1-5
6-10
11-15
16-20
21-25
100
The amount of impairment loss is the excess of book value over: A. Amortized cost. B. Undiscounted future cash flows. C. Fair value. D. Future revenues.
What is C?
100
Short Corporation acquired Hathaway, Inc., for $52,000,000. The fair value of all Hathaway's identifiable tangible and intangible assets was $48,000,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition? A. $100,000. B. $400,000. C. $200,000. D. $0.
What is D? Goodwill is not amortized.
100
Accounting for impairment losses: A. Involves a two-step process for recoverability and measurement. B. Applies only to depreciable assets. C. Applies only to assets with finite lives. D. All of these answer choices are correct.
What is A?
100
The legal life of a patent is: A. 40 years. B. 20 years. C. Life of the inventor plus 50 years. D. Indefinite.
What is B?
100
A change in the estimated useful life and residual value of machinery in the current year is handled as: A. A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along. B. A prospective change from the current year through the remainder of its useful life, using the new estimates. C. A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates. D. All of these answer choices are incorrect.
What is B?
200
The depreciable base for an asset is: A. Its service life. B. The excess of its cost over residual value. C. The difference between its replacement value and cost. D. The amount allowable under MACRS.
What is B?
200
Gains on the cash sales of fixed assets: A. Are the excess of the book value over the cash proceeds. B. Are part of cash flows from operations. C. Are reported on a net-of-tax basis if material. D. Are the excess of the cash proceeds over the book value of the assets sold.
What is D?
200
A change from the straight-line method to the sum-of-years'-digits method of depreciation is handled as: A. A retrospective change back to the date of acquisition as though the current estimated life had been used all along. B. A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old useful life estimate. C. A prospective change from the current year through the remainder of its useful life. D. None of these answer choices are correct.
What is C?
200
The overriding principle for all depreciation methods is that the method must be: A. Conservative and economic. B. Systematic and rational. C. Consistent and conservative. D. Significant and material.
What is B?
200
The replacement of a major component increased the productive capacity of production equipment from 10 units per hour to 18 units per hour. The expenditure should be debited to: A. Repairs. B. Equipment. C. Maintenance. D. Gain from repairs.
What is B?
300
Cutter Enterprises purchased equipment for $72,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $6,000. Using the sum-of-the-years'-digits method, depreciation for 2017 and book value at December 31, 2017, would be: A. $19,200 and $30,800. B. $17,600 and $26,400. C. $19,200 and $28,800. D. $17,600 and $32,400.
What is D? Depreciation, 2017 = ($72,000 - 6,000) × 4/15 = $17,600 Book value, 12/31/2017 = $72,000 - 22,000 - 17,600 = $32,400
300
A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to: A. Repairs. B. Accumulated depreciation. C. Major repairs. D. None of these answer choices are correct.
What is B?
300
The factors that need to be determined to compute depreciation are an asset's: A. Cost, residual value, and physical life. B. Cost, replacement value, and service life. C. Fair value, residual value, and economic life. D. Cost, residual value, and service life.
What is D?
300
In testing for recoverability of property, plant, and equipment, an impairment loss is required if the: A. Asset's book value exceeds the undiscounted sum of expected future cash flows. B. Undiscounted sum of its expected future cash flows exceeds the asset's book value. C. Present value of expected future cash flows exceeds its book value. D. All of these answer choices are incorrect.
What is A?
300
Depreciation: A. Is always considered a period cost. B. Could be a product cost or a period cost depending on the use of the asset. C. Is usually based on the declining-balance method. D. Per books is usually higher than MACRS in the early years of an asset's life.
What is B?
400
Depreciation, depletion, and amortization: A. All refer to the process of allocating the cost of long-term assets used in the business over future periods. B. All generally use the same methods of cost allocation. C. Are all handled the same in arriving at taxable income. D. All of these answer choices are correct.
What is A?
400
Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year? A. Straight-line. B. Units-of-production. C. Double-declining balance. D. Sum-of-the-year's digits.
What is C?
400
Recognition of impairment for property, plant, and equipment is required if book value exceeds: A. Fair value. B. Present value of expected cash flows. C. Undiscounted expected cash flows. D. Accumulated depreciation.
What is C?
400
Cutter Enterprises purchased equipment for $72,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $6,000. Using the double-declining balance method, depreciation for 2016 and the book value at December 31, 2016, would be: A. $26,400 and $45,600. B. $28,800 and $43,200. C. $28,800 and $37,200. D. $26,400 and $36,600.
What is B? Depreciation, 2016 = $72,000 × 40% = $28,800 Book value, 12/31/16 = $72,000 - 28,800 = $43,200
400
An asset should be written down if there has been an impairment of value that is: A. Relevant and objectively determined. B. Material and market driven. C. Unplanned and sudden. D. Significant.
What is D?
500
Which of the following types of subsequent expenditures normally is capitalized? A. Additions. B. Improvements. C. Rearrangements. D. All of these answer choices are normally capitalized.
What is D?
500
Canliss Mining uses the retirement method to determine depreciation on its office equipment. During 2014, its first year of operations, office equipment was purchased at a cost of $14,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2016, equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000. Canliss would record 2016 depreciation of: A. $3,500. B. $4,400. C. $5,400. D. None of these answer choices are correct.
What is B? Cost of equipment sold of $5,000 less proceeds of $600 = $4,400.
500
Cutter Enterprises purchased equipment for $72,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $6,000. Using the double-declining balance method, depreciation for 2017 would be: A. $28,800. B. $18,240. C. $17,280. D. None of these answer choices are correct.
What is C? Depreciation, 2017 = [$72,000 - ($72,000 × 40%)] × 40% = $17,280
500
Cutter Enterprises purchased equipment for $72,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, the book value at December 31, 2016, would be: A. $57,600. B. $51,600. C. $58,800. D. $52,800.
What is C? $72,000 - 13,200 = $58,800
500
Briefly explain the differences between the terms depreciation, depletion, and amortization.
What is: The terms refer to different types of long-term assets used in the business. Depreciation: Plant and equipment Depletion: Natural resources Amortization: Intangible assets
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