College Accounting A Practical Approach Jeffrey Slater 13th Edition Test Bank

College Accounting A Practical Approach Jeffrey Slater  13th Edition  Test Bank
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College Accounting, 13e (Slater)
Chapter 16 Accounting for Property, Plant, Equipment, and Intangible Assets

16.1 Learning Objective 16-1

1) Which of the following assets would be classified as property, plant, and equipment?
A) Patent
B) Copyright
C) Goodwill
D) Furniture
Answer: D
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

2) The amount to include in the entry to record the cost of a property, plant, and equipment asset would NOT include:
A) acquisition cost.
B) routine maintenance costs.
C) installation.
D) All of these answers are correct.
Answer: B
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

3) The entry to record the purchase of a machine on account that costs $15,000, installation costs, $1,500, and freight, $700, would be:
A) debit Machinery $15,000; credit Accounts Payable $15,000.
B) debit Machinery $15,000; debit Expenses 2,200; credit Accounts Payable $17,200.
C) debit Machinery $17,200; credit Accounts Payable $17,200.
D) debit Machinery $16,500; debit Freight Expense 700; credit Accounts Payable $17,200.
Answer: C
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

4) Which of the following is an example of a land improvement?
A) Shrubbery
B) Fences
C) Paving a parking lot
D) All of these answers are correct.
Answer: D
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

5) Mount Company purchased a machine at an invoice cost of $25,000 subject to terms of 2/10, n/30. The discount was taken. Additional costs were installation, $1000; insurance on the machine after it was in operation, $500. The total cost to be added to the machinery account is:
A) $24,500.
B) $25,500.
C) $26,500.
D) $26,000.
Answer: B
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

6) Strawberry Supreme purchased new baking equipment for $17,000 subject to terms 3/15, n/45. The discount was taken. Additional costs included sales tax $700 and installation $500. The total cost to be added to the equipment account is:
A) $17,000.
B) $18,200.
C) $17,690.
D) $17,190.
Answer: C
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

7) A company purchased new machinery and incurred freight, assembly, and installation costs in addition to the invoice cost of the machinery. These additional costs should be debited to:
A) Miscellaneous Expense.
B) Machinery.
C) Installation Expense.
D) Machinery Expense.
Answer: B
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
8) Which of the following is a non-depreciable asset?
A) Desk chairs
B) Land
C) Computer
D) Building
Answer: B
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

9) The cost of a plant asset was increased for the payment of this years insurance premium. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the periods end assets to be understated.
D) None of these is correct.
Answer: A
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

10) The cost of a plant asset did NOT include installation costs that were expensed. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be understated.
D) Both B and C are correct.
Answer: D
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

11) Assets that are expected to provide benefits for a number of accounting periods are called:
A) current assets.
B) fixed assets.
C) long-term assets.
D) property, plant, and equipment.
Answer: C
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Define accounting terms, accounting concepts and principles
12) Tangible assets include:
A) building.
B) equipment.
C) land.
D) All of the above are correct.
Answer: D
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Define accounting terms, accounting concepts and principles

13) Incidental costs or assessments that should be charged to the Land account include:
A) installing a fence.
B) installing sewers.
C) clearing the property.
D) Both B and C are correct.
Answer: D
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

14) A company purchased new computer equipment from a local vendor. An employee offered to pick up the equipment and received a speeding ticket on his way back to the office. The cost of the speeding ticket should not be charged to the cost of the equipment.
Answer: TRUE
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

15) Assembly costs, and any other costs necessary to get a machine ready for operation, including freight costs, would be added to the cost of the machine.
Answer: TRUE
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16) If there are repairs needed in the process of installation of machine, this should not be charged to the cost of the machine.
Answer: TRUE
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
17) Land Improvements is an asset account that records improvements to land that have a limited life.
Answer: TRUE
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

18) A purchase of land and buildings would require the use of only one asset account, Land and Buildings.
Answer: FALSE
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

19) Land is not depreciated.
Answer: TRUE
Diff: 1
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

20) R.J. Berkshire incurred the following expenditures to buy new equipment:

Invoice, subject to 4% discount $22,000
Installation cost 1,500
Insurance for equipment after installation 300
Sales tax 1,200
Discount taken

The amount the Equipment account will be debited for is ________.
Answer: $23,820 (22000 .96) + 1500 + 1200
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
21) Rockwell Industries purchased a plant asset to be used in its business. The expenditures included:

Cost of machine $10,000
Special concrete base to support machine 400
Freight charges 1,500
Repair cost of damage incurred during installation 600

The Machine account will be debited for ________.
Answer: $11,900 ($10,000 + 400 + 1,500)
Diff: 2
LO: 16-1
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16.2 Learning Objective 16-2

1) The cost of equipment is expensed:
A) at the time it is paid.
B) over the periods that benefit the company.
C) in the period it is purchased.
D) in the period it is sold.
Answer: B
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

2) In the last year of useful life, the salvage value was ignored using double declining-balance depreciation. This error would cause:
A) the periods end assets to be overstated.
B) the periods depreciation expense to be understated.
C) the period end assets to be understated.
D) None of these is correct.
Answer: C
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

3) When calculating declining balance depreciation, the straight-line rate was used instead of double the straight-line rate. In the first year of ownership, this error would cause:
A) the period end assets to be overstated.
B) the periods depreciation expense to be overstated.
C) the period end assets to be understated.
D) None of these is correct.
Answer: A
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements
4) Salvage value was ignored when originally calculating the units-of-production depreciation. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be overstated.
D) None of these is correct.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

5) The depreciation method which charges more expense in earlier years than in later years is the:
A) straight-line method.
B) double declining-balance method.
C) units-of-production method.
D) All of the above are correct.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

6) The depreciation method in which an even amount of depreciation expense is taken each year is called:
A) straight-line method.
B) double declining-balance method.
C) units-of-production method.
D) All of the above are correct.
Answer: A
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

7) The depreciation method that does not base the expense on the passage of time but on the level of use is:
A) units-of-production.
B) straight-line.
C) modified accelerated cost recovery.
D) double declining-balance.
Answer: A
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
8) Which depreciation method deducts residual value when computing depreciation expense?
A) Units-of-production
B) Straight-line
C) Double declining-balance
D) Both A and B are correct.
Answer: D
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

9) Which depreciation method uses twice the straight-line rate?
A) Units-of-production
B) Modified accelerated cost recovery
C) Straight-line
D) Double declining-balance
Answer: D
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

10) Assuming a useful life of five years, which of the following GAAP methods would most likely result in the most depreciation in the first year?
A) Straight-line
B) MACRS
C) Double declining-balance
D) None of these answers is correct.
Answer: C
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

11) Which depreciation method does NOT use the current book value in calculating depreciation expense?
A) Straight-line
B) Double declining-balance
C) Units-of-production
D) Both A and C
Answer: D
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
12) The book value of an asset is calculated by taking the:
A) market value of the asset less its accumulated depreciation.
B) cost of the asset less its accumulated depreciation.
C) residual value of the asset less its accumulated depreciation.
D) salvage value of the asset less its accumulated depreciation.
Answer: B
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

13) Josh Kindel purchased equipment for $50,000 on January 1. Its residual value is $5,000 with a useful life of 10 years. The amount of depreciation expense in the first year under the double declining-balance method is:
A) $9,000.
B) $10,000.
C) $5,000.
D) $4,500.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

14) Lacy purchased equipment for $76,000 on January 1. Its residual value is $4,000 with a useful life of 8 years. The amount of depreciation expense in the first year under the straight-line method is:
A) $9,000.
B) $9,500.
C) $19,000.
D) $10,000.
Answer: A
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
15) Jason Moore purchased computer equipment for $5,000 on January 1, 2015. It has a residual value of $200 with a useful life of 6 years. After the appropriate adjusting entries have been made, the balance in Accumulated Depreciation account for this asset on January 1, 2017, under the straight-line method, should be:
A) $800.
B) $1,600.
C) $2,400.
D) $3,200.
Answer: B
Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16) J. Long purchased computer equipment for $7,000 on January 1, 2015. It has a residual value of $700 with a useful life of 5 years. After the appropriate adjusting entry is made, the book value of the asset on December 31, 2015, under the double declining-balance method, is:
A) $4,000.
B) $4,200.
C) $3,000.
D) $4,100.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

17) Double declining balance depreciation is used in the first year when straight line depreciation should be used. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be overstated.
D) None of these is correct.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements
18) What would the depreciation expense be in year 5 for a computer system using the straight-line method when cost is $16,000, residual value is $2,000, and the expected life is 7 years?
A) $2,000
B) $1,500
C) $1,250
D) $1,000
Answer: A
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

19) What would be the depreciation expense using double declining-balance to compute the expense for year 2 of a machine costing $20,000, when residual value is $3,000, and useful life is 4 years?
A) $3,600
B) $6,000
C) $5,000
D) $3,000
Answer: C
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

20) What would be the depreciation expense in year 1, using units-of-production, for a molding machine that cost $15,000, had a useful life of 5 years, no residual value, and an estimated total machine hours of 50,000? Production in year 1 was 10,000 hours.
A) $3,000
B) $4,000
C) $6,000
D) $5,000
Answer: A
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
21) What would be the depreciation expense in year 1, using units-of-production, for a molding machine that cost $22,000, had a useful life of 7 years, and an estimated total machine hours of 40,000? The salvage value is $2,000 and production in year 1 was 8,000 hours.
A) $5,000
B) $4,400
C) $6,000
D) $4,000
Answer: D
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

22) Talaricos Subs purchased a new van for $28,000, its estimated useful life at 100,000 miles, residual value of $4,000. The van was driven 12,000 miles in year 1. What is the depreciation expense in year 1?
A) $2,880
B) $3,000
C) $3,360
D) $4,000
Answer: A
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

23) Double declining-balance method is used in the first year when straight-line should be used. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be overstated.
D) None of these is correct.
Answer: B
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

24) What would be the accumulated depreciation at the end of year 6 for a piece of equipment using the straight-line method when the cost is $11,000, residual value is $1,000, and the expected life is 10 years?
A) $6,600
B) $6,000
C) $1,000
D) $3,000
Answer: B
Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
25) A plant asset is fully depreciated when the book value is:
A) greater than the salvage value.
B) greater than the market value.
C) equal to the salvage value.
D) equal to the market value.
Answer: C
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

26) What would the book value be at the end of year 6 for a piece of equipment using the straight-line method when cost is $11,000, residual value is $1,000, and the expected life is 10 years?
A) $4,400
B) $3,000
C) $5,000
D) $4,000
Answer: C
Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

27) Using MACRS rates for a 15 and 20-year property, what is the percentage for the depreciable rate?
A) 200 percent
B) 150 percent
C) 125 percent
D) 100 percent
Answer: B
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

28) According to the MACRS tax rate table, the following classes do NOT use straight-line depreciation:
A) residential rental property.
B) automobiles.
C) nonresidential real property.
D) All of the above use straight line depreciation.
Answer: B
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
29) Under MACRS, which of the following classes uses the straight-line method?
A) 10-year property
B) 15-year property
C) 24.5-year property
D) All of the above are correct.
Answer: C
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

30) A tractor costing $180,000 is depreciated using MACRS. The tractor qualifies as a 3-year property, and has a scrap value of $20,000. The depreciation rates are:

Year 1: 33.00%
Year 2: 45.00%
Year 3: 15.00%
Year 4: 7.00%

What is the depreciation expense for year 3?
A) $27,000
B) $35,560
C) $26,670
D) $23,696
Answer: A
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

31) A depreciation method that allocates depreciation of a plant asset based on the Tax Act of 1989 is the:
A) straight-line method.
B) units-of-production method.
C) modified accelerated cost recovery method.
D) double declining-balance method.
Answer: C
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

32) For tax purposes, equipment is depreciated using the straight-line method under MACRS.
Answer: FALSE
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
33) Under MACRS, furniture is depreciated over seven years.
Answer: TRUE
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

34) The double declining-balance method is an accelerated depreciation method.
Answer: TRUE
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

35) The units-of-production method does not take into account the passage of time.
Answer: TRUE
Diff: 1
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

36) To calculate the double declining-balance rate, you would use half the straight line rate.
Answer: FALSE
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

37) Net income is not affected by the depreciation method used.
Answer: FALSE
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

38) The depreciation method that ignores the salvage value is ________.
Answer: double declining-balance
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
39) For tax purposes, ________ establishes the guidelines and the percentages for depreciation.
Answer: MACRS
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

40) Accumulated depreciation is a contra ________ and is reported on the ________ ________.
Answer: asset, balance sheet
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

41) Tender Years purchased a new van on January 1, 201X, for $60,000. The life of the van is 5 years or 100,000 miles, with an estimated residual value of $5,000. During the first year, the van was driven 22,000 miles. Compute the depreciation expense for the first year applying each of the methods below.
a) ________ Straight-line
b) ________ Units-of-production
c) ________ Double declining-balance
Answer:
a) $11,000
b) $12,100
c) $24,000
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

42) Yamara Company purchased a $80,000 machine on January 1. The machine is expected to have a useful life of 10 years or 60,000 operating hours and a residual value of $5,000. The machine was used for 6,000 hours in the first year and 4,400 hours in the second year. Compute the amount of depreciation expense for the first and second years under each of the methods below.

Year 1 Year 2 Method

a) $ ________ $ ________ Straight-line
b) $ ________ $ ________ Units-of-production
c) $ ________ $ ________ Double declining-balance
Answer:
Year 1 Year 2
a) $7,500 $7,500
b) $7,500 $5,500
c) $16,000 $12,800
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

43) Assume an asset costing $90,000 is expected to produce 400,000 units and have a salvage value of $2,000. During year 1, 75,000 units were produced; during year 2, 68,000 units were produced; and during year 3, 70,000 units were produced. Using units-of-production, compute the depreciation expense for each of the three years.
Answer:
Year 1: $16,500 ($90,000 $2,000)/400,000 75,000
Year 2: $14,960 ($90,000 $2,000)/400,000 68,000
Year 3: $15,400 ($90,000 $2,000)/400,000 70,000
Diff: 2
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

44) A car is purchased for $30,000 on January 1. It has a 5-year life and a salvage value of $2,000. Compute the annual depreciation expense using the double declining-balance method for all 4 years.
Answer:
Year 1: $12,000 ($30,000 .4)
Year 2: $7,200 ($18,000 . 4)
Year 3: $4,320 ($10,800 .4)
Year 4: $2,592 ($6,480 .4)
Year 5: $1,888 ($3,888 $2,000)
Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

45) A piece of equipment is purchased for $78,000 on January 1. It has a 5-year life and a salvage value of $8,000. Compute the annual depreciation expense using the double declining-balance method for all 5 years.
Answer:
Year 1: $31,200 ($78,000 .4)
Year 2: $18,720 ($46,800 .4)
Year 3: $11,232 ($28,080 .4)
Year 4: $6,739.20 ($16,848 .4)
Year 5: $2,108.80 ($10,108.80 $8,000)
Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

46) A company purchased a new delivery van on January 1, 2012 for $25,000. The company expects to use the van for 5 years and then sell it for $5,000. Complete the following depreciation table assuming straight-line depreciation:

End of Year Cost of Delivery Van Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year
1
2
3
4
5

Answer:
End of Year Cost of Delivery Van Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year
1 $25,000 $4,000 $4,000 $21,000
2 $25,000 $4,000 $8,000 $17,000
3 $25,000 $4,000 $12,000 $13,000
4 $25,000 $4,000 $16,000 $9,000
5 $25,000 $4,000 $20,000 $5,000

Diff: 3
LO: 16-2
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16.3 Learning Objective 16-3

1) Capital expenditures would include:
A) additions.
B) betterments.
C) extraordinary repairs.
D) All of these answers are correct.
Answer: D
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

2) Revenue expenditures do NOT include:
A) additions to existing plant assets.
B) changing tires on a car.
C) changing oil in a car.
D) All of the above are revenue expenditures.
Answer: A
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

3) A company incorrectly records revenue expenditures as capital expenditures on its books. As a result, which of the following will be true?
A) Net income will be overstated for the year.
B) Owners equity will be understated at year-end.
C) Total assets will be understated at year-end.
D) None of the above will occur.
Answer: A
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

4) What is the difference between an extraordinary repair and a betterment?
A) A betterment extends the life of the asset; an extraordinary repair does not.
B) An extraordinary repair is a capital expenditure; a betterment is not.
C) An extraordinary repair may extend the life of the asset; a betterment does not.
D) None of these answers is correct.
Answer: C
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

5) The entry to record the payment of an extraordinary repair of $5,000 that will extend the life of the machine 5 years, when the machine cost $30,000, and has accumulated depreciation of $26,000, is to:
A) debit Machinery $5,000; credit Accumulated Depreciation $5,000.
B) debit Accumulated Depreciation $5,000; credit Cash $5,000.
C) debit Accumulated Depreciation $1,000; credit Cash $1,000.
D) debit Machinery $1,000; credit Cash $1,000.
Answer: B
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

6) A company installed a new engine in their delivery vehicle. This is an example of a(n):
A) addition.
B) betterment.
C) extraordinary repair
D) revenue expenditure.
Answer: C
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

7) Budgeting for items such as equipment and furniture would be considered:
A) capital expenses.
B) capital expenditures.
C) general expenses.
D) general expenditures.
Answer: B
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

8) The journal entry to record a loss when selling a plant asset would include:
A) a credit to accumulated depreciation.
B) a debit to loss on sale of plant asset.
C) a debit to the plant asset account.
D) None of these is correct.
Answer: B
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

9) When equipment that is fully depreciated is discarded:
A) debit the original cost of the asset.
B) credit the balance of Accumulated Depreciation.
C) debit Accumulated Depreciation and credit Equipment.
D) None of these answers is correct.
Answer: C
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

10) A gain on disposal of an asset is listed as:
A) a liability on the balance sheet.
B) an asset on the balance sheet.
C) other expense on the income statement.
D) other income on the income statement.
Answer: D
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

11) A loss on the sale of a plant asset is listed as:
A) a liability on the balance sheet.
B) an asset on the balance sheet.
C) other expense on the income statement.
D) other income on the income statement.
Answer: C
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

12) A gain on the sale of an asset occurs when:
A) the cash received is less than the book value of the asset.
B) the book value is equal to the cost of the asset, and the cash received is less than the cost of the asset.
C) the cash received is greater than the book value of the asset.
D) None of these answers is correct.
Answer: C
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

13) A loss on the sale of an asset would occur when:
A) the cash received is less than the book value of the asset.
B) the cash received is equal to the book value of the asset.
C) the cash received is greater than the book value of the asset.
D) None of these answers is correct.
Answer: A
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

14) The entry to record the disposal of a laptop computer with a cost of $2,500 and an accumulated depreciation of $1,500 would be:
A) debit Depreciation Expense $2,500; credit Equipment $2,500.
B) debit Accumulated Depreciation $1,500; debit Loss on Disposal of an Asset $1,000; credit Equipment $2,500.
C) debit Equipment $2,500; credit Accumulated Depreciation $2,500.
D) debit Cash $2,500; credit Equipment $2,500.
Answer: B
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

15) If an asset is exchanged for a similar asset, a gain results:
A) when the book value of the old asset is greater than what is received for the trade-in allowance.
B) when the book value of the old asset is less than what is received for the trade-in allowance.
C) when the accumulated depreciation equals the cost of the old asset.
D) None of these answers is correct.
Answer: B
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16) When an asset is exchanged for a similar asset and a gain results, under accounting rules the gain is:
A) credited to Gain on Exchange of an Asset.
B) recorded in the other income section of the income statement.
C) absorbed into the cost of the new asset.
D) subtracted from the cost of the new asset.
Answer: C
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

17) Greetings Online disposed of a van that cost $22,000 with accumulated depreciation of $15,000. The journal entry would include a:
A) credit to Van $22,000.
B) debit to Accumulated Depreciation $15,000.
C) debit to Loss on Disposal of Plant Asset $7,000.
D) All of these answers are correct.
Answer: D
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
18) Myers Corporation exchanged an old machine costing $20,000, with an accumulated depreciation of $17,000, and trade-in value of $5,000 for a new machine cash price of $24,000. What is the journal entry?
A) Debit Machinery $22,000; debit Accumulated Depreciation $17,000; credit Machinery $20,000; credit Cash $19,000
B) Debit Machinery $19,000; debit Accumulated Depreciation $17,000; credit Gain on Disposal of Plant Asset $3,000; credit Machinery $20,000; credit Cash $19,000
C) Debit Machinery $24,000; debit Accumulated Depreciation $17,000; credit Machinery $20,000; credit Cash $19,000; credit Gain on Disposal $3,000
D) None of these answers is correct.
Answer: A
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

19) Corbin Corporation has a plant asset with a cost of $40,000 that is traded for a similar asset priced at $70,000. Assuming accumulated depreciation of $15,000 and a trade-in allowance of $10,000, what is the cost basis for the new asset?
A) $40,000.
B) $95,000.
C) $85,000.
D) $70,000.
Answer: D
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

20) A task station that originally cost $5,000 has no estimated salvage value and was depreciated at the rate of 20% per year (straight-line depreciation). At the end of the second year, it was sold for $2,500 cash. The transaction would result in a:
A) loss of $250.
B) gain of $250.
C) loss of $500.
D) gain of $500.
Answer: C
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

21) A truck that cost $28,000 has been owned for 3 years and is traded for another truck for the same purpose. Total accumulated depreciation at the time of trade is $17,600. The trade-in value of the old truck is $10,000 and the new truck has a fair market value of $32,000, the new truck would be recorded at:
A) $32,000.
B) $32,400.
C) $29,400.
D) $28,400.
Answer: A
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

22) Equipment that originally cost $900 with no salvage value has accumulated depreciation of $700. The equipment is discarded. The transaction to record the discarding of the equipment would result in a:
A) loss of $900.
B) gain of $900.
C) loss of $200.
D) loss of $700.
Answer: C
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

23) If an asset is being sold or exchanged, the gain or loss is always computed by comparing the:
A) market value and cost.
B) book value and salvage value.
C) market value and salvage value.
D) market value and book value.
Answer: D
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

24) Eagle Works traded a plant asset with a cost of $25,000 and accumulated depreciation of $22,000 for a similar asset priced at $65,000. Assuming a trade-in of $3,500, the cost basis of the new asset under income tax rules is:
A) $62,500.
B) $65,000.
C) $68,000.
D) $64,500.
Answer: D
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

25) Expenditures for changing oil in a machine or repainting a car would be:
A) added to the cost of the asset.
B) added as a capital expenditure.
C) charged to an expense account.
D) added as a betterment.
Answer: C
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

26) The Loss on Disposal account is classified as another revenue account.
Answer: FALSE
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

27) For tax purposes, the gain or loss on a traded asset is ignored when calculating the value of the new asset.
Answer: FALSE
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

28) Gains incurred in selling or trading assets are always recognized.
Answer: FALSE
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

29) Some of the past depreciation is canceled in recording an extraordinary repair.
Answer: TRUE
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

30) A capital expenditure is recorded in an equity account.
Answer: FALSE
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

31) If a plant asset is fully depreciated and discarded, no ________ or ________ will be realized.
Answer: gains; losses
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

32) The difference between the items cost and accumulated depreciation is the ________.
Answer: Book Value
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

33) A budgeted item such as a building is listed as a ________.
Answer: Capital expenditure
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

34) Payments for ordinary maintenance of an asset are called ________.
Answer: revenue expenditures
Diff: 1
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

35) Ken Applegate owned equipment with an original cost of $45,000 with $38,000 of accumulated depreciation. The equipment was traded in on new equipment costing $55,000 with a trade-in allowance of $6,000 and the balance in cash. Determine the following.

a. The book value of the old machine was ________.
b. The loss on the exchange was ________.
c. The cost basis on the books for the new machine, assuming accounting rules, is ________.
Answer:
a. $7,000
b. $1,000
c. $55,000
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

36) The Cutcut Mower Service owned a truck with an original cost of $75,000 on which there is accumulated depreciation of $55,000. The truck is exchanged for a new truck priced at $90,000 with a trade-in allowance of $12,000 and the balance in cash.

a. The book value of the old truck is ________.
b. The loss on the exchange is ________.
c. The cost basis in the new truck, assuming accounting rules is ________.
Answer:
a. $20,000
b. $8,000
c. $90,000
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

37) Journalize the following transactions for Pets R Us:

Mar. 5 Sold a truck for $10,000 that cost $15,000 and had an accumulated depreciation of $12,000.

Mar. 10 A machine costing $13,000 with accumulated depreciation of $10,500 was destroyed in a fire. No claim was filed.

May 15 Traded in a machine costing $25,000, with $19,000 of accumulated depreciation, for a new machine costing $32,000 with a trade-in allowance of$ 9,000.
Answer:
Mar. 5 Cash 10,000
Accumulated Depr., Truck 12,000
Gain on Sale of Plant Asset 7,000
Truck 15,000

Mar. 10 Loss from Fire 2,500
Accumulated Depr., Machine 10,500
Machine 13,000

May 15 Machine 29,000
Accumulated Depr., Machine 19,000
Machine 25,000
Cash 23,000
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

38) Prepare journal entries for the following for Bartz, Inc.

May 11 Replaced the engine in a Van #1, paying cash of $5,400.
May 18 Paid cash for a tune-up of the engine in Van #2 of $570.
May 29 Paid cash to add a lift to Van #2 of $3,700
Answer:
May 11 Accum. Depr. Vans 5400
Cash 5400

May 18 Repairs Expense 570
Cash 570

May 29 Vans 3700
Cash 3700
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
39) A computer server system, which had cost $250,000 and had accumulated depreciation of $170,000, was traded for a new system with a fair market value of $245,000. The old system and cash of $190,000 were given for the new system. Prepare the journal entry for the exchange of these similar assets.
Answer:
Computer Server (new) 245,000
Accum Depr. (old) 170,000
Loss on Exchange 25,000
Computer Server (old) 250,000
Cash 190,000
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

40) A computer server system, which had cost $250,000 and had accumulated depreciation of $170,000, was traded for a new system with a fair market value of $245,000. The old system and cash of $210,000 were given for the new system. Prepare the journal entry for the exchange of these similar assets assuming the income tax method is used to record the exchange.
Answer:
Computer Server (new) 290,000
Accum Depr. (old) 170,000
Cash 210,000
Computer Server (old) 250,000
Diff: 3
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

41) Define and compare capital expenditures and revenue expenditures.
Answer: Capital expenditures include the original cost of an asset as well as payments that improve on or enlarge existing assets. Capital expenditures may be put down into three categories: additions or enlargements; extraordinary repairs; and betterments.

Revenue expenditures are payments made for ordinary maintenance of an asset or unnecessary or unreasonable situations. These expenditures occur on a regular basis and are recorded as expenses. Examples would include changing tires on a truck or repainting a van.
Diff: 2
LO: 16-3
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

16.4 Learning Objective 16-4

1) Amortization of a patent was ignored. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be understated.
D) None of these is correct.
Answer: A
Diff: 2
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

2) The credit portion of the adjustment for the depletion of a coal mine was credited to the Coal Mine account. This error would cause:
A) the periods net income to be overstated.
B) the periods net income to be understated.
C) the period end assets to be overstated.
D) None of these is correct.
Answer: D
Diff: 2
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Analyze and record transactions and their effects on the financial statements

3) Which if the following would NOT be an example of an intangible asset?
A) A copyright
B) A patent
C) A franchise
D) Land
Answer: D
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

4) A company purchases a patent for $40,000. The patent will be amortized over 5 years. The entry to record the amortization in the first year is:
A) debit Patents $40,000; credit Cash $40,000.
B) debit Amortization Expense, Patents $40,000; credit Patents $40,000.
C) debit Amortization Expense, Patents $8,000; credit Patents $8,000.
D) debit Patents $10,000; credit Amortization Expense, Patents $10,000.
Answer: C
Diff: 2
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

5) The process of writing off a natural resource is:
A) depreciation.
B) depletion.
C) amortization.
D) None of these answers is correct.
Answer: B
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

6) The exclusive right to produce and sell musical work is called a:
A) copyright.
B) franchise.
C) patent.
D) goodwill.
Answer: A
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

7) The allocation of the cost of a intangible asset is known as:
A) depreciation.
B) depletion.
C) amortization.
D) accrual.
Answer: C
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

8) Intellectual property assets are:
A) depreciated.
B) depleted.
C) amortized.
D) expensed.
Answer: C
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

9) Which of the following is an example of an intangible asset?
A) Land
B) Goodwill
C) Inventory
D) Accounts Receivable
Answer: B
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

10) An exclusive right to the owner to sell or produce his or her discovery or invention is known as a:
A) franchise.
B) trademark.
C) patent.
D) copyright.
Answer: C
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

11) The write-off of an intangible asset is called:
A) depreciation.
B) amortization.
C) impairment.
D) deterioration.
Answer: C
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

12) A coal mine was acquired for $4,000,000. No salvage value was expected and the number of tons of coal is estimated to be 2,000,000 tons. During for first year, 200,000 tons of coal was mined and sold. The depletion expense is:
A) $2,000,000.
B) $200,000.
C) $4,000,000.
D) $400,000.
Answer: D
Diff: 2
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method

13) To record the depletion of natural resources, the most common method is to use the double declining-balance method.
Answer: FALSE
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

14) Patents, copyrights, and franchises are intangible assets with the same number of years of useful life.
Answer: FALSE
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

15) Copyright protection expires 50 years after the authors death.
Answer: FALSE
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

16) The portion of a natural resource cost that is recognized as an expense is ________.
Answer: depletion
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

17) The intangible that is recorded when a business is purchased for more than the fair value of the net assets is known as ________.
Answer: goodwill.
Diff: 1
LO: 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the accounting treatments for intangible assets

18) The three categories of writing off plant assets, natural resources, and intangible assets are ________, ________, and ________, respectively.
Answer: Depreciation; Depletion; Amortization
Diff: 1
LO: 16-2, 16-4
AACSB: Analytical Thinking
Learning Outcome: Use different methods to perform calculations related to plant assets and explain the advantages and disadvantages of each method
For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, in column 3 the financial statement that the account in which the account balance is reported, and in column 4 the accounts nature (permanent/temporary).

19)
Column 1 Column 2 Column 3 Column 4
Loss on goodwill

Answer:
Column 1 Column 2 Column 3 Column 4
Loss on goodwill other expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

20)
Column 1 Column 2 Column 3 Column 4
Oil deposit

Answer:
Column 1 Column 2 Column 3 Column 4
Oil deposit asset debit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

21)
Column 1 Column 2 Column 3 Column 4
Gain from sale of plant asset

Answer:
Column 1 Column 2 Column 3 Column 4
Gain from sale of plant asset other income credit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

22)
Column 1 Column 2 Column 3 Column 4
Goodwill

Answer:
Column 1 Column 2 Column 3 Column 4
Goodwill asset debit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements
23)
Column 1 Column 2 Column 3 Column 4
Loss from fire

Answer:
Column 1 Column 2 Column 3 Column 4
Loss from fire other expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

24)
Column 1 Column 2 Column 3 Column 4
Amortization Expense, Patent

Answer:
Column 1 Column 2 Column 3 Column 4
Amortization Expense, Patent operating expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

25)
Column 1 Column 2 Column 3 Column 4
Depletion of coal mine

Answer:
Column 1 Column 2 Column 3 Column 4
Depletion of coal mine operating expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

26)
Column 1 Column 2 Column 3 Column 4
Franchise

Answer:
Column 1 Column 2 Column 3 Column 4
Franchise asset debit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements
27)
Column 1 Column 2 Column 3 Column 4
Accumulated depletion, coal mine

Answer:
Column 1 Column 2 Column 3 Column 4
Accumulated depletion, coal mine contra-asset credit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

28)
Column 1 Column 2 Column 3 Column 4
Copyright

Answer:
Column 1 Column 2 Column 3 Column 4
Copyright asset debit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

29)
Column 1 Column 2 Column 3 Column 4
Loss on disposal of plant asset

Answer:
Column 1 Column 2 Column 3 Column 4
Loss on disposal of plant asset other expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

30)
Column 1 Column 2 Column 3 Column 4
Patent

Answer:
Column 1 Column 2 Column 3 Column 4
Patent asset debit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

31)
Column 1 Column 2 Column 3 Column 4
Depreciation expense

Answer:
Column 1 Column 2 Column 3 Column 4
Depreciation expense operating expense debit income statement temporary

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning Outcome: Describe the components of and prepare the four basic financial statements

32)
Column 1 Column 2 Column 3 Column 4
Accumulated depreciation

Answer:
Column 1 Column 2 Column 3 Column 4
Accumulated depreciation contra-asset credit balance sheet permanent

Diff: 3
LO: 16-1, 16-2, 16-3, 16-4
AACSB: Analytical Thinking
Learning

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