Question 1

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

Accepted Answer

A capital expenditure refers to an expenditure that increases the future economic benefits of the asset, while an expenditure that does not increase the future economic benefits is referred to as a revenue expenditure.

Question 2

Two reasons why a company might choose an accelerated depreciation method are _______________, and ______________.

Accepted Answer

The answer of Two reasons why a company might choose...

Question 3

The more efficiently a company uses its fixed assets the lower will be the fixed asset turnover ratio.

Accepted Answer

The fixed asset turnover ratio measures how efficiently a company uses its fixed assets to generate sales. A high fixed asset turnover ratio indicates that a company is using its fixed assets more efficiently, while a low ratio indicates inefficiency. Therefore, the more efficiently a company uses its fixed assets, the higher will be the fixed asset turnover ratio.

Question 4

An accumulated ________ account is used when writing off natural resources.

Accepted Answer

The answer of An accumulated ________ account is used when...

Question 5

MATCHING
For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
a. capital expenditure
b. revenue expenditure
-Costs incurred after putting the asset into service which keep the asset in normal operating condition.

Accepted Answer

Revenue expenditure refers to the costs incurred for maintaining an asset in its normal operating condition. These are typically recurring expenses necessary for the day-to-day functioning of the asset and do not increase its life or efficiency beyond its original condition. Capital expenditure, on the other hand, refers to costs that are capitalized on the balance sheet because they are expected to provide benefits over multiple periods, such as increasing the asset's useful life, efficiency, or capacity.

Question 6

____________ costs are expenditures incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product.

Accepted Answer

The answer of ____________ costs are expenditures incurred in the...

Question 7

MATCHING
For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
a. capital expenditure
b. revenue expenditure
-Costs incurred prior to using the asset, such as installation and other costs to prepare the asset for use.

Accepted Answer

Costs incurred prior to using the asset, such as installation and other costs to prepare the asset for use, are considered capital expenditures as they add value to the asset and extend its useful life.

Question 8

MATCHING
For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
a. capital expenditure
b. revenue expenditure
-Costs incurred after putting the asset into service which would extend the asset's useful life.

Accepted Answer

Capital expenditures are costs incurred to acquire or improve a fixed asset, such as a building or equipment, which extend the asset's useful life, increase its capacity, efficiency, or improve its quality, thereby enhancing its future economic benefits. Revenue expenditures, on the other hand, are short-term expenses necessary for the maintenance of the asset or for the day-to-day operation of the business, and do not extend the asset's useful life beyond its original estimate.

Question 9

A contra account called ____________________ is used to depreciate property, plant, and equipment.

Accepted Answer

The answer of A contra account called ____________________ is used...

Question 10

Select the account to which each of the following costs would be debited. (Choices may be used more than once.)
a.Land
b.Land Improvements
c.Buildings
d.Machinery and Equipment
e.An Expense Account
-The annual painting costs of an office building.

Accepted Answer

The answer of Select the account to which each of...

Question 11

To revise depreciation expense, the accountant should compute depreciation expense using the asset's remaining book value and useful life and its new residual value.

Accepted Answer

To revise depreciation expense, the accountant needs to consider the asset's remaining book value, useful life, and new residual value to calculate the new depreciation expense. This will ensure that the depreciation expense accurately reflects the asset's current value and expected future use.

Question 12

A ____________________ is a cost that improves an operating asset and is therefore added to the asset account.

Accepted Answer

The answer of A ____________________ is a cost that improves...

Question 13

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ____________________ and ____________________.

Accepted Answer

The answer of The two items that must be estimated...

Question 14

Natural resources can be replaced or restored only by an act of nature.

Accepted Answer

Natural resources, such as timber and water, can only be replenished or restored through natural processes like sunlight, rain, and natural regeneration of vegetation. Human actions can contribute to the restoration of natural resources, but ultimately it is nature that must take its course for true restoration to occur.

Question 15

The ______________ depreciation method is the GAAP depreciation method used most frequently.

Accepted Answer

The answer of The ______________ depreciation method is the GAAP...

Question 16

Select the account to which each of the following costs would be debited. (Choices may be used more than once.)
a.Land
b.Land Improvements
c.Buildings
d.Machinery and Equipment
e.An Expense Account
-The transportation charges related to the acquisition costs of a new piece of machinery.

Accepted Answer

The transportation charges related to the acquisition costs of a new piece of machinery are directly related to the cost of the machinery and equipment, therefore increasing the Machinery and Equipment account.

Question 17

The intangible asset called ____________________ can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.

Accepted Answer

The answer of The intangible asset called ____________________ can only...

Question 18

MATCHING
For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.)
a. capital expenditure
b. revenue expenditure
-Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment.

Accepted Answer

Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment, are typically treated as capital expenditures as they are considered necessary to get the asset up and running for its intended purpose. These expenses are added to the cost of the asset and depreciated over its useful life.

Question 19

Select the account to which each of the following costs would be debited. (Choices may be used more than once.)
a.Land
b.Land Improvements
c.Buildings
d.Machinery and Equipment
e.An Expense Account
-The costs paid to clear land.

Accepted Answer

The costs paid to clear land are capitalized as part of the land account because they are necessary to get the land ready for its intended use. These costs are not expensed but added to the land's cost basis.

Question 20

A _________________ is the right to produce or sell a published work.

Accepted Answer

The answer of A _________________ is the right to produce...

Quiz 7: Operating Assets

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

Two reasons why a company might choose an accelerated depreciation method are _, and .