Question

1. Long-term or relatively permanent assets such as equipment, machinery, buildings, and land. They exist physically; they are owned and used by the company in its normal operations; and they are not offered for sale as part of normal operations.

a) What are intangible assets?

b) What are current assets?

c) What are short-term investments in marketable securities?

d) What are fixed assets?

2. Costs that benefit only the current period. These costs include such items as ordinary repairs and maintenance.

a) What are revenue expenditures?

b) What are long-term liabilities?

c) What are current liabilities?

d) What are capital expenditures?

3. Costs that improve the asset or extend its useful life. These costs include such items as asset improvements and extraordinary repairs.

a) What are current liabilities?

b) What are revenue expenditures?

c) What are long-term liabilities?

d) What are capital expenditures?

4. A lease is a contract for the use of an asset for a period of time. This type of lease is accounted for as if the lessee has purchased the asset. For accounting purposes, the lessee debits an asset account for the fair market value of the asset and credits a long-term lease liability account.

a) What are long-term liabilities?

b) What is a capital lease?

c) What are fixed assets?

d) What is an operating lease?

5. A lease is a contract for the use of an asset for a period of time. This type of lease is accounted for as if the lessee is renting the asset for the lease term. The lessee records lease payments by debiting an expense account (rent expense) and crediting cash.

a) What is a capital lease?

b) What are long-term liabilities?

c) What is an operating lease?

d) What are fixed assets?

6. The periodic recording of the cost of fixed assets as an expense. This concept does not measure the decline in the market value of the fixed asset. Instead, it allocates the cost of the fixed asset to expense over the asset’s useful life.

a) What is depreciation?

b) What are fixed assets?

c) What is accumulated depreciation?

d) What are operating expenses?

7. The value of an asset at the end of its expected useful life. This concept is sometimes referred to as scrap value, salvage value, or trade-in value.

a) What is accumulated depreciation?

b) What is the residual value of an asset?

c) What is depreciation?

d) What is the fair market value of an asset?

8. The difference between a fixed asset’s initial cost and its residual value.

a) What is depreciable cost of an asset?

b) What is residual value of an asset?

c) What is the fair market value of an asset?

d) What is accumulated depreciation?

9. This depreciation method provides for the same amount of depreciation expense for each year of the asset’s useful life. It is the most widely used depreciation method.

a) What is the units-of-output method of depreciation?

b) What is the double-declining balance method of depreciation?

c) What is the straight-line method of depreciation?

d) What is MACRS method of depreciation?

10. This depreciation method provides the same amount of depreciation for each unit of production. Depending on the asset, this method can be expressed in terms of hours, miles driven, or quantity produced.

a) What is MACRS method of depreciation?

b) What is the units-of-output method of depreciation?

c) What is the straight-line method of depreciation?

d) What is the double-declining balance method of depreciation?

11. This depreciation method provides for a declining periodic expense over the expected useful life of the asset. This depreciation method also provides for a higher depreciation amount in the first year of an asset’s use, followed by declining depreciation amounts in later years.

a) What is the units-of-output method of depreciation?

b) What is the straight-line method of depreciation?

c) What is MACRS method of depreciation?

d) What is the double-declining balance method of depreciation?

12. This depreciation method is listed in the Internal Revenue Code to compute depreciation for tax purposes. This depreciation method has eight classes of useful life and assigns depreciation rates to each class.

a) What is the units-of-output method of depreciation?

b) What is MACRS method of depreciation?

c) What is the straight-line method of depreciation?

d) What is the double-declining balance method of depreciation?

13. The cost of transferring the cost of natural resources to an expense account. Involve assets such as timber, metal ores, minerals, and other natural resources.

a) What is accumulated depreciation?

b) What is amortization?

c) What is depletion?

d) What is depreciation?

14. The periodic recording of the cost of intangible assets as an expense. This concept does not measure the decline in the market value of the intangible asset. Instead, it allocates the cost of the intangible asset to expense over the asset’s useful life.

a) What is depletion?

b) What is accumulated depreciation?

c) What is depreciation?

d) What is amortization?

15. These assets have no physical existence. They include assets such as patents, copyrights, trademarks, and goodwill.

a) What are intangible assets?

b) What are fixed assets?

c) What are short-term investments in marketable securities?

d) What are current assets?

16. A type of intangible asset which involves the exclusive right of a manufacturer to produce and sell goods with one or more unique feature. The federal government issues one of these to inventors.

a) What is a patent?

b) What is a fixed asset?

c) What is an intangible asset?

d) What is a copyright?

17. A type of intangible asset which involves the exclusive right to publish and sell a literary, artistic, or musical composition.

a) What is a fixed asset?

b) What is a copyright?

c) What is a patent?

d) What is an intangible asset?

18. A type of intangible asset which involves a name, term, or symbol used to identify a business and its products.

a) What is a trademark?

b) What is a copyright?

c) What is a patent?

d) What is an intangible asset?

19. A type of intangible asset that is created from favorable factors such as location, product quality, reputation, and managerial skill. Generally accepted accounting principles only allow this intangible asset to be recorded when it can be objectively determined by a transaction.

a) What is goodwill?

b) What is a patent?

c) What is a trademark?

d) What is a copyright?

20. This ratio measures the number of dollars of revenue earned per dollar of fixed assets invested. Smaller ratios are associated with companies that require large fixed asset investments. Larger ratios are associated with companies that are more labor intensive and require smaller fixed asset investments.

a) What is the fixed asset turnover ratio?

b) What is the current ratio?

c) What is the accounts receivable turnover ratio?

d) What is the inventory turnover ratio?

Answer 1

1. (D) fixed assets

2. (A) revenue expenditures

3. (D) capital expenditures

4. (B) capital lease

5. (C) operating lease

6. (A) depreciation

7. (B) residual value of an asset

8. (A) depreciable cost of an asset

9. (C) straight-line method of depreciation

10. (B) units-of-output method of depreciation

11. (D) double-declining balance method of depreciation

12. (B) MACRS method of depreciation

13. (C) depletion

14. (D) amortization

15. (A) intangible assets

16. (A)  fixed asset

17. (B) copyright

18. (A) trademark

19. (A) goodwill

20. (A) fixed asset turnover ratio