ACCT20100 Chapter Notes - Chapter 8: Net Income, Unit
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Question 1Acompany purchased for cash a machine with a list price of $90,000.The machine was shipped FOB shipping point at a cost of $5,000.Installation and test runs of the machine cost $3,000. Therecorded acquisition costof the machine is whichamount?
| 1 | $98,000 |
| 2 | $128,000 |
| 3 | $90,000 |
| 4 | $93,000 |
Question 2Small, ordinary repairs made to keepa truck running over its useful life have been debited to theVehicles account. As a result of this, which of the followingoccurred?
| 1 | The balance in the Vehicles account was correctly stated. |
| 2 | The balance in the Vehicles account was overstated. |
| 3 | The expenses for the period were overstated. |
| 4 | The net income for the period was understated. |
Question 3 Whatis the annual straight-linedepreciation for an asset thatcost $34,600, has an estimated service life of 8 years, and anestimated salvage valueof $1,400?
| 1 | $4,150 |
| 2 | $1,450 |
| 3 | $4,325 |
| 4 | $4,500 |
Question 4An asset cost $50,000, has anestimated salvage valueof $1,500, and an estimated usefullife of 8 years. What is thedouble-declining-balance depreciationrate?
| 1 | 20.0% |
| 2 | 25.0% |
| 3 | 16.0% |
| 4 | 32.5% |
Question 5An asset having a four-year servicelife and a salvage valueof $5,000 was acquired for $45,000cash on June 20. Ignore the half-year convention and calculate the depreciation expense at the end of the first year, December 31?
| 1 | $10,000, under the straight-line method |
| 2 | $22,500, under the double-declining-balance method |
| 3 | $7,000, under the straight-line method |
| 4 | $11,250, under the double-declining-balance method |
Question 6 Publicly traded companies can use adepreciation method that does not conform to generallyaccepted accounting principles but is based on a declining-balancemethod. What is the name of this accelerated depreciation method?
| 1 | Asset Cost Recovery Statement |
| 2 | Asset Cost Recognition System |
| 3 | Modified Accelerated Cost Recovery System |
| 4 | Accelerated Cost Recovery System |
Question 7 OnJune 28, 2011, a business sold for$1,500 a plant assetthat cost $5,000.The asset had a 5-year useful life, nosalvage value, and had been used by the business sinceJanuary 1, 2008. Straight-linedepreciation was used. Thefiscal year ends on December 31. What was the result of selling theplant asset?
| 1 | No gain or loss on the disposal of plant assets |
| 2 | A $1,000 gain on the disposal of plant assets |
| 3 | A $500 loss on the disposal of plant assets |
| 4 | A $500 unrecognized gain on the sale of a plant asset. |
Question 8Your company currently is generatingnormal earnings that are equal to a 12% return on net identifiable assets of $450,000. A comparable company is generatingnormal earnings that are equal to 10% return on net identifiableassets of $450,000. What is the estimated goodwill ofyour company, when compared to the other company?
| 1 | $90,000 |
| 2 | $45,000 |
| 3 | $9,000 |
| 4 | $15,000 |
Question 9The Baker Mining Company acquired aniron ore deposit for $2,000,000. The company's geologist estimatedthe deposit to contain 1,500,000 tons of iron ore. At the end ofthe first year, 60,000 tons had been extracted. The end-of-yearjournal entry to record thedepletion of the iron ore wouldinclude which of the following?
| 1 | A credit to Iron Ore Inventory of $45,000 |
| 2 | A credit to Accumulated Depletion of $80,000 |
| 3 | A debit to Iron Ore Inventory of $50,000 |
| 4 | None the above, until all of the ore is extracted |
Question 10 Which of the following are investing activities?
| 1 | Selling a plant asset |
| 2 | Exchanging an old asset and cash for a new plant asset |
| 3 | Depreciating or amortizing an asset |
| 4 | Both (A) and (B) |
