1. multiple choice questions 2. quiz 5,6 redo questions

MULTPIPLE CHOICE CHAP 9: Long-lived Tangible and Intangible assets. 1. Which of the following statements regarding the capitalization is (are) correct? a. capitalizing costs refers to the process of converting assets to expenses. b. if a company builds its own facility, only the cost of materials is capitalized. c. both a) and b) above are true. d. neither a) nor b) above are true. 2. Under the cost principle: a. only reasonable and necessary costs of acquiring an asset should be recorded as a cost of the asset. b. costs of preparing an asset for use should never be recorded as part of the cost of the asset. c. all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset. d. only the actual purchase price of the asset is recorded as the cost of the asset. 3. The main difference between ordinary repairs and extraordinary repairs is: a. ordinary repairs cost less. b. ordinary repairs are expenditures for routine maintenance and upkeep, whereas extraordinary repairs increase an assets economic usefulness in the future through increased efficiency, capacity, or longer life. c. extraordinary repairs only maintain the asset for a short time, whereas ordinary repairs increase the usefulness of assets beyond their original condition. d. extraordinary repairs are expenditures, not expenses. 4. When a company records depreciation it debits: a. liabilities and credits expenses. b. expenses and credits cash. c. expenses and credits a contra-asset account. d. long-lived assets and credits expenses. 5. The book or carrying value of an asset is: a. its acquisition cost less the accumulated depreciation from the acquisition date to the balance sheet date. b. its acquisition cost plus accumulated depreciation from the acquisition date to the balance sheet date. c. the amount that could be obtained for the asset on the balance sheet date if it were sold. d. the annual cost of carrying the asset in inventory. 6. The widget tool and die company buys a $400,000 stamping machine that has an estimated residual value of $20,000. the company expects the machine to produce two million units. it makes 400,000 units during the current period. if the units-of-production method is used, the depreciation expense for this period is: a. $80,000. b. $400,000. c. $76,000. d. $380,000. 12-1 7. A company buys a piece of equipment for $48,000. the equipment has a useful life of ten years. using the double-declining-balance method, the company's depreciation expense in the first year would be: a. $9,600. b. $12,000. c. $4,800. d. $24,000. 8. A piece of equipment was acquired on january 1, 2004, at a cost of $22,000, with an estimated residual value of $2,000 and an estimated useful life of four years. the company uses the doubledeclining-balance method. what is its book value at december 31, 2005? a. $5,500 b. $10,000 c. $11,000 d. $12,000 9. A company sells a piece of equipment half-way through the accounting period. the straight-line rate of depreciation on the equipment is $40,000 a year. before recording the asset sale, the company should debit: a. depreciation expense for $40,000 and credit long-lived assets for $40,000. b. accumulated depreciation for $40,000 and credit cash for $40,000. c. depreciation expense for $20,000 and credit accumulated depreciation for $20,000. d. cash for $20,000 and credit depreciation expense for $20,000. 10. a trucking company sold its fleet of trucks for $55,000. the trucks had originally cost $1,410,000 and had accumulated depreciation of $1,269,000 through the date of disposal. what gain or loss did the trucking company record when it sold the fleet of trucks? a. gain of $86,000. b. gain of $55,000. c. loss of $55,000. d. loss of $86,000. 11. Goodwill: a. should be treated like most other intangible assets and amortized over a useful life of not more than 40 years. b. is an accounting measurement of how well a company's employees behave towards the company's customers. c. should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets. d. is recorded when the purchasers of a business pay more than the fair market value of the assets purchased. 12-2 12. The company has net sales revenue of $3.6 million during 2006. the company's records also included the following information: what is the company's fixed asset turnover ratio for 2006? a. 18.00 b. 1.33 c. 1.00 d. 1.50 13. Company a uses an accelerated depreciation method while company b uses the straight-line method for an asset of the same cost and useful life. which of the following statements is true? a. company a will have higher depreciation expense in the early years but company b will have the higher expense towards the end of the asset's useful life. b. company a will consistently have higher depreciation expense until residual value is reached. c. company b will have higher depreciation expense in the early years but company a will have the higher expense towards the end of the asset's useful life. d. company b will consistently have higher depreciation expense until residual value is reached. 14. The gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation. one half of the total cost is paid in cash; the other half is financed. how should the company record this transaction? a. debit cash for $250,000, debit notes payable for $250,000, and credit equipment for $500,000. b. debit equipment for $500,000, credit cash for $250,000, and credit notes payable for $250,000. c. debit cash for $250,000, debit notes payable for $250,000 credit equipment for $450,000, and credit expenses for $50,000. d. debit equipment for $450,000, debit expenses for $50,000, credit cash for $250,000, and credit notes payable for $250,000. 15. Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life. Other things being equal, which of the following is true? a. company a will have higher net income in the early years but company b will have higher net income towards the end of the asset's useful life. b. company a will consistently have the larger net income until residual value is reached. c. company b will have higher net income in the early years but company a will have higher net income towards the end of the asset's useful life. d. company b will consistently have the larger net income until residual value is reached. 12-3 Name__________________________________Quiz 5&6 REDO Acc 2013 Spring 12 26 pts #_____ 1. (6 pts) Precious Jewel Company purchased a company with a building and equipment for $650,000, using $75,000 cash and the balance was financed with a note. The fair market value of the equipment was $200,000 and the fair market value of the building was $300,000. Record the purchase. 2. (5 pts) Kit Kat's Candy shop sold a shelving unit for $400 cash. Kit Kat had purchased the shelving unit for $1000 several years ago. The shelving unit currently has a book value of $600. Record the sale of the shelving unit by Kit Kat and indicate the impact of the accounting equation. Account Dr Cr Assets Liabilities Stock Eq. **************************************************************************************** 3. (8 pts - 2pts each) Kit Kat Corporation bought a machine at the beginning of the year at a cost of $37,600. The estimated useful life was ten years, and the residual value was $1,600. Assume that the estimated productive life of the machine is 90,000 units. Annual production was: year 1: 22,000 units; year 2: 20,000 units; year 3: 18,000 units; and year 4: 12,000 units. Each of these questions is independent of the others. ( Show your work- Work not shown will EARN NO points especially if ANSWER IS INCORRECT) a. Using the straight line method of depreciation, what is the Book Value at the end of year 2? b. Using units of production method of depreciation, what is the depreciation expense at the end of year 2? c. Using Double Declining Balance, what is the depreciation expense for year 3? d. Using Double Declining Balance, what is the book value at the end of year 3? ******************************************************************************************************************* 4. (2 pts) Your company has net sales revenue of $36 million during the year. At the beginning of the year, fixed assets are $8 million. At the end of the year, fixed assets are $10 million. What is the fixed asset turnover ratio? 5. (2 pts) Your company pays $620,000 for a patent that has 10 years remaining. Calculate and record the amortization of the patent. Account Dr Cr Assets Liabilities Stock Eq. Name__________________________________Quiz 5&6 REDO Acc 2013 Spring 12 26 pts #_____ 1. (6 pts) Precious Jewel Company purchased a company with a building and equipment for $650,000, using $75,000 cash and the balance was financed with a note. The fair market value of the equipment was $200,000 and the fair market value of the building was $300,000. Record the purchase. 2. (5 pts) Kit Kat's Candy shop sold a shelving unit for $400 cash. Kit Kat had purchased the shelving unit for $1000 several years ago. The shelving unit currently has a book value of $600. Record the sale of the shelving unit by Kit Kat and indicate the impact of the accounting equation. Account Dr Cr Assets Liabilities Stock Eq. **************************************************************************************** 3. (8 pts - 2pts each) Kit Kat Corporation bought a machine at the beginning of the year at a cost of $37,600. The estimated useful life was ten years, and the residual value was $1,600. Assume that the estimated productive life of the machine is 90,000 units. Annual production was: year 1: 22,000 units; year 2: 20,000 units; year 3: 18,000 units; and year 4: 12,000 units. Each of these questions is independent of the others. ( Show your work- Work not shown will EARN NO points especially if ANSWER IS INCORRECT) a. Using the straight line method of depreciation, what is the Book Value at the end of year 2? b. Using units of production method of depreciation, what is the depreciation expense at the end of year 2? c. Using Double Declining Balance, what is the depreciation expense for year 3? d. Using Double Declining Balance, what is the book value at the end of year 3? ******************************************************************************************************************* 4. (2 pts) Your company has net sales revenue of $36 million during the year. At the beginning of the year, fixed assets are $8 million. At the end of the year, fixed assets are $10 million. What is the fixed asset turnover ratio? 5. (2 pts) Your company pays $620,000 for a patent that has 10 years remaining. Calculate and record the amortization of the patent. Account Dr Cr Assets Liabilities Stock E