Reference no: EM131841222

Question 1 - Erin Danielle Company purchased equipment and incurred the following costs.

Cash price                         $24,000

Sales taxes                          1,200

Insurance during transit          200

Installation and testing            400

Total costs                          $25,800

What amount should be recorded as the cost of the equipment?

$25,200

$25,800

$25,400

$24,000

Question 2 - Depreciation is a process of:

cost allocation.

cash accumulation.

appraisal.

valuation.

Question 3 - Micah Bartlett Company purchased equipment on January 1, 2010, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2011, if the straight-line method of depreciation is used, is:

$156,000.

$80,000.

$160,000.

$78,000.

Question 4 - Ann Torbert purchased a truck for $11,000 on January 1, 2010. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2011, can be computed by the following formula:

($11,000 / Total estimated activity) X Units of activity for 2011).

($11,000 / Total estimated activity) X Units of activity for 2010 and 2011.

($10,000 / Total estimated activity) X Units of activity for 2011).

($10,000 / Total estimated activity) X Units of activity for 2010 and 2011.

Question 5 - Jefferson Company purchased a piece of equipment on January 1, 2011. The equipment cost $60,000 and had an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2012 under the double-declining-balance method?

$15,000

$6,562

$6,500

$11,250

Question 6 - When there is a change in estimated depreciation:

previous depreciation should be corrected.

current and future years' depreciation should be revised.

only future years' depreciation should be revised.

None of the above.

Question 7 - Able Towing Company purchased a tow truck for $60,000 on January 1, 2011. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31, 2013, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2013) and the salvage value to $2,000. What was the depreciation expense for 2013?

$15,000

$12,100

$6,000

$4,800

Question 8 - Additions to plant assets are:

debited to a Purchases account.

capital expenditures.

debited to a Repair Expense account.

revenue expenditures.

Question 9 - Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2011. The machine was purchased for $80,000 on January 1, 2007, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale?

$18,000

$54,000

$22,000

$46,000

Question 10 - Maggie Sharrer Company expects to extract 20 million tons of coal from a mine that cost $12 million. If no salvage value is expected, and 2 million tons are mined and sold in the first year, the entry to record depletion will include a:

debit to Depletion Expense of $1,200,000.

debit to Accumulated Depletion of $2,000,000.

credit to Accumulated Depletion of $2,000,000.

credit to Depletion Expense of $1,200,000.

Question 11 - Which of the following statements is false?

Goodwill is recorded only when a business is purchased.

Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

If an intangible asset has a finite life, it should be amortized.

The amortization period of an intangible asset can exceed 20 years.

Question 12 - Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2, 2011. On July 31, 2011, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2011, should be:

$35,000.

$185,000.

$170,000.

$150,000.

Question 13 - Indicate which of the following statements is true.

Since intangible assets lack physical substance, they need be disclosed only in the notes to the financial statements.

Goodwill should be reported as a contra-account in the owner's equity section.

Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

Intangible assets are typically combined with plant assets and natural resources and shown in the property, plant, and equipment section.

Question 14 - Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover ratio?

0.72

1.39

0.20

0.90

Question 15 - Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair market value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books?

$49,000

$50,000

$45,000

$46,000

Question 16 - In exchanges of assets in which the exchange has commercial substance:

gains, but not losses, are recognized immediately.

losses, but not gains, are recognized immediately.

both gains and losses are recognized immediately.

neither gains nor losses are recognized immediately.