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Exam 7: Fixed Assets and Intangible Assets

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Question 41

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Which of the following statement is true about intangible assets?

A) They are usually presented in the balance sheet as fixed assets.
B) They are short-lived assets.
C) They are not held for resale.
D) They have physical existence.

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

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Question 42

True/False

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Under the straight-line method,the amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000,and a useful life of 5 years,will be $18,000.

A) True
B) False

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Question 43

Multiple Choice

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A capital expenditure would appear on the:

A patent was purchased for $585,000 with a legal life of 20 years.Management estimates that the patent has an 12- year economic life.The entry to record amortization would include:

Cook Co.incurred the following costs related to the office building used in operating its sports supply company: (a) Replaced a broken window. (b) Replaced the roof that had been on the building for 23 years. (c) Serviced all the air conditioners before summer started. (d) Replaced the air conditioners with refrigerated air conditioners in the customer service areas. (e) Added a warehouse to the back of the building. (f) Repainted the interior walls. (g) Installed window shutters on all windows. Classify each of the costs as a capital expenditure or a revenue expenditure.

You are examining the financial statements of a company.You observe patent amortization expense of $1.5 million and a loss on impairment of goodwill for $25 million.

If a company sells a fixed asset for an amount which is less than its book value,a gain must be recognized.

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.

The double-declining-balance method of depreciation is also referred to as an accelerated depreciation method.

On September 1,a machine was purchased for $47,000 with a useful life of 8 years,and a residual value of $3,000.What is the depreciation expense in the year of purchase under straight-line method,assuming a December 31 year- end?

A company sold office furniture costing $15,800 with accumulated depreciation of $13,000 for $1,500 cash.The entry to record the sale would include:

For each of the following items indicate whether the transactions listed below increased (+),decreased (-)or had no effect (o)by inserting the appropriate symbol.

To measure depreciation,which of the following must be known?

A computer equipment was acquired at the beginning of the year at a cost of $56,000 with an estimated residual value of $5,000,and an estimated useful life of 5 years.Determine the second year's depreciation expense using the straight-line method.

A machine was purchased for $35,500,having a useful life of 10 years,and a residual value of $6,000.Compute the annual depreciation expense using the straight-line method.

A fully depreciated asset must be:

Amortization refers to systematic periodic transfer of the cost of a fixed asset to an expense account.

The acquisition costs of property,plant,and equipment should include all costs necessary to get the asset in place and ready for use.

The inventory turnover measures how efficiently a company is generating sales from its property,plant,and equipment.