18 Oct Which of the following assets is not properly classified as property, plant, and equipment?

Which of the following assets is not properly classified as property, plant, and equipment?

 

A truck held for resale by an automobile dealership

 

Land improvements, such as parking lots and fences

 

A building used as a factory

 

Land used in ordinary business operations

 

One characteristic of a plant asset is that it is

 

held for sale in the ordinary course of the business.

 

intangible.

 

used in the operations of a business.

 

not currently used in the business but held for future use.

 

Which of the following assets does not decline in service potential over the course of its useful life?

 

 Equipment

 

 Fixtures

 

 Land

 

 Furnishings

 

The four subdivisions of plant assets are

 

 property, plant, equipment, and land.

 

 intangibles, land, buildings, and equipment.

 

 furnishings and fixtures, land, buildings, and equipment.

 

 land, land improvements, buildings, and equipment.

 

The balance in the Accumulated Depreciation account represents the

 

 amount charged to expense in the current period.

 

 cash fund to be used to replace plant assets.

 

 amount charged to expense since the acquisition of the plant asset.

 

 amount to be deducted from the cost of the plant asset to arrive at its fair market value.

 

The cost of a long-term asset is expensed

 

 as the asset benefits the company.

 

 in the period in which it is acquired.

 

 when it is paid for.

 

 in the period in which it is disposed of.

 

The book value of an asset is equal to the

 

 replacement cost of the asset.

 

 blue book value relied on by secondary markets.

 

 asset’s cost less accumulated depreciation.

 

 asset’s fair value less its historical cost.

 

In computing depreciation, salvage value is

 

 the fair value of a plant asset on the date of acquisition.

 

 subtracted from accumulated depreciation to determine the plant asset’s depreciable cost.

 

 ignored in all the depreciation methods.

 

 an estimate of a plant asset’s value at the end of its useful life.

 

Equipment was purchased for $137500. Freight charges amounted to $5500 and there was a cost of $19000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $32000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be

 

 $26000.

 

 $22600.

 

 $32400.

 

 $21100.

 

Equipment with a cost of $850600 has an estimated salvage value of $25000 and an estimated life of 4 years or 19200 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used for 4800 hours?

 

 $212650.

 

 $217650.

 

 $206400.

 

 $218900.

 

The declining-balance method of depreciation produces a(n)

 

 decreasing depreciation expense each period.

 

 constant amount of depreciation expense each period.

 

 declining percentage rate each period.

 

 increasing depreciation expense each period.

 

Which of the following methods will result in the highest depreciation in the first year?

 

 Straight-line

 

 Declining-balance

 

 Time valuation

 

 Sum-of-year’s-digits

 

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

 

 is required by the SEC.

 

 is used for tax purposes.

 

 expenses an asset over a single year because capital acquisitions must be expensed in the year purchased.

 

 must be used for financial statement purposes.

 

Which of the following methods of computing depreciation is production based?

 

 Straight-line.

 

 Declining-balance.

 

 Units-of-activity.

 

 None of these answer choices are correct.

 

If disposal of a plant asset occurs during the year, depreciation is

 

 recorded for the whole year.

 

 not recorded if the asset is scrapped.

 

 not recorded for the year.

 

 recorded for the fraction of the year to the date of the disposal.

 

If a plant asset is retired and is fully depreciated

 

 no gain or loss on disposal will be recorded.

 

 a gain on disposal will be recorded.

 

 a loss on disposal will be recorded.

 

 phantom depreciation must be taken as though the asset were still on the books.

 

On July 1, 2022, Sunland Company sells equipment for $121000. The equipment originally cost $350000, had an estimated 5-year life and an expected salvage value of $50000. The Accumulated Depreciation account had a balance of $210000 on January 1, 2022, using the straight-line method. The gain or loss on disposal is

 

 $11000 gain.

 

 $11000 loss.

 

 $19000 gain.

 

 $19000 loss.

 

Whispering Winds Corp. sold equipment for $77000. The equipment had an original cost of $160000 and accumulated depreciation of $56000. Ignoring the tax effect, as a result of the sale

 

 net income will decrease $27000.

 

 net income will increase $77000.

 

 net income will increase $27000.

 

 net income will decrease $77000.

 

Research and development costs

 

 must be expensed when incurred under generally accepted accounting principles.

 

 are classified as intangible assets.

 

 are capitalized and then amortized over a period not to exceed 20 years.

 

 should be included in the cost of the patent they relate to.

 

Which of the following is not classified as an intangible asset on the balance sheet?

 

 Goodwill

 

 Trademarks

 

 Employees

 

 Copyrights

 

Current Attempt in Progress

 

________________________________________

 

A current liability is a debt that can reasonably be expected to be paid

 

 within one year, or the operating cycle, whichever is longer.

 

 out of currently recognized revenues.

 

 out of cash currently on hand.

 

 between 6 months and 18 months.

 

Failure to record a liability will probably

 

 result in overstated total liabilities and owner’s equity.

 

 result in an overstated net income.

 

 result in overstated total assets.

 

 have no effect on net income.

 

Failure to record a liability will probably

 

 result in overstated total liabilities and owner’s equity.

 

 result in an overstated net income.

 

 result in overstated total assets.

 

 have no effect on net income.

 

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

 

 interest must be paid on a periodic basis regardless of earnings.

 

 income to stockholders may increase as a result of trading on the equity.

 

 bond interest is deductible for tax purposes.

 

 the bondholders do not have voting rights.

 

Bonds that are secured by real estate are termed

 

 mortgage bonds.

 

 debentures.

 

 serial bonds.

 

 convertible bonds.

 

Bonds with a face value of $440000 and a quoted price of 102.25 have a selling price of

 

 $448811.

 

 $528990.

 

 $449900.

 

 $448910.

 

If the market rate of interest is 10%, a $14000, 13%, 10-year bond that pays interest annually would sell at an amount

 

 less than face value.

 

 greater than face value.

 

 that cannot be determined.

 

 equal to face value.

 

A measure of a company’s solvency is the

 

 times interest earned.

 

 acid-test ratio.

 

 asset turnover ratio.

 

 current ratio.

 

In a recent year, Blue Spruce Corp. had net income of $111000, interest expense of $17700, and income tax expense of $27700. What was Blue Spruce Corp.’s times interest earned for the year?

 

 6.27

 

 8.84

 

 7.84

 

 7.27

 

Copyrights are granted by the federal government

 

 for the life of the creator or 70 years, whichever is shorter.

 

 for the life of the creator or 70 years, whichever is longer.

 

 and therefore cannot be amortized.

 

 for the life of the creator plus 70 years.

 

If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?

 

 The company purchased another company.

 

 The company has a well-established brand name.

 

 The company is a valuable company worth investing in.

 

 The goodwill will generate a lot of positive business for the company for many years to come.

 

On March 1, 2017, Moreno Company purchased a patent from another company for $90,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. How much is amortization expense for 2017?

 

 $9,000

 

 $5,000

 

 $6,000

 

 $7,500

 

On July 1, 2022, Cullumber Company sells machinery for $223000. The machinery originally cost $620000, had an estimated 5-year life and an expected salvage value of $70000. The Accumulated Depreciation account had a balance of $385000 on January 1, 2021, using the straight-line method. The gain or loss on disposal is

 

 $92000 gain.

 

 $92000 loss.

 

 $43000 gain.

 

 $21500 loss.

 

Expenditures that add to the utility of plant assets for more than one accounting period are

 

 committed expenditures.

 

 capital expenditures.

 

 current expenditures.

 

 revenue expenditures.