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Exam 9: Long-Lived Tangible and Intangible Assets

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Question 31

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After the early years of an asset's life,accelerated amortization methods:

A) cause an asset to be carried at a higher book value than the straight-line method.
B) cause an asset to be carried at a lower book value than the straight-line method.
C) cause an asset to be carried at the same book value as the straight-line method.
D) cannot be used if the resulting book value will be significantly different from that which would result from using the straight-line method.

E) All of the above
F) A) and B)

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Question 32

Multiple Choice

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Assuming two companies use the same accounting methods,other things being equal,the company with a higher fixed asset turnover ratio:

A) has a greater amount invested in fixed assets than a company with a lower fixed asset turnover ratio.
B) has less invested in fixed assets than a company with a lower fixed asset turnover ratio.
C) generates less sales revenue than a company with a lower fixed asset turnover ratio.
D) makes better use of its fixed assets to generate revenues than a company with a lower fixed asset turnover ratio.

E) B) and C)
F) None of the above

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Question 33

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Company A uses an accelerated amortization method while Company B uses the straight-line method.All other things equal,during the first few years of the asset's use,Company A will show which of the following compared to Company B?

What is the amortization expense for 2009?

What would be the amount of amortization expense in year 2 using the units-of-production method?

A company bought a piece of equipment for $40,000,expecting to use it for eight years.The company then plans to sell it for $3,500.The company has already recorded amortization of $35,995.Using the double-declining-balance method,the company's annual amortization expense for the upcoming year would be:

Assuming no additions,replacements,or extraordinary repairs,the book value of any long-lived asset with a limited life is always less than or equal to its acquisition cost. BT: Knowledge

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the amortization expense for this period is:

Company A uses an accelerated amortization method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is true?

Your company rents out computers to local businesses and schools.You have 1,000 computers with a net book value of $160,000.As a result of changing technology,your computers are more difficult to rent so you must severely reduce your rental price,which causes a decrease in estimated future cash flows.The fair value of the computers is estimated to be $125,000 because of their outmoded technology.Your company should report an asset impairment loss of:

Your company pays $620,000 for a patent that has 10 years remaining.After two years,the company sells the patent for $500,000.The company should report:

Which of the following is not an amount that is needed to calculate straight-line amortization?

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report amortization for the equipment of:

A journal entry is usually needed to update amortization expense on a long-lived asset at the time of disposal. BT: Comprehension

Companies within the same industry do not always use the same amortization method but will use the same expected useful life for the same piece of equipment. BT: Comprehension

Which of the following statements most appropriately describes the purpose of amortization of a long-lived tangible asset?

Which of the following statements is true when the straight-line method is used to compute amortization?

ShadyZ Corporation uses the unit-of-production method to estimate amortization.A new asset is purchased for $18,000 that will produce an estimated 100,000 units over its useful life.Estimated residual value is $2,000.What is the amortization rate per unit?

A piece of equipment purchased on January 1,2007,for $16,000 was estimated to have a residual value of $4,000 at the end of its three-year useful life.If the equipment was amortized using the straight-line method and disposed of on December 31,2008,for $5,000,what amount of gain or loss would be reported on the income statement?

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method: