BUSINESS

tellectual property assets are

 

 

A. depreciated.

 

B. depleted.

 

C. amortized.

 

D. expensed.

 

Under MACRS, the salvage value is

 

 

A. added to the straight-line depreciation.

 

B. subtracted from the cost of the asset.

 

C. ignored.

 

D. added to the cost of the asset.

 

Salvage value was ignored when originally calculating the units-of-production depreciation. This error would cause

 

 

A. the period’s net income to be overstated.

 

B. the period’s net income to be understated.

 

C. the period end assets to be overstated.

 

D. None of the above

 

Amortization of a patent was ignored. This error would cause

 

 

A. the period’s net income to be overstated.

 

B. the period’s net income to be understated.

 

C. the period end assets to be understated.

 

D. None of the above

 

The depreciation method that bases the expense on the level of use instead of the passage of time is the _______ method.

 

 

A. units-of-production

 

B. straight-line

 

C. modified accelerated cost recovery

 

D. double-declining-balance

 

According to the MACRS tax rate table, which of the following classes uses straight-line depreciation?

 

 

A. Residential rental property

 

B. Automobiles

 

C. Railroad tracks

 

D. Race horses

 

A coal mine was acquired for $2,000,000. No salvage value was expected, and the company expects to mine 2,000,000 tons of coal. During the first year, it mines and sells 220,000 tons of coal. The depletion expense is

 

 

A. $2,220,000.

 

B. $2,000,000.

 

C. $220,000.

 

D. $24,200.

 

The cost of a plant asset was increased for the payment of this year’s insurance premium. This error would cause

 

 

A. the period’s net income to be overstated.

 

B. the period’s net income to be understated.

 

C. the period’s end assets to be understated.

 

D. None of the above

 

An example of an intangible asset is

 

 

A. a patent.

 

B. a building.

 

C. assembly cost.

 

D. land.

 

Which of the following is an example of a land improvement?

 

 

A. Shrubbery

 

B. Fence

 

C. Driveway

 

D. All of the above

 

Using MACRS rates for a three-, five-, seven-, and ten-year property, what is the percentage for the depreciable rate?

 

 

A. 200%

 

B. 150%

 

C. 125%

 

D. 100%

 

The entry to record the cost of a property, plant, or equipment asset would include

 

 

A. acquisition cost.

 

B. freight.

 

C. installation.

 

D. All of the above

 

Which depreciation method is used to determine depreciation for income tax purposes?

 

 

A. Straight-line

 

B. Double-declining balance

 

C. Units-of-production

 

D. MACRS

The write-off of intangible assets is called

 

 

A. depreciation.

 

B. depletion.

 

C. amortization.

 

D. deterioration

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