The equipment cost initially reported on the balance sheet includes the equipment-related installation and transportation costs.
True
False
True
Which of the following equipment related costs is not capitalized on a balance sheet?
Transportation costs associated with the equipment purchase.
Equipment maintenance costs.
The equipment's purchase price.
Equipment installation costs.
Equipment maintenance costs.
Which of the following statements is incorrect?
Ordinary repairs and maintenance are recurring in nature.
Ordinary repairs and maintenance decrease net income.
Additions and improvements to a depreciable asset occur infrequently.
Capital expenditures decr
Capital expenditures decrease assets.
If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as repairs and maintenance expense, which of the following statements is true?
The current year's net income will be higher and future depreciatio
The current year's net income will be higher and future depreciation expense will be higher.
Salvia Company recently purchased a truck. The price negotiated with the dealer was $40,000. Salvia also paid sales tax of $2,000 on the purchase, shipping and preparation costs of $3,000, and insurance for the first year of operation of $4,000. At what a
$45,000.
Hill Inc. purchased an asset on January 1, 2016. Hill chose an accelerated depreciation method to depreciate the asset. Which of the following is correct if Hill would have chosen the straight-line depreciation method instead?
The accumulated depreciation
Depreciation expense would have been lower in 2016.
In most cases, the depreciation method chosen for financial reporting purposes (GAAP) must also be utilized for income tax reporting (IRS).
True
False
False
On December 31, 2016, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2016. What is the gain or loss from the December 31,
$200,000 loss.
On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value.
Wasson uses the units-of-production depreciation method and Wasson estimates that the vehicle will be dr
$29,920.
If a long-lived asset has been impaired, the journal entry will require a debit to a loss account and a credit to the long-lived asset account.
True
False
True
On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.
If Woodstock uses the straight-li
The December 31, 2017 book value was $24,000.
If a company has an asset with a book value of $5.0 million and estimates the future cash flows to be received over the asset's remaining life to be $5.5 million, no impairment has occurred and no loss would be recognized.
True
False
True
Which of the following is correct regarding gain or loss on disposal of a long-lived asset?
Failure to report a loss on the sale of an asset results in an understatement of earnings per share.
Failure to report a gain on the sale of an asset results in an
Failure to report a gain on the sale of an asset results in an understatement of stockholders' equity.
Which of the following accounts would not be considered an intangible asset?
Research and development costs
Goodwill
Patents
Trademarks
Research and development costs
An expenditure is capitalized when it is reported as an expense on the income statement.
True
False
False
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 impai
The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
Which of the following is correct?
If a company overstates depreciation expense, net income is overstated and assets are understated.
If a company fails to record depreciation expense, net income and assets are overstated.
If a company fails to record dep
If a company fails to record depreciation expense, net income and assets are overstated.
Which of the following does not properly describe the depreciation process?
It attempts to determine an asset's market value.
It is consistent with the matching principle.
It involves the use of estimates.
It is an allocation process.
It attempts to determine an asset's market value.
Which of the following journal entries is correct when a company owns its office building for many years and now sells the building?
Cash
xxx
Accumulated depreciation
xxx
Loss on sale
xxx
Building
xxx
Cash
xxx
Gain on sale
xxx
Building
xxx
Cash
xxx
Buildi
Cash
xxx
Accumulated depreciation
xxx
Loss on sale
xxx
Building
xxx
Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.
True
False
False
Selling a depreciable asset for a gain results in an increase in both net income and assets.
True
False
True
Use of the declining-balance method of depreciation results in higher depreciation expense during the first year of an asset's life relative to use of the straight-line depreciation method.
True
False
True
Which of the following properly describes the accounting for goodwill?
Goodwill is written down when it has been determined to be impaired.
Goodwill is the difference between the amount paid for a company relative to the book value of the acquired company
Goodwill is written down when it has been determined to be impaired.
Which of the following statements is false?
Once you select a depreciation method, then you must use this method for all depreciable assets.
The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed un
Once you select a depreciation method, then you must use this method for all depreciable assets.
On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value.
What is the vehicle's book value as of December 31, 2017, assuming Wasson uses the straight-line depreci
$28,000.
The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.
True
False
True
Which of the following includes only tangible assets?
Licenses, trademarks, and land.
Land, buildings, and natural resources.
Natural resources, buildings, and franchises.
Land, buildings, and leasehold rights.
Land, buildings, and natural resources.
A computer was sold for $5,000 after it had been used for 3 years. Originally the computer was purchased at $10,000, with a 5-year useful life and $1,000 salvage value.
Assume the computer is depreciated under straight line method,which of the following s
Assets and stockholders' equity both increase by $400.
The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded since the acquisition date.
True
False
True
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 ca
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.
Ordinary repairs and maintenance costs are incurred to maintain a long-lived productive asset and are expensed as incurred.
True
False
True
On January 1, 2016, equipment was purchased for $100,000. The equipment's estimated residual value is $20,000, and its estimated useful life is 8 years. On December 31, 2016, the book value using the straight-line method of depreciation is $90,000.
True
F
True
Carter Company disposed of an asset at the end of the eighth year of its estimated life for $10,000 cash. The asset's life was originally estimated to be 10 years. The original cost was $50,000 with an estimated residual value of $5,000. The asset was bei
$4,000 loss.