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Exam 9: Fixed Assets and Intangible Assets

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Question 91

Multiple Choice

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Which of the following should be included in the acquisition cost of a piece of equipment?

A) transportation costs
B) installation costs
C) testing costs prior to placing the equipment into production
D) all are correct

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

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Question 92

True/False

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The normal balance of the accumulated depreciation account is debit.

A) True
B) False

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Question 93

Multiple Choice

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The proper journal entry to purchase a computer costing $975 on account on January 2 to be utilized within the business would be:

An asset was purchased for $120,000 on January 1, 2010 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of 2012, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the 2012 depreciation expense using the revised amounts and straight line method.

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

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years.

The depreciable cost of a building is the same as its acquisition cost.

If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, and a trade-in allowance of $15,000 is granted by the seller, if the transaction is deemed to have commercial substance, the buyer would report a gain on disposal of fixed assets of $5,000.

Convert each of the following estimates of useful life to a straight-line depreciation rate, stated as a percentage.

A double-declining balance rate for calculating depreciation expense is determined by doubling the straight-line rate. Assuming that an asset has a useful life of 25 years, determine the rate to be used if using the double-declining balance method.

When a major corporation develops its own trademark and over time it becomes very valuable, the trademark may not be shown on their balance sheet due to lack of a material cost.

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined, the amounts can not be changed.

On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the first year.

When depreciation estimates are revised, all years of the asset's life are affected.

The cost of replacing an engine in a truck is an example of ordinary maintenance.

Ordinary gains from the sale of fixed assets should be reported in the other income section of the income statement.