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ACCOUNTING > Midterm exam > Flashcards

Midterm exam Flashcards

1
Q

It is the systematic allocation of the deprecuable amount of an asset over its useful life

A. Revaluation
B. Impairment
C. Allocation
D. Deprecation

A

D. Depreciation

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2
Q

It is the total price paid in acquiring the natural resources or property right to search for undiscovered resources

A. Acquisition cost
B. Exploration cost
C. Development cost
D. Restoration cost

A

A. Acquisition cost

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3
Q

These are also known as wasting assets

A. PPE
B. Inventories
C. Intangible assets
D. Natural resources

A

D. Natural resources

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4
Q

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?

A. Raw materials
B. Work-in-process
C. Supplies
D. Finished goods

A

D. Finished goods

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5
Q

This type of decreasing-charge method is based on a decreasing fraction of depreciable cost

A. Sum of the year’s digits method
B. Declining-balance method
C. Straight-line method
D. Activity method

A

B. Sum of the years’ digit method

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6
Q

How should unallocated fixed overhead be treated?

A. Allocated to finished goods and cost of goods sold
B. Allocated to raw materials, goods ij process and finished goods
C. Allocated to goods in process and finished goods
D. Recognized as an expense in the period incurred

A

D. Recognized as an expense in the period incurred

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7
Q

Which of the following should be included in inventory at the end of the reporting period

A. Goods in transit purchased free on board (FOB) shipping point
B. Goods in transit purchased free on board (FOB) destination
C. Goods received from another entity on consignment
D. Goods in transit sold to the costumer free on board (FOB) shipping point

A

A. Goods in transit purchased free on board (FOB) shipping point

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8
Q

Which of the following costs should be expensed immediately?

A. Cost of opening a new facility
B. Cost of introducing a new product or service including cost of advertising and promotional activities
C. Cost of conducting business in a new location
D. All of these

A

D. All of these

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9
Q

It is the cost incurred on extracting the resources such as drilling cost, tunnels, shaft, and wells

A. Acquisition cost
B. Exploration cost
C. Development cost
D. Restoration cost

A

C. Development cost

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10
Q

After recognition as an asset, an item of ppe shall be carried at its cost less any accumulated depreciation and any accumulated impairment losses

A. Cost model
B. Fair value model
C. Revaluation model
D. Equity model

A

A. Cost model

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11
Q

It is the replacement of asset into a more efficient and economical one

A. Depreciation
B. Inadequacy
C. Obsolescence
D. Supersession

A

D. Supersession

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12
Q

On which of the following assumptions is straight-line depreciation based?

A. The operating effeciency of the asset decreases in later years
B. Service value declines as a function of time rather than use
C. Service value declines as function of obsolesence rather than time
D. Physical wear and tear are more important than economic obsolescence

A

B. Service value declines as a function of time rather than use

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13
Q

It is a depreciation technique where a constant percentage is applied to the book value of an asset

A. Sum of the years’ digits method
B. Declining-balance method
C. Straight line method
D. Activity method

A

B. Declining-balance method

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14
Q

It is an asset that takes a substantial period of time to get ready for its intended use

A. Liquidating asset
B. Fixed asset
C. Qualifying asset
D. Corporate asset

A

C. Qualifying asset

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15
Q

It is the estimated amount that an entity would obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life

A. Cost
B. Carrying amount
C. Residual value
D. Depreciable amount

A

C. Residual value

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16
Q

When an entity chooses the revaluation model for ppe, which statement is TRUE?

A. Increase in asset’s carrying amount as a result of the revaluation must be recognized in income
B. When asset is revalued, the entire class of PPE to which the assets belong must revalued
C. Revaluation must be made every three years
D. Individual asset within a class to which that asset belongs can be revalued

A

B. When asset is revalued, the entire class of ppe to which the assets belongs must revalued

17
Q

A machine with a four-year estimated useful life and an estimated 15% residual value was acquired at the beginning of the current year. Based on the information, what would be the increase in accumulated depreciation for the second year using the double declining-balance method

A. Original cost x 85% x 50%
B. Original cost x 50%
C. Original cost x 85% x 50% x 50%
D. Original cost x 50% x 50%

A

D. Original cost x 50% x 50%

18
Q

Which of the following is NOT a characteristic of PPE?

A. They are tangible assets
B. They are subject to deprecation
C. They are used to business
D. They are expected to be used more than one (1) year

A

B. They are subject to depreciation

19
Q

What is the fair value of an asset?

A. The price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date
B. The discounted value of future cash flows expected to be derived from the asset
C. The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date
D. The undiscounted value of future cash flows expected to be derived from an asset

A

C. The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date

20
Q

Which of the following DOES NOT describe the gross profit method?

A. It may be used to estimate inventory for annual statements
B. It may be used by auditors
C. It is an acceptable accounting procedure
D. It may be used to estimate inventory of interim statements

A

A. It may be used to estimate inventory for annual statements

21
Q

Which is NOT a part of the cost of land

A. Cost of survey
B. Commissions related to acquisition
C. Property tax to date of acquisition
D. Property tax after date acquisition

A

D. Property tax after date acquisition

22
Q

Which is NOT a similarity of depreciation and depletion?

A. The estimated life is based on productive life
B. Assets are reported in the same classification
C. The rate may be changed upon revision of productive life
D. Both depreciation and depletion are based on time

A

D. Both depreciation and depletion are based on time

23
Q

Which of the following is NOT a condition that must be satisfied before interest capitalization can begin on a qualifying asset?

A. Interest is being incurred
B. Expenditures for the asset have been made
C. The activities that are necessary to get the asset ready for the intended used are in progress
D. The interest rate is equal to or greater than the cost of capital

A

D. The interest rate is equal to or greater than the cost of capital

24
Q

If an entity which had a fleet of cars and ships decided to revalue the PPE, which of the following statements is TRUE?

A. Revalue an entire class of PPE
B. Revalue only one-half of each class of PPE
C. Revalue one ship at a time as it is easier than revaluing all ships together
D. There is no need to depreciate since assets are being revalued regularly

A

A. Revalue an entire class of PPE

25
Q

Which of the following is NOT a cost of an item of PPE?

A. Purchase price
B. Import duties and nonrefundable purchases taxes
C. Initial estimate of the cost of dismantling and removing the item and restoring the site, the obligation for which the entity does not incur when the item was acquired
D. Any cost directly attributable in bringing the asset to the location and condition for the intended use

A

C. Initial estimate of the cost of dismantling and removing the item and restoring the site, the obligation for which the entity does not incur when the item was acquired

26
Q

Which of the following cost may NOT be eligible for capitalization as borrowing cost?

A. Imputed cost of equity
B. Interest on bonds issued to finance the construction of a qualifying asset
C. Amortization of discount or premium relating to borrowing that qualify for capitalization
D. Exchange difference arising from foreign currency borrowing to the extent that is regarded as an adjustment to interest cost pertaining to a qualifying asset

A

A. Imputed cost of equity

27
Q

Which of the following is INCORRECT about the perpetual inventory method?

A. Purchases are recorded as debit to the inventory account
B. The entry to record sale includes a debit to cost of goods sold and credit to inventory
C. Purchase returns are recorded by debiting accounts payable and crediting purchase returns and allowances
D. After a physical inventory account, inventory is credited for any missing inventory

A

C. Purchase returns are recorded by debiting accounts payable and crediting purchase returns and allowances

28
Q

Which of the following is NOT captilszed into the cost of PPE?

A. Cost of preparing the site for installation
B. Initial delivery and handling cost
C. Cost of testing and whether the asset works correctly
D. Cost of excess materials from a purchasing error

A

D. Cost of excess materials from purchasing error

29
Q

Which is the MOST accurate statement with regard to retail inventory method?

A. Generally, accountants ignore net markups and net markdowns in computing the cost ratio
B. Generally, accountants exclude net markups and include the net markdowns in computing cost ratio
C. The retail method results in a lower ending inventory if net markups are included but net markdowns are excluded in computing the cost ratio
D. It is not adaptable to first in, first out (FIFO) costing

A

C. The retail method result in a lower ending inventory if net mark ups are included but net markdowns are excluded in computing the cost ratio

ACCOUNTING (9 decks)

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