1. When a company discards machinery that is fully

1. When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry

a. debit Machinery; credit Accumulated Depreciation

b. debit Cash; credit Accumulated Depreciation

c. debit Accumulated Depreciation; credit Machinery

d. debit Depreciation Expense; credit Accumulated Depreciation

2. When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance):

a. debit Cash and Machinery; credit Accumulated Depreciation and Machinery

b. debit Machinery and Accumulated Depreciation; credit Machinery and Cash

c. debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Disposal

d. debit Cash and Machinery; credit Accumulated Depreciation

3. On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $50,000. What is the amount of the gain or loss on this transaction?

a. Cannot be determined

b. No gain or loss

c. Gain of $50,000

d. Loss of $50,000

4. Which of the following should be included in the acquisition cost of a piece of equipment?

a. Transportation Costs

b. Testing costs prior to placing the equipment into production

c. Installation Costs

d. All are correct

5. Accumulated Depreciation

a. is used to show the amount of cost expiration of intangibles.

b. is a contra asset account.

c. is used to show the amount of cost expiration of natural resources.

d. is the same as Depreciation Expense.

6. Expenditures that add to the utility of fixed assets for more than one accounting period are

a. revenue expenditures.

b. committed expenditures.

c. capital expenditures.

d. utility expenditures.

7. Which of the following below is an example of a capital expenditure?

a. Cleaning the carpet in the front room

b. Replacing an engine in a company car

c. Tune-up for a company truck

d. Replacing all burned-out light bulbs in the factory

8. The journal entry for recording an operating lease payment would

a. debit the fixed asset and credit Cash.

b. debit an expense and credit Cash.

c. debit a liability and credit Cash.

d. be a memo entry only.

9. When determining whether to record an asset as a fixed asset, what two criteria must be met?

a. Must be long lived and must use the asset in a productive manner.

b. Must be an investment and must be long lived.

c. Must be short lived and must be a tangible asset.

d. Must be a tangible asset and must be an investment.

10. When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

a. MACRS.

b. units-of-production.

c. declining-balance.

d. straight-line.

11. Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same.

a. True

b. False

12. The normal balance of the accumulated depreciation account is debit.

a. True

b. False

13. Patents are exclusive rights to manufacture, use, or sell a particular product or process.

a. True

b. False