Question 1

The Modified Accelerated Cost Recovery System (MACRS)is required for----------- purposes.

Accepted Answer

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Question 2

The acquisition cost of an intangible asset is amortized over its legal life or----------- life, whichever is shorter.

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Question 3

A company uses the units-of-output method of computing depreciation on its fleet of cars. A car that costs $44,800 is expected to have a useful life of 85,000 miles and an expected salvage value of $4,000. The rate for each mile is-------------- .

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Question 4

Each year an intangible asset's value is assessed which is then compared to the existing book value in order to determine if impairment of the asset's value must be recorded.

Accepted Answer

This statement is true. Accounting standards require that intangible assets be assessed annually for impairment, and if their fair value has declined below their book value, an impairment loss must be recorded.

Question 5

If a depreciable asset is sold for an amount that is less than the asset's book value, a(n)------------is recognized.

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Question 6

When an asset is traded for a similar asset, if the trade-in allowed is less than the book value of the asset, the loss is not recognized for financial accounting purposes.

Accepted Answer

For financial accounting purposes, if the trade-in allowance is less than the book value of the asset, the loss is recognized immediately. This ensures that the financial statements accurately reflect the loss in value of the asset traded.

Question 7

A company uses the units-of-output method of computing depreciation on its fleet of cars. A car that costs $65,000 is expected to have a useful life of 120,000 miles and an expected salvage value of $2,600. The rate for each mile is------------ .

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Question 8

The normal balance of Accumulated Depreciation is a(n)----------- .

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Question 9

All costs incurred to purchase an asset and get it in proper working condition, such as net purchase price, transportation costs, installation costs, and costs of adjustments or modifications are referred to as------------- .

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Question 10

The allocation of the acquisition cost of an intangible asset to expense during its estimated useful life is called----------- .

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Question 11

The difference between the acquisition cost of an asset and its accumulated depreciation is called the----------- .

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Question 12

When the sum-of-the-years'-digits method is used to depreciate an asset with a four-year life, the depreciation expense is computed by multiplying a fractional part of the asset's cost less the salvage value. The denominator of the fraction each year is the number------------ .

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Question 13

The periodic transfer of the acquisition cost to expense when minerals or other natural resources are physically removed during production is------------ .

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Question 14

In determining the impairment of a long-term asset, the------------ test is used to compare the asset's net book value with estimated cash flows from the asset's future use.

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Question 15

If the property used in a business has physical substance and is not real estate it is-----------property.

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Question 16

The entry to record amortization of the acquisition cost of an intangible asset includes a credit directly to the intangible asset account.

Accepted Answer

Amortization of an intangible asset involves reducing the carrying amount of the intangible asset over its useful life, and this reduction is typically recorded by crediting the intangible asset account directly.

Question 17

When an asset is acquired by trading in an asset already owned in exchange for the new one, the amount received on the trade-in is called the---------- .

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Question 18

Patents, trademarks, and copyrights are examples of --------------assets.

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Question 19

To calculate declining-balance depreciation, the-------------- of an asset is multiplied by a predetermined appropriate rate.

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Question 20

The declining-balance method and the sum-of-the-years'-digits method are referred to as-------------methods of depreciation.

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Quiz 18: Property, Plant, and Equipment