Question 13

On April 1, a machine with a useful life of 4 years and a residual value of $12,000 was purchased for $87,000. What is depreciation expense for the second year under double declining balance depreciation assuming a December 31 year end?

Select one:

a. $21,750

b. $18,750

c. $27,188

d. $23,438

Question 14

If a fixed asset with an original cost of $18,000 and accumulated depreciation of $12,000 is sold for $15,000, the company must __________.

Select one:

a. Recognize a loss on the income statement under other expenses

b. Recognize a loss on the income statement under operating expenses

c. Recognize a gain on the income statement under other revenues

d. Gains and losses are not to be recognized upon the sell of fixed assets

Question 15

If a fixed asset is sold and the book value is less than cash received, the company must __________.

Select one:

a. Recognize a loss on the income statement under other expenses

b. Recognize a loss on the income statement under operating expenses

c. Recognize a gain on the income statement under other revenues

d. Gains and losses are not to be recognized upon the sell of fixed assets

Question 16

A gain is recorded on the sale of fixed assets when __________.

Select one:

a. The asset is sold for a price less than its book value

b. The assets book value is less than the cash received

c. A gain on sale is not permitted to be recognized

d. Accumulated depreciation is less than the cash received

Question 17

A company sold a delivery truck for $18,000 cash. The truck cost $47,500 and had accumulated depreciation of $36,000 as of the date of sale. The entry to record the sale would include __________.

Select one:

a. An increase in accumulated depreciation for $36,000

b. A decrease in delivery truck for $11,500

c. A loss for $6,500

d. A gain for $6,500

Question 18

The process of transferring the cost of natural resources to an expense is termed __________.

Select one:

a. Depreciation

b. Amortization

d. Depletion

e. Reserve recognition

Question 19

A company acquired mineral rights for $10,000,000 which are estimated at 80,000 tons. During the year 15,000 tons were extracted and sold. How much depletion should be recorded for the year?

Select one:

a. $5,000,000

b. $1,875,000

c. $3,750,000

d. $2,500,000

Question 20

Research and development costs are __________.

Select one:

a. Added to the cost of patents

b. Capitalized under intangible assets

c. Charged to operating expenses

d. Charged to operating expenses only if there is no future benefit

Question 21

Goodwill is equal to the excess of purchase price of an acquired company over the total __________.

Select one:

a. Book value of its assets

b. Book value of its net assets

c. Market value of its assets

d. Market value of its net assets

Question 22

If goodwill is impaired, the write down will __________.

Select one:

a. Decrease net income, assets and owners' equity

b. Decrease net income and assets and have no effect on owners' equity

c. Decrease net income and increase assets and owner's equity

d. Decrease net income and assets, but increase owners' equity

Question 23

Intangible assets are used in operations but __________.

Select one:

a. Cannot be specifically identified

b. Cannot be sold

c. Lack physical substance

d. Cannot be long-lived

Question 24

The cost of a patent should be amortized over __________.

Select one:

a. 20 years

b. Economic life

c. 20 years or economic life whichever is shorter

d. Only amortized if an impairment occurs

Question 25

A patent was purchased for $670,000 with a legal life of 20 years. Management estimates that the patent has an 8 year economic life. The entry to record amortization would include __________.

Select one:

a. An increase in amortization expense for $33,500

b. An increase in research and development expense for $670,000

c. A decrease in patent for $83,750

d. An increase in accumulated amortization for $670,000