Ch9 accounting 201 assignment PDF

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assignment for accounting 201 american university in dubai assignment 2021...

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ch9 Student: ___________________________________________________________________________

1.

When assets are purchased as a group, the total cost must be divided up and allocated to each asset in proportion to the market value of the assets as a whole. True False

2.

Extraordinary repairs, replacements, and additions are added to the appropriate asset accounts rather than being recorded as expenses. True False

3.

The useful life of an asset is always measured in years. True False

4.

Assuming no additions, replacements, or extraordinary repairs, the book value of any long-lived asset with a limited life is always less than or equal to its acquisition cost. True False

5.

If a company produces the same number of units per period over an asset's useful life, straight-line depreciation expense per period will be the same as the depreciation expense recorded using the units-ofproduction method. True False

6.

The purpose of depreciation is to correctly value assets. True False

7.

A declining fixed asset turnover ratio can actually be caused by acquiring additional assets in the current period in preparation for greater future sales. True False

8.

If average net fixed assets decrease, then the fixed asset turnover ratio will increase, assuming all other things equal. True False

9.

Companies within the same industry do not always use the same depreciation method, but will use the same expected useful life for the same piece of equipment. True False

10. Some analysts compare companies by focusing on earnings before interest, taxes, depreciation, and amortization (EBITDA). True False

11. Depreciation measures the actual decline in the market value of an asset. True False 12. Accumulated depreciation represents funds set aside to buy new assets. True False 13. Land is not subject to depreciation so that means that items that increase the usefulness of the land, such as parking lots, are not depreciated. True False 14. Residual value is the estimate of the asset's value at the end of its useful life. True False 15. Accumulated depreciation is classified as an expense. True False 16. The calculation for depletion of natural resources is similar to the calculation for units-of-production depreciation. True False 17. Intangible assets are usually amortized using the straight-line method. True False 18. The periodic allocation of a natural resource's cost over the period of its extraction or harvesting is called amortization. True False 19. The exclusive right to use a certain name or symbol is called a trademark. True False 20. If an asset is depreciated with the straight-line method and it has a salvage (residual) value, the depreciation will be a level amount over the asset's life until the last year when it will be lower. True False 21. Impairment occurs when the estimated future cash flows from a long-lived asset fall below its book value. True False 22. Goodwill is the most frequently reported intangible asset. True False 23. Trademarks and Goodwill are intangible assets that are not amortized. True False

24. Ordinary repairs and maintenance on long-lived assets are referred to as capital expenditures. True False 25. Tax accounting and financial accounting use the same depreciation calculations and there are no differences in the results between the two accounting systems. True False 26. There are no differences between GAAP and IFRS rules of accounting for tangible and intangible assets. True False 27. When the amount of depreciation must be revised because of a change in the estimated useful life of an asset that has been depreciated for several years, it is necessary to restate prior years' financial statements. True False 28. Which of the following statements regarding the nature of long-lived assets is true? A. B. C. D.

Long-lived assets are assets that never decline in value. Another name for a tangible long-lived asset is a fixed asset. Long-lived assets have useful lives between 10 and 20 years. Long-lived assets are defined as assets that are no longer being depreciated.

29. Which of the following statements regarding capitalization is correct? A. B. C. D.

Capitalizing costs refers to the process of converting assets to expenses. If a company builds its own facility, only the cost of materials is capitalized. Capitalizing a cost means to record it as an asset. Capitalization is an immediate decrease in net income.

30. Which of the following statements regarding straight-line depreciation is correct? A. Straight-line depreciation is by far the most common method of depreciation used in the U.S. B.When the straight-line method is used to compute depreciation, an asset's carrying value remains constant over the life of the asset. C Straight-line depreciation is an approved method to allocate the cost of an asset to expense and it serves . as a measure of the physical decline in the asset. D. The straight line method of depreciation results in a straight-line increase of depreciation expense over the life of an asset. 31. Which of the following statements regarding long-lived assets is not correct? A. Depreciation and maintenance are expenses associated with the use of tangible long-lived assets. B Assuming no additions, replacements, or extraordinary repairs, the carrying value of a long-lived asset is . never more than its original cost. C. The cost of a long-lived asset minus the accumulated amortization is called the carrying value of the asset. D. All tangible and intangible long-lived assets are depreciated as they are used in the business.

32. Which of the following statements regarding impairment is correct? A. Asset impairment losses are a regular operating expense of most businesses. B. When a company records an asset impairment loss, it will increase net income for that period. C. The accounting for impairment losses is an application of the cost principle. D. Asset impairment losses are reported on the income statement as an operating expense. 33. Which of the following statements regarding disposal of long-lived assets is not correct? A The gain or loss resulting from the disposal of a long-lived asset appears below the "Income from . Operations" line on the income statement. B. A journal entry is usually needed to update depreciation expense on a long-lived asset at the time of disposal. C. A company may dispose of long-lived assets by selling them, trading them in on new assets, or by scrapping them. D A gain or loss on disposal of a long-lived asset before the end of its useful life will be influenced by the . depreciation method that had been used. 34. How many of the following statements regarding intangible assets are true? • Goodwill is an example of a self-created intangible asset and is measured by estimating the excess of fair value of the company's assets over their book value. • Goodwill is amortized using the straight-line method. • Intangible assets are not adjusted for asset impairment losses. • Only goodwill purchased from another company can be reported on the balance sheet as an intangible asset. A. One B. Two C. Three D. Four 35. The MegaHit Film Studio has a licensing right (or agreement) to distribute films produced by the Artsy Film Company. How would the MegaHit Company classify this licensing right on its balance sheet? A. Tangible asset B. Intellectual property asset C. Intangible asset D. Nonreported asset 36. The MegaHit Film Studio owns a production lot and related equipment. How would MegaHit Company classify these assets on its balance sheet? A. Tangible asset B. Other long-lived asset C. Intangible asset D. Nonreported asset 37. Which of McGraw-Hill's intangible assets gives it the legal right to prevent you from borrowing a textbook from a friend and photocopying all of it? A. Patent B. Trademark C. Franchise agreement D. Copyright

38. The right to exclude others from making or using an invention is a A. patent. B. copyright C. franchise. D. licensing right. 39. The intangible asset most frequently reported by U.S. businesses is: A. goodwill. B. trademarks. C. patents. D. licensing rights. 40. Which of the following statements is true? ALong-lived tangible assets will not be used up within one year of the purchase date, but there is no . minimum useful life for long-lived intangible assets. B. Items in a company's inventory that are not expected to be sold in the next year are considered long-lived assets. C. All long-lived intangible assets must be amortized over a period of 40 years or less. D. Intangible assets with unlimited or indefinite lives are not amortized. 41. Under the cost principle, a company capitalizes: A. all ordinary repair expenditures incurred in the use of an asset. B. any interest incurred in borrowing money to help pay for asset acquisitions. C. all reasonable and necessary costs of acquiring an asset and preparing it for use. D. the total market value of individual assets acquired in a ‘basket purchase'. 42. The primary difference between ordinary repairs and extraordinary repairs is: A. ordinary repairs cost less. Bordinary repairs are expenditures for routine maintenance and upkeep, whereas extraordinary repairs . increase an assets economic usefulness in the future through increased efficiency, capacity, or longer life. C extraordinary repairs only maintain the asset for a short time, whereas ordinary repairs increase the . usefulness of assets beyond their original condition. D. extraordinary repairs are expenditures, not expenses. 43. If a company capitalizes costs that should be expensed, how is its income statement for the current period impacted? A. Net income will be lower than it should be. B. Revenues will be lower than they should be. C. Expenses will be lower than they should be. D. Assets will be lower than they should be. 44. A real estate management company buys an abandoned apartment complex for $4.5 million. It pays a construction company $500,000 to demolish the old building. Which of the following is true? A. The company would record $5 million as the cost of the land. B. The company would record $4.5 million as the cost of the land. C. The company would record $4 million as the cost of the land. D. The company would record $500,000 as demolition expense.

45. Your company buys a computer system from IBM for $3 million and pays IBM $200,000 to install the computer system. Your company should record: A. $3 million in equipment and $200,000 in expenses. B. $3.2 million in expenses. C. $2.8 million in equipment and the rest in expenses. D. $3.2 million in equipment. 46. The Gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation. One-half of the total cost is paid in cash; the other half is financed. How should the company record this transaction? A. Debit cash for $250,000, debit notes payable for $250,000, and credit equipment for $500,000. B. Debit equipment for $500,000, credit cash for $250,000, and credit notes payable for $250,000. C. Debit cash for $250,000, debit notes payable for $250,000 credit equipment for $450,000, and credit expenses for $50,000. D. Debit equipment for $450,000, debit expenses for $50,000, credit cash for $250,000, and credit notes payable for $250,000. 47. The balance sheet category "intangible assets" includes A. Patents, trademarks, and franchises B. Equipment, land, and buildings C. Investments, receivables, and cash D. Goodwill, inventory, and vehicles 48. Ordinary repairs and maintenance always: A. are part of the asset cost of equipment and facilities. B. are recorded as expenses. C. are recorded as liabilities. D. improve the asset beyond the current accounting period. 49. A company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. Commercial use of the equipment began on May 1, 2011. The estimated residual value of the equipment is $5,000. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The company has an October 31, 2011 yearend and had used the equipment a total of 11,200 hours prior to the year-end. Using the units- of- production method, what amount of depreciation expense (to the nearest thousand) would the company report for this equipment in the income statement prepared for the year-ended October 31, 2011? A. $102,000 B. $198,000 C. $204,000 D. $206,000 50. When a company records depreciation it debits: A. liabilities and credits expenses. B. expenses and credits cash. C. expenses and credits a contra-asset account. D. long-lived assets and credits expenses.

51. The Buddy Burger Corporation has $3.5 million in long-lived assets and has an accumulated depreciation account of $1.1 million. Which of the following statements is true? A. The book value of long-lived assets is $2.4 million. B. The market value of long-lived assets is $3.5 million. C. The carrying value of long-lived assets is $3.5 million. D. The resale value of long-lived assets is $2.4 million. 52. Which of the following is not an amount that is needed to calculate straight-line depreciation? A. The cost of the asset. B. An estimate of the asset's useful economic life to the company. C. The estimated amount that the company will get when it disposes of the asset. D. The cost the company will be required to incur to replace the asset. 53. The book or carrying value of an asset is: A. its acquisition cost less the accumulated depreciation from the acquisition date to the balance sheet date. B. its acquisition cost plus accumulated depreciation from the acquisition date to the balance sheet date. C. the amount that could be obtained for the asset on the balance sheet date if it were sold. D. the annual cost of carrying the asset in inventory. 54. Purrfect Pets has a facility that originally cost $375,000. The balance of the accumulated depreciation account for the facility is $258,000. The company expects to be able to sell the facility for $107,000 at the end of its useful life. The residual value of the facility is: A. $117,000. B. $151,000. C. $268,000. D. $107,000 55. Paul Hauling has a fleet of 10 large trucks that cost a total of $1,410,000. The fleet is expected to provide 1,000,000 miles of transportation during an estimated 10-year life, and be sold for 10% of the original cost at the end of that time. If the fleet traveled 125,000 miles in the current twelve-month period, what would be the depreciation expense under the straight-line (SL) and units-of-production (U-of-P) methods? A. SL = $158,625 & U-of-P = $141,000 B. SL = $141,000 & U-of-P = $158,625 C. SL = $126,900 & U-of-P = $176,250 D. SL = $126,900 & U-of-P = $158,625 56. If the double-declining balance method were used to depreciate a building that has a 10-year useful life and a residual value equal to 10% of the building's original cost, what depreciation rate would be used? A. 9% B. 10% C. 18% D. 20%

57. A machine is purchased on January 1, 2011, for $90,000. It is expected to have a useful life of five years and a residual value of $5,000. The company closes its books on December 31. Under the double-declining balance method, what is the total amount of depreciation to be expensed during the 2012 fiscal year (year 2 of 5)? A. $21,600 B. $22,000 C. $22,400 D. $34,000 58. Which of the following statements most appropriately describes the purpose of depreciating a long-lived tangible asset? A. To indicate how the asset has physically deteriorated. B. To show that the asset will eventually and gradually become obsolete. C. To record that the asset's market value declines over time. D. To match the cost of the asset to the period in which it generates revenue. 59. Purrfect Pets has a facility that originally cost $375,000. The balance of the accumulated depreciation account for the facility is $258,000. The company expects to be able to sell the facility for $107,000 at the end of its useful life. The depreciable cost of the facility is: A. $117,000. B. $151,000. C. $268,000. D. $107,000 60. Your company buys a computer server which it expects to use for eight years and then sell when it upgrades to a more powerful model. The server would probably be used by the business that buys it at that time for another three years. The useful life of the server for your company is: A. the total length of time the server is used to produce output for your company. B. eleven years. C. the total length of time until the server can no longer function. D. three years. 61. A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000. Using the straight-line method, the company should report depreciation for the equipment of: A. $4,200 per year. B. $8,400 per year. C. $4,800 per year. D. $9,600 per year. 62. Which of the following statements is true when the straight-line method is used to compute depreciation? A. The carrying value of an asset is a constant amount during the asset's useful life. B. Accumulated depreciation is a constant amount during the asset's estimated useful life. C. Depreciation expense per period is the depreciable cost divided by the number of periods in the asset's useful life. D. The book value of an asset is an increasing amount during the asset's useful life.

63. The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation rate is: A. $0.95 per unit. B. $0.19 per unit. C. $0.05 per unit. D. $1.00 per unit. 64. The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is: A. $80,000. B. $400,000. C. $76,000. D. $380,000. 65. A company buys a piece of equipment for $48,000. The equipment has a useful life of ten years. Using the double-declining-balance method, the company's depreciation expense in the first year would be: A. $9,600. B. $12,000. C. $4,800. D. $24,000. 66. ShadyZ Corporation uses the unit-of-production method to estimate depreciation. A new asset is purchased for $18,000 that willproduce an estimated 100,000 units over its useful life. Estimated residual value is $2,000. What is the depreciation rate per unit? A. $1.60 B. $1.80 C. $0.16 D. $0.18 Shaggy Limited purchased a new van on January 1, 2011. The van cost $20,000. It has an estimated life of five years and the estimated residual value is $5,000. Shaggy uses the double-declining-balance method to compute depreciation. 67. What is the depreciation expense for 2011? A. $4,000. B. $3,000. C. $6,000. D. $8,000. 68. What is the adjusted balance in the Accumulated Depreciation account at the end of 2012? A. $3,200 B. $4,800 C. $9,600. D. $12,800.

69. A piece of equipment was acquired on January 1, 2010, at a cost of $22,000, with an estimated residual value of $2,000 and an estimated useful life of four years. The company uses the double-declining-balance method. What is its book value at December 31, 2011? A. $5,500 B. $10,000 C. $11,000 D. $12,000 70. A company bought a piece of equipment for $40,000, expecting to use it for eight years. The company then plans to sell it for $3,500. The company has already recorded depreciation of $35,995. Using the doubledeclining-balance method, the company's annual depreciation expense for the upcoming year would be: A. $1,001. B. $9,125. C. $505. D. $10,000. 71. One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method: A. takes book value below residual value. B. does not consider the useful life of the asset in the calculation of depreciation. C. cannot be used for tax purposes. D. uses book value instead of depreciable cost in the calcu...