Quiz Questions for Chapter 9

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Quiz Questions for Chapter 9
1.

A truck was purchased for $25,000. It has a six-year life and a $4,000 salvage value. Using straight-line depreciation, what is the asset’s carrying value (book value) after 2 1/2 years? a. $8,750.

b. $12,250.
c. $14,583.
d. $16,250.

2.

On January 1, 2003, Superior Landscaping Company paid $17,000 to buy a stump grinder. If Superior uses the grinder to remove 2,500 stumps per year, it would have an estimated useful life of 10 years and a salvage value of $4,500. The amount of depreciation expense for the year 2003, using units-of-production depreciation and assuming that 3,500 stumps were removed, is a. $2,380.

b. $1,750.
c. $1,700.
d. $1,250.

3.

The sale for $2,000 of equipment that cost $8,000 and has accumulated depreciation of $6,700 would result in a
a. gain of $2,000.
b. gain of $700.
c. loss of $700.
d. loss of $1,300.

4.

Underestimating the number of tons of a mineral that can be mined over a mineral deposit’s life will result in a. overstated net income each year.
b. overstated total assets each year.
c. overstated depletion expense each year.
d. no effect on total assets each year.

5.

A copyright is obtained for what becomes a very successful book. The publisher expects the book to generate sales for 10 years. The copyright should be amortized over a. 2 to 4 years.
b. 10 years.
c. 40 years.
d. the author’s life plus 50 years.

The following information pertains to the next two questions. Z Company purchased an asset for $24,000 on January 1, 2004. The asset was expected to have a four-year life and a $4,000 salvage value. 6.

The amount of depreciation expense for 2006 using double-declining-balance would be a. $2,000.
b. $3,000.
c. $6,000.
d. $12,000.

7.

Assume that Z Company uses straight-line depreciation. If on January 1, 2007, Z Company sells the asset for $10,000, the statement of cash flows would report a
a. $1,000 cash inflow from gain on the sale of the asset in the operating activities section. b. $10,000 cash inflow from an asset disposal in the investing activities section. c. $9,000 cash inflow from an asset disposal in the financing activities section. d. a and c.

8.

On January 1, 2006, Fulsom Corporation purchased a machine for $50,000. Fulsom paid shipping expenses of $500 as well as installation costs of $1,200. Fulsom estimated the machine would have a useful life of ten years and an estimated salvage value of $3,000. If Fulsom records depreciation using the straight-line method, depreciation expense for 2007 is.

a. $4,870.
b. $5,170.
c. $5,270.
d. $5,570.

9.

Hickory Ridge Company purchased land and a building for $920,000. The individual assets were appraised at the following market values:
Land
$614,400
Building
$345,600
Recording the land in the accounting records would
a. increase land by $588,800.
b. increase land by $614,400.
c. increase assets by $920,000.
d. Both a and c.

10

Penny Lane and Associates purchased a generator on January 1, 2006, for $6,300. The generator was estimated to have a five-year life and a salvage value of $600. At the beginning of 2008, the company revised the expected life of the asset to six years and revised the salvage value to $300. Using straight-line depreciation, the depreciation expense recorded in 2008 would a. decrease assets and equity by $1,140.

b. decrease assets and equity by $930.
c. decrease assets and equity by $1,005.
d. decrease assets and equity by $1,500.

11

Which of the following statements about goodwill is true?
a. The amount of goodwill is measured by subtracting the amount paid for assets from their fair market value on the purchase date.
b. The amount of goodwill is recorded as an asset.
c. Recording impairment of goodwill reduces the amount of net income. d. All of the above.

12

XYZ Company paid cash for a capital expenditure that improved the operating efficiency of one of its assets. Which of the...
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