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On January 1,2016,Coopers Industries bought a parcel of land for use in its operations by paying the seller $400,000 in cash and signing a five year,12% note payable in the amount of $100,000.In connection with the purchase of the land,Coopers incurred legal fees of $19,000,a real estate agent sales commission of $25,000,surveying fees of $1,000,and an appraisal fee of $5,000. Required: Part a.Compute the total acquisition cost of the parcel of land. Part b.Prepare the journal entry to record the purchase of the parcel of the land.

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Urban Outsiders has a building that originally cost $375,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The balance of the related Accumulated Depreciation account is $258,000.The depreciable cost of the facility is:


A) $117,000.
B) $151,000.
C) $268,000.
D) $107,000.

E) A) and B)
F) All of the above

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Why does the IRS allow larger depreciation amounts in the early years of an asset's life?


A) The calculations are easier if you allow more depreciation in the early years of an asset's life.
B) The government wants to encourage companies to invest in assets to promote economic renewal and growth.
C) So that most income taxes are paid by average taxpayers, rather than by big corporations.
D) The calculations are more complicated, so it provides more jobs for accountants and thus stimulates the economy.

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

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When estimated useful life of an asset is revised:


A) depreciation will continue at the current rate.
B) depreciation expense reported in previous years would be changed retroactively.
C) the depreciation expense in subsequent years will be changed but previous calculations will not be changed.
D) generally accepted accounting principles have been violated.

E) C) and D)
F) B) and C)

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Recording depreciation is an application of the:


A) expense recognition principle ("matching") .
B) cost principle.
C) separate entity assumption.
D) unit-of-measure assumption.

E) B) and D)
F) C) and D)

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The formula for calculating depreciation expense using the double declining-balance method involves which of the following?


A) Multiplying a declining percentage by a constant book value.
B) Multiplying a constant percentage by the previous year's depreciation expense.
C) An increasing amount of depreciation expense each period.
D) Not utilizing the residual value in calculating each year's depreciation expense.

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

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Tangible assets are first recorded at:


A) all costs to acquire them and prepare them for use.
B) current market value or resale value.
C) the amount of cash paid for them.
D) cost minus residual (or salvage) value.

E) None of the above
F) All of the above

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Which of these are natural resources that are depleted over time?


A) Timber
B) Mining equipment
C) Cash
D) Inventory

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

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The fixed asset turnover ratio measures the:


A) useful life of long-lived assets.
B) the average difference between book value and disposal value of fixed assets.
C) useful life of intangible assets.
D) efficiency with which the investment in fixed assets produces revenue.

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

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Loss on Impairment is a(n) :


A) operating expense that appears on the balance sheet.
B) reduction to depreciation expense for the year.
C) contra-revenue account.
D) operating expense that appears on the income statement.

E) B) and C)
F) All of the above

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Shenandoah Skies bought land to be used for a new ski resort.Which of the following costs should not be capitalized?


A) $5,000,000 to purchase the land
B) $5,000 paid to Jack Mogul for a title search
C) $50,000 paid to cut down timber to make way for ski runs
D) $7,500 paid for a party to celebrate the grand opening

E) B) and C)
F) All of the above

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Choose the letter to of the appropriate definition to match each term.Not all definitions will be used. Term 1._____ Accelerated depreciation 2._____ Goodwill 3._____ Patent 4._____ EBITDA 5._____ Net book value 6._____ Fixed assets 7._____ Straight-line depreciation 8._____ Residual value 9._____ Trademark Definition A.Names or images that appear with a ® or TM. B.A tax law dealing with how companies can depreciate their assets. C.An intangible asset that represents the value of unidentifiable assets acquired. D.Assets whose values do not change over time. E.When a company expenses the cost of a long-lived asset by a constant annual amount. F.The acquisition cost of an asset minus its accumulated depreciation. G.The estimated total use a company expects to receive from an asset. H.Net income plus interest,taxes,depreciation and amortization expenses. I.What a company expects to receive when an asset is disposed of at the end of its useful life. J.When a company expenses the entire cost of a long-lived asset in the first year of use. K.Tangible long-lived assets. L.When a company receives free publicity in return for charitable contributions. M.When a company allocates the cost of a long-lived asset at a higher rate in the first years of use. N.The exclusive right to sell or use a product or process that is granted to encourage innovation.

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1.M
2.C
3....

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Which of the following statements about depreciation is correct? A company:


A) must use the same depreciation method for all classes of assets consistently over time
B) may use different methods of depreciation for any class of asset and may change methods as it sees fit
C) must use straight-line depreciation for tax reporting
D) may use different depreciation methods for different classes of assets from one year to the next.

E) All of the above
F) A) and B)

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The straight-line depreciation method:


A) reports an equal amount of depreciation expense each year.
B) reports a higher amount of depreciation expense in the early years of an asset's use.
C) reports more depreciation expense in a year when an asset is heavily used and less in a year when the asset is hardly used at all.
D) can be used only by small companies.

E) B) and D)
F) A) and B)

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Which of the following accurately describes the treatment of ordinary and extraordinary repairs?


A) Ordinary repairs are expensed as incurred; extraordinary repairs are expensed as incurred
B) Ordinary repairs are treated as a capital expenditure; extraordinary repairs are expensed as incurred
C) Ordinary repairs are expensed as incurred; extraordinary repairs are treated as a capital expenditure
D) Ordinary repairs are treated as a capital expenditure; extraordinary repairs are treated as a capital expenditure

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

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On January 1,2016,Morris Minerals paid $300,000 for a mineral deposit in Morris,Illinois,and then spent $45,000 to develop the deposit for exploitation.It was estimated that 690,000 total cubic yards could be extracted economically.During 2016,69,000 cubic yards of minerals were extracted; the minerals have not yet been sold. Required: Part a.Compute the amount of depletion expense for 2016. Part b.Prepare the journal entry to record the 2016 depletion.

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Part a
Depletion expense = Cos...

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What is the effect of the sale on the balance sheet and income statement of Far Niente reported as of and for the year ended December 31,2016?


A) No effect on assets; increase net income
B) Decrease assets; Increase net income
C) Increase assets; Increase net income
D) Decrease assets; Decrease net income

E) A) and D)
F) A) and C)

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Trademarks and goodwill are intangible assets that are not amortized.

A) True
B) False

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On October 21,2017,Xit Company bought a new delivery truck for $30,000.In calculating depreciation expense for the year ended December 31,2017,Xit's accountant will assume that the truck was purchased on:


A) November 1, 2017
B) October 1, 2017
C) October 21, 2017
D) January 1, 2018

E) All of the above
F) A) and D)

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A company purchased office equipment for $24,500 and paid $1,470 in sales tax,$550 for installation,$3,200 for a needed adjustment to the equipment,and $2,600 for supplies that will be used for periodic routine maintenance.How should the company record this transaction?


A) Debit Equipment $24,500, debit Repairs and Maintenance Expense for $5,220, debit Supplies for $2,600, and credit Cash for $32,320
B) Debit Equipment for $29,720, debit Supplies for $2,600, and credit Cash for $32,320
C) Debit Equipment for $25,970, debit Repairs and Maintenance Expense $3,750, debit Supplies for $2,600, and credit Cash for $32,320
D) Debit Equipment and credit Cash for $32,320

E) B) and D)
F) A) and B)

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