Bax Industries has an inventory turnover of 60 days and an average
receivables collection period of 45 days. What is Bax's operating cycle?
Multiple choice question.
15 days
105 days
45 days
60 days
Identify the correct statement regarding long-lived assets.
Multiple choice question.
Assets could be measured at their estimated cost in an output market using
economic sacrifice approaches.
Measures that use input market numbers are called expected benefit
approaches.
Measures that use output market numbers are called expected benefit
approaches.
Expected benefit approaches recognize that assets are valuable because of
the future cash outflows.
The amount that would be received if the assets were sold in the used asset
market is the net-realizable-value.
Meyer Corporation has a two-year old truck that originally cost $80,000,
has a remaining life of 8 years with no salvage value, and is depreciated
using the straight-line method. Current resale of the truck is $65,000. Net
realizable value of the truck is
Multiple choice question.
$60,000.
$65,000.
$80,000.
$64,000.
Costs incurred in acquiring more than one asset that are apportioned
among the acquiring assets are known as-joint-costs.
The-operating-cycle-for a manufacturer begins with the receipt of raw
materials inventory and ends when the cash is received for the completed
product that has been sold.
Interest that could have been averted if expenditures for the assets had not
been made is known as-avoidable-interest.
Discounted present value and cash inflow that an asset would bring if it
were sold instead of being used in operations are examples of an
Multiple choice question.
expected sacrifice approach.
economic sacrifice approach.
input market measure.
expected benefit approach.
Hometown Village Construction Company had the following expenditures
during the current year. On May 1, they paid $7,500,000 and on September
15, they paid $4,250,000. Using the number of days, calculate the
cumulative weighted average expenditures for the year
Multiple choice question.
$11,750,000
$7,500,000
$6,280,136
$5,875,000
The dominant GAAP measurement method for measuring long-lived assets
is the
Multiple choice question.
replacement cost
current cost
historical cost
net realizable value
Meyer Corporation has a two-year old truck that originally cost $80,000,
has a remaining life of 8 years with no salvage value, and is depreciated
using the straight-line method. Current resale of the truck is $65,000.
Expected net operating cash inflows are $14,250 and a 10% rate is used.
Identify the correct statement.
Multiple choice question.
Net realizable value is $80,000.
Discounted present value is $65,000.
Historical cost is $60,000.
Discounted present value is $76,023.
The two rules that govern the initial balance sheet carrying amount of a
long-lived asset include
Multiple select question.
replacement costs.
capitalized costs.
joint costs.
measurement costs.
True or false: Capitalization is restricted to interest that arises from actual
borrowings from outsiders.
True false question.
True
False
Identify the correct statement regarding the treatment of interest in
measuring long-lived assets.
Multiple choice question.
Interest paid to lenders during the construction period is considered to be a
cost necessary to prepare the asset for its intended use.
If assets are being constructed for others, interest is never capitalized.
Avoidable interest is never capitalized.
Interest capitalization increases interest expense in the current accounting
period but decreases depreciation expense in subsequent periods.
Which of the following are true statements?
Multiple select question.
Tax reporting is concerned with minimizing tax payments.
Financial reporting is concerned with minimizing tax payments.
Tax reporting is concerned with allocating costs to the asset that generated
the costs.
Financial reporting is concerned with allocating costs to the asset that
generated the costs.
Hometown Village Construction Company had the following expenditures
during the current year. On May 1, they paid $7,500,000 and on September
15, they paid $4,250,000. Using the number of days, calculate the interest
for the year assuming a 10% rate.
Multiple choice question.
$1,175,000
$6,280,136
$628,014
$750,000
When a long-lived asset expenditure doesn't meet the capitalization criteria,
it must be treated as a period-expense-and be charged to income.
Which of the following is not a criteria required for costs to be capitalized?
Multiple choice question.
The costs would have been incurred without the contract signing.
The costs are expected to be recovered.
The costs generate resources that will be used to satisfy performance
obligations in the future.
The costs relate to a specific contract.
Examples of intangible assets include
Multiple select question.
franchises.
patents.
copyrights
accounts receivable.
land.
GAAP limits the amount of interest that can be capitalized to the lower of
which of the following two?
Multiple select question.
Avoidable interest
Interest on contributed ownership capital
Interest actually incurred
Imputed interest on equity financing
Which of the following represents the difference between the total fair value
of an acquired business and the fair value of its identifiable net assets?
Multiple choice question.
Patent
Trademark
Copyright
Goodwill
Identify the correct statement.
Multiple choice question.
U.S. tax rules don't require cost allocations between land and buildings.
U.S. tax rules differ from GAAP rules and do not require avoidable interest
to be capitalized for tax purposes.
For tax purposes, it is better to capitalize interest than to deduct it
immediately.
For financial reporting purposes, the manner in which costs are allocated is
guided by which asset generated the cost.
The amount of the write-down that must be recognized due to an
impairment loss is the difference between
Multiple choice question.
future net cash inflows and the historical cost of the asset.
future net cash inflows and the current carrying amount of the asset.
fair value of the asset and its historical cost.
the fair value of the asset and its current carrying amount.
Which of the following conditions would result in the capitalization of
expenditures on long-lived assets?
Multiple select question.
The useful life of the asset is shortened.
The useful life of the asset is extended.
The capacity of the asset is decreased.
The efficiency of the asset is increased.
Once an impairment loss has been recognized on an asset,
Multiple choice question.
that asset cannot later be written back up if the fair value recovers.
that asset can never incur an additional impairment loss.
the value of the asset can be recovered later if the value of the asset
increases.
Which of the following statements are true regarding costs? (Check all that
apply.)
Multiple select question.
In order to be capitalized, costs must be unrecoverable.
For contracts lasting more than a year, the incremental costs must be
expensed immediately.
Expenses that would have been incurred without the contract signing are
expensed immediately.
Incremental costs related to the successful negotiation of a contract should
be capitalized.
For contracts lasting less than a year, the incremental costs may be
expensed immediately.
Long-lived assets that do not have physical substance are-intangible-assets.
Which of the following are true of impairment evaluation for indefinite-lived
intangible assets?
Multiple select question.
Firms may first assess qualitative factors to determine whether a
quantitative impairment test is necessary.
Firms may first assess quantitative factors to determine whether a
qualitative impairment test is necessary.
U.S. GAAP allows a two-step impairment evaluation process.
U.S. GAAP requires that all firms perform both qualitative and quantitative
impairment tests.
Intangible assets that have indefinite lives
Multiple select question.
are evaluated annually for impairment.
are not amortized.
are not reviewed for impairment.
are amortized over a period of 20 years.
Identify the correct statement regarding assets held for sale.
Multiple choice question.
When assets are held for sale, their fair value less costs to sell are shown as
a liability on the balance sheet.
When assets are held for sale, they are reported at the higher of book value
or fair value less costs to sell.
When assets are expected to be sold within one year of the balance sheet
date, they should be classified as "held for sale".
The operating results of assets classified as held for sale are reported in
discontinued operations only if the assets have been sold as of year end.
True or false: Under GAAP, if an asset is written down, it can later be
written back up.
True false question.
True
False
Identify the correct statement regarding the depreciation process.
Multiple choice question.
The assignment of expired costs to periods for mineral deposits and other
wasting assets is referred to as amortization.
Any allocation of costs to periods is known as the impairment process.
GAAP accounting depreciation is a process of cost allocation, not asset
valuation.
Depreciation is intended to track the asset's declining market value.
Identify the correct statement regarding indefinite-lived intangible assets.
Multiple choice question.
Indefinite-lived intangible assets must be evaluated for impairment annually
or more frequently to determine if they are impaired.
U.S. GAAP has a three-step process to determine if indefinite-lived
intangible asset are impaired.
Indefinite-lived intangible assets such as goodwill must be amortized over
the life of the creator or 50 years.
Indefinite-lived intangible assets such as goodwill must be amortized 40
years.
Which of the following is not a required estimate needed to compute
depreciation?
Multiple choice question.
The expected salvage value of the asset.
The depreciation pattern that will reflect the asset's declining service
potential.
The expected useful life of the asset.
The historical cost of the asset.
Riley Corporation reports the following information regarding assets held
for sale. Book value of the assets is $450,000, fair value of the assets is
$325,000, and expected costs to sell the assets is $25,000. These assets
would be shown on the balance sheet at
Multiple choice question.
$450,000.
$325,000.
$425,000.
$300,000.
Renaldo Corporation purchased a piece of equipment for $21,000. The asset
has a useful life of 5 years and a $1,000 salvage value. The asset will be
used to produce 10,000 units. Double-declining balance depreciation for the
second year is
Multiple choice question.
$4,800.
$3,200.
$5,040.
$3,360.
Baxter Company sold equipment for $6,000. The equipment originally cost
$10,000, had a salvage value of $2,000 and a useful life of 5 years, and had
a book value of $5,200 on the date it was sold. The journal entry to record
the sale of the truck would include which of the following? (Check all that
apply.)
Multiple select question.
A credit to Equipment for $10,000.
A credit to Equipment for $5,200.
A credit to Accumulated depreciation for $2,000.
A debit to Accumulated depreciation for $4,800.
A credit to Gain on sale of asset for $800.
The systematic expensing and write-down of a tangible long-lived assets is
known as
Multiple choice question.
depreciation.
amortization.
depletion.
impairment.
Blue Corporation exchanges a delivery truck with a fair value of $50,000 for
a piece of equipment from Red Corporation. The truck's book value is
$40,000, which is the original cost of $60,000 minus accumulated
depreciation of $20,000. In addition to the truck, Blue pays Red $7,500. The
journal entry to record the sale would include
Multiple choice question.
a gain on exchange for $17,500.
a gain on exchange for $10,000.
a gain on exchange for $12,500.
a loss on exchange for $10,000.
Computing depreciation requires the reporting entity to estimate (check all
that apply).
Multiple select question.
net future cash flows.
the expected salvage value that will exist at the time the asset is retired.
the fair value of the asset less future costs to sell.
the expected useful life of the asset.
the depreciation pattern that will reflect the asset's declining service
potential.
Green agrees to exchange a delivery truck with a book value of $60,000 for
a different delivery truck owned by White Corporation. The original cost of
Green's delivery truck was $80,000 and accumulated depreciation is
$20,000 Green also pays $10,000 to complete the transaction. It is not
possible to measure the fair value of either truck. Identify the correct
statement.
Multiple choice question.
Green Corporation records the new truck at $60,000.
Green Corporation records a loss on exchange of $20,000.
Green Corporation records a loss on exchange of $10,000.
Green Corporation records the new truck at $70,000.
Renaldo Corporation purchased a piece of equipment for $21,000. The asset
has a useful life of 5 years and a $1,000 salvage value. The asset will be
used to produce a total of 10,000 units. Production for the current year was
3,500 units. Depreciation using the straight-line method for the current year
is
Multiple choice question.
$4,000.
$2,000.
$4,200.
$8,000.
To preclude firms from generating artificial gains on exchange transactions
being recorded at fair value, U.S. GAAP requires that the transaction
Multiple choice question.
has estimated future net cash flows that are more than the carrying value of
the asset.
have future cash flows that remain substantially the same.
must possess commercial substance.
be reviewed and approved by the SEC.
Prince Corporation sells a truck for $8,500 after it had been used for 3
years. The truck was purchased for $17,000, had a useful life of 5 years, and
had a $2,000 salvage value. The journal entry to record the sale of the truck
would include
Multiple choice question.
a debit to loss on sale of asset for $1,800.
a credit to gain on sale of asset of $1,000.
a credit to gain on sale of asset of $500.
a debit to loss on sale of asset for $3,700.
Sterling Corporation faced a shortage of cherry bookcases but had an
excess of mahogany bookcases. Sterling agrees to exchange cherry
bookcases with a fair value of $10,000 and a book value of $9,000 for
mahogany bookcases with a fair value of $10,500 from Princess Industries.
Which of the following would be included in the journal entry to record this
exchange? (Check all that apply.)
Multiple select question.
Debit to Inventory–cherry bookcases for $9,000.
Credit to Inventory–mahogany bookcases for $10,500.
Debit to Inventory–cherry bookcases for $10,500.
Credit to Inventory–mahogany bookcases for $9,000.
Credit to Gain on exchange for $1,500.
Blue Corporation exchanges a delivery truck with a fair value of $50,000 for
a piece of equipment from Red Corporation. The truck's book value is
$40,000, which is the original cost of $60,000 minus accumulated
depreciation of $20,000. In addition to the truck, Blue pays Red $7,500. The
cost of the equipment is
Multiple choice question.
$57,500.
$50,000.
$47,500.
$42,500.
In an exchange of nonmonetary assets when the fair value of the exchanged
assets cannot be determined,
Multiple choice question.
the asset will be recorded as the sum of the fair value of the old asset plus
any cash given.
the asset will be recorded as the sum of the book value of the old asset plus
any cash given.
the asset will be recorded as the sum of the book value of the old asset
minus any cash given.
the asset will be recorded as the sum of the fair value of the old asset minus
any cash given.
An exchange has-commercial-substance-when the firm's future cash flow are
expected to change significantly as a result of the exchange.
When assets are exchanged to balance inventories,
Multiple select question.
the exchange does not represent earnings.
the received assets are recorded at the fair value of the assets relinquished.
the exchange will result in a gain or loss.
the received assets are recorded at the book value of the assets
relinquished.
