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Chapter 10: Long-Lived Tangible and Intangible Assets
Student: ___________________________________________________________________________
1. With the exception of internally developed software costs, U.S. GAAP requires that the firm expense both
research and development expenditures as incurred.
True False
2. Market-to-book-value ratios tend to be large for firms that make substantial expenditures on internally
developed assets, including research and development, advertising, and employee development.
True False
3. U.S. GAAP and IFRS require firms to treat expenditures for maintenance and repairs as expenses of the
period as incurred but treat expenditures for improvements as assets (which firms subsequently depreciate or
amortize).
True False
4. U.S. GAAP requires firms to expense research and development (R&D) costs in the period incurred.
True False
5. Long-lived financial assets include investments in securities.

True False
6. Firms must expense when incurred the transactions cost of acquiring a firm in a business combination under
both U.S. GAAP and IFRS.
True False
7. Opportunity costs are forgone profits, and U.S. GAAP and IFRS recognize this cost as part of an assets
acquisition cost.
True False
8. Firms sometimes acquire assets by exchanging an asset other than cash or by issuing common stock. In these
cases, acquisition cost is either the fair value of the consideration given or the fair value of the asset received,
depending on which value the firms can more reliably measure.
True False
9. The capitalization of interest in the acquisition cost of assets during construction delays expense recognition
from the time periods of borrowing to the time periods of using the asset.
True False
10. The amount of goodwill represents the excess of the total purchase price over the fair value of identifiable
tangible and intangible net assets.
True False
11. The laws governing patent protection are both jurisdiction-specific and subject to change, as is the process
for obtaining approval to market a new drug. As a general rule, the longer the drug approval process, the longer
is the useful life of the patent.
True False
12. Long-lived assets with extremely long useful lives, such as land and works of art, are treated as having an
indefinite life.
True False
13. Depreciation is the accounting term used to refer to the periodic write-off of intangible assets.
True False
14. Depreciation and amortization is a measure of the decline in economic value of a long-lived asset.
True False
15. Although the legal life of a drug patent is 20 years, the expected economic life of the drug is often less than
half of that period.
True False
16. The depreciable or amortizable basis of long-lived assets is the acquisition cost less salvage value.
True False
17. For buildings, common depreciation practice assumes a zero salvage value on the assumption that the costs
a firm will incur in tearing down the building will approximate the sales value of the scrap materials recovered.
True False
18. Expenditures for maintenance or repair of tangible long-lived assets are treated as asset improvements and
subsequently depreciated.
True False
19. The straight-line (use) method is the most common depreciation method for financial reporting.
True False
20. U.S. GAAP and IFRS provide firms considerable flexibility in choosing their depreciation method(s).
True False
21. U.S. GAAP permits firms to increase the balance sheet carrying values of tangible and intangible long-lived
assets when the fair values of their assets increase.
True False
22. IFRS permits upward asset revaluations, the recognition of unrealized increases in the fair value of
long-lived assets under certain conditions.
True False
23. Tangible long-lived assets typically appear under the title Property, Plant, and Equipment, among the
current assets.
True False
24. Gains and losses on disposals of property, plant, and equipment and intangible assets appear on the income
statement, often in “Other income and expense.”
True False
25. U.S. GAAP and IFRS distinguish three categories of long-lived assets for purposes of measuring and
recognizing impairment losses.
True False
26. Both U.S. GAAP and IFRS distinguish the same three categories of long-lived assets for impairment
analysis, and have the same procedures for assessing an asset for impairment and measuring the impairment
loss.
True False
27. U.S. GAAP requires firms to recognize an impairment loss on a nonamortized intangible other than
goodwill whenever the carrying value of the asset exceeds its fair value.
True False
28. Accounting for the impairment of long-lived assets is complex because U.S. GAAP and IFRS requirements
differ for various assets.
True False
29. Firms with tangible long-term assets and predictable cash flows, such as electric utilities, tend to have
balance sheets with a
A. high proportion of long-term debt (80% or more).
B. low proportion of long-term debt (20% or less).
C. high proportion of shareholders’ equity (80% or more).
D. high proportion of cash (80% or more).
E. high proportion of retained earnings (80% or more).
30. Firms with tangible long-term assets and less predictable cash flows, such as auto manufacturers and steel
companies, whose sales vary with changes in economic conditions, tend to use
A. a more nearly equal mix of long-term debt and shareholders’ equity financing.
B. a greater amount of long-term debt [80%] than shareholders’ equity financing [20%].
C. a smaller amount of long-term debt [20%] than shareholders’ equity financing [80%].
D. a greater amount of long-term debt [80%] than assets [20%].
E. a greater amount of shareholders’ equity [80%] than assets [20%].
31. During Year 3, Carrington Company made the following expenditures relating to plant machinery and
equipment:
· Continuing, frequent, and low cost repairs $46,000

· Special long-term protection devices were attached to ten machines 11,000
· A broken gear on a machine was replaced 5,000
How much should be charged to repairs and maintenance in Year 3?

A. $46,000
B. $51,000
C. $57,000
D. $41,000
E. none of the above
32. Which of the following is/are not capitalized as an intangible asset?

A. costs of an internally developed patent
B. legal costs to defend a patent successfully
C. goodwill acquired when a company purchases another company
D. costs to purchase a patent
33. Repairs and maintenance do not include

A. the costs of restoring an asset's service potential after breakdowns.
B. expenditures that increase the asset's life.
C. routine costs such as for cleaning and adjusting.
D. major tune-ups including labor and parts.
E. All of the above are not considered to be repairs or maintenance.
34. Flagler Corporation replaces a roof damaged in a hurricane. The new roof is purposefully designed to be
stronger than the old one so that it will support the air conditioning equipment the firm plans to install. Which
of the following is/are true?
A. Part of the expenditure represents repair and part represents improvement.
B. The expenditure represents repair, only.
C. The expenditure represents improvement, only.
D. The expenditure represents asset, only.
E. The expenditure represents expense, only.
35. Firms often incur costs to maintain, repair, and improve their tangible assets. U.S. GAAP and IFRS require
firms to treat expenditures for _____ as _____ as incurred but _____ treat as _____.
A. maintenance and repairs; expenses of the period; expenditures for improvements; assets
B. maintenance and repairs; assets; expenditures for improvements; expenses of the period
C. maintenance and repairs; expenses of the period; expenditures for improvements; liabilities
D. maintenance and repairs; liabilities; expenditures for improvements; expenses of the period
E. maintenance and repairs; assets; expenditures for improvements; liabilities
36. Which of the following is/are not true regarding maintenance?

A. Maintenance includes routine costs such as for cleaning and adjusting.
B. Maintenance includes the costs of restoring an asset’s service potential after breakdowns or other damage.
C. Maintenance does not extend the estimated service life or increase its productive capacity of an asset beyond
original expectations.
D. U.S. GAAP and IFRS treat maintenance expenditures as expenses of the period when the firm makes the
expenditure.
E. Distinguishing repairs from maintenance is difficult but typically not necessary because expenditures for
both are period expenses.
37. Which of the following is/are not true regarding repairs?

A. Repairs include routine costs such as for cleaning and adjusting.
B. Repairs include the costs of restoring an asset’s service potential after breakdowns or other damage.
C. Repairs do not extend the estimated service life or increase its productive capacity of an asset beyond
original expectations.
D. U.S. GAAP and IFRS treat repair expenditures as expenses of the period when the firm makes the
expenditure.
E. Distinguishing repairs from maintenance is difficult but typically not necessary because expenditures for
both are period expenses.
38. Which of the following is not true regarding expenditures for improvements?
A. Improvements are sometimes called betterments.
B. Improvements may increase an asset’s performance by increasing the service life.
C. Improvements may increase an asset’s performance by reducing the operating costs.
D. Improvements may increase an asset’s performance by increasing the rate of output.
E. When the firm makes the expenditure for improvements, it recognizes the cost of the improvement by
debiting the Improvement Expense account.
39. Which of the following is/are not true regarding expenditures for improvements?
A. Improvements are sometimes called betterments.
B. Improvements may increase an asset’s performance by increasing the service life.
C. Improvements may increase an asset’s performance by reducing the operating costs.
D. Improvements may increase an asset’s performance by increasing the rate of output.
40. Sigma Company suffers a loss to its building in a fire and spends $100,000 on repairs and improvements. It
judges that $80,000 of the expenditure replaces long-lived assets lost in the fire, and $20,000 represents
improvements to the building. Which of the following is the single journal entry that Sigma Company will
make?
A. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
B. Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
D. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
E. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
41. Tangible long-lived assets include

A. land.
B. buildings.
C. equipment.
D. factories.
E. all of the above
42. Tangible long-lived assets include all of the following except

A. land.
B. buildings.
C. equipment.
D. factories.
E. franchise rights.
43. Intangible long-lived assets include:

A. patents.
B. brand names.
C. trademarks.
D. customer lists.
E. all of the above
44. Firms treat expenditures as assets when they:
A. have acquired rights to the future use of a resource as a result of a past transaction or event.
B. can reliably measure the cost of the expected benefits at the time of initial recognition.
C. can exercise the entity’s right to, or control of, the benefit.
D. can obtain the future service potential and control others’ access to it.
E. all of the above
45. An expenditure qualifies as a(n) _____ if it has the following characteristics:

1. It embodies a probable future benefit.
2. A particular entity can obtain the benefit and control others’ access to it.
3. The transaction or other event giving rise to the entity’s right to, or control of, the benefit has already
occurred.
4. The fair value of the item at the time of initial recognition can be measured with sufficient reliability.
A. asset
B. liability
C. shareholders’ equity
D. revenue
E. expense
46. An expenditure qualifies as an asset if it has which of the following characteristics?

A. It embodies a probable future benefit.
B. A particular entity can obtain the benefit and control others’ access to it.
C. The transaction or other event giving rise to the entity’s right to, or control of, the benefit has already
occurred.
D. The fair value of the item at the time of initial recognition can be measured with sufficient reliability.
E. all of the above
47. For many technology and pharmaceutical firms:

A. a large portion of their value to an acquirer might relate to in-process research and development (IPR&D).
B. in-process research and development (IPR&D) acquired in a business combination that meets the separability
criterion as an asset is recognized and measured initially at fair value.
C. The firm that developed the in-process research and development (IPR&D) expensed the costs as they were
incurred.
D. all of the above
48. How are tangible long-lived assets’ acquisition cost and accumulated depreciation disclosed?
A. Tangible long-lived assets typically appear under the title Property, Plant, and Equipment.
B. Information is displayed on the balance sheet.
C. Tangible long-lived assets typically appear under noncurrent assets.
D. Acquisition cost and accumulated depreciation are omitted from the balance sheet but are detailed in the
notes.
E. all of the above
49. Why is analysis of intangible assets more challenging than the analysis of tangible long-lived assets?
A. Except for software development costs under U.S. GAAP and development costs under IFRS, firms
generally do not recognize internally developed intangibles as assets on the balance sheet.
B. U.S. GAAP and IFRS require firms to measure the fair values of identifiable intangibles acquired in a
business combination and assess whether they have finite lives or indefinite lives.
C. Differences between U.S. GAAP and IFRS in the treatment of development costs mean that comparisons of
firms that apply U.S. GAAP with firms that apply IFRS require consideration of and adjustment for those
differences.
D. all of the above
50. Clarion Realty
Clarion Realty has decided to construct its own office building. The construction will be partially financed
through a construction loan and any remainder will be financed from internally generated funds. The internal
accountants have collected the following information concerning the construction.
Average Balance Construction Other

Year Construction Account Debt @ 6% Debt @ 10%
1 $2,000,000 $1,000,000 $500,000
2 $4,000,000 $1,000,000 $250,000
3 $3,000,000 $800,000 $200,000
The amount, if any, of capitalized interest cost for Year 1 is

A. $0
B. $50,000
C. $60,000
D. $110,000
E. $170,000
51. Clarion Realty
Clarion Realty has decided to construct its own office building. The construction will be partially financed
through a construction loan and any remainder will be financed from internally generated funds. The internal
accountants have collected the following information concerning the construction.

1 $2,000,000 $1,000,000 $500,000
2 $4,000,000 $1,000,000 $250,000
3 $3,000,000 $800,000 $200,000
The amount, if any, of capitalized interest cost for Year 2 is

A. $0
B. $50,000
C. $60,000
D. $180,000
E. $230,000
52. Focus Company decided to construct its own manufacturing building. Focus Company should capitalize
which of the following interest costs?
A. Building interest costs incurred prior to construction while occupying another building.
B. Building interest costs incurred during construction.
C. Building interest costs incurred after construction.
D. All interest costs incurred.
E. No interest costs incurred.
53. The Perma Company spent $300,000 on research and development during Year 8 to generate new product
lines. One of the three projects looks like it will ultimately be technologically feasible while the other two
projects resulted in unsuccessful efforts. For the project which may become technologically feasible, a total of
$125,000 was incurred during Year 8. Under U. S. GAAP, how much of the $300,000 should be recognized as
an expense in Year 8?
A. $300,000
B. $225,000
C. $175,000
D. $50,000
E. $0
54. Firms that incur research and development costs to develop a patented product:
A. must expense the costs as incurred.
B. must capitalize the costs and only reduce such costs if the patent becomes impaired.
C. must capitalize the costs and then amortize the costs over the expected economic life of the patent.
D. have a choice either to expense the costs as incurred or capitalize the costs and amortize the costs over the
legal life of the patent.
E. have a choice either to expense the costs as incurred or capitalize the costs and amortize the costs over the
expected economic life of the patent.
55. In a corporate acquisition the:

A. purchase price measures the fair value of the acquired enterprise.
B. goodwill reflects the fair value of assets that cannot be separately identify.
C. goodwill is an asset because it is part of the fair value of the acquired firm.
D. all of the above
56. Firms generally treat expenditures to develop intangibles internally as

A. expenses when incurred.
B. expenses over the useful life.
C. assets.
D. liabilities.
E. goodwill.
57. Firms treat expenditures to develop intangibles internally as assets under U.S. GAAP when _____ the
point of technological feasibility; and under IFRS when _____ the point of technological feasibility.
A. software development costs are incurred after; development costs are incurred generally after
B. software development costs are incurred after; development costs are incurred generally before
C. software development costs are incurred before; development costs are incurred generally before
D. software development costs are incurred before; development costs are incurred generally after
E. none of the above.
58. Firms recognize expenditures to acquire intangibles externally from third parties as _____ if the intangibles
are either separable or arise from contractual or other legal rights.
A. assets
B. liabilities
C. retained earnings
D. revenue
E. expenses
59. Springfield Company purchases new factory equipment. Per the terms of the contract, Springfield must pay
the freight charges, will receive a manufacturer’s discount off the invoice price on the equipment, and will have
some setup expenses to pay. As a result, the acquisition cost of equipment recorded on Springfield’s books will
be the sum of the invoice price
A. less any discounts, plus transportation costs, installation charges, and any other costs incurred before the
equipment is ready for use.
B. less any discounts and transportation costs, plus installation charges and any other costs incurred after the
C. plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for
use.
D. less transportation costs, installation charges, and any other costs incurred after the equipment is ready for
use.
E. less any discounts and installation charges, plus transportation charges and any other costs incurred after the
60. Firms sometimes acquire assets by exchanging an asset other than cash or by issuing common stock. In
these cases, acquisition cost is
A. the fair value of the asset received, only.
B. the fair value of the consideration given, only.
C. either the fair value of the consideration given or the fair value of the asset received, depending on which
amount is lower.
D. either the fair value of the consideration given or the fair value of the asset received, depending on which the
firms can more reliably measure.
E. either the fair value of the consideration given or the fair value of the asset received, depending on which
amount is higher.
61. When a firm constructs its own buildings or equipment:

A. it recognizes the labor, material, and overhead costs incurred as an asset.
B. U.S. GAAP and IFRS require firms to include, or capitalize, interest costs during construction in the cost of a
self-constructed asset.
C. it recognizes the labor, material, and overhead costs incurred as a period expense.
D. U.S. GAAP and IFRS require firms to expense interest costs incurred during construction of a
self-constructed asset.
E. both choices a and b are correct.
62. The capitalization of interest in the acquisition cost of assets during construction
A. reduces otherwise reportable interest expense.
B. increases net income during periods of construction.
C. results in higher depreciation charges, reducing net income.
D. delays expense recognition from the times of borrowing to the times of using the asset.
E. all of the above
63. Assume the following long-term debt structure for Parton Stores:
Construction Loan at 5% on Building Under Construction . . . . . . . ..$2,000,000

Other Borrowings at 6% Average Rate . . . . . . . . . . . . . . . . . . . . . . . . .7,200,000
Total Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,200,000
The account Building Under Construction has an average balance during the year of $6,000,000. Parton Stores
bases the amount of interest capitalized on the new construction-related borrowing, $2,000,000, and enough of
the other borrowing to bring the total to $6,000,000.
How much does Parton Stores capitalize interest on the new construction?
A. $240,000
B. $300,000
C. $320,000
D. $340,000
E. $360,000
64. The _____ of a long-lived asset is the cost of a series of future services.
A. present value of future cash flows
B. acquisition cost
C. current fair market value
D. liquidation value
E. current cost
65. Which of the following is/are intangible assets with a finite useful life?
A. Customer List and User Base
B. Trade Names and Trademarks
C. Developed Technologies
D. Network Access Agreements
E. all of the above
66. Which of the following is not true regarding long-lived assets with a finite life?
A. The firm consumes the asset’s services over time in generating revenues.
B. The balance sheet carrying value decreases over time as the firm recognizes the cost of the asset as an
expense.
C. A portion of the acquisition cost is recognized as an expense each period.
D. Management must estimate the asset’s finite life.
E. Remains on the balance sheet at net realizable value (unless an asset impairment occurs).
67. Which of the following is/are true regarding long-lived assets with a finite life?
A. The firm consumes the asset’s services over time in generating revenues.
B. The balance sheet carrying value decreases over time as the firm recognizes the cost of the asset as an
expense.
C. A portion of the acquisition cost is recognized as an expense each period.
D. Management must estimate the asset’s finite life.
E. all of the above
68. The cost of long-lived assets with an indefinite life

A. is not recognized as an expense each period.
B. remains on the balance sheet at acquisition cost (unless an asset impairment occurs).
C. is recognized as an expense each period.
D. presents a balance sheet carrying value that decreases over time as the firm recognizes the cost of the asset as
an expense.
E. includes both choices a and b.
69. Long-lived assets with an indefinite life include:

A. trade names.
B. trademarks.
C. certain renewable licenses.
D. goodwill arising from a business combination.
E. all of the above.
70. Depreciation is the accounting term used to refer to

A. the periodic write-off of the acquisition cost of a tangible long-lived asset with a finite service life.
B. the periodic write-off of the current fair market value of a tangible long-lived asset with a finite service life.
C. the periodic write-off of the acquisition cost of an intangible long-lived asset with a finite service life.
D. the periodic write-off of the current fair market value of a intangible long-lived asset with a finite service
life.
E. the periodic write-off of intangible assets.
71. Which of the following is/are true about goodwill?

A. Goodwill reflects the value of knowledgeable employees.
B. Goodwill reflects the value of a reputation for quality products.
C. Under both U.S. GAAP and IFRS, goodwill has an indefinite life, and firms do not amortize the amount
recognized as goodwill.
D. Firms must test goodwill annually for a loss in value.
E. all of the above
72. Which of the following is not true about goodwill?
C. Under U.S. GAAP, goodwill has an indefinite life, and firms do not amortize the amount recognized as
goodwill.
E. Under IFRS, goodwill has an indefinite life, and firms amortize the amount recognized as goodwill.
73. Which of the following is not true about goodwill?

C. Under IFRS, goodwill has an indefinite life, and firms do not amortize the amount recognized as goodwill.
E. Under U.S. GAAP, goodwill has an indefinite life, and firms amortize the amount recognized as goodwill.
74. Which of the following is/are true about holding gains on assets?
A. U.S. GAAP recognizes the holding gain on the assets for the increase in values.
B. IFRS permits recognition of the holding gains under certain circumstances.
C. IFRS precludes recognition of the holding gain on assets for the increase in values.
D. Under U.S. GAAP, if in a given period, an asset increases in value, the firm does not record depreciation and
amortization during that period.
E. Under IFRS, if in a given period, an asset increases in value, the firm does not record depreciation and
75. Which of the following is/are true about holding gains on assets?
A. U.S. GAAP recognizes the holding gain on the assets for the increase in values.
B. IFRS permits recognition of the holding gains under certain circumstances.
C. Under IFRS, if in a given period, an asset increases in value, the firm does not record depreciation and
D. Under U.S. GAAP, if in a given period, an asset increases in value, the firm does not record depreciation and
E. all of the above
76. Which of the following is/are true regarding the fair value of long-lived assets?
A. U.S. GAAP does not permit firms to increase the balance sheet carrying values of tangible and intangible
long-lived assets when the fair values of their assets increase.
B. IFRS permits upward asset revaluations, the recognition of unrealized increases in the fair value of tangible
and intangible long-lived assets under certain conditions.
C. IFRS requires that firms credit the increase in the tangible and intangible revalued asset’s balance sheet
carrying value to other comprehensive income.
D. U.S. GAAP firms recognize the increase in the fair value of the tangible and intangible asset only as the firm
realizes the value increase through either sale or continuing use.
E. all of the above
77. Which of the following is/are not true regarding the fair value of long-lived assets?
A. U.S. GAAP does not permit firms to increase the balance sheet carrying values of tangible and intangible
long-lived assets when the fair values of their assets increase.
B. IFRS permits upward asset revaluations, the recognition of unrealized increases in the fair value of tangible
and intangible long-lived assets under certain conditions.
C. IFRS requires that firms credit the increase in the tangible and intangible revalued asset’s balance sheet
carrying value to net income.
D. U.S. GAAP firms recognize the increase in the fair value of the tangible and intangible asset only as the firm
realizes the value increase through either sale or continuing use.
E. all of the above
78. Which of the following is/are true regarding measuring changes in the fair values of long-lived assets?
A. U.S. GAAP requires firms to recognize decreases in fair values as an impairment loss, and to recognize
unrealized increases in fair values.
B. IFRS requires firms to recognize decreases in fair values as an impairment loss, and to never recognize
unrealized increases in fair value.
C. U.S. GAAP requires firms to not recognize decreases in fair values, but to recognize unrealized increases in
fair value.
D. IFRS requires firms to not recognize decreases in fair values, but to recognize unrealized increases in fair
value.
E. U.S. GAAP and IFRS requires firms to recognize decreases in fair values as an impairment loss, and differ as
to the recognition of unrealized increases in fair values.
79. Goodwill that was internally developed should be amortized over a life not to exceed
A. 100 years
B. 40 years
C. 20 years
D. 10 years
E. No useful life, as such goodwill is not recorded as an asset
80. (CMA adapted, Dec 86 #12) A patent is granted by the federal government to an inventor for a period of
several years. Costs that are capitalized with regard to a patent would include
A. legal fees of obtaining the patent, incidental costs of obtaining the patent, and costs of successful patent
infringement suits.
B. legal fees of obtaining the patent, incidental costs of obtaining the patent, and research and development
costs incurred on the invention that is patented.
C. legal fees of obtaining the patent, costs of successful patent infringement suits, and research and
development costs incurred on the invention that is patented.
D. legal fees of obtaining the patent, costs of successful and unsuccessful patent infringement suits, and
research and development costs incurred on the invention that is patented.
E. legal fees of obtaining the patent, costs of successful and unsuccessful patent infringement suits, and
development costs incurred on the invention that is patented.
81. The Llama Company spent $300,000 on research and development during Year 8 to generate new product
lines. One of the three projects resulted in a successful patented product while the other two projects resulted in
unsuccessful efforts. How much of the $300,000 should be recognized as an expense in Year 8?
A. $300,000
B. $200,000
C. $150,000
D. $100,000
E. $0
82. Montana Company reports its net assets at a book value of $150,000. Recent investigation revealed that the
net assets had a market value of $175,000. In addition, Montana had been offered $220,000 for the net assets by
a company named Supply.Com. What is the amount of goodwill that should be recorded by Montana Co.?
A. $0
B. $45,000
C. $25,000
D. $70,000
E. $220,000
recognizing impairment losses. The first category addresses long-lived assets except intangible assets not
subject to amortization and goodwill. This category does not include:
A. property, plant, and equipment.
B. patents.
C. franchise rights.
D. land.
E. brand names and trademarks.
84. Firms with high proportions of intangibles, whether recognized as assets on the balance sheet or not, tend to
rely more on
A. equity financing than on long-term debt financing.
B. long-term debt financing than on equity financing.
C. short-term debt financing than on long-term debt financing.
D. long-term debt financing than on short-term debt financing.
E. None of these answer choices is correct.
85. Intangible assets make up 40 percent of the total assets of a particular firm. This firm is most likely to be:
A. a pharmaceutical firm that invests in internal research and development to create new drugs.
B. a consumer products company that invests in advertising to create brand recognition.
C. an information processing company that develops computer software to use in its business.
D. a restaurant business that has grown by acquiring other restaurant chains.
E. All of these answer choices are correct.
recognizing impairment losses. The second category addresses intangibles, other than goodwill, not subject to
amortization. This category does not include:
A. brand names.
B. trademarks.
D. renewable licenses.
87. In accounting, depreciation and amortization involve a systematic process of

A. cost allocation.
B. valuation.
C. recognizing holding gains.
D. sum-of-the-years’-digits.
E. declining balances.
88. Depreciation and amortization expenses appear in the income statement, and are sometimes
A. disclosed separately.
B. included in selling and administrative expenses.
C. included as part of cost of goods sold expense.
D. all of the above
89. The financial statements and notes provide information for analyzing changes in property, plant, and
equipment. What ratio(s) is/are used by analysts?
A. Fixed Asset Turnover
B. Proportion of Depreciable Assets
C. Average Age of Depreciable Assets
D. all of the above
90. First Third Company depreciates an asset with a cost of $55,000 over 10 years using the straight-line
method of depreciation and the yearly depreciation expense is $4,000, what is the estimated salvage value of the
asset?
A. $5,000
B. $10,000
C. $15,000
D. $20,000
E. $20,375
91. Which method of depreciation will result in the greatest depreciation charge in the last year of the asset's
life?
A. 125% declining balance
B. straight-line
C. 150% declining balance
D. sum-of-the-years' digits
E. double declining balance
92. Clayton Drug Company purchases a patent from its creator. Which of the following is/are true?
A. A patent has a legal life of up to 40 years.
B. Management’s expectations of technological change may lead to a higher economic life than the legal life.
C. Clayton should amortize the acquisition cost of the patent over its expected useful life, equal to the shorter of
the economic life and the legal life.
D. Clayton should amortize the acquisition cost of the patent over its legal life.
E. Clayton should amortize the acquisition cost of the patent over its economic life.
93. When calculating the depreciation or amortization of long-lived assets management must
A. measure the depreciable or amortizable basis of the asset.
B. estimate its service (useful) life.
C. decide the pattern of expiration of asset cost over its service life.
D. all of the above
94. The terms salvage value and residual value refer to the estimated proceeds on the disposition of an
A. asset, only.
B. asset less all removal costs, only.
C. asset less all removal and selling costs.
D. asset plus all removal and selling costs, only.
E. estimated proceeds on the disposition of an asset plus all selling costs, only.
95. Which of the following is/are not true?

A. For buildings, common practice assumes a zero salvage value on the assumption that the costs a firm will
incur in tearing down the building will approximate the sales value of the scrap materials recovered.
B. Tangible assets, with the exception of buildings, may have substantial salvage value.
C. Intangible assets related to a contractual right, such as landing rights at an airport or franchise rights to sell a
franchiser’s products, generally expire at a specific time and therefore have zero residual value.
D. Identifiable intangibles acquired in a business combination that are separable, such as customer lists or brand
names, may have significant salvage values.
96. Some assets, such as a nuclear power plant, are not readily salable at the end of their useful lives, and
retiring them may impose substantial costs. Which of the following is/are true?
A. Firms must estimate the fair value of the dismantling costs and include that amount in the initial
measurement of the asset.
B. Firms recognize a liability, referred to as an asset retirement obligation at the estimated fair value of the
dismantling costs.
C. Firms compute depreciation based on the combined cost of the plant assets, including the fair value of the
dismantling obligations.
D. all of the above
97. Some assets, such as a space shuttle, are not readily salable at the end of their useful lives, and retiring them
may impose substantial costs. Which of the following is true?
A. Firms recognize a liability, referred to as an asset retirement obligation at the present value of the estimated
dismantling costs.
B. Firms recognize a liability, referred to as an asset retirement obligation at the estimated fair value of the
dismantling costs.
C. Firms recognize a liability, referred to as an asset retirement obligation at the estimated future value of the
dismantling costs.
D. Firms recognize a liability, referred to as an asset retirement obligation at the estimated liquidation value of
the dismantling costs.
E. Firms do not recognize a liability because such costs are uncertain in nature and the firms can always file for
bankruptcy to avoid the dismantling costs.
98. In calculating depreciation and amortization for tangible assets, physical factors that limit service lives
include all of the following except:
A. ordinary wear and tear from use.
B. chemical action such as rust.
C. the effects of wind and rain.
D. changes in production processes.
99. In calculating depreciation and amortization for tangible assets, functional factors that limit service lives
include:
A. ordinary wear and tear from use.
B. chemical action such as rust.
C. the effects of wind and rain.
D. obsolescence.
100. The term _____ value refer to the estimated proceeds on the disposition of an asset less all removal and
selling costs.
A. salvage
B. present
C. future
D. end game
E. current
101. Estimating _____ presents the most difficult task in the depreciation and amortization calculation. A
change in this estimate will change the depreciation and amortization amounts going forward.
A. disposal costs
B. salvage value
C. acquisition costs
D. service lives
E. ordinary wear and tear from use
102. The _____ method divides the acquisition cost of an asset (including the cost to dismantle and retire) less
its estimated salvage value by the estimated service life to calculate depreciation or amortization.
A. straight-line
B. sum-of-the-years’-digits
C. double declining balance method
D. accelerated depreciation
E. decelerated depreciation
103. Marley Corporation has a machine which costs $10,000, has an estimated salvage value of $400, and has
an expected service life of five years. The straight-line (time) method annual depreciation is
A. $960.
B. $1,400.
C. $1,500.
D. $1,920.
E. $2,000.
104. Alpha Corporation acquired a patent for $60,000 which has an expected service life of five years and zero
salvage value. The annual amortization is
A. $5,000.
B. $6,000.
C. $12,000.
D. $24,000.
E. $30,000.
105. The method of depreciation for assets whose utilization is not uniform over time is the _____ method.
A. Accelerated
B. Decelerated
C. Straight-Line (Time)
D. Straight-Line (Use)
E. Sum-of-the-years’-digits
106. Dickinson Company owns a delivery truck that costs $108,000, has an estimated salvage value of $8,000,
and will provide 200,000 miles of use before retirement. If the truck operates 24,000 miles in a given year, the
straight-line (use) depreciation charge is
A. $6,000
B. $12,000
C. $12,960
D. $24,000
E. $0
107. Eaton Company has some assets that provide more and better services in the early years of their lives and
require increasing amounts of maintenance as they grow older. The _____ method(s), which recognize larger
depreciation charges in early years and smaller depreciation charges in later years, can be justified.
A. declining-balance
B. accelerated depreciation
C. sum-of-the-years’-digits
D. all of the above
108. If permitted a choice of depreciation methods for tax reporting, a firm should try to maximize the amount
of the
A. reductions in tax payments from claiming depreciation.
B. present value of the reductions in tax payments from claiming depreciation.
C. future value of the reductions in tax payments from claiming depreciation.
D. present value of the increase in tax payments from claiming depreciation.
E. amount of the increase in tax payments from claiming depreciation.
109. Depreciation and amortization affect both net income reported in the financial statements and taxable
income on tax returns. Which of the following is /are true?
A. Taxing authorities in most jurisdictions specify allowable depreciation methods for tax reporting.
B. When permitted to do so by the taxing authority, firms often use different depreciation methods for financial
and tax reporting.
C. The difference between depreciation expense in the financial statements and the depreciation deduction on
the tax return leads to an issue in accounting for income taxes.
D. all of the above
110. When taxing authorities permit a choice among alternative depreciation methods, a firm should choose the
alternative that allows it to pay the _____ amount of tax, as _____ as possible, within the law.
A. most; early
B. most; late
C. least; early
D. least; late
E. same; often
111. U.S. GAAP authoritative guidance requires that financial statements report depreciation charges based on
_____ estimates; in practice, the _____ method is the most common.
A. aggressive; straight-line (time)
B. reasonable; straight-line (time)
C. aggressive; straight-line (use)
D. reasonable; straight-line (use)
E. reasonable; accelerated
112. Recording periodic depreciation and amortization results in a

A. debit to an expense account, only
B. debit to a product cost account, only.
C. debit to either an expense account or a product cost account.
D. credit to either an expense account or a product cost account.
E. credit to an expense account, only.
113. Depreciation of factory buildings and equipment used in manufacturing operations become(s)
A. part of the cost of work-in-process inventories.
B. part of the cost of finished goods inventories.
C. product costs.
D. all of the above.
114. The amortization of a customer list are

A. product costs.
B. period costs.
C. not required under U.S. GAAP.
D. not required under IFRS.
E. pay back costs.
115. The recording of amortization of intangibles generally results in a

A. credit directly to the asset account that is being amortized.
B. debit directly to the asset account that is being amortized.
C. credit a contra-asset account called Accumulated Amortization.
D. debit a contra-asset account called Accumulated Amortization.
116. The entry to record periodic depreciation of $4,500 on office facilities is as follows:
A. Depreciation (or Administrative) Expense . . . . . . . . . . . . . . . . 4,500
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
B. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Depreciation (or Administrative) Expense . . . . . . . . . . . . . . . . . . . . . . 4,500
C. Depreciation (or Administrative) Expense . . . . . . . . . . . . . . . . 4,500
Office Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
D. Office Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Depreciation (or Administrative) Expense . . . . . . . . . . . . . . . . . . . . . . 4,500
117. The entry to record patent amortization of $4,500 embedded in a product is as follows:
A. Work-in-Process Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
B. Finished Goods Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
C. Work-in-Process Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Allowance for Amortization of Patent . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
D. Finished Goods Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Allowance for Amortization of Patent . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
118. The entry to record amortization of a customer list in the amount of $4,500 is as follows:
A. Amortization (or Selling) Expense . . . . . . . . . . . . . . . . . . . . . . . 4,500
Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
B. Finished Goods Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
C. Work-in-Process Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
D. Amortization (or Selling) Expense . . . . . . . . . . . . . . . . . . . . . . . 4,500
Allowance for Amortization of Customer List . . . . . . . . . . . . . . .. . . . . 4,500
E. Work-in-Process Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Allowance for Amortization of Customer List . . . . . . . . . . . . . . .. . . . . 4,500
119. The Work-in-Process Inventory account is _____. Product costs accumulate in the Work-in-Process
Inventory account until the firm completes the goods and transfers them to _____.
A. an asset; Finished Goods Inventory
B. a liability; Finished Goods Inventory
C. an asset; Cost of Goods Sold
D. a liability; Cost of Goods Sold
E. produced capital; Cost of Goods Sold
120. The original depreciation or amortization schedule for long-lived assets sometimes requires changing.
Which of the following is/are not true?
A. Each period a firm must evaluate its estimates of service life and assess if these estimates require changing in
light of new information.
B. Each period a firm must evaluate its estimates of salvage value and assess if these estimates require changing
in light of new information.
C. The firm makes no adjustment for the inaccurate estimates but spreads the remaining carrying value less the
new estimate of salvage value over the new estimate of the remaining service life of the asset.
D. If changing from the old estimates to the new estimates would have a material impact, the firm must change
the depreciation or amortization schedule retroactively.
121. A firm purchased an office machine for $18,400, estimated that it will use the machine for 15 years, and
estimated a salvage value of $400. On December 31 of the sixth year, before closing the books for the year, the
firm analyzed its estimates of useful life and salvage value. In light of new information, the firm estimated that
the machine will have a total useful life of only 10 years, and the salvage estimate of $400 remains reasonable.
The new estimate of the remaining life is five years (the year just ended plus the next four). The depreciation
entry on December 31 of the sixth year and each year thereafter is:
A. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,200
B. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,400
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,200
Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,400
Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
122. A firm purchased an office machine for $4,600, estimated that it will use the machine for 15 years, and
estimated a salvage value of $100. On December 31 of the sixth year, before closing the books for the year, the
firm analyzed its estimates of useful life and salvage value. In light of new information, the firm estimated that
the machine will have a total useful life of only 10 years, and the salvage estimate of $100 remains reasonable.
The new estimate of the remaining life is five years (the year just ended plus the next four). The depreciation
entry on December 31 of the sixth year and each year thereafter is:
A. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300
B. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .600
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .300
Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .600
Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
123. In Year 1, a firm purchased a truck for $12,000. The estimated salvage value was $2,000 and the estimated
useful life was 10 years. In Year 4, it was determined that the salvage value would only be $1,000 and that the
truck would have a total estimated useful life of 7 years rather than 10. Assuming the straight-line method is
used, what is the depreciation expense for Year 4 of the truck?
A. $1,000
B. $1,750
C. $1,950
D. $2,000
E. $2,250
124. Assume a firm has acquired an asset for $100,000 on January 1, Year 1. The asset has a 6-year life and a
salvage value of $10,000. The firm calculates the depreciation expense using the straight-line
depreciation. What was the depreciation for Year 4?
A. $10,000
B. $15,000
C. $20,000
D. $25,000
E. $30,000
125. Regarding a firm that abandons an asset,

A. there is usually no market for the asset.
B. the book value of an abandoned asset is eliminated from the balance sheet.
C. the firm recognizes a loss in an amount equal to the book value of the abandoned asset in the period that the
asset is abandoned.
D. all of the above
126. Chen Company
Chen Company office equipment costs $10,000, has an expected life of four years and a salvage value of $400.
The firm has depreciated this asset on a straight-line basis. The firm has recorded depreciation for two years and
then sells the equipment at midyear in the third year.
What is the entry to record depreciation charges up to the date of sale for Chen Company?
A. Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
B. Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
E. Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
127. Chen Company
If the Chen Company sells the equipment for $4,000 cash, the entry to record the sale would be as follows:
A. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10,000
B. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10,000
C. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Accumulated Depreciation .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
D. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Accumulated Depreciation .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
E. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
128. Chen Company
A. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Gain on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
B. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Gain on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
D. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Gain on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
E. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600
129. Chen Company
A. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
B. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Salvage Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
D. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
E. Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
130. Under U.S. GAAP and IFRS, the firm measures the assets and liabilities of a discontinued operation at the
lower of their _____ It reports any gain or loss that results in the Discontinued Operations section of the
income statement. The Discontinued Operations section also includes income or loss from operating the unit for
that year. Financial statements for prior years included for comparative purposes classify those amounts also as
a discontinued operation.
A. carrying values or their fair values.
B. net realizable values or their fair values.
C. carrying values or the present value of future cash flows.
D. net realizable values or the present value of future cash flows.
E. liquidation values or the present value of future cash flows.
131. IFRS uses the idea of a disposal group, a group of assets and directly associated liabilities that a firm will
dispose of as a group in a single transaction. The disposal group notion of IFRS envisions a larger unit than the
component notion of U.S. GAAP. In the year that a firm decides to sell or otherwise dispose of a unit that
qualifies as a discontinued operation, it aggregates the assets and liabilities of that unit on the balance sheet into
four groups. Which of the following is not one of the groups?
A. current assets
B. noncurrent assets
C. current liabilities
D. noncurrent liabilities
E. contingent liabilities
132. IFRS uses the idea of a disposal group, a group of assets and directly associated liabilities that a firm will
dispose of as a group in a single transaction. The disposal group notion of IFRS envisions a larger unit than the
component notion of U.S. GAAP. In the year that a firm decides to sell or otherwise dispose of a unit that
qualifies as a(n) _____ it aggregates the assets and liabilities of that unit on the balance sheet into four groups:
current assets, noncurrent assets, current liabilities, and noncurrent liabilities.
A. continuing operation
B. discontinued operation
C. extraordinary gain or loss
D. impaired operation
E. paid-in-capital
133. Under U.S. GAAP, sometimes a firm sells or otherwise disposes of a major division or segment of its
business during the year or contemplates its sale or disposal within a foreseeable time after the end of the
accounting period. If so, it must disclose separately any income, gains, and losses related to that division or
segment. The separate disclosure appears in the
A. income from continuing operations.
B. income, gains, and losses from discontinued operations.
C. extraordinary gains and losses.
D. retained earnings.
E. paid-in-capital.
134. Firms almost always report asset impairment charges or restructuring charges in _____.
A. income from continuing operations
B. income, gains, and losses from discontinued operations
C. extraordinary gains and losses
D. retained earnings
E. paid-in-capital
135. Which of the following is true regarding asset abandonment?
A. Firms will sometimes abandon assets if there is no market for the asset.
B. The firm eliminates the carrying value of the asset and recognizes a loss in an amount equal to the carrying
value.
C. Firms will sometimes abandon assets if an automobile is severely damaged in an accident.
D. Firms will sometimes abandon assets if a machine requires an overhaul that is not cost effective.
E. all of the above
136. A firm may retire an asset from service by trading it in on a new asset. U.S. GAAP and IFRS require that
firms record trade-in transactions at _____ unless they lack commercial substance.
A. present value of future cash flows
B. replacement value
C. liquidation value
D. fair value
E. undiscounted cash flows
137. A firm may retire an asset from service by trading it in on a new asset. U.S. GAAP and IFRS require that
firms record a trade-in that lacks commercial substance at
A. present value of future cash flows.
B. replacement value.
C. liquidation value.
D. the carrying value of the exchanged asset.
E. undiscounted cash flows.
138. Warrior Dash Express Inc. owns a moving van that originally cost $500,000 and currently has $450,000 of
accumulated depreciation. The fair value of the moving van is $120,000. Warrior Dash Express Inc. exchanges
the van plus $480,000 in cash for a new moving van costing $600,000. The entry to record the transaction is as
follows:
A. Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . . . . .450,000
Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000
B. Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
C. Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
D. Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000
Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . . . . . . . . . . . . . . . . . 450,000
E. Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,000

Cash . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . . . . . . . . . . . 450,000
139. (CMA adapted, Jun 90 #27) When a fixed plant asset with a five-year estimated useful life is sold during
the second year, how would the use of a double declining balance method of depreciation instead of the
straight-line method affect the gain or loss on the sale of the fixed plant asset?
Gain Loss
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. cannot be determined by the information provided.
140. A firm acquires a car for company business. The car costs $12,000, has a useful life of 5 years, and a
salvage value of $2,000. The straight-line method of depreciation is used. What is the gain or loss on retirement
if the car is sold for $5,000 after three years of use?
A. a gain of $200
B. a loss of $1,000
C. a gain of $1,000
D. a loss of $200
E. a loss of $800
recognizing impairment losses. The second category addresses intangibles, other than goodwill, not subject to
amortization. This category does not include:
A. brand names.
B. trademarks.
D. renewable licenses.
142. Under U.S. GAAP and IFRS reporting standards, management assesses the firm’s assets for impairment at
each reporting date by determining if impairment indicators are present. Impairment indicators include
A. the decline in the market value of an asset significantly beyond what would be expected because of use or
the passage of time.
B. significant adverse changes in the entity’s technological environment.
C. significant adverse changes in the entity’s economic environment.
D. significant adverse changes in the entity’s legal environment.
E. all of the above
143. Under U.S. GAAP and IFRS reporting standards, management assesses the firm’s assets for impairment at
each reporting date by determining if impairment indicators are present. Impairment indicators do not include
A. the decline in the market value of an asset significantly beyond what would be expected because of use or
the passage of time.
B. significant adverse changes in the entity’s technological environment.
C. significant adverse changes in the entity’s economic environment.
D. significant adverse changes in the entity’s legal environment.
E. significant adverse changes in the entity’s Chief Executive Officer’s health.
144. U.S. GAAP provisions require a three-step procedure for measuring and recording impairments for
long-lived assets other than nonamortized intangibles and goodwill. An asset impairment loss arises when the
carrying values of the assets
A. exceed the sum of the discounted cash flows.
B. exceed the sum of the undiscounted cash flows.
C. exceed the replacement cost.
D. exceed the fair market value less cost to sell.
E. exceed the fair market value.
145. Applying IFRS, the test for an impairment loss for long-lived assets other than nonamortized intangibles
and goodwill compares the balance sheet carrying value with the asset’s
A. recoverable amount.
B. sum of the undiscounted cash flows.
C. sum of the discounted cash flows.
D. expected future value.
E. fair market value.
146. Macon Company
Macon Company owns an apartment building that originally cost $40 million and by the end of the current
period has accumulated depreciation of $10 million, with net carrying value of $30 million. Macon Company
had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for
$16 million. Unanticipated placement of a new shopping center has caused Macon Company to reassess the
future rentals. Macon Company expects the building to provide rentals for only 15 more years before Macon
will sell it. Macon Company uses a discount rate of 8% per year in discounting expected rentals from the
building.
Macon now expects to receive annual rentals of $2.7 million per year for 15 years and to sell the building for
$10.0 million after 15 years; these payments, in total, have a present value of $26.2 million when discounted at
8% per year. The building’s fair value is $25 million today. Costs to sell are estimated at $1,000,000.
Using the Macon Company data, under U.S. GAAP:

A. no impairment loss has occurred.
B. an impairment loss has occurred in the amount of $3.8 million.
C. an impairment loss has occurred in the amount of $6 million.
D. an impairment gain has occurred in the amount of $6 million.
E. an impairment gain has occurred in the amount of $3.8 million.
147. Macon Company
Macon Company owns an apartment building that originally cost $40 million and by the end of the current
period has accumulated depreciation of $10 million, with net carrying value of $30 million. Macon Company
$16 million. Unanticipated placement of a new shopping center has caused Macon Company to reassess the
future rentals. Macon Company expects the building to provide rentals for only 15 more years before Macon
will sell it. Macon Company uses a discount rate of 8% per year in discounting expected rentals from the
building.
Macon now expects to receive annual rentals of $2.7 million per year for 15 years and to sell the building for
8% per year. The building’s fair value is $25 million today. Costs to sell are estimated at $1,000,000.
Using the Macon Company data, the application of IFRS indicates:

A. no impairment loss has occurred.
B. an impairment loss has occurred in the amount of $3.8 million.
C. an impairment loss has occurred in the amount of $6 million.
D. an impairment gain has occurred in the amount of $6 million.
E. an impairment gain has occurred in the amount of $3.8 million.
148. Wheaton Company
Wheaton Company owns an apartment building that originally cost $40 million and by the end of the current
period has accumulated depreciation of $10 million, with net carrying value of $30 million. Wheaton Company
$16 million. Unanticipated placement of a new shopping center has caused Wheaton Company to reassess the
future rentals. Wheaton Company expects the building to provide rentals for only 15 more years before
Wheaton will sell it. Wheaton Company uses a discount rate of 8% per year in discounting expected rentals
from the building.
Wheaton now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for
8% per year. The building’s fair value is $11.0 million today and costs to sell are $600,000.
Under U.S. GAAP, Wheaton recognizes

A. no impairment loss.
B. an impairment loss of $17.8 million.
C. an impairment loss of $19.0 million.
D. an impairment loss of $18.7 million.
E. an impairment loss of $30.0 million.
from the building.
Under U.S. GAAP, Wheaton would record the following entry

A. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . .10,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
B. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 11,000,000
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
E. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
from the building.
Under IFRS, Wheaton recognizes

A. no impairment loss.
B. an impairment loss of $17.8 million.
C. an impairment loss of $19.0 million.
D. an impairment loss of $18.7 million.
E. an impairment loss of $30.0 million.
from the building.
Applying IFRS, Wheaton would record the following entry

A. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000,000
B. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
E. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
152. U.S. GAAP requires firms to recognize an impairment loss on a nonamortized intangible other than
goodwill whenever the carrying value of the asset exceeds its
A. undiscounted cash flows less cost to sell.
B. replacement cost less cost to sell.
C. undiscounted cash flows.
D. present value of future cash flows.
E. fair value.
153. Loren Company’s balance sheet shows a trade name acquired as part of a business combination with a
carrying value of $30 million. The trade name has an indefinite life and therefore Loren does not amortize it.
Negative publicity regarding the product carrying the trade name has reduced its fair value to $24 million and
its value in use to $22 million. The entry is as follows:
A. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 8,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 8,000,000
B. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 6,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 6,000,000
C. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 4,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 4,000,000
D. Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 6,000,000
Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000,000
E. Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 8,000,000
Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000
154. Evers Company’s balance sheet shows a trade name acquired as part of a business combination with a
carrying value of $60 million. The trade name has an indefinite life and therefore Evers does not amortize it.
Negative publicity regarding the product carrying the trade name has reduced its fair value to $48 million and
its value in use to $44 million. The entry is as follows:
A. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000,000
B. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .12,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000
C. Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000
Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 8,000,000
D. Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 12,000,000
Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000
E. Trade Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 16,000,000
Loss on Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,000,000
155. U.S. GAAP or IFRS require firms to test

A. annually for impairment losses on goodwill.
B. whenever there is an indication of impairment due to changes in the legal or economic climate.
C. whenever there is an indication of impairment due to adverse regulatory conditions.
D. whenever there is an indication of impairment due to loss of key personnel.
E. all of the above
156. An impairment loss on all assets except intangibles that do not require amortization arises when
A. the book value of the assets exceed the undiscounted cash flows.
B. the book value of the assets exceed the market value.
C. the market value of the assets exceed the undiscounted cash flows.
D. the book value of the assets exceed the discounted cash flows.
E. the book value of the assets exceed the liquidation value.
157. An impairment loss on all intangibles that do not require amortization, except goodwill, arises when
A. the book value of the assets exceed the undiscounted cash flows.
B. the book value of the assets exceed the market value.
C. the market value of the assets exceed the undiscounted cash flows.
D. the book value of the assets exceed the discounted cash flows.
E. the book value of the assets exceed the liquidation value.
158. An impairment loss on a trademark arises when

A. the book value of the trademark exceeds the undiscounted cash flows.
B. the book value of the trademark exceeds the market value.
C. the market value of the trademark exceeds the undiscounted cash flows.
D. the book value of the trademark exceeds the discounted cash flows.
E. the book value of the trademark exceeds the net realizable value.
159. An impairment loss on a brand name arises when

A. the book value of the brand name exceeds the undiscounted cash flows.
B. the book value of the brand name exceeds the market value.
C. the market value of the brand name exceeds the undiscounted cash flows.
D. the book value of the brand name exceeds the discounted cash flows.
E. the book value of the brand name exceeds the liquidation value.
160. The economic value of a tangible asset may decline below its book value but an impairment loss would not
be recognized when the
A. undiscounted future cash flows exceed its book value.
B. undiscounted future cash flows exceed its market value.
C. discounted future cash flows exceed its book value.
D. discounted future cash flows exceed its market value.
E. discounted future cash flows exceed its liquidation value.
161. The economic value of a building may decline below its book value but an impairment loss would not be
recognized when the
A. undiscounted future cash flows exceed its book value.
B. undiscounted future cash flows exceed its market value.
C. discounted future cash flows exceed its book value.
D. discounted future cash flows exceed its market value.
E. discounted future cash flows exceed its liquidation value.
162. U.S. GAAP
A. does not allow firms to amortize goodwill in measuring net income each period.
B. requires that an annual test for impairment in the value of goodwill be performed each period.
C. requires the write-down of goodwill and recognition of an impairment loss if an impairment in the value of
goodwill exists.
D. all of the above
163. The Allen Company has decided to construct its own warehouse facility. The construction will be partially
financed through a construction loan and the remainder will be financed from internally generated funds. The
company’s accountants have collected the following information concerning the construction.

1 $1,000,000 $1,000,000 $1,500,000
2 $2,000,000 $1,700,000 $1,700,000
3 $2,500,000 $2,000,000 $1,300,000
Required:
Determine the amount, if any, of capitalized interest cost for each year.
a. Year 1
b. Year 2
c. Year 3
164. Nebraska Steakhouse opened a new restaurant on the site of an existing building. It paid the owner
$520,000 for the land and building, of which it attributes $104,000 to the land and $416,000 to the building.
Nebraska incurred legal costs of $25,200 to conduct a title search and prepare the necessary legal documents for
the purchase. It then paid $71,800 to renovate the building to make it suitable for Nebraska’s use. Property and
liability insurance on the land and building for the first year was $24,000, of which $8,000 applied to the period
during renovation and $16,000 applied to the period after opening. Property taxes on the land and building for
the first year totaled $30,000, of which $10,000 applied to the period during renovation and $20,000 applied to
the period after opening. Calculate the amounts that Nebraska Steakhouse should include in the Land account
and in the Building account.
165. An engineering firm has decided to construct its own office building. The construction will be partially
financed through a construction loan and any remainder will be financed from internally generated funds. The
internal accountants have collected the following information concerning the construction.

1 $1,000,000 $1,000,000 $500,000
2 $1,500,000 $1,000,000 $250,000
3 $2,000,000 $ 800,000 $200,000
Required:
Determine the amount, if any, of capitalized interest cost for each year.
a. Year 1
b. Year 2
c. Year 3
166. The Barker Company purchased equipment in Year 1 at a cost of $26,000. The equipment was estimated to
last for 8 years and have a salvage value of $2,000. In Year 5, it was determined that the life of the equipment
was really 12 years, and the salvage value was expected to remain unchanged. What amount of depreciation
was recorded for the equipment for years 1 through 12? The firm uses the straight-line method of depreciation.
167. Genesis acquires a machine for $177,600. It expects the machine to last six years and to operate for 30,000
hours during that time. Estimated salvage value is $9,600 at the end of the machine’s useful life. Calculate the
depreciation charge for each of the first three years using each of the following methods:
a. The straight-line (time) method.
b. The straight-line (use) method, with the following operating times: first year, 4,500 hours; second year,
5,000 hours; third year, 5,500 hours.
168. On January 1, Year 1, Young Company purchased a machine for $6,000. It had an estimated salvage value
of $1,200 and a life of six years. The straight-line method of depreciation was used. At midyear in Year 4,
Young sold the machine for $4,500 cash.
Required:
a. What is the book value of the machine at the time of the sale?
b. Give the journal entry to record the sale of the machine.
169. Describe several issues in the accounting for long-lived assets.
170. Discuss the treatment of expenditures as assets versus immediate expenses.
171. When a firm constructs its own buildings or equipment, what costs are capitalized?
172. How is the acquisition cost treated over the life of tangible and intangible assets?
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Charlie. Nonthenth! The’ll never know who told. You might ath
well make five dollarth.
Polly. But Mr. Van Tromp might tell.
Reg. (with extreme dignity). Mr. Van Tromp is too much of a
gentleman to either bwibe or tell tales.
Charlie. But he’ll lithen all the thame!
Polly (fearfully). She’s going to wear a white silk one with cardinal
ribbons, and a black lace veil.
[Receives note and exits l.
Charlie (triumphantly). Ah! Now I have her.

Reg. Deucid sowy to spoil your little dweam, but I fahncy I shall
speak to her myself this evening.
Charlie (gleefully). All right. The knowth you are after her money.
Stuart (coming down). Ah! Damon and Pythias together as usual.
It really gives one faith in friendship to see how you two fellows run
together.
Charlie. Mither Thuart, did you ever hear anything more
nonthenthical than for Van Tromp to thuppothe that Mith Wortley
ith going to thave him from the poorhouth?
Reg. (with dignity). Mr. Stuart will tell you that a born gentleman
can do much that is impossible to the canaille.
Charlie (angrily). What do you mean by that, thir?
Reg. Pway dwaw your own conclusions.
Stuart (sitting on desk). And so you two bloods intend to question
the oracle? I hadn’t credited you with the courage.
Charlie. It dothn’t need much when one knowth what the anther
will be.
Reg. (confidently). I’m not afwaid for my part, but even “no”
wouldn’t make me commit suicide.
Charlie. Thath prethuth fortunate for you, but hard on the reth of
uth.
Stuart (quizzically). Oh, it’s easy enough to propose to a girl when
she isn’t present. You fellows forget that Miss Wortley is a masked
battery this evening. It takes pluck to face one of them, and I don’t
believe you’ll either of you dare do it.
Charlie. I’d like to bet a monkey I will.
Stuart. Done! And do the same with you, Van Tromp.
Charlie. He hathn’t the money.
Reg. (glancing scornfully at Charlie). You’ll oblige me gweatly by
minding your own affairs. Done, Mr. Stuart.
Enter Fred b. d.
Stuart. Ah, Fred, you’ve just missed a rare bit of sport.
Fred. What was that?
Stuart. Why, we’ve just wagered—
Reg. (dignified). I beg pawdon, Mr. Stuart, but I had always
supposed a wager was a confidential mattah.
[Walks with dignity up r. and

exits b. d.
Charlie. For onth in hith life, Van Tromp ith right.
[Bows grandly and goes up l.

Exits b. d.
Stuart (laughing). I thought that would get rid of them. Well, have
you shown Miss Wortley that you can still be occasionally jolly?
Fred (gloomily). I haven’t had the chance. She must be in her
room, for I’ve looked everywhere else for her. Not that it’s much loss.
I know I should not have been in the mood to please her.
Stuart. That’s because you don’t try hard enough.
Fred (bitterly). Hear the bachelor talk of making love!
Stuart. You think me ignorant?
Fred. Rather,—judging from the results.
Stuart (resting hand on Fred’s shoulder). Fred, I’m not the kind of
a man who lets the world know what he’s thinking about. With all
due respect to a young fellow who is not far distant, it doesn’t pay to
show one’s feelings too much. But I’m going to tell you my bit of
romance as an object-lesson. Two months ago I met the most
charming woman in the world, and could no more help falling in love
—
Fred (looking up in surprise). What! The ideal bachelor in love?
Stuart. I don’t see why two and forty should be debarred from that
universal sensation, any more than four and twenty.
Fred. Oh, of course not,—only, to make an Irish bull, we had all
grown to think you as wedded to celibacy.
Stuart. There are divorces and desertions in celibacy as well as in
matrimony. Well, I love this woman; I don’t think she loves me,—
though you never can tell with a clever one, and sometimes I think
she is beginning to like me, because she—because she tries to make
me believe she is worse than she is. She delights in making me think
she’s a devil, which shows that she is a bit afraid of me. I’ve never
said a word of my love to her, but she knows it as well as I do. But
nobody else dreams of it. I don’t make my attentions so obvious that
every one sees them, and so cause her embarrassment whenever I
even come into the room. I don’t cut up rough if she talks or dances
with other fellows. I simply try to be pleasant and useful enough to
make her prefer my society to that of any other man.
Fred (sighing). Well, of course you are right, but—tell me what you
think I ought to do.
Stuart (walking to desk and holding bell). What do you suppose
would happen if I rang this?
[Rings.
Fred. That doesn’t answer my question.
Stuart. I want to see if the bell won’t save me the trouble.
Enter Polly, l. d.
Polly. Did you ring, sir?
Stuart. Yes, I want to find out if you told the truth about Miss
Wortley’s domino?
Polly (embarrassed). Well, sir, Miss Wortley has two dominos,
and I don’t know which she intends to wear first.
Stuart. What is the other domino like?
Polly. It’s blue with silver lace.
Stuart. What will you charge me to wear the white and cardinal
one this evening, leaving Miss Wortley only the blue and silver one?
Polly (eagerly). Oh, Mr. Stuart, that’s just what I’ve wanted to do,
but haven’t dared! Please don’t tempt me.
Stuart. Fudge! If you’ll do as I’ll tell you, you shall have a year’s
wages to-morrow.
Polly. Gracious!!
Stuart. Is it a bargain?
Polly (eagerly). Yes, sir. What am I to do?
Stuart. H’m. Can you write a good hand?
Polly. Ask Mr. Stevens?
Stuart (reproachfully). Oh, Fred!!
Fred. I don’t know what she means.
Polly. I wrote that note to-day thanking you for the flowers: I write
nearly all Miss Wortley’s notes.
Fred. Bosh!
[During letter-writing he
surreptitiously dives
into inside pocket and
produces glove,
handkerchief, faded
flowers, and letters tied
with ribbon. Examines
letters, and then crosses
to mantel, tears them
up, and throws them
into fire.
Stuart. Good! It couldn’t be better. They’ll think it’s Miss Wortley’s

hand-writing. Sit down at that desk and write as I dictate.
Polly. Yes, sir.
[Sits at desk—business of
letter-writing.
Stuart. “My own: Driven to the verge of desperation by the
parasites who cluster about my wealth, I long for nothing but a
refuge. This you can give me, and if you cherish one emotion of
tenderness for me, you will be in the little morning room at twelve.
A.” Address that to Newbank. Now take another sheet. “Reginald: If
you have one spark of affection for me, keep me no longer in
suspense! I shall be in the little morning room over the supper-room
at ten minutes after twelve. Fly then to your loving but unhappy A.”
Address that to Van Tromp. Now, Polly, you must deliver those notes
in person, get into Miss Wortley’s domino, and be here at that time.
Newbank will propose to you, and you must accept him and get rid of
him. Then you must do the same to Van Tromp. Understand?
Polly. Yes, Mr. Stuart.
[Rises with two notes in hand.
Stuart. And you mustn’t let them find out their mistake till to-
morrow.
[Exits Polly b. d.
Fred. Do you think that’s honourable?

Stuart. It’s too soon after dinner for me to discuss ethics. But for
you it’s the chance of a lifetime. You know what Miss Wortley is to
wear. Go and make yourself agreeable to her, and if her mask gives
you courage, tell her that you love her.
Fred. You don’t understand. I’m not afraid to tell her that to her
face. It’s not the woman I’m afraid of. If she were poor, I could have
said to her as I say to myself, fifty times a day, “I love you.” But I
can’t say that to her money.
Stuart. And so you are going to place your Brunhilde on the top of
her gold and then fear to climb the fiery mountain? Why, Fred, tell
her that you love her, and leave it for her to decide whether it’s the
woman or the wealth you care for.
Fred. I can’t bear to give her the chance even to think I’m sordid.
Stuart. Nonsense, my boy! Go and tell Miss Wortley that you love
her before it’s too late. Make her the prettiest compliment a man can
pay a woman, and if she has the bad taste to think it’s her money and
not her beauty and sweetness, you are no worse off.
Fred. Mr. Stuart, I’ve tried to say it and to write it. I’ve begun
sentence after sentence; I’ve torn up letter after letter. It’s no good.
Stuart (wearily). I don’t see anything to be done, except to get
your proposal made by proxy. (Stops short in walk.) By Jove, that’s
an idea.
Fred. What?
Stuart (triumphantly). I have it. I’ll get into a domino, pass myself
off for you, and propose.
[Goes up back.
Fred (angrily). You’ll do nothing of the kind!
Stuart. Why not?
Fred. Mr. Stuart, your proposition is simply insulting. A moment
since you said that a declaration of love was the greatest compliment
a man could pay a woman, and now you would turn it into a joke or
trick. Do you think I will allow the woman I love to be so treated?
Stuart (soothingly). All right. We’ll say no more about it.
[At b.d.
Fred. Then give me your word you won’t.
Stuart. That’s another matter.
Fred. Then I shall at once find Miss Wortley and—
Stuart (interrupting). Tell her all about it. That’s right. You will
have told her that you love her.
[Exits b. d.
Fred (following). Not at all! I shall simply keep near her, and if
you make the attempt I shall interfere.
[Exits b. d.
[Agnes rises from

concealment, peeks out
and comes down c. with
Mrs. V. T.’s domino
and mask on her arm.
Agnes. At last! I began to think I should have to spend the night
there,—though I did nearly burst in on them two or three times. And
that’s the way men discuss women! (Scornfully.) So, Mr. Van Tromp,
I’m to save you from the poorhouse! And “no” wouldn’t make you
commit suicide! And you’re not afraid of what my answer will be, Mr.
Newbank! Oh!!! (Laughs.) I should like to hear their proposals to
Polly. I’ve always thought that girl a treasure, but she gets her
dismissal to-morrow. The idea of wearing my domino, and telling all
those men what I was to wear! And telling Mr. Stevens that she wrote
my letters for me! (Anxiously.) What must he think of me! And the
only one of them too who seemed to think I deserve the commonest
courtesy. “I could say to Miss Wortley, as I say to myself fifty times a
day, I love you.” (Demurely.) That was nice! I wonder if he— I
wonder if Mr. Stuart will propose to me? I never thought he would
behave so badly. (Pacing across stage meditatively.) How can I turn
the tables and punish them all? Let me see—(checking off on fingers)
—the two puppies will be punished by the loss of their bets and—me!
Polly will lose her position. Now—
Enter Mrs. V. T. l. d.
Mrs. V. T. Oh, Agnes, I can’t find my domino anywhere, and—
Why, you have it!
Agnes (as if seized with an inspiration). Frances, you must let me
change dominos and masks with you.
Mrs. V. T. What for?
Agnes. Mr. Stuart has bribed Polly to tell about our dominos,—and
he’s going to propose to my blue one.
Mrs. V. T. (incredulously). What,—to you?
Agnes (embarrassed). Oh! That is— Well—he’s— You see it’s—he’s
only asking for some one else.
Mrs. V. T. Oh, I see! Some one who hasn’t dared?
Agnes. Yes. Mr. Newbank is so—
Mrs. V. T. Of course. He is shy.
Agnes. Very. (Hurriedly.) And so I thought we could change
dominos, and—and—don’t you see?
Mrs. V. T. (reflectively). But then— Wouldn’t— Oh! Why, of course
I will. Here, let me help you on with it; and now run along
downstairs. The dancing is in full swing.
Agnes (going up). I’ll go at once. (Turns in b. d.) You will find my
domino in my dressing-room.
[Exits l. d.
Mrs. V. T. (reflectively). And so Mr. Stuart is going to propose to a
blue domino—that’s me—on behalf of Mr. Stevens? (Laughs.)
There’s a nice game of cross purposes. Ah, sir, you’ll have to be
cleverer than that to— What a chance to beat him! Let me see.
Stuart appears at b. d.
Stuart. Not masked yet?
Mrs. V. T. Ah! Mr. Stuart, I am ready to name our game of forfeits.
Stuart (coming down). Bravo!
Mrs. V. T. You want to win my cousin for Mr. Stevens. Succeed,
and you shall name whatever forfeit you choose. Fail, and I set what
penalty I please.
Stuart. Agreed.
Mrs. V. T. But I warn you: I shall stoop to anything rather than be
beaten. If a man is honourable he will be at a great disadvantage.
Like Faust, I have made a pact with the devil.
Stuart. Better take a partner with whom I am on less friendly
relations.
Mrs. V. T. He is not on so good terms with you as with me. Don’t
you know that women are extremes? That they are either a great deal
better or worse than men?
Stuart. I have always heard that women said spiteful things of
their sex, but I don’t think it’s nice of you to make such speeches
about the one I care for. One would almost think you were jealous of
her.
Mrs. V. T. (throwing glove on floor). There is my challenge to the
combat.
Stuart (picking it up). I accept the gage.
Mrs. V. T. (holding out hand). But not to keep it.
Stuart. I will only return the glove without the g.
Mrs. V. T. And without that letter, I prefer to get a new pair.
[Going up.
Stuart (following). Then it is real war?
Mrs. V. T. War, fierce and merciless.
[Exit Mrs. V. T. and Stuart, b. d.
Polly peeks in l. d., then enters with white domino and mask on
arm.
Polly. I didn’t dare to put this on (putting on domino and mask) in
Miss Wortley’s room for fear she might come in. What will she say
when she only finds one? My! I shall have to keep out of her way this
evening, or she will want to know who is wearing it. (Looking down
at domino.) Oh, I wish I dared go to Miss Wortley’s dressing-room
and look at myself in the glass! (Walks off, looking behind her.) I
will. (Goes up to l. d. and starts to exit.) Oh, Jiminy!
[Turns and rushes out b. d.
Enter Agnes l. d. in domino, and with mask in her hand.

Agnes (coming down). I changed my mind about going
downstairs, for I had rather miss all the dancing in the world than
puppydom’s love-making to the back-stairs. I could almost forgive
Polly when I think of what I have in store. (Crosses r. and looks
through curtains at bay window.) From my hiding-place, I’ll hear
every word of it. (Goes to mantel and looks at clock.) Quarter to
twelve—I’m early!
Stuart appears at b. d. and looks in.
Agnes. Ah!
[Hurriedly masks herself.
Stuart (aside). That’s the quickest change I ever saw. I only just
left her at the door of her room! (Comes down.) Are you practising
lightning transformations?
Agnes. Comment ça va-t-il, Monsieur?
Stuart (regretfully). I’m sorry, but I don’t understand French.
(Aside.) Whopper number one.
Agnes. Wie gehts?
Stuart. Nor German. (Aside.) Number two.
Agnes. Buenas noches, señor?
Stuart (wearily). And on Spanish I’m an entire failure. (Aside.)
The recording angel didn’t catch me that time!
Agnes. Will you kindly tell me what you do speak?
Stuart (gallantly and bowing). In your society only the universal
language.
Agnes. And I don’t understand Volapük.
Stuart. Volapük! That’s not the one of which I speak.
Agnes. And of what, then?
Stuart. To the language which without instruction is known
around the world; to the language that’s spoken by all classes, and is
never out of fashion; to the language that has no dictionary; yet
which possesses the most beautiful vocabulary in the universe.
Agnes. I don’t remember any such in my text-book on philology.
Stuart. It is too real to be taught in schools. Nor were you old
enough to understand it had it been. I speak of the language of love.
Agnes. Of course; I suppose it is a universal tongue. (Satirically.)
But so few can speak it well. Don’t you think it ought to be left to the
poets?
Stuart. I love the future of the human race too much to wish that.
Think of the frightful increase of bad rhymers it would cause,—and
that too with the markets already overstocked.
Agnes. But would that be any worse than to see the average
unromantic breadwinner make love? It’s very hard on our sex to
appear sympathetic. Most men do it about as successfully as a
hippopotamus would waltz.
Stuart. Aren’t you a little unfair, Mrs. Van Tromp?
Agnes. And so you think I am Mrs. Van Tromp?
Stuart. I don’t think it; I know it. Do you think for a moment you
could deceive me? But that doesn’t answer my question.
Agnes. As to the justice of my criticism on the way men propose?
(With affected coyness.) Perhaps I have had too little experience to
speak with knowledge.
Stuart. Mrs. Van Tromp would not dare to say that unmasked. Her
face would give her tongue the lie.
Agnes. I fancy you are the first man who ever turned calling one a
liar into a compliment.
Stuart. Since that is possible, may not a poetic proposal be also?
Agnes. Perhaps. And when I hear one that does not make me want
to laugh, I’ll make public recantation.
Stuart. It’s a bold man or a fool who’d venture after what you have
said. And yet I should like to try.
Agnes (laughing). Why, Mr. Stuart, what would you do if I were to
take you seriously and say yes?
Stuart (with mock resignation). Bear it—like a man. But I am
quite safe from that danger! I trust you won’t mind if in the passion
of the moment I call you Frances.
Agnes. This once I’ll condone the liberty.
Stuart (coming very close to Agnes). And if I should so far forget
myself as to try and—well, behave as lovers generally do?
Agnes (retreating). Oh, Mrs. Van Tromp is quite safe from that.
[Slips past Stuart and crosses

to l.
Stuart (aside). Don’t be too sure of that.

Agnes. Well, begin.
Stuart (crossing to chair c.). Now that’s no way to give a lover an
opening. I want this to have verisimilitude. In real life you don’t as
good as say to the man (sits very much on the edge of chair c.) sitting
on the edge of his chair, ‘Please begin.’ Do let’s make it realistic.
Agnes (laughing). Even to the mitten? Very well. (Imitating
society manner.) I didn’t see you at Mrs. Grainger’s rosecotillion
Tuesday, Mr. Stuart.
Charlie (without). Ah! My angel, we meet.
Agnes (seizing Stuart’s hand). Quick! Come!
[Drags him over to bay

window, where she
conceals both with
curtain.
Enter Polly, in mask and domino, and Charlie b. d.
Charlie. My own! What can I do to thow my gratitude?
Polly. If you but knew how I have trembled at my unmaidenly
imprudence in writing you!
Charlie. My angel, love knowth no prudenth; no boundth can limit
it.
Polly. And you don’t scorn and despise me?
Charlie. Thcorn? Dethpithe? Never.
Polly. And you don’t think me unmaidenly?
Charlie. It ith impothible. You are nothing but what ith perfect and
beautiful.
Polly (sighing). Ah!
Charlie (sighing). Ah! (Reaches out and takes her hand.) Mith
Wortley, did you mean what you thaid in your letter?
Polly (languishing). Can you doubt it?
Charlie. And you really love your Cholly?
Polly (tenderly). Oh, Cholly!
Charlie (kneeling). And you really want to marry your Cholly?
Polly (faintly). Oh, Cholly!
Reginald appears b. d. and enters.
Reg. Miss Wortley, I have hurwied to your side. And none too
soon, it appears.
Charlie (jumping to his feet and speaking very angrily). You
thpethimen of the horroth of heredity, you get out of here!
Polly (sotto voce to Charlie). Oh, please don’t make a disturbance!
Remember whose house it is! Leave us and I’ll get rid of him and
follow.
Charlie. My angel, I can refuth you nothing. (Goes up stage and
speaks to Reg.) Thir, you owe your thafety to that lady.
[Exit b. d.
Reg. (coming down). Miss Wortley, I am deucid sowy that epitome
of bad form has been borwing you.
Polly. Oh, I don’t mind that. I was only afraid he was going to
misbehave.
Reg. Aw, the cad’s always doing that, don’tcher know.
Polly. Oh, Mr. Van Tromp, what must you think of me!
Reg. Think of you? The woman Reginald De Lancey Van Tromp
loves is above thought. In but one way can the loveliest of her sex
offend me.
Polly (eagerly). Ah! Tell me, so that I may never do it.
Reg. By wefusing the heart and hand he (kneeling) places at her
feet.
Polly. Oh! I am faint with too great happiness. (Leans on Reg.)
Reginald, support— Oh, Jiminy! Some one’s coming.
[Recovers, and rushes up l. to

l. b., exit l. d. followed
by Reg.
Enter Mrs. Van Tromp and Fred, b. d.

Mrs. V. T. (coming down). I told you we should find this room
empty.
[Looks about.
Fred. But that doesn’t tell me why you asked me to bring you here.
Mrs. V. T. Perhaps to cheat you out of your dance with our host’s
pretty daughter.
Fred. I might answer you in kind. But it’s fairer to tell you that
your mask is no disguise.
Mrs. V. T. You know me?
Fred. Yes. You are “our host’s pretty daughter.”
Mrs. V. T. I am but a poor actress if I have played my part so badly.
Fred. Indeed, no. Even now I find it hard to believe, your acting is
so perfect. If I had not known your domino, I should never have
recognised you.
Mrs. V. T. My domino?
Fred. I overheard it mentioned. I was sorry to learn your secret,
but really I couldn’t help it.
Mrs. V. T. It really does not matter. But I am glad you told me.
Most men would have kept mum and let me talk on about “our host’s
pretty daughter,” and then have never let me hear the last of it.
Fred. I’m afraid I’m no better than the rest of my sex, Miss
Wortley. With most women I should have done that.
Mrs. V. T. And why am I an exception?
Fred. I didn’t want to deceive you.
Mrs. V. T. Why not?
Fred. Because I wanted you to think well of me.
Mrs. V. T. Why, I do that already. If you only knew how I respected
and admired the men who have been real friends, and not seekers of
my money!
Fred. Miss Wortley, I thank you for your kind thoughts of me, but
you mustn’t think them any longer.
Mrs. V. T. Why not?
Fred. Because I don’t deserve them. Do you remember our first
meeting?
Mrs. V. T. (aside). Gracious! I hope I’m not to be cross-examined.
(Aloud, hesitatingly.) It was on a yacht, wasn’t it?
Fred. After that cruise I came back to my desk and bachelor
quarters, but neither they nor I have been the same since. It’s always
seemed to me as if a bit of heaven had come into my life in those
days. Every hour since has been consecrated to an ideal. I have
worked as I was never able to work before. And why? Because I was
straining every fibre to win money and position enough to be able to
come to you and say: “Miss Wortley, I love you as a man must love
one so sweet and beautiful. I’m not rich, but if you can care for me
enough to make a few sacrifices I will try and keep you from
regretting them, by love and tenderness.”
Mrs. V. T. But, Mr. Stevens, you seem to forget that the man I
marry will be made rich at once. (Aside.) Ugh, I feel like a brute.
Fred. I’ve tried to forget it, but I couldn’t. It has come between us
in the past; is it to do so in the future?
Mrs. V. T. Mr. Stevens, I can’t tell you my grief in finding you like
the rest of my disinterested masculine friends.
Fred (hotly). You think I care for your money?
Mrs. V. T. What else can I think? (Aside.) You cat!
Agnes (starting to pull aside curtain, sotto voce to Stuart). Oh! I
mustn’t—
Stuart (checking her). No, don’t interfere, Mrs. Van Tromp. Let
the poor fellow take the whole dose while he’s about it.
Fred (who has gone up back and now comes down). Miss
Wortley, do you realize what you are saying? In the last minute you
have three times deliberately insulted me. Say you don’t love me, if
that is so, but don’t impute shameful motives to my love. It is of
value to me if worthless to you.
Mrs. V. T. Mr. Stevens, frankness under such circumstances is best
for all. Put yourself in my place. I am an heiress, with expectations
from my father. You acknowledge yourself that you are poor. Don’t
blame me if I draw my own conclusions.
Fred. But I will blame you, and it is the last time I shall ever
trouble you. You ask me to put myself in your place: let us try the
reverse. I offer you a love as true and unmercenary as was ever
offered a woman. What do I deserve at your hands? Mercy, at least.
But instead, you—you have not been content to reject it—you have
poisoned it forever.
[Turns and walks up stage to

b. d. Mrs. Van Tromp
begins to take off mask.
Agnes springs from
bay window, and
rushes forward c.
Agnes. One moment, Mr. Stevens. (To Mrs. V. T. tearfully.) Oh,

Frances, how could you?
Mrs. V. T. (taking off mask). I couldn’t. I was unmasking to show
him his mistake.
[Fred stands hesitating,
looking from one to the
other. Stuart’s head
through curtains.
Fred. You are not Miss Wortley?

Agnes (taking off mask). No, Mr. Stevens. Miss Wortley never
thought you a fortune-hunter. She remembers perfectly the first time
she met you. She’s glad she brought a little heaven into your life.
She’s glad that you—that you—
Fred (rushing down stage). That I love you?
Agnes. Yes.
Fred. And you are willing to make the sacrifice?
Agnes. Yes.
Fred. And you care for me?
Agnes. No (holds out her hand), I love you.
Fred (taking and kissing it). My treasure!
[Both retire up back l.
Mrs. V. T. Heigho! That’s what comes of wrong-doing. In trying to
win my wager, I’ve actually helped Mr. Stuart to beat me.
Stuart (head through curtains). For which I can’t thank you
enough!
Mrs. V. T. You!
Stuart. Exactly! Aren’t you ashamed?
[Comes out c.
Mrs. V. T. Of being defeated? Yes. But don’t be too triumphant.

You didn’t win single-handed.
Stuart. I certainly did not have much assistance, except from Mrs.
Van Tromp.
Mrs. V. T. On the contrary, you had the best assistance in the
world. I ought to have known better than bet against so powerful a
coalition as Mr. Stuart and Cupid. I only hope my behaviour has
made me odious to you!
[Crosses petulantly to r.
Stuart. On the contrary, I’m rather fond of real deviltry! So, if

agreeable, we’ll settle the stakes at once.
Mrs. V. T. I throw myself on your mercy.
Stuart. And what mercy would you have shown me, had I lost?
Mrs. V. T. Yes, but then I’m a woman.
Stuart. Deo gratia.
Mrs. V. T. And you know, Mr. Stuart, a woman is never expected to
pay her bets.
Stuart. There’s one woman who will pay hers to me, and that
promptly. Attention, please. As a forfeit, you are to say to me, “I love
you.”
Mrs. V. T. Ah, Mr. Stuart, don’t make me tell any more untruths!
Stuart (taking her hand). Don’t say it then; tell me without words.
[Stoops head and they kiss.

Sounds of altercation
outside.
Agnes (coming down with Fred). What’s that?

Charlie and Reg. enter at b. d. and come down.
Charlie. Well, you reprethentative of a graveyard, you juth athk
her.
Reg. Ask her? I tell you she’s engaged to me. (Sees Stuart). Aw,
Mr. Stuart, you’ve lost your wager.
Stuart (to Agnes). Has Mr. Van Tromp proposed to you this
evening?
Agnes. No.
Charlie (reeling with laughter against mantel). Ha, ha, ha, ha, ha!
Oh, thith ith rich! Oh, I thall die of laughing! Oh, thum one thtop me!
To think of the proud and haughty Reginald De Lanthy Van Tromp
propothing to the wrong girl,—ha, ha, ha, ho, ho, ho!
Stuart. Laugh away, Newbank. Get it all in now, for it won’t last.
Charlie. Won’t latht? I don’t underthtand you.
[Polly, with domino on her
arm, appears at b. d.—
looks in, and starts
back as if frightened.
Agnes. Come here, Polly.
[Polly comes down r. between

Charlie and Reg.
Stuart. Here is the minx who can make all clear. Polly, did Mr.
Newbank propose to you?
Polly. Yes, sir.
Reg. Oh, deah, how funny! Haw, haw, haw! But then, people in his
station always do take maids. Pwoposing to a servant!
Polly. But you proposed to me too, Mr. Van Tromp.
Charlie (laughing very hard). Holy Motheth, but I thall thertainly
die of laughing!
Polly. Please, Miss Wortley, forgive me?
Stuart. Yes. Remember what she has done for (points to Fred and
Agnes) you two.
Fred. And for (pointing at Stuart and Mrs. V. T.) those two.
Agnes. But she must have a lesson.
Stuart. Why, we’ve all had a lesson—on the mysterious means
Cupid employs to accomplish his purposes.
Mrs. V. T. Verily ’tis so:
“Love goes by haps,
Some Cupid kills with arrows, some with traps.”
Curtain
TRANSCRIBER’S NOTES
1. Silently corrected obvious typographical errors and
variations in spelling.
2. Retained archaic, non-standard, and uncertain spellings
as printed.
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Financial Accounting An Introduction

to Concepts Methods and Uses 14th

5. Long-lived financial assets include investments in securities.

· Continuing, frequent, and low cost repairs $46,000

How much should be charged to repairs and maintenance in Year 3?

32. Which of the following is/are not capitalized as an intangible asset?

33. Repairs and maintenance do not include

36. Which of the following is/are not true regarding maintenance?

37. Which of the following is/are not true regarding repairs?

41. Tangible long-lived assets include

42. Tangible long-lived assets include all of the following except

43. Intangible long-lived assets include:

45. An expenditure qualifies as a(n) _____ if it has the following characteristics:

46. An expenditure qualifies as an asset if it has which of the following characteristics?

47. For many technology and pharmaceutical firms:

50. Clarion Realty

Average Balance Construction Other

The amount, if any, of capitalized interest cost for Year 1 is

Average Balance Construction Other

The amount, if any, of capitalized interest cost for Year 2 is

55. In a corporate acquisition the:

56. Firms generally treat expenditures to develop intangibles internally as

61. When a firm constructs its own buildings or equipment:

Construction Loan at 5% on Building Under Construction . . . . . . . ..$2,000,000

68. The cost of long-lived assets with an indefinite life

69. Long-lived assets with an indefinite life include:

70. Depreciation is the accounting term used to refer to

71. Which of the following is/are true about goodwill?

73. Which of the following is not true about goodwill?

87. In accounting, depreciation and amortization involve a systematic process of

95. Which of the following is/are not true?

112. Recording periodic depreciation and amortization results in a

114. The amortization of a customer list are

115. The recording of amortization of intangibles generally results in a

125. Regarding a firm that abandons an asset,

126. Chen Company

E. Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,000

146. Macon Company

Using the Macon Company data, under U.S. GAAP:

Using the Macon Company data, the application of IFRS indicates:

148. Wheaton Company

Under U.S. GAAP, Wheaton recognizes

Under U.S. GAAP, Wheaton would record the following entry

Under IFRS, Wheaton recognizes

Applying IFRS, Wheaton would record the following entry

155. U.S. GAAP or IFRS require firms to test

158. An impairment loss on a trademark arises when

159. An impairment loss on a brand name arises when

Average Balance Construction Other

Average Balance Construction Other

170. Discuss the treatment of expenditures as assets versus immediate expenses.

[Receives note and exits l.

Charlie (triumphantly). Ah! Now I have her.

[Walks with dignity up r. and

Charlie. For onth in hith life, Van Tromp ith right.

[Bows grandly and goes up l.

Stuart. Good! It couldn’t be better. They’ll think it’s Miss Wortley’s

[Rises with two notes in hand.

Fred. Do you think that’s honourable?

[Agnes rises from

[Turns and rushes out b. d.

Enter Agnes l. d. in domino, and with mask in her hand.

[Slips past Stuart and crosses