Reference no: EM131757480

Question 1

Allocating the cost of a natural resource over its service life is called __________.
depreciation
market valuation
amortization
depletion

Question 2
Behrend gave land and also paid $10,000 in cash in exchange for equipment. The book value and the fair value of the land were $80,000 and $90,000, respectively. The transaction has commercial substance. Which of the following choices would be correct?
Record equipment at & record a gain of:

$100,000; $30,000
$90,000; $20,000
$80,000; $10,000
$100,000; $10,000

Question 3
During the accounting period, Behrend incurred substantial costs in order to increase the productive capacity of a lathe from 20 parts per hour to 36 parts per hour. These costs should be recognized in the financial statements by:

increasing repairs expense.
increasing gain from repairs.
increasing maintenance expense.
increasing the asset - lathe.

Question 4
Which of the following methods recognizes the largest total amount of depreciation over an asset's entire service life:

straight-line
declining balance
sum-of-the-year's-digits
all of the above will recognize the same amount

Question 5

The following expenditures relate to machinery purchased by Godfrey Manufacturing:
Purchase price $16,000
Transportation costs 800
Installation 500
Repair of part broken during installation 300
Sales Tax 1,000

What amount should Godfrey record as the cost of the machinery?

$16,300
$18,300
$18,600
None of the above

Question 6
Goodwill and trademarks are:

amortized over the greater of estimated service life or forty years, whichever is longer.
not amortized, but instead, annually considered for impairment.
immediately expensed if purchased.
both b. and c. are correct.

Question 7
Accumulated depreciation is reported __________.

in the income statement as an expense
in the balance sheet as a contra asset
in the balance sheet as an asset
in the statement of cash flows as an outflow of cash from operating activities

Question 8
Costs incurred in order to keep an asset in its normal operating condition are:

capitalized as assets
treated as a reduction in accumulated depreciation
expensed in the period incurred
depreciated over the asset's remaining life

Question 9

Behrend Corp. purchases two patents in a basket purchase for a total cost of $9,000,000. The patents acquired and their estimated fair values are: Patent A = $2,000,000 and Patent B = $8,000,000. The cost of Patent A should be recognized at:

$1,800,000
$2,000,000
$1,000,000
None of the above.

Question 10
Accounting for a change in estimate:

is handled prospectively.
requires retrospective restatement of prior year's financial statements.
will not affect current or future period financial statements.
none of the above.

Question 11
Behrend Corp. purchases a delivery truck on 1/01/2012. Its full acquisition cost is $50,000. Behrend estimates that the truck will have a 5-year service life and a residual value of $10,000.
Assuming straight-line depreciation, the amount of depreciation expense recognized in 2013 is:

$8,000.
$10,000.
$12,000.
none of the above.

Question 12
Behrend Corp. purchases a delivery truck on 1/01/2012. Its full acquisition cost is $50,000. Behrend estimates that the truck will have a 5-year service life and a residual value of $10,000.
Assume that Behrend uses straight-line depreciation and that during 2014, management changes its estimate of total service life from 5 to 8 years and revises the estimate of residual value from $10,000 to $4,000. Depreciation expense recognized in 2014 is:

$8,000.
$4,000.
$5,000.
none of the above.

Question 13
Behrend Corp. purchases a delivery truck on 1/01/2012. Its full acquisition cost is $50,000. Behrend estimates that the truck will have a 5-year service life and a residual value of $10,000.
Assuming 200% (double) declining balance, the amount of depreciation expense recognized in 2013 is:

$8,000.
$9,600.
$12,000.
none of the above.

Question 14
Which of the following would not be included in the cost of a new machine?

freight cost incurred in having the machine delivered
sales tax paid on the new machine
cost of installing the machine
all the above would be included in the cost of the new machine

Question 15
Which of the following methods results in depreciation behaving as a variable cost?

Straight Line
Double Declining Balance
Sum-of-the-Years' Digits
none of the above

Question 16
"Component Depreciation" is required under:

U.S. GAAP.
IFRS.
Both of the above.
None of the above.

Question 17
Firms generally use __________ depreciation for financial reporting purposes, and __________ for tax reporting purposes.

straight-line, accelerated
straight-line, straight-line
accelerated, straight-line
accelerated, accelerated

Question 18
Under what circumstances would a company report goodwill in its balance sheet?

when the company has developed a substantial competitive advantage over other companies in the same industry
when a company purchases another company at a purchase price that exceeds the fair value of the net identifiable assets acquired
when a company has invested very large amounts of money in a successful effort to improve the level of customer satisfaction
under any of the above circumstances

Question 19
Behrend Corporation purchased all of the assets and assumed all of the liabilities of PSU Inc., paying $2,000,000 cash. Book values and fair values of Blair's identifiable assets and liabilities were:
Book value Fair value
Current assets $ 420,000 $ 450,000
Property, plant, & equip. 1,200,000 1,750,000
Liabilities 300,000 300,000
Behrend would report goodwill of:

$-0-.
$400,000.
$680,000.
$100,000.

Question 20
Capitalization of interest during construction of depreciable operating asset:

decreases net income during the construction phase.
decreases future depreciation expense.
increases future net income.
increases future depreciation expense.

Question 21
Which of the following costs are capitalized as assets?

the purchase price of a patent
the cost of conducting research that eventually results in a patent
all of the above
none of the above

Question 22
A U.S. corporation includes machinery on its 12/31/2014 balance sheet at its "book value" of $1,000,000 (cost of $1,500,000, and accumulated depreciation of $500,000). This indicates:

the machinery is worth $1,000,000 at the balance sheet date
$500,000 of depreciation expense was recognized in 2014
the undepreciated cost of the machinery is $1,000,000 at the balance sheet date
all of the above are correct

Question 23
Under U.S. GAAP, software development costs are capitalized if they are incurred:

Prior to point at which technological feasibility has been established.
After technological feasibility has been established but prior to commercial production.
Always capitalized in full.
Always expensed in full.

Question 24
Sales taxes withheld by retailers are:

Included in revenue with a matching expense recognized when paid to the appropriate taxing authority
Not included in revenue, but are placed into a payable account until forwarded to the taxing authority
Recognized as an expense in the period incurred
Never included in financial statements

Question 25
Under GAAP, "Generic" warranty costs are recognized as expense of the income statement period in which the:

related revenue from the sale of goods or providing of services is recognized.
repairs and replacements occur.
all of the above.
none of the above.

Question 26
For merchandising firms, employees' vacation pay is recognized as expense in the period in which the employee:

takes the paid time off.
earns the paid time off by providing service to the corporation.
all of the above.
none of the above.

Question 27
When a gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:

reported in the income statement and disclosed in the financial statement notes.
offset against shareholders' equity.
disclosed in the financial statement notes, but not recognized in the income statement.
neither recognized in the income statement nor disclosed in the financial statement notes

Question 28
Bonds with a 7% stated interest rate that are issued when the effective rate of interest is 8% will:

be issued at a premium
be issued at a discount
not be issued because the stated rate is less than the market rate
be issued at an amount equal to the maturity value of the bond

Question 29
10 year 8% bonds payable are issued at a premium on 1/1/14 with interest payable annually at year end. Under the effective interest method the bond's carrying value reported in the year-end balance sheets will ___________ over the term of the bonds.

increase
decrease
be the same amount
any of the above, depending upon changes in market interest rates

Question 30
On January 1, 2014, Behrend Corp. issues 8-year bonds with a total face value of $10,000,000 and a stated interest rate of 5%with interest paid annually each 12/31. The bonds are issued to provide an effective (market) interest rate of6%. Round all amounts to the nearest dollar.
Total interest expense recognized over the entire 8-year term of the bonds is:

$4,000,000.
$3,353,679.
$4,620,979.
none of the above.

Question 31
On January 1, 2014, Behrend Corp. issues 8-year bonds with a total face value of $10,000,000 and a stated interest rate of 5%with interest paid annually each 12/31. The bonds are issued to provide an effective (market) interest rate of6%. Round all amounts to the nearest dollar.
The cash proceeds from issuing the bonds on 1/01/2014 is:

$10,000,000.
$9,379,021.
$10,646,321.
none of the above.

Question 32
On January 1, 2014, Behrend Corp. issues 8-year bonds with a total face value of $10,000,000 and a stated interest rate of 5%with interest paid annually each 12/31. The bonds are issued to provide an effective (market) interest rate of6%. Round all amounts to the nearest dollar.
The bond's carrying value reported in Behrend's year-end 12/31/2014 balance sheet is:

$10,000,000.
$9,441,762.
$10,578,637.
none of the above.

Question 33
On January 1, 2014, Behrend Corp. issues 8-year bonds with a total face value of $10,000,000 and a stated interest rate of 5%with interest paid annually each 12/31. The bonds are issued to provide an effective (market) interest rate of6%. Round all amounts to the nearest dollar.
The amount of interest expense recognized in Behrend's 2014 income statement is:

$500,000.
$532,316.
$562,741.
none of the above.

Question 34
The amount of cash "interest" paid on a bond's interest payment date is determined by multiplying the:

effective rate of interest by the face value of the bond
effective rate of interest by the bond's beginning of the accounting period carrying value
stated rate of interest by the face value of the bond
stated rate of interest by the bond's beginning of the accounting period carrying value

Question 35
Behrend Inc. issued a 10-year, 6% $100,000 note at its face value on October 1, 2014. Interest is paid annually each September 30. The balance sheet at December 31, 2014, will report _________.

notes payable of $100,000 and interest expense of $1,500
notes payable of $100,000 and interest payable of $6,000
notes payable of $100,000 and interest payable of $1,500
notes payable of $100,000 and nothing related to interest because the first interest payment is not payable until September 30, 2015.

Question 36
A firm issues 10-year bonds with no stated interest rate ("zero coupon" bonds) with a maturity value of $10,000,000 and receives $6,000,000 from the issue (they are issued at a $4,000,000 discount). Total interest expense incurred over the entire 10 years of the bond issue is:

$10,000,000.
$4,000,000.
-0-
cannot be determined with the information provided.

Question 37
On 12/1/14, Behrend Corp. received $9,000 from a tenant for three month's rent for the period December 2014 through February 2015. The year-end 12/31/14 financial statements should include:

$3,000 of rent revenue in the income statement.
$6,000 of "unearned rent revenue," as a liability in the balance sheet.
all of the above.
$9,000 of rent revenue in the income statement.

Question 38
Under U.S. GAAP, unamortized discount on bonds payable appears:

in the income statement as "unearned interest revenue."
in the balance sheet as a contra liability account.
in the balance sheet as an asset.
none of the above.

Question 39
When the effective interest rate decreases, the market value of related non-callable bonds will

increase
decrease
be unaffected
all of the above

Question 40
Callable bonds benefit the issuer through the ability to benefit from

a lower effective rate at issuance date
an increase in proceeds from the bond issue
increases in the effective interest rate that may occur subsequent to issuance
decreases in the effective interest rate that may occur subsequent to issuance