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| 1 | |
Which of the following statements is not correct? |
| | A) | The term, betterment, is synonymous with the term, improvement. |
| | B) | A capital expenditure is a balance sheet expenditure. |
| | C) | A plant asset is a natural resource. |
| | D) | A natural resource is a wasting asset. |
| | E) | The term, service life, is synonymous with the term, useful life. |
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| 2 | |
What will be the result of the failure to record the year-end adjusting entry for depreciation? |
| | A) | An overstatement of income and an understatement of equity. |
| | B) | An overstatement of income and an understatement of assets. |
| | C) | An overstatement of income and an overstatement of assets. |
| | D) | An understatement of income and an overstatement of equity. |
| | E) | An understatement of income and an understatement of equity. |
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| 3 | |
An asset is being depreciated over a 10 year useful life. At the end of the fifth year, company management determines that the asset will only be used for three more years. How should this change be handled? |
| | A) | No changes should be made in the depreciation calculation. |
| | B) | The financial statements for the past four years should be changed to reflect only eight years of depreciation. |
| | C) | The change should be reflected in only the future years' financial statements. |
| | D) | The change should be reflected in the current and future years' financial statements. |
| | E) | None of the above. |
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| 4 | |
Which of the following statements is not correct? |
| | A) | The units-of-production method will have varying amounts charged to depreciation expense during an asset's life depending upon usage of the asset. |
| | B) | The ending book value of an asset will be the same regardless of which depreciation method is used. |
| | C) | Both the straight-line and declining balance method use depreciable cost in the calculation of annual depreciation expense. |
| | D) | The declining-balance method yields a larger depreciation expense in the early years of an asset's life and less depreciation in later years. |
| | E) | The straight-line method yields a constant amount of depreciation expense for each year. |
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| 5 | |
The net sales for the year total $4,000,000 and the December 31 cash balance is $50,000. Assets totaled $600,000 at the beginning of the year and $1,000,000 at the end of the year. What is the total asset turnover? |
| | A) | 4.00 |
| | B) | 4.40 |
| | C) | 5.00 |
| | D) | 6.51 |
| | E) | None of the above |
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| 6 | |
Which of the following should not be charged to the Land account? |
| | A) | Government assessments for public roadways, sewers, and sidewalks |
| | B) | Title fees and real estate commissions |
| | C) | Removal of existing structures |
| | D) | Fences and lighting systems |
| | E) | Accrued property taxes paid by the purchaser |
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| 7 | |
Which of the following costs would not be debited to the Equipment account? |
| | A) | Taxes paid on the purchase price |
| | B) | Insurance while in transit |
| | C) | Costs incurred to assemble and test the equipment |
| | D) | Repairs to keep the asset in working condition |
| | E) | All of the above costs would be debited to the Equipment account |
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| 8 | |
An asset having a four-year service life and a salvage value of $5,000 was acquired for $45,000 cash on April 2. Using straight-line depreciation, what will be the depreciation expense at the end of the first year, December 31? |
| | A) | $7,500 |
| | B) | $8,437.50 |
| | C) | $9,375 |
| | D) | $10,000 |
| | E) | $11,250 |
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| 9 | |
A factory machine is purchased for $50,000 on July 1. The machine is expected to have no salvage value at the end of its useful life of 5 years and be useful for 25,000 machine hours. The company decides to use the units-of-production method for depreciating the asset. If the machine is used for 1,920 hours during the first year, what is the book value of the asset at the end of year one? |
| | A) | $3,840 |
| | B) | $10,000 |
| | C) | $40,000 |
| | D) | $46,160 |
| | E) | None of the above |
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| 10 | |
Which of the following statements is false? |
| | A) | U.S. GAAP prohibits companies from recording increases in the value of plant assets. |
| | B) | IFRS requires an annual review of useful life and salvage value estimates. |
| | C) | When the value of plant assets declines after acquisition, but before disposition, only IFRS requires companies to record those decreases as impairment losses. |
| | D) | IFRS permits upward asset revaluations. |
| | E) | All of the above. |
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| 11 | |
A company purchased a machine on January 1 for $11,000. The machine is expected to have a salvage value of $1,000 at the end of its useful life of 10 years. Using the double-declining balance method, what is the amount of depreciation that will be recorded during the second-year of its useful life? |
| | A) | $1,760 |
| | B) | $1,800 |
| | C) | $2,000 |
| | D) | $2,200 |
| | E) | None of the above |
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| 12 | |
Adding a new wing to a building is an example of which of the following? |
| | A) | Ordinary repair |
| | B) | Revenue expenditure |
| | C) | Betterment |
| | D) | Capital expenditure |
| | E) | Both C and D |
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| 13 | |
A car with a book value of $5,000 (cost of $20,000 less accumulated depreciation of $15,000) is sold for $8,000. Which of the following would be included in the journal entry to record the sale? |
| | A) | A debit to the Vehicles account for $5,000 |
| | B) | A debit to the Gain on Sale account for $3,000 |
| | C) | A credit to the Gain on Sale account for $3,000 |
| | D) | A debit to Cash for $5,000 |
| | E) | None of the above |
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| 14 | |
The Oxide Mining Company acquired an iron ore deposit for $2,000,000. The company's geologist estimated the deposit to contain 1,000,000 tons of iron ore. At the end of the first year, 60,000 tons had been extracted. The end-of-year journal entry to record the depletion of the iron ore would require which of the following? |
| | A) | A credit to Iron Ore Deposit of $120,000 |
| | B) | A credit to Accumulated Depletion of $120,000 |
| | C) | A debit to Depletion Expense of $30,000 |
| | D) | A debit to Accumulated Depletion of $30,000 |
| | E) | None of the above |
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| 15 | |
Which of the following is an exclusive right that is granted to an inventor to sell an item or use a process for 17 years? |
| | A) | Copyright |
| | B) | Patent |
| | C) | Leasehold |
| | D) | Franchise |
| | E) | Trademark |
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