Chapter 7 Accounting

1. Which among the following is not an intangible asset

Goodwill

Copyright

Trademark

All of the above are intangible

2. Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?

Natural resources

Goodwill

Land improvements

Intangibles

3. Which of the following is NOT a capital expenditure?

Complete overhaul of an air-conditioning system

Replacement of an old motor with a new one in a piece of equip

A tune-up of a company car

The cost of installing a piece of equip

4. Why would a business select an accelerated method of depreciation for tax purposes?

Accelerated is easier to calculate because salvage value is ignored

MACRS depreciation follows a specific pattern or depreciation

Accelerated generates higher depreciation expense immediately, and therefore lowers taxes in the early years of the assets life

Accelerated generates a greater amount of depreciation over the life of the asset than that of straight-line

5. A company purchased an oil well for $210,000. It estimates that the well contains 30,000 barrels, has an 8 year life, and no salvage value. If the company extracts and sells 2,000 barrels of oil in the first year, how much in cost of sales should be recorded?

14000

105000

21000

26250

6. An important measure of profitability is

Inventory turnover

Quick ratio

ROA

Net sales

7. In 2012, total asset turnover for JBC has increased. This means that the

Company has become more effective

Company has been more efficient

Company has become more effective and more efficient

Company has neither become effective nor efficient

8. Homes purchased a tract of land, small office building, and equipment for 1,800,000. The appraised value of the land was 1,144,000, the building 660,000, and the equip 396,000. What is the cost of the land?

600000

936000

1144000

None of the above

9. Which statement is false?

Depreciation is a process of allocating the cost of a plant asset over its useful life

Depreciation creates a fund to replace the asset at the end of its useful life

The cost of a plant asset- accum. depreciation = book value

10. A company bought a new machine for $23,000 on Jan 1. The machine is expected to last 4 years and to have a residual value of $3,000. If the company uses the double-declining method, accumulated depreciation at the end of year 2 will be

23000

20000

17250

15000