Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

(S.O. 4) The Archer Company purchased a tooling machine in 2000 for $30,000. The machine was being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2012, when the machine had been in use for 10 years, the company
(S.O. 4) Composite or group depreciation is a depreciation system whereby:A. the years of useful life of the various assets in the group are added together and the total divided by the number of items.B. the cost of individual units within an asset group is charged to expense in the year a unit is
(S.O. 3) When depreciation is computed for partial periods under a decreasing charge depreciation method, it is necessary to:A. charge a full year's depreciation to the year of acquisition.B. determine depreciation expense for the full year and then prorate the expense between the two periods
(S.O. 3) Each year Abner Corporation sets aside an amount of cash equal to depreciation expense on its only machine. When the asset is completely depreciated, the cash fund will allow the corporation to buy a new machine if:A. prices rise throughout the life of the property.B. an accelerated
(S.O. 3) SL and YD Companies purchase identical equipment having an estimated service life of 5 years, with no salvage value. SL Company uses the straight-line depreciation method; YD Company uses the sum-of-the-years' digits method. Assuming that the companies are identical in all other
(S.O. 3) Which of the following depreciation methods does not consider salvage value in computing the total depreciation to be taken?Straight-line.Sum-of-years'-digits.Declining-balance.vaw> Activity or production.
(S.O. 3) A graph is set up with "depreciation expense" on the vertical axis and "time" on the horizontal axis. Assuming linear relationships, how would the graphs for declining-balance and straight-line, respectively, be drawn?A. Sloping down to the right and vertically.B. Sloping up to the right
(S.O. 3) Which of the following statements is the assumption on which straight-line depreciation is based?The operating efficiency of the asset decreases in later years.Service value declines as a function of time rather than use.Service value declines as a function of obsolescence rather than
(S.O. 3) Which of the following is a realistic assumption of the straight-line method of depreciation?The asset's economic usefulness is the same each year.The repair and maintenance expense is essentially the same each period.The rate of return analysis is enhanced using the straight-line
(S.O. 2) The activity method of depreciation (often called the variable charge approach) assumes that depreciation is a function of:Productivity Passage of Time A. Wies Yes B. No No CS Yes No D. No Yes
(S.O. 2) The economic factors related to an asset's service life include:A. obsolescence.B. wear and tear.C. decay.D. unexpected casualties.
(S.O. 2) The major difference between the service life of an asset and its physical life is that:A. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last.B. physical life is the life of an asset without consideration of salvage
(S.O. 1) Which of the following most accurately reflects the concept of depreciation as used in accounting?A. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.B. The process of allocating the cost of tangible assets to
(S.O. 8) In recording depreciation for tax purposes, companies can use any method as long as the amount reported on the tax return exceeds the amount recorded for financial statement purposes.
(S.O. 8) The Internal Revenue Code allows the use of an accelerated depreciation method for tax purposes as long as the use of the method does not cause the company to report a net loss.
(S.O. 6) Reserve recognition accounting is specifically related to the oil and gas industry, whereas discovery value accounting is a broader term associated with the whole natural resources area.
(S.O. 6) The computation of depletion is essentially the same as the activity method of depreciation.
(S.O. 6) The full costing approach, related to accounting for exploration costs, requires that the full cost of exploration be charged against income in the year it is incurred.
(S.O. 6) Development costs include tangible equipment used for transportation and other heavy equipment necessary to extract a natural resource and get it ready for production or shipment.
(S.O. 6) Depletion is the systematic allocation of the cost of natural resources (wasting assets).
(S.O. 5) Losses or gains relating to impaired assets intended to be disposed of should be reported as extraordinary items.
(S.O. 5) The impairment loss is the amount by which the carrying amount of the asset. is greater than the market value or present value of the asset.
(S.O. 5) When determining whether an asset has been impaired, the recoverability test compares discounted future net cash flows to the carrying amount of the asset.
(S.O. 4) If one of the estimates used in computing depreciation is subsequently found to require adjustments, no change in prior years' financial statements is required.
(S.O. 4) The composite depreciation rate is determined by dividing the depreciation per year by the total cost of the assets.
(S.O. 4) Under the group and composite methods, the term group refers to a collection of assets that are similar in nature; composite refers to a collection of assets that are dissimilar in nature.
(S.O. 3) Under the declining-balance depreciation method, salvage value is considered only in computing the amount of depreciation for the final year(s) of an asset's service life.
(S.O. 3) Accelerated depreciation methods accomplish the objective of writing an asset off over a shorter period of time than its useful life.
(S.O. 3) The straight-line depreciation method is used most often in actual practice. This is because the assumptions upon which it is based apply to most plant assets.
(S.O. 3) The straight-line method considers depreciation a function of time rather than a function of usage.
(S.O. 3) Companies that desire low depreciation during periods of low productivity and high depreciation during high productivity either adopt or switch to a declining-balance method.
(S.O. 3) One problem associated with the activity method of depreciation concerns estimating the total units of output an asset will produce.
(S.O. 2) Estimation and judgment are the primary means through which the service life of an asset is determined.
(S.O. 2) Replacing a black and white monitor with a color monitor for a computer is an example of supersession.
(S.O. 2) Whenever the economic nature of the asset is the primary determinant of service life, maintenance plays an extremely vital role in prolonging service life.
(S.O. 2) Physical factors such as wear and tear set the outside limit for the service life of an asset.
(S.O. 2) An asset's cost less its salvage value is referred to as the depreciable base.
(S.O. 1) The accounting concept of depreciation reflects the decline in value associated with a plant asset.
(S.O. 7) When a plant asset is disposed of a gain or loss may result. The gain or loss would be classified as an extraordinary item on the income statement if it resulted from:A. an involuntary conversion and the conditions of the disposition are unusual and infrequent in nature.B. a sale prior to
(S.O.6) An expenditure made in connection with a machine being used by an enterprise should be:A. expensed immediately if it merely extends the useful life but does not improve the quality.B. expensed immediately if it merely improves the quality but does not extend the useful life.C: capitalized
(S.O.5) Elizabeth Company recently accepted a donation of land with a cost to the donor of $200,000 and a fair market value of $250,000. Which of the following journal entries would Elizabeth Company most likely make to record the receipt of the land?8 A. Land 200,000 Donated Capital 200,000 B.
(S.O.5) Hardin Company received $40,000 in cash and a used computer with a fair value of $120,000 from Page Corporation for Hardin Company's existing computer having a fair value of $160,000 and an undepreciated cost of $150,000 recorded on its books. The transaction has no commercial substance.
(S.O. 5) Would either company record a loss on the transaction?A. Glen Inc. would record a loss.B. Armstrong Co. would record a loss.C: Both companies would record a loss.D. Neither company would record a loss.
(S.O.5) What amount should Armstrong Co. record for the asset received?@ A. $15,000.B. $16,000.Cit SES TO(OOO!D. $20,000.
(S.O. 5) On the basis of the foregoing facts, what amount should Glen Inc. record for the asset received?A. $15,000.B. $16,000.Cc. $19,000.D. $20,000.
(S.O. 5) The Chicago Cubs had a player contract with Ryan Dempster that was recorded in its accounting records at $7,450,000. The Chicago White Sox had a player contract with Mark Buehrle that was recorded in its accounting records at $7,600,000. The Cubs traded Dempster to the Sox for Buehrle by
(S.O. 5) In an exchange of no commercial substance of nonmonetary assets that results in a gain, the gain is totally deferred when Cash No Cash Is Received Is Received A ies Yes B. No Yes G. ies No D: No No
(S.O. 5) The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded at:A. the fair value of the asset given up, and a gain or loss is recognized.B. the fair value of the asset given up, and a gain but not a loss
(S.O. 5) When boot is involved in an exchange having commercial substance:A. gains or losses are recognized in their entirety.B gain or loss is computed by comparing the fair value of the asset received with the fair value of the asset given up.Cc: only gains should be recognized.D. only losses
(S.O. 5) Which of the following nonmonetary exchange transactions represents a culmination of the earning process?A. Exchange of assets with no difference in future cash flows.B. Exchange of products by companies in the same line of business with no difference in future cash flows.C. Exchange of
(S.O. 5) When a property is acquired by a company by issuance of its actively traded common stock, the cost of the property is properly measured by the:A. par value of the stock.B. stated value of the stock if it is in excess of the par value.C. par value or stated value of the stock whichever is
(S.O. 5) When a group of plant assets are purchased for a lump sum purchase price, it would be 13, 14.appropriate to determine fair value using:An Assessed Insurance Valuation for Independent Appraisal Property Taxes Appraisal A. Yes No Yes B. No Yes Yes CG WES nies Yes Ds Yes Wes No
(S.O. 4) On January 1, 2012, Probst, Inc. signed a contract to have MCL construct a major plant Lt facility at a cost of $5,000,000. It was estimated that it would take two years to complete the project.In addition, Probst financed the construction costs on January 1, 2012 by borrowing $5,000,000
(S.O. 4) The capitalization of interest costs is justified as being necessary in order to fulfill the:Conservatism concept.Economic entity assumption.Revenue recognition principle. y GOP Historical cost principle.
(S.O. 4) If land is purchased as a site for a structure (such as a plant site), interest costs capitalized during the period of construction are part of the cost of the:Plant Land A. Yes Yes Be Yes No&. No No D. No Yes
(S.O. 4) Which of the following is not a condition that must be satisfied before interest capitalization can begin on a qualifying asset?Interest cost is being incurred.Expenditures for the assets have been made.The interest rate is equal to or greater than the company's cost of capital.Activities
(S.O. 4) Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant, and equipment?Capitalize only the actual interest costs incurred during construction. t Charge construction with all costs of funds employed, whether
(S.O. 3) To be consistent with the historical cost principle, overhead costs incurred by an enterprise constructing its own building should be:A. allocated on the basis of lost production.B. eliminated completely from the cost of the asset.C. allocated on an opportunity cost basis.D. allocated on a
(S.O. 2) On January 15, 2012, Thorne Corporation purchased a parcel of land as a factory site for ¢$100,000. An old building on the property was demolished, and construction began on a new building which was completed on October 18, 2012. Costs incurred during this period are listed
(S.O. 2) Stacia Theater Corporation recently purchased the Robinson Theater and the land on which it is located. Stacia plans to raze the building immediately and build a new modern theater on the site.The cost to raze the Robinson Theater should be:A. written off as an extraordinary loss in the
(S.O. 2) Which of the following is not a necessary characteristic for an item to be classified as property, plant, and equipment?A. Usually subject to depreciation.B. Characterized by physical substance.Cc: Can be used in operations for at least 5 years.iD: Not acquired for resale.
(S.O. 2) Historical cost is the basis advocated for recording the acquisition of property, plant, and equipment for all of the following reasons except:at the date of acquisition, cost reflects fair value.property, plant, and equipment items are always acquired at their original historical
(S.O. 7) If an asset still can be used even though it is fully depreciated, it may be kept on the books at historical cost less depreciation, or the asset may be carried at scrap value.
(S.O. 7) Gains and losses on the retirement of property, plant, and equipment should be shown in the income statement as extraordinary items.
(S.O. 6) Ifa capital expenditure related to a machine increases the useful life but does not improve its quality, the expenditure may be debited to accumulated depreciation rather than to the asset account.
(S.O. 6) By definition, any addition to a building or machine is capitalized because a new asset has been created.
(S.O. 6) Once an asset has been placed into productive use, the major criterion used to determine whether an expenditure should be capitalized or expensed is the significance of that expenditure in relation to the original cost.
(S.O. 5) The recommended accounting treatment for donated property, plant, and equipment represents a departure from the cost principle.
(S.O. 5) In an exchange of no commercial substance of assets where there is a gain situation and cash is received in the amount of $25,000 and the fair value of other assets received is $70,000, the recognized gain is limited by the use of a formula.
(S.O. 5) When an exchange of no commercial substance of nonmonetary assets results in a gain and insignificant boot is included as a part of the transaction, the gain to be recognized is limited to the amount of the boot received.
(S.O. 5) Gains and losses on the exchange of nonmonetary assets are computed by comparing the book value of the asset given up with the fair value of the asset given up.
(S.O. 5) If an exchange transaction involving no commercial substance of nonmonetary assets results in a loss, the loss is recognized immediately, even when boot is included as a part of the transaction.
(S.O. 5) If an exchange of nonmonetary assets occurs and the exchange has commercial substance, it is presumed that the earnings process related to these assets is completed.
(S.O. 5) In general, because the exchange of nonmonetary assets does not constitute a sale by either party involved in the transaction, the accounting should be based on the book value of the assets involved.
(S.O. 5) The purpose of imputed interest is to approximate the interest rate of a deferred purchase contract when one is not expressly stated.
(S.O. 5) Equipment purchased through the use of deferred payment contracts should be accounted for at the present value of the contract.
(S.O. 5) An asset should be recorded at the fair value of the consideration given up to acquire it or at its fair market value, whichever is higher.
(S.O. 4) The interest incurred on the specific borrowings is used for the portion of weighted-average accumulated expenditures that is less than or equal to any amounts borrowed specifically to finance construction of the assets.
(S.O. 4) The amount of interest to be capitalized is the higher of actual interest cost incurred during the period or avoidable interest.
(S.O. 4) Land that is not being developed qualifies for interest capitalization.
(S.O. 4) The interest costs on funds used to acquire an asset should not be capitalized even if a significant period of time is required to bring the asset to a condition or location necessary for its intended use.
(S.O. 3) If the allocation of overhead to self-constructed assets results in an asset cost that is greater than the cost that would be charged by an independent producer, the excess overhead should be recorded as a period loss.
(S.O. 2) When land has been purchased for the purpose of constructing a new building, all costs incurred in connection with preparing the land for excavation are considered building costs.
(S.O. 2) The cost of items classified as property, plant, and equipment should include all expenditures related to the asset incurred during the first three months of the asset's useful life.
(S.O. 2) Use of the current replacement cost method to account for property, plant and equipment would most likely result in the recognition of gains and losses prior to the time the asset is sold.
(S.O. 2) The cash or cash equivalent price of items classified as property, plant and equipment best measures the value of the asset on the date of acquisition.
(S.O. 2) A building owned by a corporation is always classified as property, plant and equipment.
(S.O.6) Which of the following is not a reason the retail inventory method is used widely:A. as a control measure in determining inventory shortages.B. for insurance information.c: to permit the computation of net income without a physical count of inventory.D. to defer income tax liability.
(S.O. 6) If the ending inventory is to be valued at the lower of cost or market, what is the cost-to-retail ratio?re $221,000/$362,000 B: $221,000/$360,000 C, $221,000/$358,000 D. $221,000/$357,000
(S.O.6) What is the ending inventory at retail?A. $66,000 B. $67,000 Ce $69,000 D. $71,000
(S.O. 6) Under the retail inventory method, purchase returns and allowances are normally considered& a reduction of price at:Cost Retail A. No No B. No Yes Cc: Yes No D. Yes Yes
(S.O. 6) One of the basic assumptions of the conventional retail method is that:net markups apply to the goods sold.net markdowns apply to the total goods available for sale.net markdowns apply only to the goods sold.the cost to retail percentage is unchanged from that of prior years.
(S.O. 6) Phair Co., a specialty clothing store, uses the retail inventory method. The following relates to 2012 operations:Inventory, January 1, 2012, at cost $14,200 Inventory, January 1, 2012 at sales price 20,100 Purchases in 2012 at cost 32,600 Purchases in 2012 at sales price 50,000 Additional
(S.O. 6) The retail method has been used by a retail department store during its first year of operations. As of the end of the year, compare (A) the markdowns with (B) the markdown cancellations:A will be equal to B.A will be less than or equal to B.A will be greater than or equal to B.vOw> A
(S.O. 6) To determine an inventory valuation that approximates lower of average cost or market using the retail method, the computation of the cost to retail percentage should:include markups but not markdowns.include markups and markdowns.include markdowns but not markups.yow> exclude markups but
(S.0. 6) Which of the following is not required when using the rehtaitl ienvNee n tory method: ?A. All inventory items must be categorized according to the retail markup percentage which reflects the item's selling price.B. A record of the total cost and retail value of goods purchased.C. A record
(S.O. 5) Devers Company sells its product for $25.00 per unit. This price is set to yield a gross margin on selling price of 25%. What is the cost of the product and what is the markup on cost for the product?Cost Markup of Product on Cost A. $ 6.25 40%B. $ 9.75 715%(Gis $12.50 20%D. $18.75 33%
(S.O. 5) On January 31, fire destroyed the entire inventory of Mojares Company. The following data are available:Sales for January $60,000 Inventory, January 1 10,000 Purchases for January 55,000 Markup on cost 25%The amount of the loss is estimated to be:A. $17,000.B. $20,000.G; $15,000.BY:
(S.0O. 5) Which of the following is not a basic assumption of the gross profit method?A. The beginning inventory plus the purchases equal total goods to be accounted for.B. Goods not sold must be on hand.C. If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory
(S.O. 4) Maricel Company has a noncancelable purchase commitment to buy 10,000 units of a particular product during the next three years. The contract was signed one year prior to the first year in which the purchase commitment must be honored. At the end of the year in which the contract was

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Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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