A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.

True or False

The double-declining-balance method is an accelerated method of depreciation.

True or False

The gain or loss on the sale of a plant asset is determined by comparing:

sale value and original cost.

sale value and book value.

sale value and residual value.

book value and residual value.

A company purchased a computer on July 1, 2015 for $50,000. Estimated useful life of the computer was 5 years and it has no residual value. Which of the following methods should be used to best match its expense against the revenue it produces?

the straight-line method

the first-in, first-out method

the units-of-production method

the double-declining-balance method

When a plant asset is sold for a price lower than its book value, there will be a gain.

True or False

Which of the following accounting principles requires businesses to record depreciation?

the matching principle

the going concern principle

the cost principle

the revenue recognition principle

Which of the following is included in the cost of a plant asset?

amounts paid to make the asset ready for its intended use

replacement of damaged parts of the asset

regular repair and maintenance cost

wages of workers who work with the asset

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. At the beginning of 2017, the company revised the total estimated life of the asset from 5 years to 4 years. The estimated residual value remained the same as estimated earlier. Calculate the depreciation expense for the year 2017.

$250,000

$220,000

$213,000

$145,000

Which of the following is true of asset turnover ratio?

It measures how efficiently a business uses its sales to finance the assets.
It measures how the ending inventory helps in increasing the value of assets.

It measures how efficiently a business uses its net profit to finance the assets.

It measures how efficiently a business uses its average total assets to generate sales.

Which of the following is an expense resulting from decline in the utility of a natural resource?

depletion
amortization

depreciation
obsolescence

Fred owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?

modification for new use
addition to storage capacity

major engine overhaul
oil change and lubrication

If a company uses the contra account, Accumulated Amortization, this account will typically be shown on the balance sheet.

True or False

A company purchased a used machine for $10,000. The machine required installation costs of $1,000 and insurance while in transit of $500. At which of the following amounts would the machine be recorded?

$10,500
$11,000
$10,000
$11,500

Steel Rolling Company purchased a mine on January 1, 2015, for $500,000 and it is estimated to contain 30,000 tons of iron ore. There is no residual value. The company has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016. What is depletion expense for 2016? (Do not round your intermediate calculations).

$42,667
$63,667
$63,333
$33,333