Question 1

In an activity-based depreciation method,we allocate an asset's cost based on its use.

Accepted Answer

A) True 
 B)False

Question 2

When a firm develops a trademark internally through advertising,it does not record the advertising costs as an intangible asset,but rather expenses them in the income statement.

Accepted Answer

A) True 
 B)False

Question 3

Goodwill is amortized over its estimated useful life.

Accepted Answer

A) True 
 B)False

Question 4

Using the straight-line method,depreciation expense for 2015 would be:

Accepted Answer

A)  $12,000.
B)  $11,000.
C)  $60,000.
D)  None of the other answers are correct.E) B) and C)
F) A) and D)

Question 5

Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

Accepted Answer

A) True 
 B)False

Question 6

Return on assets is equal to:

Accepted Answer

A)  Profit margin plus asset turnover.
B)  Profit margin minus asset turnover.
C)  Profit margin times asset turnover.
D)  Profit margin divided by asset turnover.E) None of the above
F) C) and D)

Question 7

Asset turnover is net sales divided by ending total assets.

Accepted Answer

A) True 
 B)False

Question 8

Recognition of impairment for long-term assets is required if book value exceeds:

Accepted Answer

A)  Original cost.
B)  Fair value.
C)  Future cash flows.
D)  Accumulated depreciation.E) C) and D)
F) A) and C)

Question 9

If a firm successfully defends an intangible right,it should expense the litigation costs as incurred.

Accepted Answer

A) True 
 B)False

Question 10

The exclusive right to benefit from a creative work,such as a film,is a:

Accepted Answer

A)  Patent.
B)  Copyright.
C)  Trademark.
D)  Franchise.E) B) and D)
F) None of the above

Question 11

China Dragon purchased new restaurant equipment on September 1,2015,for $8,000.Residual value at the end of an estimated 5 year service life is expected to be $2,000.Calculate depreciation expense using the straight-line method for 2015 and 2016,assuming a December 31 year-end.

Accepted Answer

The answer of China Dragon purchased new restaurant equipment on...

Question 12

Explain how the accounting treatment differs between purchased and internally developed intangible assets.

Accepted Answer

We value purchased intangible assets at ...

Question 13

Goodwill is:

Accepted Answer

A)  Amortized over the greater of its estimated life or forty years.
B)  Only recorded by the seller of a business.
C)  The value of a business as a whole,over and above the value of its net identifiable assets.
D)  Recorded when created internally through advertising expense.E) B) and D)
F) A) and C)

Question 14

Depreciation in accounting records the decrease in value of an asset.

Accepted Answer

A) True 
 B)False

Question 15

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.

Accepted Answer

A) True 
 B)False

Question 16

In testing for recoverability of an operational asset,an impairment loss is required if the:

Accepted Answer

A)  Asset's book value exceeds the present value of its expected future cash flows.
B)  Expected future cash flows exceeds the asset's book value.
C)  Present value of expected future cash flows exceeds its carrying value.
D)  Asset's book value exceeds the expected future cash flows.E) A) and B)
F) B) and C)

Question 17

An impairment loss is equal to the amount by which book value exceeds the fair value of a long-term asset.

Accepted Answer

A) True 
 B)False  True

Question 18

Which of the following would be recorded as land improvements?

Accepted Answer

A)  Property taxes.
B)  Title insurance.
C)  Real estate commissions.
D)  Adding a parking lot.E) B) and D)
F) B) and C)

Question 19

Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $25,000.Strawberry Fields recorded depreciation using the straight-line method,a five-year service life,and an $8,000 residual value.What was the gain or loss on the sale? Record the sale.

Accepted Answer

* ($38,000 - $8,000)/ 5 years = $6,000 per year x 2 years = $12,000.

Question 20

If a company initially records an expense incorrectly as an asset,explain how this mistake affects the income statement and the balance sheet.

Accepted Answer

This mistake will overstate net income on the income statement and overstate assets and retained earnings on the balance sheet.If a company initially records an expense incorrectly as an asset,expenses are understated or too small.Since expenses are subtracted from revenues in arriving at net income,understating expenses will overstate net income reported on the income statement.Similarly,recording an expense as an asset will overstate assets on the balance sheet.Retained earnings on the balance sheet will also be overstated due to the overstatement of net income.

Exam 7: Long-Term Assets

In an activity-based depreciation method,we allocate an asset's cost based on its use.

Correct Answer
verified

When a firm develops a trademark internally through advertising,it does not record the advertising costs as an intangible asset,but rather expenses them in the income statement.

Correct Answer
verified

Goodwill is amortized over its estimated useful life.

Correct Answer
verified

Using the straight-line method,depreciation expense for 2015 would be:

Correct Answer
verified

Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

Correct Answer
verified

Return on assets is equal to:

Correct Answer
verified

Asset turnover is net sales divided by ending total assets.

Correct Answer
verified

Recognition of impairment for long-term assets is required if book value exceeds:

Correct Answer
verified

If a firm successfully defends an intangible right,it should expense the litigation costs as incurred.

Correct Answer
verified

The exclusive right to benefit from a creative work,such as a film,is a:

Correct Answer
verified

China Dragon purchased new restaurant equipment on September 1,2015,for $8,000.Residual value at the end of an estimated 5 year service life is expected to be $2,000.Calculate depreciation expense using the straight-line method for 2015 and 2016,assuming a December 31 year-end.

Correct Answer
verified

Explain how the accounting treatment differs between purchased and internally developed intangible assets.

Correct Answer
verified
We value purchased intangible assets at ...
View Answer

Goodwill is:

Correct Answer
verified

Depreciation in accounting records the decrease in value of an asset.

Correct Answer
verified

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.

Correct Answer
verified

In testing for recoverability of an operational asset,an impairment loss is required if the:

Correct Answer
verified

An impairment loss is equal to the amount by which book value exceeds the fair value of a long-term asset.

Correct Answer
verified
True

Which of the following would be recorded as land improvements?

Correct Answer
verified

Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $25,000.Strawberry Fields recorded depreciation using the straight-line method,a five-year service life,and an $8,000 residual value.What was the gain or loss on the sale? Record the sale.

Correct Answer
verified
11eaa3e2_158f_4aee_9f8f_9d97ec5dac80_TB2393_00 * ($38,000 - $8,000)/ 5 years = $6,000 per year x 2 years = $12,000.

If a company initially records an expense incorrectly as an asset,explain how this mistake affects the income statement and the balance sheet.

Exam 7: Long-Term Assets

In an activity-based depreciation method,we allocate an asset's cost based on its use.

Correct AnswerverifiedShow Answer

When a firm develops a trademark internally through advertising,it does not record the advertising costs as an intangible asset,but rather expenses them in the income statement.

Correct AnswerverifiedShow Answer

Goodwill is amortized over its estimated useful life.

Correct AnswerverifiedShow Answer

Using the straight-line method,depreciation expense for 2015 would be:

Correct AnswerverifiedShow Answer

Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

Correct AnswerverifiedShow Answer

Return on assets is equal to:

Correct AnswerverifiedShow Answer

Asset turnover is net sales divided by ending total assets.

Correct AnswerverifiedShow Answer

Recognition of impairment for long-term assets is required if book value exceeds:

Correct AnswerverifiedShow Answer

If a firm successfully defends an intangible right,it should expense the litigation costs as incurred.

Correct AnswerverifiedShow Answer

The exclusive right to benefit from a creative work,such as a film,is a:

Correct AnswerverifiedShow Answer

China Dragon purchased new restaurant equipment on September 1,2015,for $8,000.Residual value at the end of an estimated 5 year service life is expected to be $2,000.Calculate depreciation expense using the straight-line method for 2015 and 2016,assuming a December 31 year-end.

Correct AnswerverifiedShow Answer

Explain how the accounting treatment differs between purchased and internally developed intangible assets.

Correct AnswerverifiedWe value purchased intangible assets at ...View AnswerShow Answer

Goodwill is:

Correct AnswerverifiedShow Answer

Depreciation in accounting records the decrease in value of an asset.

Correct AnswerverifiedShow Answer

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.

Correct AnswerverifiedShow Answer

In testing for recoverability of an operational asset,an impairment loss is required if the:

Correct AnswerverifiedShow Answer

An impairment loss is equal to the amount by which book value exceeds the fair value of a long-term asset.

Correct AnswerverifiedTrue

Which of the following would be recorded as land improvements?

Correct AnswerverifiedShow Answer

Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $25,000.Strawberry Fields recorded depreciation using the straight-line method,a five-year service life,and an $8,000 residual value.What was the gain or loss on the sale? Record the sale.

Correct Answerverified11eaa3e2_158f_4aee_9f8f_9d97ec5dac80_TB2393_00 * ($38,000 - $8,000)/ 5 years = $6,000 per year x 2 years = $12,000.

If a company initially records an expense incorrectly as an asset,explain how this mistake affects the income statement and the balance sheet.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
We value purchased intangible assets at ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
verified
11eaa3e2_158f_4aee_9f8f_9d97ec5dac80_TB2393_00 * ($38,000 - $8,000)/ 5 years = $6,000 per year x 2 years = $12,000.