6. Which of the following is not one of the basic questions that must be answered before the amount of depreciation can be computed?

1. What is the depreciation base to use for the asset?
2. What is the assets useful life?
3. What method of cost apportionment is best for this asset?
4. What product or service is the asset related to?

7. A general description of the depreciation methods applicable to major classes of depreciable assets

1. Is not a current practice in financial reporting.
2. Is not essential to a fair presentation of financial position.
3. Is needed in financial reporting when company policy differs from income tax policy.
4. Should be included in corporate financial statements or notes thereto.

8. The cost of an intangible asset includes all of the following except

1. Purchase price.
2. Legal fees.
3. Other incidental expenses.
4. All of these choices are include

9. The recoverability test is used to determine any impairment loss on which of the following types of intangible assets?

1. Indefinite life intangibles other than goodwill.
2. Indefinite life intangibles.
3. Goodwill.
4. Limited life intangibles.

10. The total amount of patent cost amortized to date is usually

1. Shown in a separate Accumulated Patent Amortization account which is shown contra to the Patents account
2. Shown in the current income statement.
3. Shown as credits in the Patents account.
4. Reported as a contra property, plant and equipment item.