Question 1

Cost allocation of an intangible asset is referred to as

Accepted Answer

A)  amortization.
B)  depletion.
C)  accretion.
D)  capitalization.E) All of the above
F) A) and B)

Question 2

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

Accepted Answer

A) True 
 B)False

Question 3

The cost of a purchased building includes all of the following except

Accepted Answer

A)  closing costs.
B)  real estate broker's commission.
C)  remodeling costs.
D)  All of these answers are correct.E) A) and C)
F) B) and C)

Question 4

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

Accepted Answer

A) True 
 B)False

Question 5

Intangible assets

Accepted Answer

A)  should be reported under the heading Property, Plant, and Equipment.
B)  are not reported on the balance sheet because they lack physical substance.
C)  should be reported as Current Assets on the balance sheet.
D)  should be reported as a separate classification on the balance sheet.E) A) and C)
F) B) and C)

Question 6

If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,

Accepted Answer

A)  total depletion on the mine is based on the 1,200,000 tons.
B)  depletion expense is recognized on the 1,500,000 tons extracted.
C)  depletion expense is recognized on the 1,200,000 tons extracted and sold.
D)  a separate accumulated depletion account is set up to record depletion on the 300,000 tons extracted but not sold.E) A) and D)
F) None of the above

Question 7

All of the following intangible assets are amortized except

Accepted Answer

A)  copyrights.
B)  limited-life franchises.
C)  patents.
D)  trademarks.E) A) and D)
F) B) and C)

Question 8

IFRS allows companies to revalue plant assets to fair value. Which of the following statements is true regarding revaluation?

Accepted Answer

A)  At the time a company purchases an asset it must decide whether to follow revaluation procedures for the asset; once the election is made, it must be followed for the remainder of the asset's useful life.
B)  Assets that are experiencing rapid price changes must be revalued quarterly, other assets can be revalued on an annual basis.
C)  The journal entry to record a revaluation when the asset's price has increased includes a credit to the account revaluation surplus.
D)  All of the choices are correct regarding revaluation of plant assets.E) B) and C)
F) None of the above

Question 9

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

Accepted Answer

A) True 
 B)False

Question 10

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability.

Accepted Answer

A) True 
 B)False

Question 11

The fair value of a plant asset is always the same as its book value.

Accepted Answer

A) True 
 B)False

Question 12

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

Accepted Answer

A)  $ 8,400.
B)  $18,667.
C)  $14,000.
D)  $11,200.E) B) and C)
F) C) and D)

Question 13

Land improvements should be depreciated over the useful life of the

Accepted Answer

A)  land.
B)  buildings on the land.
C)  land or land improvements, whichever is longer.
D)  land improvements.E) A) and D)
F) B) and C)

Question 14

Units-of-activity is an appropriate depreciation method to use when

Accepted Answer

A)  it is impossible to determine the productivity of the asset.
B)  the asset's use will be constant over its useful life.
C)  the productivity of the asset varies significantly from one period to another.
D)  the company is a manufacturing company.E) B) and C)
F) None of the above

Question 15

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

Accepted Answer

A)  Salvage value
B)  Estimated useful life
C)  Cash needed to replace the plant asset
D)  CostE) C) and D)
F) B) and D)

Question 16

The cost of successfully defending a patent in an infringement suit should be

Accepted Answer

A)  charged to Legal Expenses.
B)  deducted from the book value of the patent.
C)  added to the cost of the patent.
D)  recognized as a loss in the current period.E) None of the above
F) B) and C)

Question 17

If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized.

Accepted Answer

A) True 
 B)False

Question 18

During 2015, Stein Corporation reported net sales of $5,000,000 and net income of $2,100,000. Stein also reported beginning total assets of $1,000,000 and ending total assets of $1,500,000. Stein's asset turnover is

Accepted Answer

A)  5.0 times.
B)  4.0 times.
C)  3.3 times.
D)  1.7 times.E) A) and B)
F) A) and C)

Question 19

Improvements are

Accepted Answer

A)  revenue expenditures.
B)  debited to an appropriate asset account when they increase useful life.
C)  debited to accumulated depreciation when they do not increase useful life.
D)  debited to an appropriate expense account when they do not increase useful life.E) A) and B)
F) None of the above

Question 20

A patent should

Accepted Answer

A)  be amortized over a period of 20 years.
B)  not be amortized if it has an indefinite life.
C)  be amortized over its useful life or 20 years, whichever is longer.
D)  be amortized over its useful life or 20 years, whichever is shorter.E) A) and B)
F) None of the above

Exam 9: Plant Assets, Natural Resources, and Intangible Assets

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

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Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

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The fair value of a plant asset is always the same as its book value.

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During 2015, Stein Corporation reported net sales of $5,000,000 and net income of $2,100,000. Stein also reported beginning total assets of $1,000,000 and ending total assets of $1,500,000. Stein's asset turnover is

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Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability.

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The cost of a purchased building includes all of the following except

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Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

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Units-of-activity is an appropriate depreciation method to use when

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Land improvements should be depreciated over the useful life of the

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The cost of successfully defending a patent in an infringement suit should be

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If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,

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A patent should

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All of the following intangible assets are amortized except

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If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized.

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Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

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Cost allocation of an intangible asset is referred to as

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Intangible assets

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A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

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Improvements are

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IFRS allows companies to revalue plant assets to fair value. Which of the following statements is true regarding revaluation?

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