Question: Which item would be classified as a fixed asset in a movie theater?

Answer Options:

a. Trademark
b. A popcorn machine
c. Land for sale
d. The latest movie

Answer: B. A popcorn machine 26

Question: The depletion rate is computed as _____.

Answer Options:

a. Cost of Resource ÷ Estimated Total Units of Resource
b. Cost of Resource ÷ Estimated Useful Life of Resource
c. Estimated Total Units of Resource ÷ Cost of Resource
d. Estimated Useful Life of Resource ÷ Cost of Resource

Answer: A. Cost of Resource ÷ Estimated Total Units of Resource 27

Question: If an asset is long-lived and is used productively in a business, it is classified as a(n) _____.

Answer Options:

a. intangible asset
b. investment
c. fixed asset
d. expense

Answer: C. fixed asset 28

Question: The expensing of intangible assets is called _____.

Answer Options:

a. depreciation
b. depletion
c. amortization
d. expense

Answer: C. amortization 29

Question: Tangible and intangible assets are normally presented _____.

Answer Options:

a. together in a Tangible and Intangible Assets section
b. on the income statement
c. together in the Property, Plant, and Equipment section
d. in separate Property, Plant, and Equipment and Intangible Assets sections

Answer: D. in separate Property, Plant, and Equipment and Intangible Assets sections 30

Question: The more efficiently a company is using its assets, _____.

Answer Options:

a. this does not affect fixed asset turnover
b. the higher the fixed asset turnover
c. the lower the fixed asset turnover
d. None of these choices are correct

Answer: B. the higher the fixed asset turnover 31

Question: If a company has many classes of fixed assets, which is the most likely financial-statement presentation?

Answer Options:

a. Combine intangible assets and fixed assets into one section
b. Report depreciation and amortization expense on the balance sheet
c. Present one amount on the balance sheet, supported by a detailed note
d. None of these choices are correct

Answer: C. Present one amount on the balance sheet, supported by a detailed note 32

Question: Which statement regarding selling fixed assets for cash is not true?

Answer Options:

a. The journal entry is similar to discarding fixed assets
b. The cash receipt is recorded
c. The cash payment to the buyer is recorded
d. A gain is recorded when the selling price exceeds book value

Answer: C. The cash payment to the buyer is recorded 33

Question: Which costs should be included in the acquisition cost of equipment?

Answer Options:

a. installation costs
b. transportation costs
c. testing costs before placing the equipment into production
d. All of these choices

Answer: D. All of these choices 34

Question: Which criteria determine whether an asset should be recorded as a fixed asset?

Answer Options:

a. It must be tangible and an investment
b. It must be an investment and long-lived
c. It must be long-lived and used in normal company operations
d. It must be short-lived and tangible

Answer: C. It must be long-lived and used in normal company operations 35

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

Answer Options:

a. committed expenditures
b. revenue expenditures
c. utility expenditures
d. capital expenditures

Answer: D. capital expenditures 36

Question: Which is an example of a capital expenditure?

Answer Options:

a. cleaning the carpet in the front room
b. replacing an engine in a company car
c. replacing burned-out factory light bulbs
d. tuning up a company truck

Answer: B. replacing an engine in a company car 37