Question 1

1. The formula for computing annual straight-line depreciation is: A.

   Depreciable cost divided by useful life in units

   B.

   Cost plus salvage value divided by the useful life in years

   C.

   Cost less salvage value divided by the useful life in years

   D.

   Cost divided by useful life in years

1 points  

Question 2

1. The June depreciation expense was not recorded in June. How are the financial statements affected by not recording this expense in June? A.

   Net income is overstated and assets are overstated

   B.

   Net income is understated and assets are understated

   C.

   Expenses are overstated and net income is understated

   D.

   Expenses are understated and assets are understated

1 points  

Question 3

1. The asset section of a classified balance sheet usually includes: A.

   Current assets, investments, plant assets, and intangible assets.

   B.

   Current assets, long-term assets, revenues, and intangible assets.

   C.

   Current assets, investments, plant assets, and equity.

   D.

   Current liabilities, investments, plant assets, and intangible assets.

1 points  

Question 4

1. Accumulated Depreciation appears on the A.

   Balance sheet in the current assets section

   B.

   Balance sheet in the property, plant and equipment section

   C.

   Balance sheet in the long-term liabilities section

   D.

   Income statement as an operating expense

1 points  

Question 5

1. Which depreciation method will result in the same depreciation expense every year? A.

   Straight-Line

   B.

   Units-of-Production

   C.

   Double-Declining-Balance

   D.

   Sum-of-the-Years-Digits

1 points  

Question 6

1. A company has installed a piece of machinery for a total of $76,000. In its third month of operation, repairs of $1,300 had to be made on the machine. This $1,300 would be: A.

   Added to the cost of the machinery

   B.

   Treated as a machinery repairs expense

   C.

   Placed in a separate account to be capitalized

   D.

   A maintenance expense

1 points  

Question 7

1. Using double-declining balance, calculate the first two years of depreciation expense for the following piece of equipment: Cost 435,000, salvage value of $25,000, useful life of 10 years. A.

   Year 1 = $87,000; Year 2 = $69,600

   B.

   Year 1 = $82,000; Year 2 = $65,600

   C.

   Year 1 = $80,000; Year 2 = $60,000

   D.

   Not enough information present to answer the question.

1 points  

Question 8

1. Research and development costs (R&D) are generally A.

   Listed as “long-term assets” on the balance sheet

   B.

   Expensed and become part of the income statement

   C.

   Listed as “current assets” on the balance sheet

   D.

   Listed as “other intangibles” on the balance sheet

1 points  

Question 9

1. Patents and trademarks are A.

   Depleted

   B.

   Amortized

   C.

   Expensed

   D.

   Depreciated

1 points  

Question 10

1. Using units of production, what is the annual depreciation amount for a vehicle which cost $42,000, has a salvage value of $4000, a useful life of 4 years and 100,000 miles, driven 22,000 miles this year? A.

   $10,500

   B.

   $10,000

   C.

   $9,500

   D.

   $8,360

1 points  

Question 11

1. Depletion: A.

   Is the process of allocating the cost of natural resources to periods in which they are consumed

   B.

   Is also called depreciation

   C.

   Is also called amortization

   D.

   Is an unrealized expense reported in equity

1 points  

Question 12

1. The total cost of an asset less its accumulated depreciation is called: A.

   Historical cost

   B.

   Book value

   C.

   Present value

   D.

   Current (market) value

1 points  

Question 13

1. If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the: A.

   Straight-line method

   B.

   Units-of-depletion method

   C.

   Double-declining balance method

   D.

   Expense method

1 points  

Question 14

1. Extraordinary repairs: A.

   Are revenue expenditures

   B.

   Extend an asset’s useful life beyond its original estimate

   C.

   Are additional costs of plant assets that do not materially increase the asset’s life

   D.

   Are expensed as incurred

1 points  

Question 15

1. Which of the following would NOT be considered part of the cost of the land? A.

   Survey and legal fees

   B.

   Realtor commissions

   C.

   Paving

   D.

   Unpaid property taxes on the land

1 points  

Question 16

1. Examples of assets are A.

   Cash and accounts receivable

   B.

   Cash and revenue

   C.

   Cash and rent expense

   D.

   Common stock and revenue

1 points  

Question 17

1. A company replaced an engine on a vehicle and added the amount to repairs expense, rather than adding the amount to the “vehicle” account. Which of the following would occur because of this error? A.

   The asset “vehicle” would be overstated

   B.

   The asset “vehicle” would be understated

   C.

   Repairs expense would be understated

   D.

   Net income would be overstated

1 points  

Question 18

1. Revenue expenditures: A.

   Are additional costs of plant assets that do not materially increase the asset’s life or its productive capabilities

   B.

   Are known as balance sheet expenditures.

   C.

   Extend the asset’s useful life.

   D.

   Substantially benefit future periods.

1 points  

Question 19

1. Which one of the fixed asset accounts listed below will NOT have a related contra asset account A.

   Office Equipment

   B.

   Land

   C.

   Delivery Equipment

   D.

   Building

1 points  

Question 20

1. Notes Receivable due in 350 days appear on the A.

   Balance sheet in the current assets section

   B.

   Balance sheet in the fixed assets section

   C.

   Balance sheet in the current liabilities section

   D.

   Income statement as an expense

1 points  

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