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Session:11 Long-Term Assets

Multiple Choice

Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session

Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting

1. LO 11.1Property, Plant, and Equipment is considered which type of asset?

  1. current asset
  2. contra asset
  3. tangible asset
  4. intangible asset

2. LO 11.1Which of the following would not be considered an intangible asset?

  1. goodwill
  2. patent
  3. copyright
  4. inventory

3. LO 11.1The legal protection that provides a company exclusive rights to produce and sell a unique product is known as which of the following?

  1. trademark
  2. copyright
  3. patent
  4. goodwill

4. LO 11.2Which of the following statements about capitalizing costs is correct?

  1. Capitalizing costs refers to the process of converting assets to expenses.
  2. Only the purchase price of the asset is capitalized.
  3. Capitalizing a cost means to record it as an asset.
  4. Capitalizing costs results in an immediate decrease in net income.

5. LO 11.2Ngo Company purchased a truck for $54,000. Sales tax amounted to $5,400; shipping costs amounted to $1,200; and one-year registration of the truck was $100. What is the total amount of costs that should be capitalized?

  1. $60,600
  2. $66,100
  3. $54,000
  4. $59,400

6. LO 11.2If a company capitalizes costs that should be expensed, how is its income statement for the current period impacted?

  1. Assets understated
  2. Net Income understated
  3. Expenses understated
  4. Revenues understated

7. LO 11.3Depreciation of a plant asset is the process of ________.

  1. asset valuation for statement of financial position purposes
  2. allocation of the asset’s cost to the periods of use
  3. fund accumulation for the replacement of the asset
  4. asset valuation based on current replacement cost data

8. LO 11.3An accelerated depreciation method that takes more expense in the first few years of the asset’s life is ________.

  1. units-of-production depreciation
  2. double-declining-balance depreciation
  3. accumulated depreciation
  4. straight-line depreciation

9. LO 11.3The estimated economic life of an asset is also known as ________.

  1. residual value
  2. book value
  3. salvage life
  4. useful life

10. LO 11.4The amortization process is like what other process?

  1. depreciation
  2. valuation
  3. recognizing revenue
  4. capitalization

11. LO 11.4How are intangible assets with an indefinite life treated?

  1. They are depreciated.
  2. They are amortized.
  3. They are depleted.
  4. They are tested yearly for impairment.

12. LO 11.4If the market value of goodwill is found to be lower than the book value, goodwill is __________ and must be adjusted by __________.

  1. worthless; reducing it with a credit
  2. impaired; reducing it with a credit
  3. impaired; increasing it with a credit
  4. worthless; increasing it with a credit

13. LO 11.4Which of the following represents an event that is less routine when accounting for long-term assets?

  1. recording an asset purchase
  2. recording depreciation on an asset
  3. recording accumulated depreciation for an asset or asset category
  4. changing the estimated useful life of an asset

14. LO 11.4Which of the following is true regarding special issues in accounting for long-term assets?

  1. An asset’s useful life can never be changed.
  2. An asset’s salvage value can never be changed.
  3. Depreciation expense calculations may need to be updated using new and more accurate estimates.
  4. Asset values are never reduced in value due to physical deterioration.

15. LO 11.4The loss in value from all causes within a property except those due to physical deterioration is known as which of the following?

  1. functional obsolescence
  2. obsolescence
  3. true obsolescence
  4. deterioration
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