Question :
91. During 2010, a company purchased a mine at a cost : 1228537
91. During 2010, a company purchased a mine at a cost of $3,000,000. The company spent an additional $600,000 getting the mine ready for its intended use. It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000. During 2010, 45,000 tons of mineral were removed from the mine and 35,000 tons were sold. Which of the following statements is incorrect with respect to the accounting for the mine?
A. The book value of the mine on December 31, 2010 was $2,640,000.
B. The book value of the mine decreased $450,000 during 2010.
C. The inventory of minerals increased $100,000 during 2010.
D. The 2010 cost of goods sold was $350,000.
92. Which of the following is most likely to be an intangible asset with an indefinite life?
A. Leasehold
B. Franchise
C. Patent
D. Goodwill
93. Which one of the following would not be recorded as an intangible asset?
A. Leaseholds
B. Copyrights
C. Internally generated goodwill
D. Franchises
94. Failure to record amortization expense on a patent during the current year will result in which of the following?
A. Net income will be overstated, but there would be no affect on total assets.
B. Net income for the year and total assets would both be overstated.
C. Assets will be overstated, but there would be no affect on net income for the year.
D. Net income and assets will both be understated.
95. Which of the following properly describes the accounting for goodwill?
A. Goodwill is created when it is internally generated.
B. Goodwill is amortized over its useful life.
C. Goodwill is the difference between the amounts paid for a company relative to the book value of the company’s net assets.
D. Goodwill is written-down when it has been determined to be impaired.
96. Which of the following properly describes the accounting for a patent?
A. Research and development costs associated with a patent are capitalized.
B. The patent will be amortized over its useful life.
C. Patent amortization expense is accounted for within the accumulated depreciation account.
D. Their legal life extends to 70 years after the death of the inventor.
97. Which of the following statements is correct?
A. A copyright has a legal life not exceeding 70 years.
B. A trademark is recorded on the balance sheet at an amount equal to the related research and development costs incurred.
C. A patent’s legal life is 20 years.
D. A franchise’s amortization is a function of the underlying contract.
98. During 2010, the Bowtie Company reported net income of $1,872 million, depreciation expense of $1,412 million and $978 million paid for purchases of property, plant and equipment. What would be the effect on cash flows from operating activities during 2010?
A. Depreciation expense would increase cash flows from operations and the property, plant and equipment purchases would decrease cash flow from operations.
B. Depreciation would increase cash flow from operations and property, plant and equipment purchases would increase cash flows from operations.
C. Depreciation would increase cash flow from operations but the property, plant and equipment purchases would have no effect on cash flow from operations.
D. Depreciation is a non-cash expense and would not be used to calculate cash flow from operations.
99. Landmark Restaurants reported net income in 2008 of $45.9 million and depreciation expense of $48.8 million. They also report additions to property and equipment of $162.9 million. Which of the following disclosures would appear on the 2008 statement of cash flows?
A. Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be added under investing activities.
B. Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be added under investing activities.
C. Depreciation of $48.8 million would be added to net income under operating activities and the $162.9 million would be deducted under investing activities.
D. Depreciation of $48.8 million would be deducted from net income under operating activities and the $162.9 million would be deducted under investing activities.
100. Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year estimated useful life with a residual value of $3,000. At the beginning of the eighth year, a major overhaul on it was completed at a cost of $8,000, and the total estimated useful life was changed to 12 years with the residual value unchanged. How much is the year 8 depreciation expense assuming use of the straight-line depreciation method?
A. $2,200
B. $2,920
C. $3,100
D. $8,800
101. Augie Corporation purchased a truck at a cost of $60,000. It has an estimated useful life of five years and estimated residual value of $5,000. At the beginning of year three, Augie’s managers concluded that the total useful life would be four years, rather than five. There was no change in the estimated residual value. What is the amount of depreciation that Augie should record for year 3 under the straight-line depreciation method?
A. $15,500
B. $8,250
C. $11,000
D. $16,500
