comprehensiveexam_c - COMPREHENSIVE EXAMINATION C PART 3...

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COMPREHENSIVE EXAMINATION C PART 3 (Chapters 10–14) Problem C-I — Multiple Choice — Tangible and Intangible Assets. Choose the best answer for each of the following questions and enter the identifying letter in the space provided. _____ 1. When the sum-of-the-years'-digits method is used, depreciation expense for a given asset will a. decline by a constant amount each year. b. be the same each year. c. decrease rapidly and then slowly over the life of the asset. d. vary from year to year in relation to changes in output. _____ 2. Perry Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $550,000. At the time of acquisition Perry paid $50,000 to have the assets appraised. The appraisal disclosed the following values: Land $320,000 Buildings 256,000 Equipment 64,000 What cost should be assigned to the land, buildings, and equipment, respectively? a. $400,000, $320,000, and $80,000. b. $275,000, $220,000, and $55,000. c. $300,000, $240,000, and $60,000. d. $200,000, $200,000, and $200,000. _____ 3. In accordance with GAAP, the maximum period over which a patent can be amortized is a. 20 years. b. 28 years. c. 40 years. d. 50 years. _____ 4. Purchased goodwill represents a. excess of price paid over fair value of net assets obtained in a combination. b. excess of price paid over the book value of the net assets obtained in a combination. c. the difference in the aggregate amount of the market prices of the stock of the combining companies. d. a tangible asset.
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Comprehensive Exam C Use the following data to answer questions 5 through 9: Davis Company purchased a new piece of equipment on July 1, 2012 at a cost of $1,080,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $90,000. The current year end is 12/31/13. Davis records depreciation to the nearest month. _____ 5. What is straight-line depreciation for 2013? a. $99,000. b. $108,000. c. $198,000. d. $216,000. _____ 6. What is sum-of-the-years'-digits depreciation for 2013? a. $263,999. b. $947,000. c. $324,000. d. $330,000. _____ 7. What is double-declining-balance depreciation for 2013? a. $2,59,200. b. $345,600. c. $396,000. d. $432,000. _____ 8. If Davis expensed the total cost of the equipment at 7/1/12, what was the effect on 2012 and 2013 income before taxes, assuming Davis uses straight- line depreciation? a. $882,000 understated and $198,000 overstated. b. $972,000 understated and $108,000 overstated. c. $981,000 understated and $198,000 overstated. d. $1,080,000 understated and $108,000 overstated. _____ 9. If, at the end of 2014, Davis Company decides the equipment still has five more years of life beyond 12/31/14, with a salvage value of $90,000, what is straight-line depreciation for 2014? (Assume straight-line used in all years.) a. $108,000. b. $115,500. c. $130,500. d. $198,000. C-2
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Comprehensive Exam C Use the following data for questions 10 through 17. Each question is independent of the other questions. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/12 for $360,000. On 12/31/12 such machines have a selling price and fair market value of $414,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method.
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