Q1. All of the following will be included in the cost of a fixed asset except
a. the cost of installing equipment.
b. mistakes in installation.
c. freight costs.
d. direct costs of new construction.
Q2. If an asset is long lived and is used in a productive manner in a business, it will be classified as a(n)
a. intangible asset.
b. investment.
c. fixed asset.
d. expense.
Q3. Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated to be good for 5,000 hours. Compute the depreciation expense for the first year using the units-of-activity method of depreciation if the generator was used for 1,040 hours.
a. $2,000
b. $2,288
c. $208
d. $2,080
Q4. A copy machine was purchased for $35,000. The machine is estimated to have a useful life of four years with a residual value of $3,000. It is estimated that the machine will make 2,000,000 copies. Using the units-of-activity method to depreciate the copy machine, what information is needed to calculate the first year's depreciation if 550,000 copies were made?
a. $35,000 cost, useful life of four years, 2,000,000 copies, and $3,000 residual value
b. $35,000 cost, 2,000,000 copies, and $3,000 residual value
c. $35,000 cost, useful life of four years, and $3,000 residual value
d. $35,000 cost, 2,000,000 copies, $3,000 residual value, and 550,000 copies made
Q5. Which of the following is not one of the most common depreciation methods?
a. Sum-of-the-years-digits method
b. Units-of-output method
c. Double-declining-balance method
d. Straight-line method
6. Which of the following fixed assets is not depreciated?
a. building
b. land
c. equipment
d. None of these choices are correct.
Q7. A machine was purchased at a cost of $52,000. The equipment had an estimated useful life of seven years and a residual value of $3,000. Assuming the equipment was sold at the end of Year 6 for $14,000 cash, which of the following will be included in the journal entry? (Assume the straight-line depreciation method.)
a. a debit to Accumulated Depreciation-Equipment
b. a credit to Loss on Sale of Asset
c. a credit to Cash
d. a debit to Gain on Sale of Asset
Q8. A machine was purchased at a cost of $70,000. The equipment had an estimated useful life of eight years and a residual value of $6,000. Assuming the equipment was sold at the end of Year 6 for $14,000, determine the gain or loss on the sale of the equipment. (Assume the straight-line depreciation method.)
a. a gain of $14,000
b. a loss of $8,000
c. a loss of $14,000
d. a gain of $8,000
Q9. A fixed asset should be removed from the accounts except
a. when it is given away.
b. when it is sold.
c. when it is discarded.
d. when it is fully depreciated.
Q10. In regard to discarding fixed assets, which of the following is not true?
a. If a fixed asset is no longer used and has no residual value, it is written off.
b. If an asset has not been fully depreciated, depreciation should not be recorded before removing the asset from the accounting records.
c. If an asset has not been fully depreciated, depreciation should be recorded before removing the asset from the accounting records.
d. If a fixed asset is no longer used and has no residual value, it is discarded.
Q11. Depletion can be compared to which of the following depreciation methods?
a. units-of-production
b. double-declining-balance
c. straight-line
d. None of these choices are correct.
Q12. The expensing of a natural resource is called
a. amortization.
b. depletion.
c. depreciation.
d. expensing.
Q13. The journal entry to record depletion includes
a. a credit to Depletion Expense.
b. a credit to Accumulated Depreciation.
c. a debit to Accumulated Depletion.
d. a debit to Depletion Expense.
Q14. The calculation of depletion expense is
a. Quantity Extracted × Estimated Useful Life.
b. Depletion Rate × Quantity Extracted.
c. Depletion Rate × Estimated Useful Life.
d. None of these choices are correct.
Q15. Which of the following is not classified as an intangible asset?
a. Trademark
b. Investment
c. Goodwill
d. Patent
Q16. Which of the following statements is true regarding goodwill?
a. In a purchase of a business at a price in excess of the fair value of its net assets, goodwill is recorded as the excess.
b. Goodwill is the exclusive use of a name, term, or symbol used to identify a business or its product.
c. Goodwill is amortized based on a 10-year period.
d. Goodwill is amortized based on the lesser of the useful life or the legal life.
Q17. Tangible and intangible assets are normally presented
a. on the balance sheet in categories called Tangible and Intangible Assets.
b. on the income statement.
c. all together on the balance sheet in Property, Plant, and Equipment.
d. in two separate sections on the balance sheet as Property, Plant, and Equipment and Intangible Assets.
Q18. All of the following assets will be included as intangible assets on the balance sheet except
a. goodwill.
b. investments.
c. copyrights.
d. patents.