Question

Property, plant and equipment are:

Tangible assets used in the operation of a business having a useful life of more than one accounting period.

Current assets.

Long-term investments.

Intangible assets used in the operations of a business having a useful life of more than one accounting period.

Tangible assets used in the operation of business having a useful life of less than one accounting period.

The relevant factor(s) in calculating depreciation is (are):

Cost.

Residual value.

Useful life.

Both cost and useful life.

All of these answers are correct.

Sports world purchased equipment costing $10,000. The equipment has a residual value of $1,000, and an estimated useful life of 5 years or 36,000 shoes. Actual units produced during the year were 7,000 units. Calculate annual amortization using the straight-line method.

$1,800

$4,000

$1,450

$2,000

$1,750

Depreciation is usually recorded:

From the beginning of the accounting year in which an asset is purchased.

From the actual date of purchase.

From the first of the month nearest the actual purchase date.

From the end of the month nearest the actual purchase date.

By any of the above methods.

A machine originally had an estimated service life of 5 years, and after 3 years, it was decided that the original estimate should have been for 10 years. The remaining cost to be depreciated should be allocated over the next:

2 years.

5 years.

7 years.

8 years.

10 years.

At the end of the year SportsWorld completed an asset impairment test and noted that a piece of equipment with a book value of 12,000, has a recoverable value of $2,000. Calculate the amount of impairment loss on the equipment.

$2,000

$10,000

$14,800

$12,800

$2,160

Sports Med sold an X-ray machine that originally cost $100,000 for $60,000. The accumulated depreciation on the machine to the date of sale was $40,000. On this sale, Sports Med should recognize:

$0 gain or loss.

$20,000 gain.

$25,000 gain.

$40,000 loss.

$60,000 gain.

The characteristics of a liability include:

Occurrence of a past transaction or event.

Existence of a present obligation.

Requirement of future payment of assets or rendering of services.

A liability can be current or long term.

All of these answers are correct.

Fees accepted in advance from a client:

Are recorded as earned revenues on the income statement.

Increase income.

Are recorded as liabilities.

Do not increase assets.

None of these answers is correct.

The difference between the amount received from a note payable and the amount repaid is:

Interest.

Principal.

Face value.

Discount.

Premium.

An estimated liability:

Is an unknown liability of a certain amount.

Is a known obligation of an uncertain amount.

Is a liability that may occur if a future event occurs.

Can be the result of a lawsuit.

None of these answers is correct.

Contingent liabilities occur when the liability is:

Probable and can be reliably estimated.

Cannot be reliably estimated.

Known and determinable.

Reliably estimated.

All of these answers are correct.

Property, plant and equipment are assets held for sale.

True

False

Depreciation is the process of allocating the cost of a tangible asset in a rational and systematic manner over the asset's estimated useful life.

True

False

Intangible assets should be amortized over their anticipated legal, regulatory, contractual, competitive or economic life.

True

False

A liability is a future payment of assets or services that a company is currently obligated to make as a result of past transactions or events.

True

False

Trade accounts payable are amounts owed to suppliers for products or services purchased on credit.

True

False

A note payable can be used to extend the credit period for an account payable.

True

False

Answer 1