Chapter 8

Question 1

Although they may be represented by physical documents, __ assets are rights or privileges that cannot be seen or touched.

Answer 1

intangilble

Question 2

Property, plant, and equipment includes ______.

land

computers

buildings

timber

Answer 2

land

computers

buildings

Question 3

The term used when recognizing expense for intangible assets with identifiable useful lives is ____

Answer 3

amortization

Question 4

The cost of equipment includes ______.

regular maintenance cost

sales tax paid on the purchase

ordinary installation cost

Purchase price

fine for work safety violations during installation

delivery costs

Answer 4

sales tax paid on the purchase

ordinary installation cost

Purchase price

delivery costs

Question 5

Acquiring a group of assets in a single transaction is known as a(n) ____ purchase

Answer 5

basket

Question 6

Which of the following is not a tangible asset?

Land

Oil reserves

Pepsi trademark

Truck

Answer 6

pepsi trademark

Question 7

The salvage value of an asset is the ______.

book value of an asset

current market value of an asset

expected market value of a fully depreciated asset

cost of an asset minus accumulated depreciation

Answer 7

expected market value of a fully depreciated asset

Question 8

Property, plant and equipment is a classification of ____ long-term assets.

Answer 8

tangible

Question 9

Intangible assets with an identifiable useful life include ______.

goodwill

patents

copyrights

trademarks

Answer 9

patents

copyrights

Question 10

When depreciation is recorded, the asset reduction is reported ______.

as a direct reduction to the cost of the asset

using a contra-asset account

as a liability

Answer 10

using a contra-asset account

Question 11

Kate Company submitted an offer to purchase land listed at $120,000 for 10% below the list price. The offer was accepted. Kate paid $10,000 to remove an old structure in order to make the land ready for use. Title and attorney fees were $3,000. Annual property taxes for the first year will be $5,000. Based on this information, the cost of the land as shown on the balance sheet is ______.

Answer 11

$121,000

Reason: $120,000 List price x 90% = $108,000 purchase price + $10,000 structure removal + $3,000 title and attorney fees = $121,000.

Question 12

Buck Company purchased a computer and a desk for $9,000 cash. An appraiser determined the fair market value of computer to be $3,000 and the desk to be $7,000. Based on this information, the recorded cost of the computer is $____ and the recorded cost of the desk is $____

Answer 12

Computer: 2,700
Reason: 3,000/ 10,000 x 9,000

Desk: 6,300
Reason: 7,000/ 10,000 x 9,000

Question 13

The number of years that a company expects to use a depreciable asset is called the ___ ___ life

Answer 13

estimated useful

Question 14

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses double-declining-balance depreciation, depreciation expense for Year 3 is ______.

$6,000

$4,000

$12,000

$0

Answer 14

$4,000

Reason: ($48,000 cost - $36,000 accumulated depreciation) x 50% = $6,000 Year 3 Depreciation Expense per formula. However, total depreciable cost is $40,000 ($48,000 - $8,000). Since accumulated depreciation from Year 1 + Year 2 is $36,000, only an additional $4,000 of depreciation expense can be recognized.

Question 15

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000 and has an $8,000 salvage value. BLC expected to drive the limo a total of 100,000 miles. Actual miles driven were: Year 1: 30,000 miles Year 2: 40,000 miles Year 3: 20,000 miles Year 4: 25,000 miles Based on this information, depreciation expense for Year 2 using units-of-production depreciation is ______.

Multiple choice question.

$28,000

$16,000

$24,000

$10,000

Answer 15

$16,000

Reason: ($48,000 cost - $8,000 salvage) ÷ 100,000 miles = 0.40 per mile; 40,000 miles x 0.40 = $16,000 Year 2 depreciation expense.

Question 16

The Black Limo Company (BLC) sold a limo that had been used in it operations. The limo cost $48,000, had accumulated depreciation of $20,000, and was sold for $26,000. The journal entry to record the disposal of the limo includes a ______ account.

$20,000 credit to the accumulated depreciation

$48,000 debit to the limo

$2,000 debit to the loss on sale of limo

$2,000 credit on the gain on the sale of limo

Answer 16

$2,000 debit to the loss on sale of limo

Reason: $26,000 sales price - $28,000 book value = $2,000 loss. The journal entry to record the asset disposal would include a debit to cash for $26,000, a debit to accumulated depreciation for $20,000, a debit to the loss on sale of limo for $2,000, and a credit to limo for $48,000.

Question 17

The cost of a building includes ______.

More than 1 answer

fire Insurance

realtor commissions

purchase price

maintenance

renovation cost

Answer 17

realtor commissions

purchase price

renovation cost

Question 18

Lopez Company purchased land and a building for $460,000 cash. A real estate appraiser determined the fair market values are $100,000 for the land and $400,000 for the building. Based on this information, the cost of the ______.

land should be established at $100,000

land should be established at $92,000

building should be established at $368,000

building should be established at $400,000

Answer 18

land should be established at $92,000
Reason: $100,000/ $500,000 = .2 x 460,000

building should be established at $368,000
Reason: $400,000/ $500,000 = .8 x 460,000

Question 19

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000, with an expected useful life of 4 years and an $8,000 salvage value. BLC expected to drive the limo for 100,000 miles before disposing of it. Actual miles driven per year was 30,000 miles in Year 1, 40,000 miles in Year 2, 20,000 miles in Year 3, and 25,000 miles in Year 4. Based on this information which of the following statements are true?

Depreciation expense is highest in Year 1 if the units of production method is used.

Reason: The highest method in Year 1 is double declining balance.

The total amount of accumulated depreciation at the end of Year 4 is $40,000, regardless of the method used to depreciate the asset.

The impact on net income will only be constant if the straight-line method is used.

The timing of the expense is the only difference between the three methods.

Answer 19

The total amount of accumulated depreciation at the end of Year 4 is $40,000, regardless of the method used to depreciate the asset.

The impact on net income will only be constant if the straight-line method is used.

The timing of the expense is the only difference between the three methods.