Question 1

Which of the following statements is incorrect?

Accepted Answer

Reversals of revaluation gains or write-ups are not prohibited; they are allowed under certain circumstances.

Question 2

If disposal of an asset occurs during the year, depreciation is

Accepted Answer

Depreciation is recorded for the portion of the year up to the date of disposal, reflecting the asset's use until it was disposed of.

Question 3

When an asset is sold, a gain is reported that is equal to the amount that the

Accepted Answer

A gain on the sale of an asset is calculated as the difference between the proceeds received and the carrying amount (book value) of the asset at the time of sale.

Question 4

Intangible assets are the rights and privileges that result from ownership of assets that

Accepted Answer

Intangible assets are characterized by their lack of physical substance, unlike tangible assets which have a physical form. They represent rights and privileges that can provide future economic benefits.

Question 5

The carrying amount of an asset is the difference between the

Accepted Answer

The carrying amount of an asset is calculated as the cost of the asset minus the accumulated depreciation to date.

Question 6

When an impairment loss is recorded what is the effect (if any) on Depreciation?

Accepted Answer

The answer of When an impairment loss is recorded what...

Question 7

A truck costing $15,000 and on which $14,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a

Accepted Answer

The answer of A truck costing $15,000 and on which...

Question 8

A truck costing $14,000 and on which $12,000 of accumulated depreciation has been recorded was disposed of for $3,000 cash. The entry to record this event would include a

Accepted Answer

The answer of A truck costing $14,000 and on which...

Question 9

Mandeep Ltd. has decided to change the estimate of the useful life of an asset that has been in service for two years. Which of the following statements describes the proper way to revise a useful life estimate?

Accepted Answer

When the useful life of an asset is revised, the change affects both the current and future periods. Past depreciation is not adjusted retroactively.

Question 10

A truck costing $32,000 was destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $16,000. An insurance cheque for $37,000 was received based on the replacement cost of the truck. The entry to record the insurance proceeds and the disposition of the truck will include a

Accepted Answer

The answer of A truck costing $32,000 was destroyed when...

Question 11

On July 1, 2018, Happy Hound Kennels Inc. sells equipment for $20,000. The equipment originally cost $80,000, had an estimated 5-year life and an expected residual value of $10,000. The Accumulated Depreciation account had a balance of $49,000 on January 1, 2018, using the straight-line method. The gain or loss on disposal is

Accepted Answer

The answer of On July 1, 2018, Happy Hound Kennels...

Question 12

The cost of successfully defending a patent in an infringement suit should be

Accepted Answer

The cost of successfully defending a patent in an infringement suit is capitalized and added to the cost of the patent. This is because such costs enhance the patent's value and extend its useful life.

Question 13

An intangible asset should

Accepted Answer

Intangible assets with an indefinite life should not be amortized, as they do not have a foreseeable limit to the period over which they are expected to generate cash flows.

Question 14

If an asset is fully depreciated and retired for proceeds equal to its residual value

Accepted Answer

When an asset is fully depreciated and retired for proceeds equal to its residual value, the book value equals the residual value, resulting in no gain or loss on disposal.

Question 15

On December 31, 2018, Cee Corp. sells an asset that originally cost $300,000 for $75,000. The company recognized a loss on disposal of $25,000. What was the balance of the accumulated depreciation account after the current year's depreciation of $15,000 was recorded?

Accepted Answer

The loss on disposal is calculated as the difference between the asset's book value and the sale price. The book value is the original cost minus accumulated depreciation. Given the loss of $25,000, the accumulated depreciation must have been $200,000 ($300,000 - $75,000 - $25,000).

Question 16

A change in the estimated useful life of equipment requires

Accepted Answer

A change in the estimated useful life of equipment is considered a change in accounting estimate, which affects the current and future periods' depreciation calculations, not past periods.

Question 17

If the carrying amount of an asset equals its selling price at the date of sale, then

Accepted Answer

When the carrying amount of an asset equals its selling price, there is no gain or loss on disposal because the asset is sold for its book value.

Question 18

An asset with a cost of $45,000 was sold for $9,500 and resulted in a gain of $2,000. How much was accumulated depreciation at the time of sale?

Accepted Answer

The answer of An asset with a cost of $45,000...

Question 19

Anali Corporation has determined that its drilling equipment is impaired. The cost of the equipment is $210,000. Accumulated depreciation recorded to date is $140,000. Anali has determined, that based on market data, the recoverable amount will be $45,000. Determine the amount of the impairment loss that Anali will be required to record.

Accepted Answer

The impairment loss is calculated as the difference between the carrying amount of the asset and its recoverable amount. The carrying amount is the cost of the asset minus accumulated depreciation, which is $210,000 - $140,000 = $70,000. The recoverable amount is the higher of the fair value less costs to sell and the value in use. In this case, the recoverable amount is $45,000. Therefore, the impairment loss is $70,000 - $45,000 = $25,000.

Question 20

Which of the following statements is not true?

Accepted Answer

The answer of Which of the following statements is not...

Quiz 9: Reporting and Analyzing Long-Lived Assets