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Exam 7: Long-Term Assets

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Question 31

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Bio-Lab Pharmaceuticals carried on a project to develop a new drug that dramatically shortened the recovery period for flu infection.The project cost the company $150,000 before Bio-Lab abandoned the project due to the slim possibility to gain FDA approval.Bio-Lab then spent $300,000 on another project developing a kind of shot that achieves the same goal for flu recovery,and the company is confident in gaining FDA approval for the new shot and in making profits out of the shot.What amount would be expensed?

A) $0.
B) $150,000.
C) $300,000.
D) $450,000.

E) C) and D)
F) A) and B)

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Question 32

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Return on assets is calculated as:

A) Net Income divided by total assets.
B) Net Income divided by average total assets.
C) Net Income divided by ending total assets.

D) All of the above
E) A) and C)

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Question 33

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The cost of an engine tune-up is an example of which of the following expenditures after acquisition?

Wiley Company purchased new equipment for $60,000.Wiley paid cash for the equipment.Other costs associated with the equipment were: transportation costs,$1,000;sales tax paid $3,000;and installation cost,$2,500.The cost recorded for the equipment was:

The balance sheet of Purdy's BBQ reports total assets of $800,000 and $900,000 at the beginning and end of the year,respectively.Net income and sales for the year are $85,000 and $1,700,000,respectively.What is Purdy's asset turnover?

If the defense of an intangible right is unsuccessful,then the firm should expense the litigation costs as incurred because they provide no future benefit.

Crestview Estates purchased a tractor on January 1,2018,for $65,000.The tractor's useful life is estimated to be 30,000 miles and has a residual value of $5,000.If Crestview used the tractor 5,000 miles in 2018 and 3,000 miles in 2019,what is the balance for accumulated depreciation at the end of 2019 using the activity-based method?

Bricktown Exchange purchases a copyright for $50,000.The copyright has a remaining legal life of 25 years,but only an expected useful life of five years with no residual value.Assuming the company uses the straight-line method,what is the carrying value at the end of the first year?

Bricker Enterprises purchased a machine for $100,000 on October 1,2018.The estimated service life is ten years with a $10,000 residual value.Bricker records partial-year depreciation based on the number of months in service.Depreciation expense for the year ended December 31,2018,using straight-line depreciation,is:

The following financial information is from Cook Company: What is the amount of long-term assets assuming the accounts above reflect normal activity? $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 55,000 \\\hline \text { Land } & \$ 90,000 \\\hline \text { Inventory } & \$ 10,500 \\\hline \text { Accounts Receivable } & \$ 7,500 \\\hline \text { Equipment } & \$ 8,000 \\\hline \text { Deferred Revenue } & \$ 58,500 \\\hline \text { Short-term Investments } & \$ 20,000 \\\hline \text { Notes Receivable (due in 8 months) } & \$ 45,500 \\\hline \text { Interest P ayable } & \$ 2,000 \\\hline \text { Patents } & \$ 75,000 \\\hline\end{array}$

On January 1,2016,Jacob Inc.purchased a commercial truck for $48,000 and uses the straight-line depreciation method.The truck has a useful life of eight years and an estimated residual value of $8,000.On December 31,2018,Jacob Inc.sold the truck for $30,000.What amount of gain or loss should Jacob Inc.record on December 31,2018?

Berry Co.purchases a patent on January 1,2018,for $40,000 and the patent has an expected useful life of five years with no residual value.Assuming Berry Co.uses the straight-line method,what is the amortization expense for the year ended December 31,2019?

Research and development costs should be capitalized when the:

Straight-line,declining-balance,and activity-based depreciation all are acceptable depreciation methods for both financial reporting and tax reporting.These are acceptable methods for financial reporting,not tax reporting.Most companies use MACRS for income tax depreciation.

Which of the following subsequent expenditures would be capitalized?

Recognition of impairment for long-term assets is required if book value exceeds:

Kansas Enterprises purchased equipment for $60,000 on January 1,2018.The equipment is expected to have a five-year life,with a residual value of $5,000 at the end of five years.Using the straight-line method,the book value at December 31,2018 would be:

Capital Construction purchased a 3-acre tract of land for a building site for $350,000.The company demolished the old building at a cost of $12,000,but was able to sell scrap from the building for $1,500.The cost of title insurance was $900 and attorney fees for reviewing the contract was $500.Property taxes paid were $3,000,of which $250 covered the period after the purchase date.The capitalized cost of the land is:

Research and development costs incurred in developing a patent internally are not recorded as an intangible asset in the balance sheet,but rather are expensed directly in the income statement.

A basket purchase is the purchase of more than one asset at the same time for one purchase price.