PPE, Intangibles, Natural Resources

PPE, Intangibles, Natural Resources
Plant Blank 1Blank 1 Plant , Correct Unavailable assets are assets used in a company's operations that
have a useful life of more than one accounting period.
Consistent with the ________ principle, plant assets should be recorded at cost, which includes
all the normal and reasonable expenditures necessary to get the asset in place and ready for its
intended use.
Multiple choice question.
monetary unit
plant asset
cost
full disclosure
Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs
(brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting,
carpet, lighting, etc. Alin should record the cost of the building at:
$350,000.
$300,000.
Reason:
300,000+30,000+20,000=350,000
$330,000.
Reason:
300,000+30,000+20,000=350,000
$320,000.
Reason:
300,000+30,000+20,000=350,000
Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen
also paid an additional $15,000 to modify the building in order to accommodate his business
needs. Wen should record the cost of the building at:
$215,000
$220,000
$235,000
$200,000
Land Improvements Blank 1Blank 1 Improvements , Correct Unavailable are assets that increase the
benefits of land, have a limited useful life, and are depreciated—such as walkways and fences.
Which of the following items are plant assets? (Check all that apply.)
Multiple select question.
Equipment being used in operations
Equipment with no value
Land held for investment

Reason:
If land is held for investment purposes, it is included in the Investments of the company and
would not be a plant asset. Plant assets are used in the operations of the company.
Building being used for operations
PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs
of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should
record the cost of the land for:
$250,000
$235,000
Reason:
200,000+15,000+35,000=250,000
$215,000
Reason:
200,000+15,000+35,000=250,000
$200,000
Reason:
200,000+15,000+35,000=250,000
Plant assets should be recorded at cost, including all normal and reasonable expenditures
necessary to get the asset in place and ready for its intended use. This would include which of the
following costs? (Check all that apply.)
Testing
Fines incurred for failing to get the correct permits
Repairs necessary for damages incurred during installation
Assembling
Shipping charges
The purchase of multiple plant assets for one purchase price is called a ______ purchase.
extraordinary
fixed-rate
betterment
lump-sum
The cost at which a company records purchases of machinery and equipment should include
which of the following? (Check all that apply.)
Operating costs
Shipping fees
Purchase price
Installation
Taxes
Cen Co. purchases land and a building for $130,000. The land is appraised at $100,000 and the
building at $150,000. Allocating the cost based on market values, the land should be recorded at
what amount?
$90,000
Reason:
[100,000/(100,000+150,000)] x 130,000
$110,000
Reason:
[100,000/(100,000+150,000)] x 130,000
$52,000
$100,000
Reason:
[100,000/(100,000+150,000)] x 130,000
$60,000
Reason:
[100,000/(100,000+150,000)] x 130,000
$40,000
Reason:
[100,000/(100,000+150,000)] x 130,000
Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title
and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's
needs. Geo should record the building at $ 495000
______ is the process of allocating the cost of a plant asset to expense in the accounting periods
benefiting from its use.
Depreciation
Depletion
Allocation
Amortization
Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as
parking lots and street lights—are called:
land improvements.
land.
land additions.
land structures.
The factors necessary to compute depreciation include all of the following, except:
cost.
useful life.
salvage value.
book value.
Reason:
The factors that determine depreciation are cost, salvage value, and useful life.
Ion Co. purchased land for $190,000. Ion also paid $5,000 in brokerage fees, $1,000 in legal
fees, and $500 in title costs. Ion should record the cost of this land to be:
$196,000
Reason:
190,000+5,000+1,000+500=196,500
$196,500
$195,500
Reason:
190,000+5,000+1,000+500=196,500
$195,000
Reason:
190,000+5,000+1,000+500=196,500
$190,000
Reason:
190,000+5,000+1,000+500=196,500
salvage Blank 1Blank 1 salvage , Correct Unavailable value, also called residual value or scrap
value, is an estimate of the asset's value at the end of its benefit period.
The Useful Blank 1Blank 1 Useful , Correct Unavailable life (also called service life) is the length of
time the asset is productively used in a company's operations.
Depreciation Blank 1Blank 1 Depreciation , Correct Unavailable is the process of allocating the cost of a
plant asset to expense in the accounting periods benefiting from its use.
True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to
acquire it and prepare it for its intended use.
True false question.
True
False
Reason:
The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and
prepare it for its intended use.
Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life
(cost plus salvage value)/productive life
(cost minus salvage value)/productive life
(cost plus salvage value)/useful life

The ______ life of a plant asset is the length of time it is productively used in a company's
operations
productive
useful
total
obsolescence
Which of the following items related to depreciating equipment would be found on a company's
income statement?
Equipment
Net Book Value
Accumulated Depreciation - Equipment
Depreciation Expense - Equipment
The term ______ refers to a plant asset that is in the process of becoming outdated and no longer
used.
obsolescence
inadequacy
scrap
salvage
The factors necessary to compute depreciation include all of the following, except:
cost.
salvage value.
useful life.
book value.
Reason:
The factors that determine depreciation are cost, salvage value, and useful life.
Accumulated depreciation is recorded on which of the following financial statements?

Income statement
Statement of retained earnings
Statement of cash flows
Balance sheet
The cost of a plant asset includes the following:

Disposal cost
Reason:
The cost of a plant asset includes all necessary and reasonable expenditures to acquire it and
prepare it for its intended use.
Depreciation expense
Reason:
The cost of a plant asset includes all necessary and reasonable expenditures to acquire it and
prepare it for its intended use. Depreciation expense is the allocation of the cost of an asset over
its expected useful life.
Purchase price
Cost to prepare it for use
On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven
years and have a salvage value of $1,000. Assuming the company uses the straight-line method,
depreciation expense should be $ 2,000 Blank 1Blank 1 2,000 , Correct Unavailable per year.
Straight-line depreciation is calculated by taking cost minus (salvage/market) salvage
Book value can be calculated by taking an asset's acquisition costs less its accumulated Blank 1Blank 1
accumulated , Correct Unavailable depreciation
Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van
for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the
second year would be $ 17000 Blank 1Blank 1 17000 , Correct Unavailable.
The inability of a company's plant assets to meet its demands is called:

scrap
inadequacy
salvage
obsolescence
The method of depreciation that charges a varying amount to depreciation expense for each
period depending on its usage is called the _________ method.
declining-balance
Reason:
The declining balance method is not based on usage. The units-of-production method varies
based on usage.
units-of-production
straight-line
MACRS
Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years
with a $2,000 salvage value. Using the double declining-balance depreciation method, compute
the machine's first year depreciation expense.
$4,000
Reason:
$10,000 x (.25 x 2) = $5,000.
$2,000
Reason:
$10,000 x (.25 x 2) = $5,000.
$5,000
Reason:
$10,000 x (.25 x 2) = $5,000.
$2,500
Reason:
$10,000 x (.25 x 2) = $5,000.
On January 2, Dice Co. purchases a mixing machine for $25,500. The machine is expected to last four
years and have a salvage value of $5,500. Assuming the company uses the straight-line method,
depreciation expense should be $ 5000 Blank 1Blank 1 5000 , Correct Unavailable per year.
Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage
value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively.
Based on this information, Privo is using the ________ depreciation method.
units-of-production
straight-line
declining-balance
The asset's acquisition costs less its accumulated depreciation is called:

accumulated deprecation
resale value
market value
book value
Which depreciation method will compute the most depreciation expense over the life of the
asset?
Units-of-production will produce the most depreciation expense.
All methods will produce equal depreciation expense over the life of the asset.
Declining-balance will produce the most depreciation expense.
Straight-line will produce the most depreciation expense.

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of
the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation, using
the straight-line method, at the end of the period?
$12,000
Reason:
25,000-12,000 =13,000
$13,000
$25,000
Reason:
25,000-12,000 =13,000
$37,000
Reason:
25,000-12,000 =13,000
True or false: Modified Accelerated Cost Recovery System (MACRS) is a depreciation method
that allows companies to delay depreciation expense for tax purposes.
True false question.
True
Reason:
MACRS is a depreciation method that allows companies to accelerate depreciation for tax
purposes.
False
Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation
expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number
of copies that have been made on the copier. Based on this information, the company uses the
________ depreciation method.
units-of-production
MACRS
straight-line
declining-balance
On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine
for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute
the machine's first year partial depreciation expense for October 30 through December 31.
$1,000
$1,500
Reason:
This is a partial year depreciation. $26,000 - 2,000 = $24,000/4 = $6000 per year. $6000 x 2/12 =
$1,000.
$3,000
Reason:
$1,000.
$6,000
Reason:
$1,000.
On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine
for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute
the machine's first year partial depreciation expense for October 30 through December 31.
$1,000
$1,500
Reason:
$1,000.
$3,000
Reason:
$1,000.
$6,000
Reason:
$1,000.
Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation,
estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides
to use the equipment for a total of 6-years with no salvage value. Compute the revised
depreciation for the third year.
$2,875
Reason:
(12,000-500)/5=2,300 per year. $2,300 x 2 years = $4,600 depreciation taken. Book value at
beginning of year 3 = $12,000-4,600= $7,400/4 = $1,850.
$1,250
Reason:
$2,375
Reason:
$1,850
The depreciation method that determines the depreciation for the period by multiplying a
depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is
known as the __________ method.
straight-line
units-of-production
declining-balance
Depreciation expense is reported as a decrease in which of the following financial statements?

Statement of cash flows

Reason:
Depreciation expense belongs on the Income Statement.
Income statement

Reason:
Balance sheet
Reason:
A(n) _________ is a permanent decline in the market value of an asset relative to its book value.
obsolescence
inadequacy
betterment
impairment
Modified Accelerated Cost Recovery System is not Blank 1Blank 1 not , Correct Unavailable acceptable
for financial reporting purposes.
Determine which of the following expenses are considered revenue expenditures related to a
company vehicle. (Check all that apply.)
Engine overhaul
Installation of special equipment
Car wash
Oil change
Dent repair
On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine
for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute
the machine's first year (partial) depreciation expense for June 1st through December 31st.
$2,400
Reason:
(14,000-2000)/5 x 7/12=1,400 for a partial year depreciation.
$1,000
Reason:
$1,200
Reason:
(14,000-2000)/5 x 7/12=1,400 for a partial year depreciation The partial year depreciation should
be recorded for seven months (June 1- December 31).
$1,400
$2,800
Reason:
When a company revises an estimate used to record depreciation expense, the company should
revise depreciation by using the formula (_______ - revised salvage value)/revised remaining
useful life.
book value
accumulated depreciation
market value
original cost
Which of the following expenses would not be considered an ordinary repair?

Replacing an engine
Replacing small parts
Lubricating
Cleaning
Ordinary repairs, such as normal repairs and maintenance to a vehicle, would be recorded with a
debit to which of the following accounts?
Accounts payable
Depreciation expense
Vehicle
Repairs expense
A permanent decline in the fair value of an asset relative to its book value is called
asset impairment Blank 1Blank 1 impairment , Correct Unavailable.
Niren Co. made modifications to a manufacturing machine that increased its productivity by
40%. Niren would classify this expense as a(n):
extraordinary repair.
ordinary repair.
betterment.
revenue expenditure.
(Capital/Revenue) Capital Blank 1Blank 1 Capital , Correct Unavailable expenditures are additional costs
of plant assets that provide benefits extending beyond the current period, such as a plant expansion, or
machine overhaul.
Trio Co. reported that maintenance and normal repair costs are expensed as incurred. If Trio's
current year machinery and equipment repair costs are $8,200, which accounts would be
impacted to complete the journal entry? (Check all that apply.)
Credit Machinery & equipment.

Credit Cash.
Debit Machinery & equipment.
Credit Repairs expense.
Debit Cash.
Debit Repairs expense.
Quick Catering Co. paid for a refrigeration system to be added to their delivery van to keep the
food cooled during deliveries. To record this expense, Quick would debit the ________ account.
Equipment
Repairs & Maintenance Expense
Unearned Delivery Fees
_________ are expenditures that make a plant asset more efficient or productive, but
do not always increase an asset's useful life.
Ordinary repairs
Extraordinary repairs
Revenue expenditures
Betterments
Sioux Co. replaced the roof on its existing building, therefore increasing the building's life by 10
years. The cost of the roof is considered a(n):
revenue expenditure
betterment
Reason:
This is an extraordinary repair because it extended the life of the building by 10 years.
extraordinary repair
ordinary repair
Rojo's Roses Co. received an invoice for replacement of the engine on its main delivery van. The
replacement will extend the life of the van an additional three years. The entry to record receipt
of the invoice would include which of the following entries? (Check all that apply.)
Credit to Repairs Expense.

Reason:
The credit is to Accounts Payable.
Debit to Repairs Expense.

Reason:
Since this is a betterment, it will be debited to the Equipment account.
Debit to Equipment.
Debit to Cash.
Reason:
Cash is not involved in this entry.
Credit to Equipment.
Reason:
The credit is to Accounts Payable.
Credit to Accounts Payable.
Determine which of the following expenses related to a building would be classified as a capital
expenditure. (Check all that apply.)
Air conditioning maintenance

Reason:
A capital expenditure is one that provides benefits beyond the current period. Air conditioning
maintenance is a revenue expenditure.
New air conditioning system
Room addition
Minor drywall repair

Reason:
A capital expenditure is one that provides benefits beyond the current period. A minor drywall
repair is a revenue expenditure.
Carpet cleaning
Reason:
A capital expenditure is one that provides benefits beyond the curre
A plant asset is (depreciated/discarded/obsolete) discarded Blank 1Blank 1 discarded , Correct

Unavailable when it is no longer useful to the company, and it has no market value.
Which of the following expenses would not be considered an ordinary repair?

Replacing an engine
Lubricating
Cleaning
Replacing small parts
Zion Co. paid cash for an upgrade to an existing machine that would reduce the amount of waste
produced by the machine (and therefore, increasing efficiency). The journal entry to record this
upgrade would include which of the following entries? (Check all that apply.)
Credit to Machinery
Debit to Machinery
Debit to Cash
Credit to Repair & Maintenance Expense
Credit to Cash
Debit to Repair & Maintenance Expense
Rino Co. pays $35,000 for equipment. The machine's useful life is estimated at 10 years, or
50,000 units of product with a $5,000 salvage value. During the first year, the machine produced
12,000 units of product. How much depreciation expense will Rino record this first year based
on the units-of-production depreciation method?
$3,500
Reason:
(35,000-5,000)/50,000 x 12,000
$8,400
Reason:
(35,000-5,000)/50,000 x 12,000
$7,200
$3,000
Reason:
(35,000-5,000)/50,000 x 12,000
___________ are expenditures that extend the asset's useful life beyond its original estimate.
Betterments
Reason:
Betterments make the plant asset more efficient or productive.
Revenue expenditures
Extraordinary repairs
Ordinary repairs
Which of the following situations will result in recognizing a gain on sale of a plant asset?
An asset with book value of $2,000 is sold for $2,000.
An asset that cost $5,000 with accumulated depreciation of $3,000 is sold for $1,500.
A fully depreciated asset is discarded.
A fully depreciated asset is sold for $1,000.
An asset with a book value of $2,000 is sold for $1,500.
Diamond Co. paid cash to overhaul a forklift, which extended the life of the forklift for an
additional four years. The entry to record this purchase would include a debit to the _______
account.
Cash
Repairs & Maintenance Expense
Equipment
Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for
$2,000 cash. The entry to record this transaction will recognize a gain or loss of how much?
There is a loss of $8,000.

Reason:
Book value is equal to the selling price so there is no gain or loss. Book value = $10,000 minus
accumulated depreciation of $8,000 = $2,000.
There is a gain of $2,000.

Reason:
There is a gain of $8,000.

Reason:
There is no gain or loss.
There is a loss of $2,000.

Reason:
A company owns an asset that is fully depreciated. The asset is no longer being used in
operations and has no market value. The company has decided to ________ the asset by
recording an entry to remove it from the balance sheet.
take a loss on
depreciate
discard
ATZ Co. sells equipment that cost $9,000 with current accumulated depreciation of $8,000 for
$2,000 cash. To record this transaction, ATZ will credit which accounts? (Check all that apply.)
Gain on Sale of Equipment
Equipment
Loss on Sale of Equipment
Accumulated Depreciation - Equipment

Reason:
Accumulated depreciation will be debited when the asset is sold.
Depreciation Expense
On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated
depreciation of $4,500. The entry to record this disposal would include a debit to which account
and for how much?
Loss on Disposal of Equipment for $1,500
Depreciation Expense - Equipment for $1,500

Reason:
The equipment was disposed of, so no cash was received. Loss on disposal of equipment is
debited for the difference between cost and accumulated depreciation.
Accumulated Depreciation for $6,000

Reason:
The equipment was disposed of, so no cash was received. Accumulated depreciation is debited
for $4,500.
Equipment for $6,000

Reason:
The equipment was disposed of, so no cash was received. The equipment account is credited for
$6,000.
$20,000 loss
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$10,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$20,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$5,000 loss
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$10,000 loss
$15,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) _______
on the balance sheet.
natural resource
plant asset
Reason:
Because the land will be used to drill oil, this is a natural resource.
current asset
Reason:
intangible asset
Reason:
A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated
depreciation. The entry to record this transaction will include which of the following entries?
(Check all that apply.)
Credit to Cash for $500.

Reason:
Since the company is receiving cash, cash will be debited.
Debit to Machinery for $7,000.

Reason:
Machinery is credited for $7,000.
Debit to Accumulated Depreciation - Machinery for $6,500.
Debit to Loss on Sale of Machinery for $500.

Reason:
No gain or loss is recorded because the asset was sold for book value.
Credit to Accumulated Depreciation - Machinery for $6,500.

Reason:
Accumulated Depreciation - Machinery is debited for $6,500.
Credit to Gain on Sale of Machinery for $500.
Reason:
No gain or loss is recorded because the asset was sold for book value.
Debit to Cash for $500.
Credit to Machinery for $7,000.

Correct Answer
Debit to Accumulated Depreciation - Machinery for $6,500.
Debit to Cash for $500.
Credit to Machinery for $7,000.
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Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased
for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold
200,000 tons of coal. Depletion expense for the period will be how much?
$30,000
Reason:
(300,000 - 50,000)/1,000,000 x 200,000 = 50,000.
$50,000
$60,000
Reason:
(300,000 - 50,000)/1,000,000 x 200,000 = 50,000.
Ironworks Co. sells a machine that cost $5,000 with a current book value of $1,500 for $2,000
cash. Ironworks will record a debit to which account and for how much?

Accumulated Depreciation - Equipment for $1,500
Reason:
The Accumulated Depreciation account is $3,500 which is cost of $5,000 minus book value of
$1,500.
Accumulated Depreciation - Equipment for $3,500
The process of allocating the cost of a natural resource to a period when it is consumed requires a debit
entry to the depletion Blank 1Blank 1 depletion , Correct Unavailable expenses Blank 2Blank 2 expenses
, Correct Unavailable account.
A delivery van that cost $45,000 with accumulated depreciation of $15,000 is sold for $20,000.
How much gain or loss will be recognized on this sale?
$10,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$15,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$5,000 loss
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$20,000 loss
Reason:
45,000-15,000 =30,000-20,000 =10,000.
$10,000 loss
$20,000 gain
Reason:
45,000-15,000 =30,000-20,000 =10,000.
Which of the following asset(s) are not considered intangible assets? (Check all that apply.)
Copy machine
Goodwill
Mineral deposit
Copyright
Trademark
Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period.
This entry will be recorded with a credit to:
Accumulated Depreciation - Mineral Deposit
Mineral Deposit
Depletion Expense - Mineral Deposit
Accumulated Depletion - Mineral Deposit
Which of the following assets are amortized? (Check all that apply.)
Building
Reason:
Buildings are depreciated.
Land
Reason:
Only intangible assets are amortized.
Copyright
Coal mine
Reason:
Coal mines are depleted.
Patent
An oil company recognizes the cost of discovering and operating oil wells by recording ______
expense for each unit of oil used.
depreciation
depletion
amortization
operating
Accumulated depletion is a contra asset account, and is therefore reported on the balance Blank 1Blank 1
balance , Correct Unavailable sheet Blank 2Blank 2 sheet , Correct Unavailable.
Bilos Co. purchased a patent on a newly developed technology. They will recognize the cost of
this patent:
over the asset's life using amortization expense

over the asset's life using depreciation expense
immediately, using depletion expense
immediately, using patent expense
To calculate depletion expense in a period, a company should multiply the depletion per unit by:
units extracted and sold in the period
total units of capacity

Reason:
Units extracted and sold in the period
units sold in the period

Reason:
units extracted in the period

Reason:
Accumulated amortization is reported on which of the following financial statements?

Income statement
Balance sheet
_______ are nonphysical assets (used in operations) that confer on their owners long-term rights,
or competitive advantages.
Current assets
Plant assets
Intangible assets
Natural resource
Copyrights, trademarks, and other intangible assets are expensed over their useful lives through
the process of:
impairment
amortization
depreciation
depletion
A patent was purchased for $20,000 and expected to be used for the 20-year life with no salvage
value. The entry to expense the patent during the second year of life will include which of the
following entries? (Check all that apply.)
Debit to Accumulated Amortization $1,000.
Credit to Amortization Expense $1,000.
Debit to Amortization Expense $1,000.
Credit to Accumulated Amortization $1,000.

Which of the following intangible assets is not amortized using straight-line amortization?
Patent
Leasehold
Copyright
Goodwill
The exclusive right to publish or sell a musical, literary, or artistic work during the life of the
creator plus 70 years is called a
copyright
patent
goodwill
lease
If an intangible asset has a limited life, its cost is systematically allocated to expense over its
useful life through the process of:
impairment
depletion
amortization
depreciation
Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this
symbol is an asset called a:
leasehold
patent
trademark
copyright
Amortization expense is recorded on which financial statement?

Balance sheet
Reason:
Amortization expense is an expense which is reported on the Income Statement.
Income statement
____ is measured as the excess of the cost of an acquired entity over the value of the acquired net
assets.
Copyright
Leasehold
Patent
Goodwill
A _______ is an exclusive right granted to its owner to manufacture and sell an item or use a
process for 20 years.
patent
leasehold
copyright
goodwill
Advantages of leasing versus buying an asset include all of the following:

little or no up-front payment
large payments near the end of the lease term
lease terms often allow exchanges to trade up on leased assets
asset purchases often allow exchanges to trade up on assets
The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus
70 years is called a COPYRIGHT Blank 1Blank 1 COPYRIGHT , Correct Unavailable.
In a leasehold improvement, the lessee debits the costs to

Leaseholds
Leasehold Improvements
Lease Liability
Lease Amortization
The total asset turnover ratio is computed by taking net sales divided by:
average current assets
total assets
total current assets
average total assets
The amount by which a company's value exceeds the value of its individual assets and liabilities is
called goodwill
Franco Co. reported net sales of $10,000 in year 2 and $8,000 in year 1. Franco reported total assets of
$18,000 in year 2 and $22,000 in year 1. Total asset turnover for year 2 would equal 0.5 Blank 1Blank 1
0.5 , Correct Unavailable(answer should be a decimal number).
Property rented under a contract is called a lease Blank 1Blank 1 lease , Correct Unavailable.
If an asset exchange has commercial substance, a gain or loss is recorded based on the difference between
the book Blank 1Blank 1 book , Correct Unavailable value of the asset given up and the market value of
the asset received.
A patent was purchased for $20,000 and expected to be used for the 20-year life with no salvage
value. The entry to expense the patent during the second year of life will include which of the
following entries? (Check all that apply.)
Debit to Accumulated Amortization $1,000.
Credit to Accumulated Amortization $1,000.

Credit to Amortization Expense $1,000.
Debit to Amortization Expense $1,000.
Johnson Co. trades in a machine with a book value of $10,000 for a new machine with a list
value of $12,000. In addition to the old machine, Johnson also pays $5,000 cash. The gain or loss
on this exchange (which has commercial substance) would be how much?
$2,000 loss
Reason:
12,000-10,000-5,000=(3,00)0
$3,000 gain
Reason:
12,000-10,000-5,000=(3,00)0
$2,000 gain
Reason:
12,000-10,000-5,000=(3,00)0
$3,000 loss
An improvements to a leased asset is called a leasehold improvement Blank 1Blank 1 improvement ,

Correct Unavailable.
Keva Co. trades in a vehicle with an original cost of $20,000 and accumulated depreciation of
$18,000. The list price of the new vehicle is $25,000. In addition to the old vehicle, Keva also
provides $24,000 cash. Assuming this transaction has commercial substance, the entry to record
this transaction would include debits to which of the following accounts? (Check all that apply.)
Loss on Exchange of Vehicles for $1,000

Reason:
Book value is $20,000-$18,000=$2,000. Asset received = $25,000 - assets given: $2,000 book
value + $24,000 = $26,000. Loss = $25,000-26,000 = $1,000.
Gain on Exchange of Vehicles for $1,000
Cash for $24,000
Accumulated Depreciation - Vehicles for $18,000
Vehicles for $25,000
Total asset turnover is computed as net sales Blank 1Blank 1 sales , Correct Unavailable /average total
assets
New equipment with a market value of $30,000 is received by exchanging an old piece of
equipment with a book value of $10,000 along with cash of $7,000. Gain on Exchange of Assets
is credited for:
$13,000
$10,000
Reason:
$30,000 market value of new machine minus book value of $10,000 minus cash given of $7,000
= $13,000 gain.
$30,000
Reason:
= $13,000 gain.
$23,000
Reason:
$30,000 market value of new machine minu
Total asset turnover is computed by dividing net sales by average Blank 1Blank 1 average , Correct
Unavailable total assets.
A plant asset trade-in with commercial substance implies that it alters the company's:
income statement
past cash flows
future cash flows
current cash flows
Vonetech Co. trades in a plant asset with a book value of $15,000 for a new machine with a
market value of $10,000. In addition to the old machine, Johnson also pays $1,000 cash. The
gain or loss on this exchange which has commercial substance is?
$5,000 loss
Reason:
10,000-15,000-1,000=(6,000)
$5,000 gain
Reason:
10,000-15,000-1,000=(6,000)
$6,000 loss
$10,000 gain
Reason:
10,000-15,000-1,000=(6,000)
New equipment with a market value of $15,000 is purchased by exchanging old equipment with
a book value of $10,000 along with cash of $8,000. The debit to Loss on Exchange of Assets is:
$3,000
$8,000
Reason:
Subtract the book value of the old asset of $10,000 plus the cash given of $8,000 from the market
value of the new asset of $15,000 equals $18,000 minus $15,000 equals $3,000 loss.
$5,000
Reason:
$7,000
Reason:
New equipment with a market value of $30,000 is received by exchanging an old piece of
equipment with a book value of $10,000 along with cash of $7,000. Gain on Exchange of Assets
is credited for:
$23,000
Reason:
= $13,000 gain.
$30,000
Reason:
= $13,000 gain.
$13,000
$10,000
Reason:
= $13,000 gain.

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Equipment being used in operations

Equipment with no value

Land held for investment

Building being used for operations

Fines incurred for failing to get the correct permits

Repairs necessary for damages incurred during installation

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

(cost plus salvage value)/productive life

(cost minus salvage value)/productive life

(cost plus salvage value)/useful life

Net Book Value

Accumulated Depreciation - Equipment

Depreciation Expense - Equipment

Accumulated depreciation is recorded on which of the following financial statements?

Statement of retained earnings

Statement of cash flows

The cost of a plant asset includes the following:

Cost to prepare it for use

Straight-line depreciation is calculated by taking cost minus (salvage/market) salvage

accumulated , Correct Unavailable depreciation

The inability of a company's plant assets to meet its demands is called:

The asset's acquisition costs less its accumulated depreciation is called:

Units-of-production will produce the most depreciation expense.

Declining-balance will produce the most depreciation expense.

Straight-line will produce the most depreciation expense.

Depreciation expense is reported as a decrease in which of the following financial statements?

Statement of cash flows

Statement of retained earnings

Installation of special equipment

Which of the following expenses would not be considered an ordinary repair?

Replacing small parts

Credit Machinery & equipment.

Debit Machinery & equipment.

Credit Repairs expense.

Debit Repairs expense.

Repairs & Maintenance Expense

Unearned Delivery Fees

Depreciation Expense - Equipment

Credit to Repairs Expense.

Debit to Repairs Expense.

Air conditioning maintenance

New air conditioning system

Minor drywall repair

A plant asset is (depreciated/discarded/obsolete) discarded Blank 1Blank 1 discarded , Correct

Which of the following expenses would not be considered an ordinary repair?

Replacing small parts

Credit to Repair & Maintenance Expense

Debit to Repair & Maintenance Expense

An asset with book value of $2,000 is sold for $2,000.

A fully depreciated asset is discarded.

A fully depreciated asset is sold for $1,000.

An asset with a book value of $2,000 is sold for $1,500.

Repairs & Maintenance Expense

Depreciation Expense - Equipment

There is a loss of $8,000.

There is a gain of $2,000.

There is a gain of $8,000.

There is no gain or loss.

There is a loss of $2,000.

Gain on Sale of Equipment

Loss on Sale of Equipment

Accumulated Depreciation - Equipment