ACC 563 Week 7 Quiz â€“ Strayer NEW Click On The Link Below to Purchase A+ Graded Material Instant Download http://budapp.net/ACC-563-Week-7-Quiz-Strayer-NEW-ACC563W7Q.htm Week 7 Quiz 5: Chapters 9 and 10
Chapter 9 Multiple Choice 1. When a closely held corporation issues preferred stock for land, the land should be recorded at the a. Total par value of the stock issued b. Total book value of the stock issued c. Appraised value of the land d. Total liquidating value of the stock issued Answer 2. A principal objection to the straight-line method of depreciation is that it a. Provides for the declining productivity of an aging asset b. Ignores variations in the rate of asset use c. Tends to result in a constant rate of return on a diminishing investment base d. Gives smaller periodic write-offs than decreasing charge methods Answer 3. Property, plant, and equipment are conventionally presented n the balance sheet at a. Replacement cost less accumulated depreciation b. Historical cost less salvage value c. Original cost adjusted for general price level changes d. Acquisition cost less depreciated portion thereof Answer 4. As generally used in accounting, depreciation a. Is a process of asset valuation for balance sheet purposes b. Applies only to long-lived intangible assets c. Is used to indicate a decline in market value of a long-lived asset d. Is an accounting process that allocates long-lived asset cost to accounting periods
Answer 5. Lyle, Inc., purchased certain plant assets under a deferred payment contract on December 31, 2011. The agreement was to pay $20,000 at the time of purchase and $20,000 at the end of each of the next five years. The plant assets should be valued at a. The present value of a $20,000 ordinary annuity for five years b. $120,000 c. $120,000 less imputed interest d. $120,000 plus imputed interest Answer 6. For income statement purposes, depreciation is a variable expense if the depreciation method used for book purposes is a. Units of production b. Straight line c. Sum-of-the-yearâ€™s-digits d. Declining balance Answer 7. A method that excludes salvage value from the base for the depreciation calculation is a. Straight line b. Sum-of-the-yearâ€™s digits c. Double-declining balance d. Productive output Answer 8. When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the cost incurred to tear down the building should be a. Expensed as incurred b. Added to the cost of the plant c. Added to the cost of the land d. Amortized over the estimated time period between the tearing down of the building and the completion of the plant Answer 9. A machine with a four-year estimated useful life and an estimated 15 percent salvage value was acquired on January 1, 2010. On December 31, 2012, the accumulated depreciation using the sum-of-yearâ€™s digits method would be a. (Original cost less salvage value) multiplied by 9/10
b. Original cost multiplied by 9/10 c. Original cost multiplied by 9/10 less total salvage value d. (Original cost less salvage value) multiplied by 1/10 Answer 10. The theoretical justification for reporting depreciation expense is a. Depreciation expense represents a decrease in the value of the asset that has occurred during the accounting period. b. Depreciation expense represents the impairment of the asset that has occurred during the accounting period. c. Depreciation expense represents the unrealized loss that has been incurred by using the asset during the accounting period. d. Depreciation expense represents the allocation of the historical cost of the asset that has been applied to the accounting period. Answer 11. A company using the group depreciation method for its delivery trucks retired one of its delivery trucks due to damage before the average service life of the group was reached. An insurance recovery was received. The net book value of these group asset accounts would be decreased by the a. Original cost of the truck b. Original cost of the truck less the insurance recovery received c. Original cost of the truck less depreciation on the truck to the date of retirement d. Insurance recovery received Answer 12. When equipment is retired, accumulated depreciation is debited for the original cost less any residual recovery under which of the following depreciation methods?
a. b. c. d.
Composite Depreciation No No Yes Yes
Group Depreciation No Yes No Yes
Answer 13. Recognizing depletion expense is an example of the accounting process of a.
b. c. d.
No Yes Yes
Yes Yes No
Answer 14. A donated plant asset for which the fair value has been determined, and for which incidental costs were incurred in acceptance of the asset, should be recorded at an amount equal to its a. Incidental costs incurred b. Fair value and incidental costs incurred c. Book value on books of donor and incidental costs incurred d. Book value on books of donor Answer Essay 1. List the objectives of accounting for property, plant and equipment.
2. Describe how cost is assigned to individual assets when they are acquired in a lump-sum group purchase. 3. Discuss the three approaches to allocating fixed overhead to a self-construction project. 4. Discuss the issue of allocating interest to self construction projects. That is, when should interest be allocated and how much interest should be allocated? 5. Explain the concept of commercial substance originally outlined in SFAS No. 158. 6. How did SFAS No. 116, now FASB ASC 605-10-15-3, change the accounting for donated assets?
7. Discuss the factors comprising the depreciation process. 8. Discuss the distinction between capital and revenue expenditures for long-term assets.
9. Define and discuss accounting for asset retirement obligations under SFAS No. 14FASB ASC 410-20. 10. Discuss the guidelines for accounting for property, plant and equipment outlined in IAS No. 16. 11. How does IAS no. 23 define borrowing costs? 12. Discuss accounting for the impairment of assets as outlined in IAS No. 36. EXAMPLE TEST QUESTIONS Chapter 10 Multiple Choice 1. Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the a. Investor sells the investment b. Investee declares a dividend c. Investee pays a dividend d. Earnings are reported by the investee in its financial statements Answer 2. Pence Corporation, which accounts for its investments in the common stock of Walsh Company by the equity method, should ordinarily record a dividend received from Walsh as a. An addition to the carrying value of the investment b. Dividend revenue c. A reduction of the carrying value of the investment d. Revenue from affiliate Answer 3. On January 15, 2002, a corporation was granted a patent on a product. On January 2, 2010, to protect its patent, the corporation purchased a patent on a competing product the originally was issued on January 10, 2008. Because of its unique plant, the corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be a. Amortized over a maximum period of 17 years b. Amortized over a maximum period of 13 years c. Amortized over a maximum period of 9 years d. Expensed in 2010
Answer 4. Pacer Company purchased 300 of the 1, 000 outstanding shares of Queen Company’s common stock for $80,000 on January 2, 2008. During 2009, Queen Company declared dividends of $8,000 and reported earnings for the year of $20,000. If Pacer Company uses the equity method of accounting for its investment in Queen Company, its Investment in Queen Company account at December 31, 2009 should be a. $100, 000 b. $88,000 c. $83,600 d. $80,000 Answer 5. Refer to the facts in problem (4). If Pacer Company uses the lower of cost or market method of accounting for its investment in Queen Company, and the value of its investment hasn’t changed, its Investment in Queen Company account on December 31, 2009, should be a. $100, 000 b. $88,000 c. $80,000 d. $73,600 Answer 6. A large, publicly held company developed and registered a trademark during 2010. The cost of developing and registering the trademark should be accounted for by a. Charging it to an asset account that should not be amortized b. Expensing it as incurred c. Amortizing it over 25 years if in accordance with management’s evaluation d. Amortizing it over its useful life or 17 years, whichever is shorter Answer 7. Goodwill should be written off a. As soon as possible against retrained earnings b. When there is evidence that its carrying value has been impaired c. By systematic charges against retained earnings over the period benefited, but not more than 40 years d. By systematic charges to expense over the period benefited, but not more than 40 years Answer
8. A net unrealized loss on a companyâ€™s long-term portfolio of available for sale securities should be reflected in the current financial statements as a. An extraordinary item shown as a direct reduction from retained earnings b. A current loss resulting from holding marketable equity securities c. A footnote or parenthetical disclosure only d. A component of other comprehensive income Answer 9. Changes in the fair value of a long-term available for sale equity securities portfolio should be reported as a component of a. Other comprehensive income b. Noncurrent assets c. Noncurrent liabilities d. Net income Answer 10. Cash dividends declared out of current earnings are distributed to an investor. How will the investorâ€™s investment account be affected by those dividends under each of the following accounting methods? Fair Value Method Equity Method a. Decrease No effect b. Decrease Decrease c. No effect Decrease d. No effect No effect Answer 11. An activity that would be expensed currently as research and development costs is the a. Testing in search for or evaluation of product or process alternatives b. Adaptation of an existing capability to a particular requirement or customerâ€™s need as a part of continuing commercial activity c. Legal work in connection with patent applications or litigation, and the sale or licensing of patents d. Engineering follow-through in an early phase of commercial production Answer 12. Should the following fees associated with the registration of an internally developed patent be capitalized? Registration Legal fees fees a. Yes Yes b. Yes No
Answer 13. Which of the following assets acquired in 2010 are amortizable? Goodwill Trademarks a. No No b. No Yes c. Yes No d. Yes No Answer 14. A purchased patent has a remaining life of 15 years. It should be a. Expensed in the year of acquisition b. Amortized over 15 years regardless of its useful life c. Amortized over its useful life if less than 15 years d. Amortized over 40 years Answer 15. Which of the following amounts incurred in connection with a trademark should be capitalized? Cost of a Registration Successful defense fees a. Yes No b. Yes Yes c. No Yes d. No No Answer 16. Zink Company owns 32% of Ace Company's outstanding voting stock. Zink Company normally should account for its investment in Ace Company using the a. Fair value method. b. Cost method. c. Consolidation procedure. d. Equity method. Answer 1. An investor purchased a bond as a long-term investment on January 1. Annual interest was received on December 31. The investorâ€™s interest income for the year would be lowest if the bond was purchased at a. A discount
b. c. d.
A premium Par Face value
Answer 19. The theoretical justification for expensing research and development (R&D) cost as it is incurred is based on which of the following arguments? a. R&D costs provide no future benefits, thus it does not meet the definition of an asset b. R&D costs are incurred to generate current period revenue, thus the matching concept requires that it be expensed as incurred. c. Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset. d. Since R&D costs have been incurred during the current period, they meet the definition of an expense. Answer 20. When a patent is successfully defended in court, the cost of the lawsuit a. Should be expensed as incurred because it is a period cost. b. Should be added to the cost of the patent and depreciated over the remaining useful life of the patent. c. Should be added to the cost of the patent which is then expensed as a period cost. d. Has already been expensed so there is no further action to take. Answer
21. Goodwill is an intangible asset a. That has a definite life and its cost should be amortized over its useful life. b. That is recorded when the company has projected earnings in excess of earnings expected for an investment in a similar company in the same industry. c. That is reviewed for impairment when circumstances indicate that impairment may have occurred. d. That is reviewed annually to determine whether impairment has occurred. Answer 22. A trading security is measured at fair value on the balance sheet date and reported as a. A current asset, and changes in fair value are reported in earnings as unrealized gains and losses. b. A current asset, and changes in fair value are reported in earnings as realized gains and losses.
c. Either a current or noncurrent asset depending on whether they meet the definition of a current asset. d. A current asset, and changes in fair value are reported in accumulated other comprehensive income as unrealized gains and losses. Answer 23. Current accounting for an available-for-sale (AFS) security is consistent with a. The financial capital maintenance concept of income because AFS security unrealized gains and losses are reported in earnings. b. The financial capital maintenance concept of income because AFS security unrealized gains and losses are reports in other comprehensive income. c. The physical capital maintenance concept of income because AFS security unrealized gains and losses are reported in earnings. d. The physical capital maintenance concept of income because AFS security unrealized gains and losses are reported in other comprehensive income. Answer 24. The physical capital maintenance concept of income would require that an investment in the common stock of another entity be a. Reported in the balance sheet at historical cost and that only realized gains and losses be reported in earnings. b. Reported in the balance sheet at historical cost and that unrealized gains and losses be reported in earnings. c. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in earnings. d. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in other comprehensive income. Answer 25. The economic concept of income would require that an investment in the common stock of another entity be a. Reported in the balance sheet at historical cost and that only realized gains and losses be reported in earnings. b. Reported in the balance sheet at historical cost and that unrealized gains and losses be reported in earnings. c. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in earnings. d. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in other comprehensive income. Answer
26. Under the fair value option, an investment in the common stock of another entity will be a. b. c. d.
Reported as a current asset Reported as a noncurrent asset Reported as either a current or noncurrent asset depending on managerial intent. Reported as a current asset only if it was not previously reported as an equity method investment.
Answer 27. When a company reports goodwill in its balance sheet, we know that a. It was internally generated because the company has earnings in excess of those of other companies in the industry. b. The company purchased it. c. The company will be reporting amortization expense for the goodwill. d. The company will not be reporting an impairment loss for the goodwill. Answer Essay 1. How are income and balance sheet values determined under the equity method?
2. Discuss accounting for equity securities under the cost method. 3. Discuss accounting for equity securities under the SFAS No. 115 now contained at FASB ASC 320. 4. Summarize the accounting requirements for investments in equity securities. That is, what methods are available and when is each method appropriate? 5. Discuss the use of the fair value option originally described in SFAS No. 159 now contained at FASB ASC 825-10. 6. Discuss accounting for investments in debt securities. 7. What is an intangible asset? How is the cost of an intangible asset amortized? 8. What is goodwill? How is goodwill written off under the provisions of SFAS No. 142 now FASB ASC 350? 9. Define research and development. How are research and development costs recorded
10. How does IAS No 39 define fair value?