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An asset's useful life is based on the:


A) asset's depreciable cost.
B) useful economic life to the company.
C) asset's residual value.
D) schedule required by the IRS.

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

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Match each term with the appropriate explanation.Not all explanations will be used. -Net sales revenue


A) Assets that will be used for more than a year.
B) When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated.
C) The numerator of the fixed asset turnover ratio.
D) The cost of financing an asset.
E) When costs are recorded as assets rather than expenses.
F) How expenses are reported in the income statement.
G) The denominator of the fixed asset turnover ratio.
H) The average proportion of a company's total assets that is long-lived.
I) A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years.
J) When a company writes down the value of an asset because estimated future cash flows fall below the book value.
K) Assets that have physical substance.
L) A depreciation method that spreads asset cost by use rather than time.
M) The process of transferring the cost of long-lived tangible assets to expenses.
N) Also known as book value.

O) F) and L)
P) D) and L)

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The write-down of goodwill due to impairment will cause:


A) net income to increase.
B) intangible assets to decrease.
C) property and equipment to decrease.
D) long-term liabilities to increase.

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

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Vango,Inc.sold its van for $6,000 cash.The van's original cost was $40,000,and its accumulated depreciation was $32,000.When recording the sale,Vango should record a:


A) gain of $2,000.
B) loss of $2,000.
C) loss of $8,000.
D) gain of $6,000.

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

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Luxton Ltd.signed a $378,000,5-year note payable to buy a new machine.Luxton paid $6,000 cash for transportation of the machine and $900 cash for installation costs.What is the overall effect of this transaction on the accounting equation?


A) Total liabilities increase $384,900.
B) Machinery,an asset,increases $378,000.
C) Total assets increase $378,000.
D) Total liabilities increase $371,100.

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

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Which of the following statements about the end of an asset's life is correct?


A) At the end of an asset's life,its book value should equal its depreciable cost.
B) At the end of an asset's life,the Accumulated Depreciation should equal the residual value.
C) Assets are depreciated below residual value only when the double-declining balance method is used.
D) At the end of an asset's life,the book value would equal zero if there is no residual value.

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

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Match each term with the appropriate explanation.Not all explanations will be used. -Depreciation


A) Assets that will be used for more than a year.
B) When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated.
C) The numerator of the fixed asset turnover ratio.
D) The cost of financing an asset.
E) When costs are recorded as assets rather than expenses.
F) How expenses are reported in the income statement.
G) The denominator of the fixed asset turnover ratio.
H) The average proportion of a company's total assets that is long-lived.
I) A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years.
J) When a company writes down the value of an asset because estimated future cash flows fall below the book value.
K) Assets that have physical substance.
L) A depreciation method that spreads asset cost by use rather than time.
M) The process of transferring the cost of long-lived tangible assets to expenses.
N) Also known as book value.

O) B) and L)
P) B) and J)

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Match each term with the appropriate definition.Not all definitions will be used. -EBITDA


A) When a company expenses the entire cost of a long-lived asset in the first year of use.
B) When a company receives free publicity in return for charitable contributions.
C) A tax law dealing with how companies can depreciate their assets.
D) The acquisition cost of an asset minus its accumulated depreciation.
E) When a company expenses the cost of a long-lived asset by a constant annual amount.
F) The exclusive right to sell or use a product or process that is granted to encourage innovation.
G) Net income plus interest,taxes,depreciation and amortization expenses.
H) Tangible long-lived assets.
I) An intangible asset that represents the value of unidentifiable assets acquired.
J) Names or images that appear with a ® or TM.
K) What a company expects to receive when an asset is disposed of at the end of its useful life.
L) Assets whose values do not change over time.
M) When a company allocates the cost of a long-lived asset at a higher rate in the first years of use.
N) The estimated total use a company expects to receive from an asset.

O) B) and J)
P) E) and J)

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Heatherbrae Co.uses the units-of-production method to estimate depreciation.The company purchased a new machine for $45,000 that will produce an estimated 100,000 units over its useful life.The estimated residual value of the machine is $5,000.What is the depreciation rate per unit?


A) $4.00
B) $4.50
C) $0.40
D) $0.45

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

Correct Answer

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Intangible assets are:


A) long-lived assets with no physical substance.
B) unnecessary for most major companies.
C) all current assets.
D) any assets acquired without using cash.

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

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Match each term with the appropriate definition.Not all definitions will be used. -Residual value


A) When a company expenses the entire cost of a long-lived asset in the first year of use.
B) When a company receives free publicity in return for charitable contributions.
C) A tax law dealing with how companies can depreciate their assets.
D) The acquisition cost of an asset minus its accumulated depreciation.
E) When a company expenses the cost of a long-lived asset by a constant annual amount.
F) The exclusive right to sell or use a product or process that is granted to encourage innovation.
G) Net income plus interest,taxes,depreciation and amortization expenses.
H) Tangible long-lived assets.
I) An intangible asset that represents the value of unidentifiable assets acquired.
J) Names or images that appear with a ® or TM.
K) What a company expects to receive when an asset is disposed of at the end of its useful life.
L) Assets whose values do not change over time.
M) When a company allocates the cost of a long-lived asset at a higher rate in the first years of use.
N) The estimated total use a company expects to receive from an asset.

O) E) and M)
P) A) and G)

Correct Answer

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The MegaHit Film Studio owns a production lot and related equipment.How would MegaHit Company categorize these assets?


A) Tangible assets
B) Natural resources
C) Intangible assets
D) Goodwill

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

Correct Answer

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A company purchased a computer system on January 2,2018 for $1,600,000.The company used the straight-line depreciation method with an estimated useful life of 6 years and a residual value of $130,000.The company prepares financial statements at December 31. Which of the following is correct about the depreciation recorded?


A) Accumulated Depreciation will be debited for $266,667.
B) The book value of the computer system at December 31,2018 will be $1,225,000.
C) Depreciation expense will be debited for $245,000.
D) The depreciable cost of the computer system is $1,600,000.

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

Correct Answer

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If a fully depreciated asset with no residual value is "retired" to a junk yard without receiving any cash:


A) a gain on disposal will be recorded.
B) depreciation must be recorded as though the asset were still on the books.
C) a loss on disposal will be recorded.
D) no gain or loss on disposal will be recorded.

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

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Mia Hero Shop sold its table with a book value of $1,000 for $800.Mia Hero will record:


A) a loss on the sale of $200.
B) a gain on the sale of $200.
C) depreciation expense of $200.
D) cash received of $1,000.

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

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The units-of-production method provides the closest matching of a long-lived asset's depreciation expense to the revenues generated by using that asset when the:


A) amount of production is the highest in the early years of an asset's life and lower in later years.
B) long-lived asset is used by a merchandising operation.
C) amount of production remains fairly constant from one period to the next.
D) amount of asset production varies significantly from one period to the next.

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

Correct Answer

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Extraordinary repairs,replacements,and additions are added to the appropriate asset accounts rather than being recorded as expenses.

A) True
B) False

Correct Answer

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A declining fixed asset turnover ratio suggests that a:


A) company is not as efficient in using its fixed assets as it was in previous periods.
B) company's net sales must be increasing.
C) company must have purchased some intangible assets.
D) company's beginning fixed asset balance must be greater than its ending fixed asset balance.

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

Correct Answer

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An asset's cost minus accumulated depreciation is its ________ value.


A) book
B) market
C) residual
D) salvage

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

Correct Answer

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Match each term with the appropriate explanation.Not all explanations will be used. -Average net fixed assets


A) Assets that will be used for more than a year.
B) When a company writes down the value of an asset when estimated future cash flows fall below the original level estimated.
C) The numerator of the fixed asset turnover ratio.
D) The cost of financing an asset.
E) When costs are recorded as assets rather than expenses.
F) How expenses are reported in the income statement.
G) The denominator of the fixed asset turnover ratio.
H) The average proportion of a company's total assets that is long-lived.
I) A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years.
J) When a company writes down the value of an asset because estimated future cash flows fall below the book value.
K) Assets that have physical substance.
L) A depreciation method that spreads asset cost by use rather than time.
M) The process of transferring the cost of long-lived tangible assets to expenses.
N) Also known as book value.

O) G) and I)
P) A) and H)

Correct Answer

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