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Research and development costs are capitalized under GAAP once a product or process has been developed.

A) True
B) False

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Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?


A) $30,720.
B) $32,000.
C) $58,880.
D) $64,000.

E) A) and B)
F) C) and D)

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Which of the following statements about the Modified Accelerated Cost Recovery System (MACRS) is correct?


A) It is similar to the units-of-production depreciation method.
B) It is applied using longer asset lives than the estimated useful lives required by GAAP.
C) It provides a short-term tax benefit because of the higher depreciation expense reported in the early years of an asset's life.
D) It is acceptable for use when preparing financial statements.

E) None of the above
F) A) and D)

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Which of the following is correct?


A) If a company fails to record depreciation expense, net income and expenses are overstated.
B) If a company fails to record depreciation expense, net income and assets are overstated.
C) If a company overstates depreciation expense, net income is overstated and assets are understated.
D) If a company fails to record depreciation expense, stockholders' equity, net income, and assets are understateD.If depreciation expense is not recorded, expenses are understated, and net income is overstated.Also, accumulated depreciation is understated because depreciation has not been added to it.Since accumulated depreciation reduces assets, understating accumulated depreciation will overstate assets.

E) All of the above
F) A) and D)

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Which of the following statements is correct?


A) Using straight-line depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset's life.
B) Using accelerated depreciation in the first year of an asset's life will result in a higher net income during the first year compared to using the straight-line depreciation method.
C) Using an accelerated depreciation method will lead to a higher fixed asset turnover ratio for the first year.
D) Using straight-line depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset's life.

E) B) and C)
F) All of the above

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The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded since the acquisition date.

A) True
B) False

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A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?


A) The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
B) The loss account is debited for $0.4 million and the asset account is credited for $0.4 million.
C) The loss account is debited for $5.4 million and the asset account is credited for $5.4 million.
D) The loss account is debited for $4.8 million and the asset account is credited for $4.8 million.

E) A) and C)
F) All of the above

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International Financial Reporting Standards (IFRS) require the recording of research and development costs as follows:


A) Expense research and development costs.
B) Expense research costs and capitalize development costs.
C) Expense development costs and capitalize research costs.
D) Capitalize research and development costs.

E) None of the above
F) C) and D)

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Barkley Company has a piece of equipment that it has been depreciating for 3 years. The equipment originally was estimated to have a useful life of 8 years and at the beginning of the current year, Barkley determines that the equipment's life has been extended to 10 years. When Barkley calculates depreciation for the current year, how many years of life should be used to calculate the depreciation expense?


A) 5 years.
B) 7 years.
C) 8 years.
D) 10 years.

E) A) and B)
F) A) and C)

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Natural resource depletion is recognized on the income statement for all resources removed during the period whether they are sold or not.

A) True
B) False

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The fixed asset turnover ratio measures the amount of operating income generated per dollar of average fixed assets.

A) True
B) False

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Which of the following costs associated with a land purchase is not a component of the land cost reported on a balance sheet?


A) The payment of delinquent property taxes.
B) The incurrence of legal fees.
C) The cost of title insurance.
D) The land's appraised value.

E) A) and B)
F) None of the above

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Smith Company exchanges assets to acquire a building. The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is incorrect for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?


A) The common stock account increases by $100,000.
B) The building account increases by $370,000.
C) Stockholders' equity increases $350,000.
D) The additional paid-in capital account increases by $100,000.

E) All of the above
F) B) and C)

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Hi-Crest Company purchased a machine on January 1, 2016, for $300,000. The machine has an estimated useful life of 5 years and a $10,000 residual value. Required: Calculate depreciation expense and the year-end book value for 2016 and 2017 using the double declining-balance method of depreciation.

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blured image *$120,000 = $300,00...

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Tangible long-lived productive assets differ from intangible long-lived productive assets in that tangible assets have physical substance whereas intangible assets have no physical substance.

A) True
B) False

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Lincoln Restaurants reported net income in 2016 of $45.9 million and depreciation expense of $48.8 million. It also reported additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2016 statement of cash flows?


A) Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be added under investing activities.
B) Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be added under investing activities.
C) Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be deducted under investing activities.
D) Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be deducted under investing activities.

E) All of the above
F) C) and D)

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Which of the following is most likely to be an intangible asset with an indefinite life?


A) Leasehold
B) Franchise
C) Patent
D) Goodwill

E) A) and D)
F) A) and C)

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On March 1, Wright Company purchased new equipment for $50,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $4,000; and installation cost, $2,500. At what amount will the equipment be recorded on a balance sheet?


A) $57,500.
B) $54,000.
C) $51,000.
D) $53,500.

E) All of the above
F) B) and D)

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Which statement is false?


A) Shortening the estimated useful lives of depreciable assets will lead to a higher fixed asset turnover.
B) Using an accelerated depreciation method instead of the straight-line depreciation method will lead to reporting a higher fixed asset turnover during the earlier years of an asset's life.
C) Acquiring more long-lived, productive assets when a company is growing will lead to a lower fixed asset turnover.
D) Selling off long-lived, productive assets while maintaining sales will lead to a lower fixed asset turnover.

E) B) and C)
F) All of the above

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Which of the following is not true in comparing U.S. GAAP and International Financial Reporting Standards (IFRS) ?


A) IFRS and U.S.GAAP both allow intangible assets to be reported at their cost minus accumulated amortization.
B) U.S.GAAP requires expensing of all costs of research and development.
C) IFRS allows for adjustments for increases in fair value of tangible assets.
D) IFRS requires capitalizing of research costs and expensing of development costs.

E) B) and D)
F) B) and C)

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Showing 21 - 40 of 131

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