Question Details

CHAPTER 10 PART 11 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

181. In recording the acquisition cost of an entire business,
a. goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
b. assets are recorded at the seller's book values.
c. goodwill, if it exists, is never recorded.
d. goodwill is recorded as the excess of cost over the book value of identifiable net
assets.
182. Research and development costs
a. are classified as intangible assets.
b. must be expensed when incurred under generally accepted accounting principles.
c. should be included in the cost of the patent they relate to.
d. are capitalized and then amortized over a period not to exceed 40 years.
Plant Assets, Natural Resources, and Intangible Assets 10 - 27
183. A computer company has $2,000,000 in research and development costs. Before
accounting for these costs, the net income of the company is $1,600,000. What is the
amount of net income or loss after these R & D costs are accounted for?
a. $400,000 loss
b. $1,600,000 net income
c. $0
d. Cannot be determined from the information provided.
184. Denton Company incurred $300,000 of research and development costs in its laboratory
to develop a new product. It spent $40,000 in legal fees for a patent granted on January 2,
2008. On July 31, 2008, Denton paid $30,000 for legal fees in a successful defense of the
patent. What is the total amount that should be debited to Patents through July 31, 2008?
a. $300,000
b. $70,000
c. $370,000
d. Some other amount
185. Given the following account balances at year end, compute the total intangible assets on
the balance sheet of Anisha Enterprises.
Cash $1,500,000
Accounts Receivable 4,000,000
Trademarks 1,000,000
Goodwill 4,500,000
Research & Development Costs 2,000,000
a. $11,500,000
b. $7,500,000
c. $5,500,000
d. $9,500,000
186. During 2008, Sitter Corporation reported net sales of $2,000,000, net income of
$1,200,000, and depreciation expense of $100,000. Sitter also reported beginning total
assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and
accumulated depreciation of $500,000. Sitter- asset turnover ratio is
a. 2 times.
b. 1.6 times.
c. 1.3 times.
d. .96 times.
187. During 2008, Tyler Corporation reported net sales of $3,000,000 and net income of
$1,800,000. Tyler also reported beginning total assets of $1,000,000 and ending total
assets of $1,500,000. Tyler- asset turnover ratio is
a. 3.0 times.
b. 2.4 times.
c. 2.0 times.
d. 1.4 times.
188. Natural resources are generally shown on the balance sheet under
a. Intangibles.
b. Investments.
c. Property, Plant, and Equipment.
d. Owner's Equity.
10 - 28 Test Bank for Accounting Principles, Eighth Edition
189. Which of the following statements concerning financial statement presentation is not a
true statement?
a. Intangibles are reported separately under Intangible Assets.
b. The balances of major classes of assets may be disclosed in the footnotes.
c. The balances of the accumulated depreciation of major classes of assets may be
disclosed in the footnotes.
d. The balances of all individual assets, as they appear in the subsidiary plant ledger,
should be disclosed in the footnotes.
190. Intangible assets
a. should be reported under the heading Property, Plant, and Equipment.
b. are not reported on the balance sheet because they lack physical substance.
c. should be reported as Current Assets on the balance sheet.
d. should be reported as a separate classification on the balance sheet.
191. A company has the following assets:
Buildings and Equipment, less accumulated depreciation of $2,000,000 $9,600,000
Copyrights 960,000
Patents 4,000,000
Timberlands, less accumulated depletion of $2,800,000 4,800,000
The total amount reported under Property, Plant, and Equipment would be
a. $19,360,000.
b. $14,400,000.
c. $18,400,000.
d. $15,360,000.
a192. A company decides to exchange its old machine and $77,000 cash for a new machine.
The old machine has a book value of $63,000 and a fair market value of $70,000 on the
date of the exchange. The cost of the new machine would be recorded at
a. $140,000.
b. $147,000.
c. $133,000.
d. cannot be determined.
a193. A company exchanges its old office equipment and $40,000 for new office equipment. The
old office equipment has a book value of $28,000 and a fair market value of $20,000 on
the date of the exchange. The cost of the new office equipment would be recorded at
a. $68,000.
b. $60,000.
c. $48,000.
d. cannot be determined.
a194. In an exchange of plant assets that has commercial substance, any difference between
the fair market value and the book value of the old plant asset is
a. recorded as a gain or loss.
b. recorded if a gain but is deferred if a loss.
c. recorded if a loss but is deferred if a gain.
d. deferred if either a gain or loss.
Plant Assets, Natural Resources, and Intangible Assets 10 - 29
a195. Gains on an exchange of plant assets that has commercial substance are
a. deducted from the cost of the new asset acquired.
b. deferred.
c. not possible.
d. recognized immediately.
a196. Losses on an exchange of plant assets that has commercial substance are
a. not possible.
b. deferred.
c. recognized immediately.
d. deducted from the cost of the new asset acquired.
a197. The cost of a new asset acquired in an exchange that has commercial substance is the
cash paid plus the
a. book value of the old asset.
b. fair market value of the old asset.
c. book value of the asset acquired.
d. fair market value of the new asset.
Additional Multiple Choice Questions
198. The cost of land includes all of the following except
a. real estate brokers’ commissions.
b. closing costs.
c. accrued property taxes.
d. parking lots.
199. A term that is not synonymous with property, plant, and equipment is
a. plant assets.
b. fixed assets.
c. intangible assets.
d. long-lived tangible assets.
200. The factor that is not relevant in computing depreciation is
a. replacement value.
b. cost.
c. salvage value.
d. useful life.
201. Depreciable cost is the
a. book value of an asset less its salvage value.
b. cost of an asset less its salvage value.
c. cost of an asset less accumulated depreciation.
d. book value of an asset.
202. Santayana Company purchased a machine on January 1, 2006, for $12,000 with an
estimated salvage value of $3,000 and an estimated useful life of 8 years. On January 1,
2008, Santayana decides the machine will last 12 years from the date of purchase. The
salvage value is still estimated at $3,000. Using the straight-line method, the new annual
depreciation will be
10 - 30 Test Bank for Accounting Principles, Eighth Edition
a. $675.
b. $750.
c. $900.
d. $1,000.
203. Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and
are referred to as
a. capital expenditures.
b. expense expenditures.
c. improvements.
d. revenue expenditures.
204. Improvements are
a. revenue expenditures.
b. debited to an appropriate asset account when they increase useful life.
c. debited to accumulated depreciation when they do not increase useful life.
d. debited to an appropriate asset account when they do not increase useful life.
205. A gain on sale of a plant asset occurs when the proceeds of the sale are greater than the
a. salvage value of the asset sold.
b. market value of the asset sold.
c. book value of the asset sold.
d. accumulated depreciation on the asset sold.
206. The entry to record depletion expense
a. decreases owner's equity and assets.
b. decreases net income and increases liabilities.
c. decreases assets and liabilities.
d. decreases assets and increases liabilities.
207. All of the following are intangible assets except
a. copyrights.
b. goodwill.
c. patents.
d. research and development costs.
208. A purchased patent has a legal life of 20 years. It should be
a. expensed in the year of acquisition.
b. amortized over 20 years regardless of its useful life.
c. amortized over its useful life if less than 20 years.
d. not amortized.
209. The asset turnover ratio is computed by dividing
a. net income by average total assets.
b. net sales by average total assets.
c. net income by ending total assets.
d. net sales by ending total assets.
Plant Assets, Natural Resources, and Intangible Assets 10 - 31
a210. In an exchange of plant assets that has commercial substance
a. neither gains nor losses are recognized immediately.
b. gains, but not losses, are recognized immediately.
c. losses, but not gains, are recognized immediately.
d. both gains and losses are recognized immediately.