ACCT MCQ’S If a capital expenditure is treated as a revenue expenditure, then __________…

If a capital expenditure is treated as a revenue expenditure, then
__________. a.expenses are overstated and stockholders’ equity is understated
b.expenses are overstated and assets are overstated c.expenses are understated
and stockholders’ equity is overstated d.net income is overstated and
stockholders’ equity is understated 2 A company acquired some land for
$80,000 to construct a new office complex. Legal fees paid were $2,300,
delinquent real estate taxes assumed were $3,400 and $5,850 was paid to remove
an old building from which salvaged materials were sold for $950. What is the
cost of acquiring the land? a.$90,600 b.$91,550 c.$88,150 d.$87,200 correct: a 3
Which of the following is true with regard to depreciation recorded on the books
of a company? a.It represents the periodic transfer of the cost of a fixed asset
to expense. b.It represents the difference between the book value and market
value of an asset. c.It represents the amount retained to replace fixed assets
as they wear out. d.It represents the decline in market value of an asset.
4 A machine was purchased for $45,000. It has an estimated useful life
of 6 years and an estimated residual value of $6,000. What is annual
depreciation expense under the straight-line method? a.$7,500 b$15,000 c$3,750
d.$6,500 5 Which of the following factors are used in
computing depreciation expense using the straight-line method? Residual value
Useful life Market value Initial cost a.Yes Yes No Yes b. Yes Yes Yes Yes c. Yes
No No Yes d. No Yes Yes No 6 Pansy Co. purchased mining rights of an
existing gold mine for $10,000,000 on January 1, 2013. The mine is estimated to
contain 400,000 ounces of gold. If Pansy extracts 75,000 ounces of gold during
2013, what is the depletion expense for the year ended December 31, 2013?
a.$1,875,000 b.$1,578,947 c.$8,421,053 d.$8,125,000 7 A company sold a
delivery truck for $18,000 cash. The truck was purchased at a cost of $47,500
and had accumulated depreciation of $36,000 as of the date of sale. The effect
of the sale would include a(n) __________. a.increase in Accumulated
Depreciation for $36,000 b.decrease in Delivery Truck for $11,500 c.loss on
disposal of asset for $6,500 dgain on disposal of asset for $6,500
A company acquired mineral rights for $10,000,000 which are estimated
at 80,000 tons. During the year 15,000 tons were extracted and sold. How much
depletion should be recorded for the year? a.$5,000,000 b.$1,875,000
c.$3,750,000 d.$2,500,000 9 A patent was purchased for $670,000 with a
legal life of 20 years on January 1, 2013. Management estimates that the patent
has an 8-year economic life. The amortization at the end of 2013 would include
a(n) __________. a.increase in Amortization Expense for $33,500 b.increase in
Research and Development Expense for $670,000 c.decrease in Patent for $83,750
d.increase in Accumulated Amortization for $670,000 10 Fixed assets:
a.are shown at their book value or at their fair market value, whichever is
lower. b.are shown on the face of the balance sheet by class of investment.
c.are normally shown under the caption of property, plant, and equipment. d.are
offered for sale as part of normal operation. Diamond Miner Co.
acquired mineral rights for $60,000,000. It is estimated that there are 80,000
tons and during the current year 10,750 tons were mined and sold. What is amount
of depletion to be recorded? a. $8,000,000 b. $100,750 c. $60,000,000 d.
$8,062,500 Intangible assets are reported on the balance sheet a. after fixed
assets. b. before current assets. c. before fixed assets. d. after current
assets. Which of the following is not considered a fixed assets? a. Building b.
Copyright c. Land d. Equipment The All About Sales Store purchased a generator
which cost $11,000. It has an estimated life of 5 years, a residual value of
$1,000 and it is estimated that it will be good for 1,000,000 hours. Compute the
depreciation expense for the second year using the double declining balance
method of depreciation. a. $2,400 b. $2,640 c. $4,400 d. $4,000 A machine was
purchased at a cost of $52,000. It had an estimated useful life of 7 years and a
residual value of $3,000. Straight-line depreciation was used. The machine was
sold at the end of year 6 for $4,000. Calculate the gain or loss to be recorded.
a. a loss of $6,000 b. a loss of $4,000 c. a gain of $4,000 d. a gain of $6,000
Which
one of the following would not be included in the cost of a fixed asset? a.
Damage during unpacking b. Freight costs c. Installation costs d. Testing to
prepare asset for use Equipment that cost $5,225 and had accumulated
depreciation of $4,000 was discarded. How much will be recorded as a loss or
gain on disposal? a. No loss or gain will be recorded b. Gain of $1,225 c. Loss
of $1,225 d. Cannot be determined.  Amortization expense and depreciation expense
are a. reported on the Income Statement with the methods used disclosed in a
note. b. reported on the balance sheet under current assets. c. reported on the
balance sheet under current liabilities. d. reported on the balance sheet with
fixed assets. Recording the use of a natural resource is called a. depletion. b.
depreciation. c. amortization. d. expensing. The expensing of intangible assets
is called a. depletion. b. amortization. c. depreciation. d. expense.
Which
of the following is not classified as an intangible asset? a. Investments b.
Copyrights c. Goodwill d. Patents Which of the following is a revenue
expenditure? a. New roof b. Engine overhaul c. Automobile tune-up d. Building
addition The All About Sales Store purchased a generator which cost $11,000. It
has an estimated life of 5 years, a residual value of $1,000 and it is estimated
that it will be good for 1,000,000 hours. Compute the depreciation expense for
the first year using the straight line method of depreciation. a. $2,250 b.
$2,400 c. $2,000 d. $2,200 A trademark is a. a name, term, or symbol used
to identify a business or its product. b. the exclusive right to publish and
sell literacy, artistic, or musical compositions. c. an asset created from
favorable factors such as location, product quality, reputation and managerial
skills. d. the exclusive right to produce and sell goods with one or more unique
features. A patent is a. the exclusive right to publish and sell literacy,
artistic, or musical compositions. b. a name, term, or symbol used to identify a
business or its product. c. the exclusive right to produce and sell goods with
one or more unique features. d. an asset created from favorable factors such as
location, product quality, reputation and managerial skills. Which of the
following is a capital expenditure? a. Carpet cleaning b. Broken window
replacement c. Engine overhaul d. Automobile tune-up An asset that cost
$9,000 and had accumulated depreciation of $4,275 was discarded. How much will
be recorded as a loss or gain on disposal? a. Gain of $4,725 b. Gain of $4,275
c. Loss of $4,275 d. Loss of $4,725 A copy machine was purchased for $35,000. It is
estimated that the machine will have a useful life of 4 years or 2,000,000
copies with a residual value of $3,000. How much will be depreciated during the
first full year using the straight line method of depreciation? a. $8,750 b.
$9,500 c. $3,000 d. $8,000 Depletion is a. computed like straight-line
depreciation. b. used to record the use of an intangible asset. c. used to
record the use of a natural resource. d. computed like double-declining balance
depreciation Which of the following is classified as an intangible asset? a. Land
Improvements b. Investment c. Mineral Resources d. Trademark A copy machine was
purchased for $35,000. It is estimated that the machine will have a useful life
of 4 years or 2,000,000 copies with a residual value of $3,000. How much will
the depreciation expense be for the second full year using the double declining
balance method? a. $8,750 b. $17,500 c. $16,000 d. $8,000 Amortization expense
is a. used to record the cost of copyrights and patents over their estimated
useful lives. b. used to record goodwill expense. c. used to record trademark
expense. d. All of these choices are correct. Which of the following would be
included in the cost of a fixed asset? a. installation mistakes b. modification
for use c. damage during set-up d. All of these choices would be included in the
cost of the asset. A long-lived asset used in a productive manner
in a business is classified as a(n) a. fixed asset. b. investment. c. expense.
d. intangible asset. Which of the following will not be found under
the caption of property, plant, and equipment on the balance sheet? a. Computer
Equipment b. Trademarks c. Land Improvements d. Vehicles A machine was
purchased at a cost of $52,000. The equipment had an estimated useful life of 7
years and had a residual value of $3,000. The equipment was sold at the end of
year 6 for $14,000. Assuming straight-line depreciation, calculate the gain or
loss on the sale of the equipment. a. a loss of $14,000 b. a loss of $4,000 c. a
gain of $4,000 d. a gain of $14,000 Gemstones Miner Co. acquired mineral rights for
$100,000,000. It is estimated that there are 2,500,000 tons and during the
current year 500,000 tons were mined and sold. What is amount of depletion for
the current year? a. $10,000,000 b. $2,000,000 c. $20,000,000 d. $2,500,000
A
company acquired some land for $80,000 to construct a new office complex. Legal
fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid
to remove an old building. Materials salvaged from the demolition of the
building were sold for $1,950. Determine the cost of the land to be reported on
the balance sheet. a. $85,700 b. $89,600 c. $93,500 d. $91,550 3.Expenditures that
add to the utility of fixed assets for more than one accounting period are
called: a. committed expenditures. b. revenue expenditures. c. current
expenditures. d. capital expenditures.4.Which of the following is an example of a
capital expenditure? a. Regular tune-up for a company truck b. Cleaning the
carpet in the front-office room c. Replacing an engine in a company car d.
Replacing all burned-out light bulbs in the factory 5.Book value is computed as: a.
current market value less accumulated depreciation. b. current market value less
residual value. c. cost less accumulated depreciation. d. cost less residual
value. 6.Depreciable cost is computed as: a. cost less residual value. b. cost
less accumulated depreciation. c. book value less residual value. d. market
value less residual value. 7.Recording depreciation: a. decreases net
income and cash flows. b. decreases net income but has no effect on fixed assets
and cash flows. c. decreases net income but has no effect on cash flows. d.
decreases net income, fixed assets, and cash flows. 8.A machine was purchased for
$60,000. It has a useful life of 5 years and a residual value of $6,000.
Determine the annual depreciation expense using the straight-line method? a.
$11,000 b. $12,000 c. $10,800 d. $13,200 9.An equipment was purchased for
$18,000. It has a useful life of 5 years and a residual value of $2,000.
Determine the depreciation expense for the first year using the
double-declining-balance method? a. $6,400 b. $3,600 c. $3,200 d. $7,200
10.An
equipment was purchased for $30,000. It has a useful life of 5 years, and a
residual value of $4,000. Compute the depreciation expense for the second year
using the double-declining-balance method. a. $6,000 b. $7,200 c. $6,240 d.
$5,200 11.A fixed asset with a cost of $30,000 and accumulated depreciation of
$25,000 is sold for $3,500. What is the amount of gain or loss on disposal of
the fixed asset? a. $2,500 loss b. $1,500 loss c. $1,500 gain d. $2,500 gain
12.A
fully depreciated asset must be: a. removed from the books. b. disclosed only in
the notes to the financial statements. c. recognized on the income statement as
a loss. d. kept on the books until sold or discarded. 13.A company sold a
delivery truck for $18,000 cash. The truck cost $47,500 and had accumulated
depreciation of $36,000 as of the date of sale. The entry to record the sale
would include: a. a total decrease in delivery truck for $11,500. b. a loss for
$6,500. c. an increase in accumulated depreciation for $36,000. d. a gain for
$6,500.14.A company purchased an oil well for $25 million. It is estimated
that 10 million barrels can be extracted from the well. Determine depletion
expense assuming 3 million barrels are extracted and sold during the year. a.
$7,350,000 b. $7,650,000 c. $7,500,000 d. $5,000,000 15.Expenditures for
research and development are generally recorded as: a. assets, and amortized
over their estimated useful life. b. current operating expenses. c. current
assets. d. assets, and usually amortized over 40 years. 16.Fixed assets are
ordinarily presented in the balance sheet: a. at its replacement cost. b. at its
current market value. c. at its cost less accumulated depreciation. d. under
intangible assets.