Question Details

CHAPTER 10 PART 10 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

161. A coal company invests $16 million in a mine estimated to have 20 million tons of coal and
no salvage value. It is expected that the mine will be in operation for 5 years. In the first
year, 1,000,000 tons of coal are extracted and sold. What is the depletion expense for the
first year?
a. $800,000
b. $320,000
c. $80,000
d. Cannot be determined from the information provided.
162. Accumulated Depletion
a. is used by all companies with natural resources.
b. has a normal debit balance.
c. is a contra-asset account.
d. is never shown on the balance sheet.
163. On July 4, 2008, Montana Mining Company purchased the mineral rights to a granite
deposit for $800,000. It is estimated that the recoverable granite will be 400,000 tons.
During 2008, 100,000 tons of granite was extracted and 60,000 tons were sold. The
amount of the Depletion Expense recognized for 2008 would be
a. $100,000.
b. $60,000.
c. $120,000.
d. $200,000.
164. Depletion expense is computed by multiplying the depletion cost per unit by the
a. total estimated units.
b. total actual units.
c. number of units extracted.
d. number of units sold.
165. Intangible assets are the rights and privileges that result from ownership of long-lived
assets that
a. must be generated internally.
b. are depletable natural resources.
c. have been exchanged at a gain.
d. do not have physical substance.
166. Identify the item below where the terms are not related.
a. Equipment—depreciation
b. Franchise—depreciation
c. Copyright—amortization
d. Oil well—depletion
Plant Assets, Natural Resources, and Intangible Assets 10 - 25
167. A patent should
a. be amortized over a period of 20 years.
b. not be amortized if it has an indefinite life.
c. be amortized over its useful life or 20 years, whichever is longer.
d. be amortized over its useful life or 20 years, whichever is shorter.
168. The entry to record patent amortization usually includes a credit to
a. Amortization Expense.
b. Accumulated Amortization.
c. Accumulated Depreciation.
d. Patents.
169. The cost of successfully defending a patent in an infringement suit should be
a. charged to Legal Expenses.
b. deducted from the book value of the patent.
c. added to the cost of the patent.
d. recognized as a loss in the current period.
170. An asset that cannot be sold individually in the market place is
a. a patent.
b. goodwill.
c. a copyright.
d. a trade name.
171. Goodwill can be recorded
a. when customers keep returning because they are satisfied with the company's
products.
b. when the company acquires a good location for its business.
c. when the company has exceptional management.
d. only when there is an exchange transaction involving the purchase of an entire
business.
172. On July 1, 2008, Marsh Company purchased the copyright to Parsons Computer tutorials
for $162,000. It is estimated that the copyright will have a useful life of 5 years with an
estimated salvage value of $12,000. The amount of Amortization Expense recognized for
the year 2008 would be
a. $32,400.
b. $15,000.
c. $30,000.
d. $16,200.
173. All of the following intangible assets are amortized except
a. copyrights.
b. limited-life franchises.
c. patents.
d. trademarks.
174. Which of the following is not an intangible asset arising from a government grant?
a. Goodwill
b. Patent
c. Trademark
d. Trade name
10 - 26 Test Bank for Accounting Principles, Eighth Edition
175. The amortization period for a patent cannot exceed
a. 50 years.
b. 40 years.
c. 20 years.
d. 10 years.
176. Cost allocation of an intangible asset is referred to as
a. amortization.
b. depletion.
c. accretion.
d. capitalization.
177. A patent
a. has a legal life of 40 years.
b. is nonrenewable.
c. can be renewed indefinitely.
d. is rarely subject to litigation because it is an exclusive right.
178. If a company incurs legal costs in successfully defending its patent, these costs are
recorded by debiting
a. Legal Expense.
b. an Intangible Loss account.
c. the Patent account.
d. a revenue expenditure account.
179. Copyrights are granted by the federal government
a. for the life of the creator or 70 years, whichever is longer.
b. for the life of the creator plus 70 years.
c. for the life of the creator or 70 years, whichever is shorter.
d. and therefore cannot be amortized.
180. Goodwill
a. is only recorded when generated internally.
b. can be subdivided and sold in parts.
c. can only be identified with the business as a whole.
d. can be defined as normal earnings less accumulated amortization.