ACC 206 Week 2 Quiz – Strayer NEW



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CHAPTER10

PLANTASSETS,NATURALRESOURCES,ANDINTANGIBLEASSETS



CHAPTERSTUDYOBJECTIVES


1.Describehowthecostprincipleappliestoplantassets.

2.Explaintheconceptofdepreciation..

3.Computeperiodicdepreciationusingdifferentmethods.

4.Describetheprocedureforrevisingperiodicdepreciation.

5.Distinguishbetweenrevenueandcapitalexpenditures,andexplaintheentriesforeach.

6.Explainhowtoaccountforthedisposalofaplantasset.

7.Computeperiodicdepletionofnaturalresources.

8.Explainthebasicissuesrelatedtoaccountingforintangibleassets.

9.Indicatehowplantassets,naturalresources,andintangibleassetsarereported.

10.Explainhowtoaccountfortheexchangeofplantassets.


TRUE-FALSESTATEMENTS


1.     Allplantassets(fixedassets)mustbedepreciatedfor accountingpurposes.

2.     Whenpurchasingland,thecostsforclearing,draining,filling,andgradingshouldbe chargedto aLandImprovementsaccount.

3.     Whenpurchasingdeliveryequipment,salestaxesandmotorvehiclelicensesshouldbe chargedto DeliveryEquipment.

4.     Landimprovementsaregenerallychargedto theLandaccount.

5.     Oncecostisestablishedforaplantasset,itbecomes thebasis ofaccounting fortheasset unlesstheassetappreciatesinvalue,inwhichcase,marketvaluebecomesthebasisfor accountability.

6.     Thebookvalueof aplantassetisalwaysequaltoitsfairmarketvalue.

7.     Recordingdepreciationonplantassetsaffectsthebalancesheetandtheincome statement.

8.     Thedepreciablecostof aplant asset is itsoriginalcostminusobsolescence.

9.     Recordingdepreciationeachperiodisanapplicationof thematchingprinciple.

10.     TheAccumulatedDepreciationaccountrepresentsacashfundavailabletoreplaceplant assets.

11.     Incalculatingdepreciation,bothplantassetcost andusefullifearebasedonestimates.

12.     Usingtheunits-of-activitymethodofdepreciatingfactoryequipmentwillgenerallyresultin moredepreciationexpensebeingrecordedoverthelifeoftheassetthanifthestraight-line method hadbeenused.

13.     Salvagevalueisnotsubtractedfromplantassetcostindeterminingdepreciationexpense underthedeclining-balancemethodofdepreciation.

14.     Thedeclining-balancemethodofdepreciationiscalledanaccelerateddepreciation methodbecauseitdepreciatesanassetinashorterperiodoftimethantheasset'suseful life.

15.     Underthedouble-declining-balancemethod,thedepreciationrateusedeachyear remainsconstant.

16.     TheIRSdoesnotrequirethetaxpayertousethesamedepreciationmethodonthetax returnthatisusedinpreparingfinancialstatements.

17.     Achangeintheestimatedusefullifeofaplantassetmaycauseachangeintheamount ofdepreciationrecognizedinthecurrentandfutureperiods,but nottopriorperiods.

18.     Achangeintheestimatedsalvagevalueofaplantassetrequiresarestatementofprior years'depreciation.

19.     Todetermineanewdepreciationamountafterachangeinestimateofaplantasset's useful life, the asset'sremaining depreciablecost isdividedbyits remainingusefullife.

20.     Additionsand improvementstoaplantassetthatincreasethe asset'soperatingefficiency, productive capacity,or expectedusefullife aregenerallyexpensed intheperiodincurred.

21.     Capitalexpendituresareexpendituresthatincreasethecompany'sinvestmentin productive facilities.

22.     Ordinaryrepairs shouldberecognizedwhenincurredas revenueexpenditures.

23.     A characteristicofcapitalexpendituresis that theexpendituresoccurfrequently duringthe period ofownership.

24.     Onceanassetisfullydepreciated,noadditionaldepreciationcanbetakeneventhough theasset is still beingusedbythebusiness.

25.     Thefairmarketvalueof a plantasset isalwaysthesameasits bookvalue.

26.     Iftheproceedsfromthesaleofaplantassetexceeditsbookvalue,againondisposal occurs.

27.     Alossondisposalofaplantassetcanonlyoccurifthecashproceeds received fromthe assetsaleis lessthanthe asset'sbook value.

28.     Thebookvalueofaplantassetistheamount originallypaid fortheassetlessanticipated salvagevalue.

29.     Alossondisposal ofaplantasset asaresult ofasaleoraretirementiscalculated inthe sameway.

30.     A plantassetmustbefullydepreciatedbeforeit canberemovedfromthe books.

31.     Ifaplantasset issoldata gain,thegain ondisposal shouldreducethecost ofgoodssold section of the incomestatement.

32.     Depletioncostperunitiscomputedbydividingthetotalcostofanaturalresourcebythe estimatednumberof unitsintheresource.

33.     TheAccumulatedDepletionaccountisdeductedfromthecostofthenaturalresourcein thebalancesheet.

34.     Depletionexpenseforaperiodisonlyrecognizedonnaturalresourcesthathavebeen extractedandsoldduringtheperiod.

35.     Naturalresourcesarelong-livedproductiveassetsthatareextractedinoperationsand arereplaceableonlybyanactof nature.

36.     Thecostofnaturalresourcesisnotallocatedtoexpensebecausethenaturalresources arereplaceableonlybyanactof nature.

37.     Conceptually,thecostallocationproceduresfornaturalresourcesparallelsthatofplant assets.

38.     Naturalresourcesincludestandingtimberandundergrounddepositsofoil,gas,and minerals.

39.     Ifanacquiredfranchiseorlicensehasanindefinitelife,thecostoftheassetisnot amortized.

40.     Whenanentirebusinessispurchased,goodwillistheexcessofcostoverthebookvalue of thenet assetsacquired.

41.     Researchand development costswhich result in asuccessful product which ispatentable arechargedtothePatentaccount.

42.     Thecostof apatentmustbeamortizedovera 20-yearperiod.

43.     Thecostofapatentshouldbeamortizedoveritslegallifeorusefullife,whicheveris shorter.

44.     The balancesofthe majorclassesofplantassetsand accumulated depreciationby major classes shouldbedisclosedinthebalance sheetornotes.

45.     Theassetturnover ratioiscalculated astotalsales dividedbyendingtotalassets.

46.     Researchanddevelopmentcostscanbeclassifiedasaproperty,plant,andequipment itemoras an intangibleasset.

a47.     An exchangeofplantassetshas commercial substanceifthe futurecashflows change as a resultofthe exchange.

a48.     Companiesrecordagainorlossontheexchangeofplantassetsbecausemost exchangeshavecommercialsubstance.

a49.     Whenplantassetsareexchanged,thecostofthenewassetisthebookvalueoftheold assetplus anycashpaid.

Additional True-FalseQuestions

50.     Whenconstructingabuilding,acompanyispermittedtoincludetheacquisitioncostand certaininterest costs incurredinfinancingtheproject.

51.     Recognitionofdepreciationpermitstheaccumulationofcashforthereplacementofthe asset.

52.     Whenanassetispurchasedduringtheyear,itisnotnecessarytorecorddepreciation expense inthefirst yearunderthedeclining-balancedepreciationmethod.

53.     Depletionexpenseisreported intheincomestatementas anoperatingexpense.

54.     Goodwillisnotrecognizedinaccountingunlessitisacquiredfromanotherbusiness enterprise.

55.     Researchanddevelopmentcostsshouldbechargedtoexpensewhenincurred.

56.       Alossontheexchangeofplantassetsoccurswhenthefairmarketvalueoftheoldasset islessthanitsbookvalue.







MULTIPLECHOICEQUESTIONS


57.     Thecostof apurchasedbuildingincludes allofthefollowingexcept a.closingcosts.
b.realestatebroker's commission. c.remodeling costs.
d.Allof theseareincluded.

58.     Acompanypurchasedlandfor$90,000cash.Realestatebrokers'commissionwas $5,000and$7,000wasspentfordemolishinganoldbuildingonthelandbefore constructionofanewbuildingcouldstart.Underthecostprinciple,thecostoflandwould be recordedat
a.$97,000. b.$90,000. c.$95,000. d.$102,000.

59.     Whichoneofthefollowingitemsisnotconsideredapartofthecostofatruckpurchased for businessuse?
a.Salestax
b.Trucklicensec.Freightcharges
d.Costofletteringonsideoftruck

60.     Whichofthefollowingassetsdoesnotdeclineinservicepotentialoverthecourseofits useful life?
a.Equipment b.Furnishings c.Land
d.Fixtures

61.     Thefoursubdivisions forplantassetsare
a.land,landimprovements,buildings,andequipment. b.intangibles,land,buildings,andequipment.
c.furnishingsandfixtures,land,buildings, andequipment. d.property,plant,equipment,andland.

62.     Thecostof landdoesnotinclude
a.realestatebrokers' commission. b.annualpropertytaxes.
c.accruedpropertytaxesassumedbythepurchaser. d.title fees.

63.     FeeneyClinicpurchaseslandfor$130,000cash.Theclinicassumes$1,500inproperty taxesdueontheland.Thetitleandattorneyfeestotaled$1,000.Theclinichastheland gradedfor $2,200.WhatamountdoesFeeneyClinicrecordasthecostforthe land?
a.$132,200 b.$130,000 c.$134,700 d.$132,500

64.     BelleCompanybuyslandfor$50,000on12/31/07.Asof3/31/08,thelandhas appreciatedinvalueto$50,700.On12/31/08,thelandhasanappraisedvalueof $51,800.Bywhatamountshouldthe Landaccount beincreasedin 2008?
a.$0b.$700
c.$1,100 d.$1,800

65.     PineCompanyacquireslandfor$86,000cash.Additional costsareasfollows:

Removalof shed                                        $300 Fillingandgrading                                      1,500 Salvagevalue oflumberofshed                   120 Brokercommission                                     1,130 Pavingofparkinglot                                 10,000 Closingcosts                                                 560

Pinewillrecordtheacquisitioncostof thelandas a.$86,000.
b.$87,690. c.$89,610. d.$89,370.

66.     ShawneeHospitalinstallsanewparkinglot.Thepavingcost$30,000andthelightsto illuminatethenewparkingareacost$15,000.Whichofthefollowingstatementsistrue with respecttotheseadditions?
a.$30,000shouldbedebitedtothe Landaccount.
b.$15,000shouldbedebitedtoLandImprovements. c.$45,000shouldbedebitedtotheLandaccount.d.$45,000shouldbedebitedtoLandImprovements.
10-10

67.     Landimprovementsshouldbedepreciatedovertheusefullife of the a.land.
b.buildingsontheland.
c.land or landimprovements,whicheverislonger. d.landimprovements.

68.     GeneralMoldingisbuildinganewplantthatwilltakethreeyearstoconstruct.The constructionwillbefinancedinpartbyfundsborrowedduringtheconstructionperiod. Therearesignificantarchitectfees,excavationfees,andbuildingpermitfees.Whichof the followingstatementsis true?
a.Excavationfeesarecapitalizedbut building permitfeesarenot. b.Architectfeesarecapitalizedbut buildingpermitfeesarenot.
c.Interestiscapitalizedduring theconstructionas partof thecostofthebuilding.
d.The capitalizedcost is equaltothecontractprice tobuildthe plant less any intereston borrowed funds.

69.     Acompanypurchasesaremotesitebuildingforcomputeroperations.Thebuildingwillbe suitableforoperationsaftersomeexpenditures.Thewiringmustbereplacedtocomputer specifications.Theroofisleakyandmustbereplaced.Allroomsmustberepaintedand recarpetedandtherewillalsobesomeplumbingworkdone.Whichofthefollowing statements is true?
a.Thecost ofthebuildingwillnot includetherepaintingandrecarpeting costs. b.Thecostofthebuildingwillincludethecostof replacing theroof.
c.Thecostofthebuildingisthepurchasepriceofthebuilding,whiletheadditional expendituresareallcapitalizedas BuildingImprovements.
d.Thewiringis partofthecomputercosts,notthebuildingcost.

70.     CarleyCompany purchasesanewdeliverytruck for$45,000.Thesalestaxesare$3,000. Thelogo of thecompanyis painted on thesideofthe truckfor$1,200.Thetrucklicenseis $120.Thetruckundergoessafetytestingfor$220.WhatdoesCarleyrecordasthecostof thenewtruck?
a.$49,540 b.$49,420 c.$48,000 d.$47,420

71.       Allof thefollowingfactorsincomputin

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