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Sekai 07

This document contains 50 multiple choice questions related to accounting for long-lived assets such as property, plant, and equipment. The questions cover topics such as impairment testing, depreciation methods, calculating depreciation expense, determining gains or losses on asset disposals, and asset impairment.

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Micaela Encinas
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177 views2 pages

Sekai 07

This document contains 50 multiple choice questions related to accounting for long-lived assets such as property, plant, and equipment. The questions cover topics such as impairment testing, depreciation methods, calculating depreciation expense, determining gains or losses on asset disposals, and asset impairment.

Uploaded by

Micaela Encinas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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41. 51.

All of the following are true with regard to impairment testing of long-lived assets except:

a. If impairment indicators are present, the company must conduct an impairment test. b. The
impairment test compares the asset’s carrying value with the lower of its fair value less cost to sell and
its value-in-use. c. If the recoverable amount is lower than the carrying value, an impairment loss will be
reported on the period’s income statement. d. If either the fair value less cost to sell or the value-in-use
is higher than the carrying amount, no impairment loss will be recorded.

42. 53. Which of following is not a similarity in the accounting treatment for depreciation and cost
depletion?

a. The estimated life is based on economic or productive life. b. Assets subject to either are reported in
the same classification on the statement of financial position. c. The rates may be changed upon revision
of the estimated productive life used in the original rate computations. d. Both depreciation and
depletion are based on time.

43. 58. Of the following costs related to the development of mineral resources, which one is not a part
of depletion cost?

a. Acquisition cost of the mineral resource deposit b. Exploration costs c. Tangible equipment costs
associated with machinery used to extract the mineral resource d. Intangible development costs such as
drilling costs, tunnels, and shafts

44. 66. Solar Products purchased a computer for P13,000 on July 1, 2010. The company intends to
depreciate it over 4 years using the double-declining balance method. Residual value is P1,000.
Depreciation for 2011 is

a. P6,500 b. P3,250 c. P4,875 d. P3,000

45. 68. Gardner Corporation purchased a truck at the beginning of 2010 for P75,000. The truck is
estimated to have a residual value of P3,000 and a useful life of 120,000 miles. It was driven 18,000
miles in 2010 and 32,000 miles in 2011. What is the depreciation expense for 2011?

a. P20,000 b. P53,333 c. P19,200 d. P32,000

46. 77. A plant asset has a cost of P24,000 and a residual value of P6,000. The asset has a three-year life.
If depreciation in the third year amounted to P3,000, which depreciation method was used? a. Straight-
line b. Declining-balance c. Sum-of-the-years'-digits d. Cannot tell from information given 78. On January
1, 2010, Graham Company purchased a new machine for P2,100,000. The new machine has an
estimated useful life of nine years and the residual value was estimated to be P75,000. Depreciation was
computed on the sum-of-the-years'-digits method. What amount should be shown in Graham's balance
sheet at December 31, 2011, net of accumulated depreciation, for this machine?

a. P1,695,000 b. P1,335,000 c. P1,306,666 d. P1,244,250

47. 83. Orton Corporation, which has a calendar year accounting period, purchased a new machine for
P40,000 on April 1, 2006. At that time Orton expected to use the machine for nine years and then sell it
for P4,000. The machine was sold for P22,000 on Sept. 30, 2011. Assuming straightline depreciation, no
depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain
to be recognized at the time of sale would be
a. P4,000 b. P3,000 c. P2,000 d. P0.

48. 93. Archer Company purchased equipment in January of 2000 for P90,000. The equipment was being
depreciated on the straight-line method over an estimated useful life of 20 years, with no residual value.
At the beginning of 2010, when the equipment had been in use for 10 years, the company paid P15,000
to overhaul the equipment. As a result of this improvement, the company estimated that the useful life
of the equipment would be extended an additional 5 years. What should be the depreciation expense
recorded for this equipment in 2010?

a. P3,000 b. P4,000 c. P4,500 d. P5,500

49. 97. Holcomb Corporation owns machinery with a book value of P190,000. The machinery’s fair value
less costs to sell is P175,000, and its value-in-use is P200,000. Holcomb should recognize a loss on
impairment of

a. P -0- b. P10,000 c. P15,000 d. P25,000.

50. 99. Technique Co. has equipment with a carrying amount of P800,000. The equipment’s fair value
less costs to sell is P780,000, and its value-in-use is P815,000. The equipment is expected to be used in
operations in the future. What amount (if any) should Technique report as an impairment to its
equipment?

a. No impairment b. P20,000 c. P15,000 d. P35,000

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