Question 1

A change in an accounting estimate is:

Accepted Answer

A)  Reflected in future financial statements and also requires modification of past statements.
B)  Not allowed under current accounting rules.
C)  Reflected in current and future years' financial statements, not in prior statements.
D)  Considered an error in the financial statements.
E)  Reflected in past financial statements.F) All of the above
G) C) and D)

Question 2

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Accepted Answer

A) True 
 B)False

Question 3

Extraordinary repairs:

Accepted Answer

A)  Are revenue expenditures.
B)  Are expensed when incurred.
C)  Extend the useful life of an asset beyond its original estimate.
D)  Are additional costs of plants assets that do not materially increase the asset's life.
E)  Are credited to accumulated depreciation.F) A) and B)
G) D) and E)

Question 4

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A)  Units-of-production depreciation.
B)  Modified accelerated cost recovery system (MACRS) depreciation.
C)  Accelerated depreciation.
D)  Declining-balance depreciation.
E)  Straight-line depreciation.F) B) and C)
G) C) and D)

Question 5

Depreciation:

Accepted Answer

A)  Measures the decline in market value of an asset.
B)  Measures physical deterioration of an asset.
C)  Is the process of allocating the cost of a plant asset to expense.
D)  Is applied to land.
E)  Is an outflow of cash from the use of a plant asset.F) None of the above
G) C) and D)

Question 6

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Accepted Answer

A) True 
 B)False

Question 7

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Accepted Answer

A) True 
 B)False

Question 8

Betterments are:

Accepted Answer

A)  Revenue expenditures.
B)  Expenditures making a plant asset more efficient or productive.
C)  Credited against the asset account when incurred.
D)  Also called ordinary repairs.
E)  Always increase an asset's life.F) C) and E)
G) A) and E)

Question 9

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

Accepted Answer

Depreciation is revised when changes in estimates such as salvage value and useful life occur. If the asset's useful life and/or salvage value changes, the remaining depreciable cost is allocated over the remaining revised useful life of the asset. The new estimate is used to compute depreciation for current and future periods.

Question 10

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Accepted Answer

A) True 
 B)False

Question 11

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

Accepted Answer

A)  Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.
B)  Debit Amortization Expense $112,100; credit Natural Resources $112,100.
C)  Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.
D)  Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.
E)  Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.F) A) and B)
G) A) and C)

Question 12

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Accepted Answer

A) True 
 B)False

Question 13

When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

Accepted Answer

A)  $11,500.
B)  $2,875.
C)  $5,000.
D)  $2,500.
E)  $5,750.F) B) and C)
G) B) and D)

Question 14

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Accepted Answer

A)  Accelerated depreciation.
B)  Modified accelerated cost recovery system (MACRS) depreciation.
C)  Units-of-production depreciation.
D)  Straight-line depreciation.
E)  Declining-balance depreciation.F) All of the above
G) C) and D)

Question 15

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Accepted Answer

A)  $1,667.
B)  $1,400.
C)  $2,067.
D)  $1,250.
E)  $5,000.F) C) and D)
G) C) and E)

Question 16

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Accepted Answer

A) True 
 B)False

Question 17

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Accepted Answer

A) True 
 B)False

Question 18

The straight-line depreciation method and the double-declining-balance depreciation method:

Accepted Answer

A)  Are the only acceptable methods of depreciation for financial reporting.
B)  Produce the same total depreciation over an asset's useful life.
C)  Produce the same depreciation expense each year.
D)  Are acceptable for tax purposes only.
E)  Produce the same book value each year.F) A) and C)
G) C) and D) B

Question 19

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:

Accepted Answer

A)  Debit to accumulated depreciation for $22,500.
B)  Credit to loss on sale for $10,000.
C)  Credit to cash for $20,000.
D)  Debit to loss on sale for $10,000.
E)  Debit to gain on sale for $2,500.F) B) and E)
G) C) and E) A

Question 20

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Accepted Answer

A) True 
 B)False

Exam 10: Plant Assets, Natural Resoures, and Intangibles

A change in an accounting estimate is:

Correct Answer
verified

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Correct Answer
verified

Extraordinary repairs:

Correct Answer
verified

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Correct Answer
verified

Depreciation:

Correct Answer
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Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Correct Answer
verified

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Correct Answer
verified

Betterments are:

Correct Answer
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Explain the impact, if any, on depreciation when estimates that determine depreciation change.

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Correct Answer
verified

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

Correct Answer
verified

Correct Answer
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Correct Answer
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The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Correct Answer
verified

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Correct Answer
verified

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Correct Answer
verified

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Correct Answer
verified

The straight-line depreciation method and the double-declining-balance depreciation method:

Correct Answer
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B

Correct Answer
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A

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Correct Answer
verified

Exam 10: Plant Assets, Natural Resoures, and Intangibles

A change in an accounting estimate is:

Correct AnswerverifiedShow Answer

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Correct AnswerverifiedShow Answer

Extraordinary repairs:

Correct AnswerverifiedShow Answer

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Correct AnswerverifiedShow Answer

Depreciation:

Correct AnswerverifiedShow Answer

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Correct AnswerverifiedShow Answer

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Correct AnswerverifiedShow Answer

Betterments are:

Correct AnswerverifiedShow Answer

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Correct AnswerverifiedShow Answer

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Correct AnswerverifiedShow Answer

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Correct AnswerverifiedShow Answer

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Correct AnswerverifiedShow Answer

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Correct AnswerverifiedShow Answer

The straight-line depreciation method and the double-declining-balance depreciation method:

Correct AnswerverifiedB

Correct AnswerverifiedA

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Correct AnswerverifiedShow Answer

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B

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A

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