ACC 557 Week 7 Quiz – Strayer NEW
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All
possible questions with answers
TRUE-FALSE
STATEMENTS
All
plant assets (fixed assets) must be depreciated for accounting purposes.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
When
purchasing land, the costs for clearing, draining, filling, and grading should
be charged to a Land Improvements account.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
When
purchasing delivery equipment, sales taxes and motor vehicle licenses should be
charged to Delivery Equipment.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Land
improvements are generally charged to the Land account.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Once
cost is established for a plant asset, it becomes the basis of accounting for
the asset unless the asset appreciates in value, in which case, market value
becomes the basis for accountability.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The book
value of a plant asset is always equal to its fair market value.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Recording
depreciation on plant assets affects the balance sheet and the income
statement.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
depreciable cost of a plant asset is its original cost minus obsolescence.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Recording
depreciation each period is an application of the expense recognition
principle.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The
Accumulated Depreciation account represents a cash fund available to replace
plant assets.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
In
calculating depreciation, both plant asset cost and useful life are based on
estimates.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Using
the units-of-activity method of depreciating factory equipment will generally
result in more depreciation expense being recorded over the life of the asset
than if the straight-line method had been used.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Salvage
value is not subtracted from plant asset cost in determining depreciation
expense under the declining-balance method of depreciation.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The
declining-balance method of depreciation is called an accelerated depreciation
method because it depreciates an asset in a shorter period of time than the
asset's useful life.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Under
the double-declining-balance method, the depreciation rate used each year
remains constant.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The IRS
does not require the taxpayer to use the same depreciation method on the tax
return that is used in preparing financial statements.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A change
in the estimated useful life of a plant asset may cause a change in the amount
of depreciation recognized in the current and future periods, but not to prior periods.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A change
in the estimated salvage value of a plant asset requires a restatement of prior
years' depreciation.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
To
determine a new depreciation amount after a change in estimate of a plant asset's
useful life, the asset's remaining depreciable cost is divided by its remaining
useful life.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Additions
and improvements to a plant asset that increase the asset's operating
efficiency, productive capacity, or expected useful life are generally expensed
in the period incurred.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Capital
expenditures are expenditures that increase the company's investment in
productive facilities.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Ordinary
repairs should be recognized when incurred as revenue expenditures.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A
characteristic of capital expenditures is that the expenditures occur
frequently during the period of ownership.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Once an
asset is fully depreciated, no additional depreciation can be taken even though
the asset is still being used by the business.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The fair
market value of a plant asset is always the same as its book value.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
If the
proceeds from the sale of a plant asset exceed its book value, a gain on
disposal occurs.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A loss
on disposal of a plant asset can only occur if the cash proceeds received from
the asset sale is less than the asset's book value.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The book
value of a plant asset is the amount originally paid for the asset less
anticipated salvage value.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A loss
on disposal of a plant asset as a result of a sale or a retirement is
calculated in the same way.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
A plant
asset must be fully depreciated before it can be removed from the books.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
If a
plant asset is sold at a gain, the gain on disposal should reduce the cost of
goods sold section of the income statement.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Depletion
cost per unit is computed by dividing the total cost of a natural resource by
the estimated number of units in the resource.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
Accumulated Depletion account is deducted from the cost of the natural resource
in the balance sheet.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Depletion
expense for a period is only recognized on natural resources that have been
extracted and sold during the period.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Natural
resources are long-lived productive assets that are extracted in operations and
are replaceable only by an act of nature.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The cost
of natural resources is not allocated to expense because the natural resources
are replaceable only by an act of nature.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Conceptually,
the cost allocation procedures for natural resources parallels that of plant
assets.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Natural
resources include standing timber and underground deposits of oil, gas, and
minerals.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
If an
acquired franchise or license has an indefinite life, the cost of the asset is
not amortized.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
When an
entire business is purchased, goodwill is the excess of cost over the book
value of the net assets acquired.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Research
and development costs which result in a successful product which is patentable
are charged to the Patent account.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The cost
of a patent must be amortized over a 20-year period.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The cost
of a patent should be amortized over its legal life or useful life, whichever
is shorter.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The
balances of the major classes of plant assets and accumulated depreciation by
major classes should be disclosed in the balance sheet or notes.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
asset turnover ratio is calculated as total sales divided by ending total
assets.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Research
and development costs can be classified as a property, plant, and equipment
item or as an intangible asset.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Usually,
companies combine plant assets and intangibles under "Property, plant, and
equipment in the balance sheet.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
asset turnover ratio analyzes the productivity of a company's assets.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Accounting
for exchanges of plant assets is easier if the transaction does not have
commercial substance.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
An
exchange of plant assets has commercial substance if the future cash flows
change as a result of the exchange.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
a51.
Companies record a gain or loss on the exchange of plant assets because most
exchanges have commercial substance.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
a52.
When plant assets are exchanged with commercial substance, the cost of the new
asset is the book value of the old asset plus any cash paid.
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