Question 1. Long-term assets are defined as
- assets that extend benefits beyond the coming fiscal year or operating cycle
- only tangible assets that extend benefits beyond the coming year or operating cycle, whichever is longer
- assets that are depreciated for a maximum of 40 years
- assets that extend no future benefits to a company
Question 2. On January 1, 2007 a Medical Testing Laboratory acquired new blood processing equipment costing $400,000. The equipment has an estimated useful life of 10 years and an estimated residual value of $50,000. After making all necessary calculations and entries on December 31, 2008, what is the accumulated depreciation to date and book value of the equipment? (Assume the straight-line method is used.)
Accumulated Depreciation Book Value as of
as of December 31, 2008 December 31, 2008
- $70,000 $330,000
- $70,000 $280,000
- $35,000 $365,000
- $35,000 $315,000
Question 3. When companies have a temporary surplus of cash, they often invest it in
- short-term marketable securities
- long-term marketable securities
- intangible assets
- property, plant, and equipment
Question 4. A bond is purchased at a discount. What will happen to the net carrying value of the bond on the balance sheet as its maturity date approaches?
- stays the same
- increases
- decreases
- cannot be determined from the data given
Question 5. Which of the following are included as part of the cost of plant assets?
- amount paid for the asset only
- the cost of site preparation and installation of the asset only
- construction costs to make assets usable
- all of the above are included as part of the cost of plant assets
Question 6. Marbella Company has an investment in stock, classified as available-for-sale, with the following information at December 31, 2007:
Cost = $240,000
Market value = $280,000
How would Marbella report this information?
- unrealized holding gain of $40,000 added to stockholders' equity
- realized gain added to the income statement of $40,000
- unrealized holding gain deducted from stockholders' equity of $40,000
- unrealized holding gain added to the income statement of $40,000
Question 7. Intangible assets would include patents, copyrights, trademarks, and goodwill.
Question 8. Which of the following statements is correct concerning investing activities?
- they involve obtaining and managing financial resources
- they use financial resources to acquire items to sell in the normal course of activities
- they use financial resources to acquire assets a company needs to produce and sell its products
- they involve buying and selling a company's own stock
Question 9. Assume a building was purchased for $250,000 and used for four of its estimated 10-year life. It has residual value of $50,000 and the straight-line method is used for depreciating the building. The book value of the building after the four years' of usage would be reported on the balance sheet at
- $20,000
- $80,000
- $120,000
- $170,000
Question 10. Cash received from the sale of long-term assets is reported as an operating activity
- a financing activity
- an adjustment to stockholders' equity
- an investing activity
Question 11. Depreciation and amortization
- reduce net income and cash flow from operating activities
- reduce net income but increase cash flow from operating activities
- reduce net income but have no direct effect on cash flow from operating activities
- have no direct effect on net income or cash flow from operating activities
Question 12. Which of the following is NOT true?
- the source of financing for plant assets does not affect the way assets are reported on the balance sheet
- intangible assets provide legal rights or benefits to a company
- one of the four categories of assets on the balance sheet includes the value of management and employee skills
- long-term investments are investments in the debt or equity securities of other companies
Question 13. The excess of the purchase price of a company over the fair market value of its net assets is known as
- surplus
- amortization
- goodwill
- capital
Question 14. Accelerated depreciation
- results in lower net income in earlier years and higher net income in later years
- is used more often on the income statement than is the straight-line method
- leads to higher book values for depreciable assets than does the straight-line method
- allocates larger portions of cost to later periods than to earlier
Question 15. Emergent Markets Corporation purchased a machine for $200,000 on January 1, 2007. The estimated life is 10 years. What is the book value on the December 31, 2009 balance sheet assuming straight-line depreciation is used and estimated residual value is zero?
- $180,000
- $160,000
- $140,000
- $ 60,000
Question 16. Which of the following would NOT be included in property, plant, and equipment?
- inventory
- land
- equipment
- buildings
Question 17. Meteorite Company sells its Available-For-Sale stock investment at a price of $61 per share. It had originally been purchased at $20 per share and its most recent adjustment had been to a market value of $32 per share. What was the per share realized gain or loss on sale?
- $29 realized gain
- $41 realized gain
- $12 realized loss
- $73 realized gain
Question 18. Plant assets are reported on the balance sheet at their fair market value.
Question 19. Murray Company purchased a 5%, $5,000, 10-year bond for $4,800 at the date of issue. The interest revenue shown on Murray's income statements over the life of the bond will total
- $2,500
- $2,700
- $2,300
- $2,600
Question 20. Quick Freight Trucking owned a truck which cost $30,000 when it was purchased on January 1, 2007. It had accumulated depreciation of $18,000 at December 31, 2008. The company originally estimated the truck would have a residual value after using it for four years of $3,000. It sold the truck for $22,500 cash on January 1, 2009. The amount of gain (loss) on the sale of the truck was
$4,500 gain
$19,500 gain
$1,500 loss
$10,500 gain