Accounting Basics

1. The cash inflows generated from a long-term asset will be received over several future periods.

True

False

2. Depreciation expense is a measure of an asset's increase in value due to wear and tear.

True

False

3. All patents have useful and economic lives of 20 years..

True

False

4) Which of the following is not a tangible capital asset?

a) buildings

b) land

c) copyrights

d) equipment

5) Which of the following would not be classified as property, plant, and equipment?

a) buildings in current use

b) land purchased for resale

c) machinery

d) tools used in production

6) A machine was purchased for $125,500 during August; the cost included $750 in supplies that would be used with the new machine. The company had to pay $6,000 for to have the machine shipped. The capitalized cost of the equipment is

a) $125,500.

b) $126,250.

c) $131,500.

d) $132,250.

7) The ultimate sales value of a long-term asset is referred to as its

a) residual value.

b) value in use.

c) net book value.

d) historical value.

8) The depreciable amount of an asset is defined as the

a) original cost less residual value.

b) original cost less depreciation.

c) original cost less accumulated depreciation.

d) original cost.

9) The most commonly used method of depreciation is

a) straight-line.

b) capital cost allowance.

c) declining-balance.

d) units-of-activity.

10) The correct entry to record the annual depreciation expense for a long-term asset is

a) Dr. Accumulated depreciation.

b) Dr. Depreciation expense, Cr. Accumulated depreciation.

c) Dr. Accumulated depreciation, Cr. Long-Term asset.

d) Dr. Depreciation expense, Cr. Long-Term asset.