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Question : 8.5   Questions 1) Disposal of a plant asset always occurs after : 1232330

Accounting

 

8.5   Questions

1) Disposal of a plant asset always occurs after the asset has been fully depreciated.

2) When an asset is disposed of, the current period’s depreciation expense account must be updated to the time of the disposal.

3) The first step in recording a disposal transaction is to figure the gain or loss on the disposal.

4) GAAP requires that exchanges of assets must be categorized as like-kind or dissimilar assets.

5) If an exchange of assets lacks commercial substance, then no gain or loss on the exchange is recognized.

6) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $500. The journal entry to record this transaction is to:

A) debit Cash for $500, debit Truck for $50,000, debit Loss on Disposal for $5,500 and credit Accumulated Depreciation – Truck for $56,000.

B) debit Cash for $500, debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal for $5,500 and credit Truck for $56,000.

C) debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal $6,000, and credit Truck for $56,000.

D) debit Cash for $500, debit Loss on Disposal for $55,500 and credit Truck for $56,000.

7) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $0. The journal entry to record this transaction is to:

A) debit Truck for $50,000, debit Loss on Disposal for $6,000 and credit Accumulated Depreciation – Truck for $56,000.

B) debit Accumulated Depreciation – Truck for $50,000, and credit Truck for $50,000.

C) debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal $6,000, and credit Truck for $56,000.

D) debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000 and credit Gain on Disposal for $6,000.

8) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is sold for $8,500. The journal entry to record this transaction is to:

A) debit Cash for $8,500, debit Accumulated Depreciation – Truck for $50,000, credit Truck for $56,000, and credit Gain on Disposal for $2,500.

B) debit Accumulated Depreciation – Truck for $50,000, and credit Truck for $50,000.

C) debit Cash for $8,500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000 and credit Gain on Disposal for $14,500.

D) debit Cash for $2,500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000, and credit Gain on Disposal for $8,500.

9) Which of the following accounts would be debited in a journal entry for an asset exchange?

A) Accumulated Depreciation–Old Truck

B) Old Truck

C) Gain on Exchange of Assets

D) Notes Payable

10) Which of the following accounts would be credited in a journal entry for an asset exchange?

A) Accumulated Depreciation–Old Truck

B) Truck (Old)

C) Loss on Exchange of Assets

D) Truck (New)

11) Which of the following might be debited as part of what you got in a transaction involving an exchange of assets?

A) Old machine

B) Cash

C) Accumulated depreciation

D) Gain on exchange

12) If an asset is being sold or exchanged, the gain or loss is always computed by comparing the:

A) market value and book value.

B) market value and salvage value.

C) book value and salvage value.

D) market value and cost.

13) Equipment costing $118,000 has accumulated depreciation of $92,000. The equipment is a trade-in for new equipment costing $187,000. If the trade-in value received for the old equipment is $30,000, the journal entry to record this transaction is to:

A) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000 and credit Cash for $161,000.

B) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000, credit Cash for $157,000, and credit Gain on Exchange of Assets for $4,000.

C) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $26,000, credit Equipment (Old) for $118,000 and credit Cash for $187,000.

D) debit Equipment (New) for $187,000, and credit Cash for $187,000.

14) Equipment costing $118,000 has accumulated depreciation of $92,000. The equipment is a trade-in for new equipment costing $187,000. If the trade-in value received for the old equipment is $20,000, the journal entry to record this transaction is to:

A) debit Equipment (New) for $187,000, and credit Cash for $187,000.

B) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000 and credit Cash for $161,000.

C) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $26,000, credit Equipment (Old) for $118,000, credit Cash for $187,000.

D) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $6,000, credit Equipment (Old) for $118,000 and credit Cash for $167,000.

 

 

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31) Unplanned inventories increase when

A) real GDP is less than aggregate planned expenditure.

B) actual aggregate expenditure is greater than aggregate planned expenditure.

C) actual aggregate expenditure is equal to GDP.

D) aggregate planned expenditure is less than GDP.

E) actual aggregate expenditure is less than GDP.

 

32) When the change in unplanned inventories is positive, then

A) real GDP is less than aggregate planned expenditure.

B) real GDP equals aggregate planned expenditure.

C) real GDP is larger than aggregate planned expenditure.

D) economic growth will occur as the economy returns to equilibrium.

E) planned inventories will increase in order to return to equilibrium.

33) According to the aggregate expenditure model, when faced with unwanted inventory firms

A) are forced to go out of business.

B) decrease production.

C) immediately cut prices.

D) increase production.

E) do nothing and wait for equilibrium to be restored.

 

34) If real GDP ________ aggregate planned expenditure, then as a result firms ________ production.

A) equals; increase

B) exceeds; decrease

C) is less than; decrease

D) equals; decrease

E) exceeds; increase

 

35) A country reports that unplanned inventories increased during 2012. The increase in unplanned inventories leads to

A) the government decreasing production, which decreases GDP.

B) consumers increasing their consumption expenditure, which increases GDP.

C) firms decreasing production, which decreases GDP.

D) firms increasing production, which increases GDP.

E) actual aggregate expenditure being different than real GDP.

 

36) If a firm accumulates unwanted inventories, then it

A) will increase its production.

B) must hire more workers.

C) has actual investment that is less than its planned investment.

D) will decrease its production.

E) has actual investment equal to its planned investment.

37) If firms' inventories exceed their planned inventories, firms

A) increase production.

B) decrease production.

C) increase GDP.

D) increase income.

E) increase employment.

 

38) In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories ________ planned inventories and real GDP ________.

A) exceed; increases

B) exceed; decreases

C) are less than; increases

D) are less than; decreases

E) exceed; does not change

 

39) When aggregate planned expenditure is less than GDP,

A) firms increase production until the economy reaches equilibrium expenditure.

B) firms decrease production until the economy reaches equilibrium expenditure.

C) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.

D) the economy definitely is at its equilibrium expenditure and firms do not change production.

E) the economy definitely is at its equilibrium expenditure but even so, firms decrease production.

40) If real GDP exceeds aggregate planned expenditure, then the change in unplanned inventories is ________ and firms ________ production.

A) positive; increase

B) positive; decrease

C) negative; increase

D) negative; decrease

E) zero; do not change

 

 

default image
July 1, 2023
    

 

 

31) Unplanned inventories increase when

A) real GDP is less than aggregate planned expenditure.

B) actual aggregate expenditure is greater than aggregate planned expenditure.

C) actual aggregate expenditure is equal to GDP.

D) aggregate planned expenditure is less than GDP.

E) actual aggregate expenditure is less than GDP.

 

32) When the change in unplanned inventories is positive, then

A) real GDP is less than aggregate planned expenditure.

B) real GDP equals aggregate planned expenditure.

C) real GDP is larger than aggregate planned expenditure.

D) economic growth will occur as the economy returns to equilibrium.

E) planned inventories will increase in order to return to equilibrium.

33) According to the aggregate expenditure model, when faced with unwanted inventory firms

A) are forced to go out of business.

B) decrease production.

C) immediately cut prices.

D) increase production.

E) do nothing and wait for equilibrium to be restored.

 

34) If real GDP ________ aggregate planned expenditure, then as a result firms ________ production.

A) equals; increase

B) exceeds; decrease

C) is less than; decrease

D) equals; decrease

E) exceeds; increase

 

35) A country reports that unplanned inventories increased during 2012. The increase in unplanned inventories leads to

A) the government decreasing production, which decreases GDP.

B) consumers increasing their consumption expenditure, which increases GDP.

C) firms decreasing production, which decreases GDP.

D) firms increasing production, which increases GDP.

E) actual aggregate expenditure being different than real GDP.

 

36) If a firm accumulates unwanted inventories, then it

A) will increase its production.

B) must hire more workers.

C) has actual investment that is less than its planned investment.

D) will decrease its production.

E) has actual investment equal to its planned investment.

37) If firms' inventories exceed their planned inventories, firms

A) increase production.

B) decrease production.

C) increase GDP.

D) increase income.

E) increase employment.

 

38) In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories ________ planned inventories and real GDP ________.

A) exceed; increases

B) exceed; decreases

C) are less than; increases

D) are less than; decreases

E) exceed; does not change

 

39) When aggregate planned expenditure is less than GDP,

A) firms increase production until the economy reaches equilibrium expenditure.

B) firms decrease production until the economy reaches equilibrium expenditure.

C) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.

D) the economy definitely is at its equilibrium expenditure and firms do not change production.

E) the economy definitely is at its equilibrium expenditure but even so, firms decrease production.

40) If real GDP exceeds aggregate planned expenditure, then the change in unplanned inventories is ________ and firms ________ production.

A) positive; increase

B) positive; decrease

C) negative; increase

D) negative; decrease

E) zero; do not change

 

 

default image
July 1, 2023
    

 

 

31) Unplanned inventories increase when

A) real GDP is less than aggregate planned expenditure.

B) actual aggregate expenditure is greater than aggregate planned expenditure.

C) actual aggregate expenditure is equal to GDP.

D) aggregate planned expenditure is less than GDP.

E) actual aggregate expenditure is less than GDP.

 

32) When the change in unplanned inventories is positive, then

A) real GDP is less than aggregate planned expenditure.

B) real GDP equals aggregate planned expenditure.

C) real GDP is larger than aggregate planned expenditure.

D) economic growth will occur as the economy returns to equilibrium.

E) planned inventories will increase in order to return to equilibrium.

33) According to the aggregate expenditure model, when faced with unwanted inventory firms

A) are forced to go out of business.

B) decrease production.

C) immediately cut prices.

D) increase production.

E) do nothing and wait for equilibrium to be restored.

 

34) If real GDP ________ aggregate planned expenditure, then as a result firms ________ production.

A) equals; increase

B) exceeds; decrease

C) is less than; decrease

D) equals; decrease

E) exceeds; increase

 

35) A country reports that unplanned inventories increased during 2012. The increase in unplanned inventories leads to

A) the government decreasing production, which decreases GDP.

B) consumers increasing their consumption expenditure, which increases GDP.

C) firms decreasing production, which decreases GDP.

D) firms increasing production, which increases GDP.

E) actual aggregate expenditure being different than real GDP.

 

36) If a firm accumulates unwanted inventories, then it

A) will increase its production.

B) must hire more workers.

C) has actual investment that is less than its planned investment.

D) will decrease its production.

E) has actual investment equal to its planned investment.

37) If firms' inventories exceed their planned inventories, firms

A) increase production.

B) decrease production.

C) increase GDP.

D) increase income.

E) increase employment.

 

38) In the aggregate expenditure (AE) model, when real GDP exceeds aggregate planned expenditure, actual inventories ________ planned inventories and real GDP ________.

A) exceed; increases

B) exceed; decreases

C) are less than; increases

D) are less than; decreases

E) exceed; does not change

 

39) When aggregate planned expenditure is less than GDP,

A) firms increase production until the economy reaches equilibrium expenditure.

B) firms decrease production until the economy reaches equilibrium expenditure.

C) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.

D) the economy definitely is at its equilibrium expenditure and firms do not change production.

E) the economy definitely is at its equilibrium expenditure but even so, firms decrease production.

40) If real GDP exceeds aggregate planned expenditure, then the change in unplanned inventories is ________ and firms ________ production.

A) positive; increase

B) positive; decrease

C) negative; increase

D) negative; decrease

E) zero; do not change

 

 

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