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Exam 9: Long-Lived Assets

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Question 41

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Development costs

A) are always expensed when incurred.
B) cannot be recorded separately from research costs.
C) can be capitalized if it can be shown that the costs will provide future benefits.
D) are intangible assets that are not amortized.

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Question 42

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A loss on disposal of a long-lived asset is reported in the financial statements

A) as an increase to depreciation expense in the income statement.
B) in the operating expenses section of the income statement.
C) as a direct increase to the capital account on the balance sheet.
D) as a direct decrease to the capital account on the balance sheet.

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Question 43

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If paid by the purchaser, freight charges and insurance during transit are included in the cost of equipment.

Bay of Fundy Company uses the units-of-production method in calculating depreciation. A new piece of equipment is purchased for $18,000 that will produce an estimated 100,000 units over its useful life. Estimated residual value at the end of its useful life is $2,000. What is the depreciable cost per unit?

Dorchester Company purchased a new van for floral deliveries on July 1, 2017. The van cost $20,000 with an estimated life of 5 years and $5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used. What is the depreciation expense for 2017?

In calculating depreciation, both the long-lived asset's cost and useful life are based on estimates.

Which of the following is NOT true of ordinary repairs?

Architect's fee for the plans for a new building would be included in the cost of the land improvements.

When estimating the useful life of an asset, accountants do NOT consider

The amount of an asset's residual value does NOT affect the calculation of depreciation in the units-of-production method.

For the year ended December 31, 2017, Akito Co. has net sales of $1,000,000 and profit of $290,000. Total assets on January 1, 2017 were $1,750,000 and total assets at December 31, 2017 are $1,245,000. Akito's return on assets for 2017 is

Conceptually, the cost allocation procedure for natural resources parallels that of property, plant, and equipment.

The calculation of depreciation using the diminishing-balance method

Which of the following is NOT an intangible asset that is reported on the balance sheet?

Natural resources are often called wasting assets because it is difficult to use the assets in an efficient manner.

Which of the following methods of depreciation results in the highest cash flow?

If a long-lived asset is sold before it is fully depreciated, and the proceeds received is less than the asset's carrying amount,

The carrying amount of a long-lived asset is the amount originally paid for the asset less anticipated residual value.

The balance in the accumulated depreciation account represents the

If a long-lived asset is sold and the carrying amount is higher than the proceeds received,