Devry ACCT305 midterm exam 2016

Question 1. 1. (TCO 1) Productive assets that are physically consumed in operations are (Points : 5) equipment. natural resources. land. land improvements.Question 2. 2. (TCO 3) Our company exchanged land and cash of $5,000 for similar land. The book value and the fair value of the land were $90,000 and $100,000, respectively. Assuming the exchange lacks commercial substance, which amount is correct? (Points : 5) Debit Cash $5,000 Debit Cash $10,000 Credit Cash $5,000 Credit Cash $10,000Question 3. 3. (TCO 2) The exclusive right to benefit from a creative work, such as a film, is a (Points : 5) patent. copyright. trademark. franchise.Question 4. 4. (TCO 4) Depreciation (Points : 5) is always considered a period cost. is usually based on the declining-balance method. per books is usually higher than MACRS in the early years of an asset’s life. could be a product cost or a period cost depending on the use of the asset.Question 5. 5. (TCO 4) On September 30, 2013, our company purchased a machine for $100,000. The estimated service life is 10 years, with a $10,000 residual value. Our company records partial-year depreciation based on the number of months in service. Depreciation for 2013 using the straight-line method is (Points : 5) $6,750. $7,500. $2,250. $2,500.Question 6. 6. (TCO 4) A change from the straight-line method to the sum-of-years’-digits method of depreciation is handled as (Points : 5) a retrospective change back to the date of acquisition as though the current estimated life had been used all along. a prospective change from the current year through the remainder of its useful life. a cumulative adjustment to income in the current year for the difference in depreciation under the new versus old useful life estimate. None of the aboveQuestion 7. 7. (TCO 5) Which of the following investment securities may be classified as held-to-maturity securities in its balance sheet? (Points : 5) Common stock Callable preferred stock Long-term debenture bonds All of the aboveQuestion 8. 8. (TCO 5) If Father Company owns 17% of the common stock of Daughter Company, then Father Company typically (Points : 5) would record dividends received from Daughter Company as investment revenue. would record 17% of the net income of Daughter Company as investment income each year. would increase its investment account by 17% of Daughter Company income each year. All of the aboveQuestion 9. 9. (TCO 4) Interest is eligible to be capitalized as part of an asset’s cost, rather than being expensed immediately, when (Points : 5) the interest is incurred during the construction period of the asset. the asset is a discrete construction project for sale or lease. the asset is self-constructed, rather than acquired. All of the aboveQuestion 10. 10. (TCO 2) Software development costs are capitalized if they are incurred (Points : 5) prior to the point at which technological feasibility has been established. after technological feasibility has been established but prior to the product availability date. after commercial production has begun. None of the aboveQuestion 11. 11. (TCO 4) Depreciation, depletion, and amortization (Points : 5) all generally utilize the same methods of cost allocation. are all handled the same in arriving at taxable income. all refer to the process of allocating the cost of long-term assets used in the business over future periods. All of the aboveQuestion 12. 12. (TCO 5) Unrealized gains and losses are not reported for which type of security? (Points : 5) Securities available-for-sale Held-to-maturity securities Trading securities None of the aboveQuestion 13. 13. (TCO 1) The capitalized cost of land excludes (Points : 5) maintenance. purchase price. razing old buildings. closing costs.Question 14. 14. (TCO 3) When selling property, plant, and equipment for cash (Points : 5) the seller recognizes a gain or loss for the difference between the cash received and the fair value of the asset sold. the seller recognizes losses but not gains. the seller recognizes a gain or loss for the difference between the cash received and the book value of the asset sold. None of the aboveQuestion 15. 15. (TCO 2) Research and development expense for a given period includes (Points : 5) the full cost of newly acquired equipment that has an alternative future use. research and development conducted on a contract basis for another entity. depreciation on a research and development facility. patent filing and legal costs.Question 16. 16. (TCO 4) The factors that need to be determined to compute depreciation are an asset’s (Points : 5) cost, residual value, and physical life. cost, replacement value, and service life. fair value, residual value, and economic life. cost, residual value, and service life.Question 17. 17. (TCO 5) Securities that are purchased with the intent of selling them in the near future to take advantage of short-term price changes are classified as (Points : 5) trading securities. securities available-for-sale. consolidating securities. held-to-maturity securities.Question 18. 18. (TCO 5) Accumulated Other Comprehensive Income in the shareholders’ equity section of the balance sheet reflects changes in the fair value of securities for which type of securities? (Points : 5) Securities available-for-sale Trading securities Consolidated securities Held-to-maturity securitiesQuestion 19. 19. (TCO 5) When using the equity method to account for an investment, cash dividends received by the investor from the investee should be recorded (Points : 5) as an increase in the investment account. as dividend income. as a reduction in the investment account. as a contra item to stockholders’ equity.Page 2Question 1. 1. (TCO 2) Briefly explain how R&D is reported in financial statements. (Points : 25) Question 2. 2. (TCO 4) How is a change in depreciation method accounted for? (Points : 25) Question 3. 3. (TCO 1) Please distinguish between tangible operational assets, intangible assets, and natural resources. Provide three examples of each. (Points : 30)