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# Acct305 Week 4 Midterm Exam (2016)

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1.Property, plant, and equipment and intangible assets are (Points : 9) long-term revenue-producing assets. created by the normal operation of the business and include accounts receivable. all assets except cash and cash equivalents. current and long-term assets used in the production of either goods or services. 2.(TCO 3) Our company exchanged land and cash of \$5,000 for similar land. The book value and the fair value of the land were \$90,000 and \$100,000, respectively. Assuming the exchange lacks commercial substance, which amount is correct? (Points : 9) Debit Land-old \$90,000 Credit Land-old \$90,000 Debit Land-old \$95,000 Credit Land-old \$95,000 3.(TCO 2) The exclusive right to benefit from a creative work, such as a film, is a (Points : 9) patent. copyright. trademark. franchise. 4.(TCO 4) Assuming an asset is used evenly over a 4-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year? (Points : 9) Straight-line Units-of-production Sum-of-the-yearsâ€™ digits Double-declining balance 5.(TCO 4) On September 30, 2013, our company purchased a machine for \$100,000. The estimated service life is 10 years, with a \$10,000 residual value. Our company records partial-year depreciation based on the number of months in service. Depreciation for 2014, using double-declining balance, would be (Points : 9) \$16,000. \$17,000. \$19,000. \$20,000. 6.(TCO 4) A change in the estimated useful life and residual value of machinery in the current year is handled as (Points : 9) a prospective change from the current year through the remainder of its useful life, using the new estimates. a retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along. a cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates. None of the above 7.(TCO 5) Fair value and appreciation of the investee are not as relevant for investments in which of the following categories? (Points : 9) Securities reported under the equity method Held-to-maturity securities Trading securities Securities available-for-sale 8.(TCO 5) Consolidated financial statements are prepared when one company has (Points : 9) accounted for the investment using the equity method. control over another company. accounted for the investment as securities available-for-sale. None of the above 9.(TCO 4) Interest is not capitalized for (Points : 9) inventories routinely and repetitively produced in large quantities. assets that are constructed as discrete projects for sale or lease. assets constructed for a company’s own use. None of the above 10.(TCO 2) Software development costs are capitalized if they are incurred (Points : 9) prior to the point at which technological feasibility has been established. after technological feasibility has been established but prior to the product availability date. after commercial production has begun. None of the above 11.(TCO 4) The factors that need to be determined to compute depreciation are an asset’s (Points : 9) cost, residual value, and service life. cost, replacement value, and service life. fair value, residual value, and economic life. cost, residual value, and physical life. 12.(TCO 5) Which of the following types of securities only includes debt securities? (Points : 9) Securities available-for-sale Held-to-maturity securities Trading securities Consolidated securities 13.(TCO 1) The capitalized cost of equipment excludes (Points : 9) sales tax. shipping. insurance for the first year. installation. 14.(TCO 3) The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at (Points : 9) the book value of the asset given plus any cash or other monetary consideration received. the fair value of the asset(s) given up. the fair value or book value, whichever is s

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