When a business constructs a new building, the cost of the building should include the insurance on the building during the period of construction.
True / False
True
The cost to have a second-hand machine assembled at the time it is purchased would be charged to an expense account since the machine is not new.
True / False
False
When a business acquires land as a site to construct a new store, the cost of removing unwanted buildings, grading, clearing, and delinquent real estate taxes should be recorded as part of the cost of the new store.
True / False
False
Land improvements are assets that increase the usefulness of land but that have a limited useful life and are subject to amortization.
True / False
True
Obsolescence refers to a condition in which the capacity of the plant assets becomes too small for the productive demands of the business.
True / False
False
The terms trade-in allowance and salvage value refer to the anticipated value of an asset on its disposal date.
True / False
True
Book value is the recorded cost of a plant asset less its salvage value.
True / False
False
If an asset is purchased on April 1, 1999, for $30,000 and amortization is calculated at $6.00 an hour, two thousand hours of service will require recording amortization of $9,000 (2,000 x $6.00 x 9/12).
True / False
False
An amortizable asset that is purchased on March 18 would be amortized for nine months of the first year, if the fiscal year ends on December 31.
True / False
True
An amortization method that applies a constant rate to a declining base is the declining-balance method.
True / False
True
Major repairs that extend the useful life of a plant asset beyond the time period originally estimated may be referred to as betterments.
True / False
False
At the time a plant asset is being discarded or sold, it may be necessary to update the accumulated amortization of the plant asset.
True / False
True
The book value of the asset is equal to the market value of the asset.
True / False
False
An asset that cost $5,000 has a current book value of $2,000. A revision of the useful life of the asset estimates the asset will last four years and will have a salvage value of $400. Using the straight-line method, the revised amortization will be $500 per year.
True / False
False
A parcel of land with a building is purchased for $200,000 cash. The assets are appraised at $144,000 for the building and $96,000 for the land. The journal entry to record this purchase will include a debit to the Land account for $80,000.
True / False
True
The periodic allocation of the cost of a patent is called amortization.
True / False
True
An exclusive right granted by the federal government or by international agreement to publish and sell a musical, literary, or artistic work for a period of years is called a copyright.
True / False
True
A contract under which the owner of property (the lessor) grants to the lessee the right to use the property is called a lease.
True / False
True
Goodwill is an intangible asset of a business that represents future earnings greater than the average in its industry and it is recognized on the balance sheet when such earnings become a reality.
True / False
False
A unique symbol used by a company in marketing its products or services is called a trade name.
True / False
False
Grading, levelling, fencing, and adding lighting are all examples of land improvements.
True / False
False
Amortization methods that produce larger amortization charges during the early years of an asset's life and smaller changes in the later years are called _______________ amortization methods.
ACCELERATED
A process of systematically allocating the cost of a patent to expense over its estimated useful life is called _______________.
AMORTIZATION
The cost of replacing a motor on a printing press to increase the printed pages per minute is an example of a _______________ or improvement.
BETTERMENT
If an asset cost $45,000, and has been amortized $35,000, the $10,000 unamortized value of the asset is the asset's _______________.
BOOK VALUE
The publisher of this chapter review program has an exclusive right to publish and sell this program. This exclusive right is granted the publisher through an intangible asset called a _______________.
COPYRIGHT
The cost of freight to deliver a printing press to a printer should be charged to the asset account (Printing Press) as part of the asset's _______________.
COST
When the accountant multiplies the cost an asset by 50% to determine the amortization expense on an asset with a four-year life, the accountant is using the _______________ amortization method.
DECLINING-BALANCE
The process of allocating to expense the cost of a piece of production equipment to the accounting periods benefiting from its use is called _______________.
AMORTIZATION
If a new roof is put on a building, thereby extending the life of the building ten years beyond the original estimated life of the building, the cost of the new roof is called a _______________.
BETTERMENT
If a company that has assets with a fair market value of $2,000,000 is sold for $2,250,000, the $250,000 may be attributed to _______________.
GOODWILL
A printing press that currently prints 240 pages per minute, and has 5,000 estimated remaining hours of use, is replaced with a faster printing press that will meet the growth in customer demand. The old printing press is being replaced under a condition known as (not obsolescence) _______________.
INADEQUACY
Patents, copyrights, leaseholds, leasehold improvements, goodwill, and trademarks are examples of _______________ assets
INTANGIBLE
The cost of a constructing a parking lot beside a medical research building would be shown on the balance sheet as land _______________.
IMPROVEMENTS
The party to a lease that secures the right to possess and use the property is called the _______________(LESSOR or LESSEE).
LESSEE
A name for the rights granted to the lessee by the lessor by a lease is _______________.
LEASEHOLD
Timber, mineral deposits, and oil and gas fields are called _______________ or wasting assets.
NATURAL RESOURCES
A condition in which, because of new inventions and improvements, a plant asset can no longer be used to produce goods or services with a competitive advantage is called (not inadequacy) _______________
OBSOLESCENCE
Repairs made to keep a plant asset in normal, good operating condition and are treated as a revenue expenditures are called _______________ repairs.
ORDINARY
Another term for residual value or scrap value is _______________ value.
SALVAGE
A building that is being amortized at $10,000 per year is being amortized under the _______________ method of amortization.
STRAIGHT-LINE
Straight-line amortization is based, in part, on the useful or _______________ life of the asset.
SERVICE
The _______________-of-_______________ amortization expense is computed by taking the cost of the asset less its salvage value and dividing by the total number of units expected to be produced during its useful life.
UNITS PRODUCTION
