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- 1. Multiple Choice
All fixed assets(plant assets) must be depreciated for accounting purposes.
TRUE
FALSE
- 2. Multiple Choice
Land improvements such as drainage cost, fencing cost and etc. are generally charged to the Land account.
TRUE
FALSE
- 3. Multiple Choice
Once cost is established for a fixed asset, it becomes the basis of accounting for the asset especially in computing current depreciation expense.
TRUE
FALSE
- 4. Multiple Choice
The book value of a fixed asset is always equal to its fair market value.
TRUE
FALSE
- 5. Multiple Choice
Additions and improvements to a fixed asset that increase the asset's operating efficiency, productive capacity, or expected useful life are recorded as operational expenses for the current period.
TRUE
FALSE
- 6. Multiple Choice
A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership of the fixed asset.
TRUE
FALSE
- 7. Multiple Choice
Recording depreciation on fixed assets affects both the Statement of Profit or Loss and the Statement of Financial Position.
TRUE
FALSE
- 8. Multiple Choice
Recording depreciation each period is an application of the expense recognition concept/principle.
TRUE
FALSE
- 9. Multiple Choice
Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.
TRUE
FALSE
- 10. Multiple Choice
If the cash proceeds from the sale of a fixed asset exceed its book value, a gain on disposal occurs.
TRUE
FALSE
- 11. Multiple Choice
The book value of a fixed asset is the amount originally paid for the asset less anticipated salvage value.
TRUE
FALSE
- 12. Multiple Choice
The book value of a fixed asset is the amount originally paid for the asset less the latest accumulated depreciation amount.
TRUE
FALSE
- 13. Multiple Choice
The cost of a purchased of a building includes all of the following except..
closing costs or agreeable price.
real estate broker's commission.
remodeling costs.
All of these are included.
- 14. Multiple Choice
A company purchased land for RM90,000 cash. Real estate brokers' commission was RM5,000 and RM7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at..
RM107,000
RM90,000
RM95,000
RM102,000
- 15. Multiple Choice
Which of the following assets does not decline in service potential over the course of its useful life, meaning it don't depreciate?
Equipment
Furnitures
Land
Buildings
- 16. Multiple Choice
All of the following factors in computing depreciation are estimates except..
cost
residual value
salvage value
useful life
- 17. Multiple Choice
Costs incurred to increase the operating efficiency or useful life of a fixed asset are referred to as..
capital expenditures
expense expenditure
ordinary repairs
revenue expenditure
- 18. Multiple Choice
Which of the following is not true of ordinary repairs and maintenance?
They primarily benefit the current accounting period.
They can be referred to as revenue expenditures.
They maintain the expected productive life of the asset.
They increase the productive capacity of the asset.
- 19. Multiple Choice
Depreciation is a process of..
asset devaluation.
cost accumulation.
cost allocation.
asset valuation.
- 20. Multiple Choice
In computing depreciation, salvage value is...
the fair value of a plant asset on the date of acquisition.
subtracted from accumulated depreciation to determine the plant asset's depreciable cost.
an estimate of a fixed asset's value at the end of its useful life.
ignored in all the depreciation methods.
- 21. Multiple Choice
Equipment was purchased for RM300,000. Freight charges amounted to RM14,000 and there was a cost of RM40,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a RM60,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be..
RM70,800
RM58,800
RM49,200
RM48,000
- 22. Multiple Choice
Which of the following methods resulting in the same amount of annual depreciation expense each year?
Straight-line method
Reducing balance method
Units-of-activity method
None of these answer choices are correct.
- 23. Multiple Choice
The balance in the Accumulated Depreciation account is..
represent the cash fund to be used to replace plant assets.
the amount to be deducted from the cost of the plant asset to arrive at its fair market value.
the amount charged to expense in the current period.
the amount to be deducted from the cost of the plant asset in the Statement of Financial Position.
- 24. Multiple Choice
The book value of an asset is equals to the...
asset's fair value less its historical cost.
blue book value relied on by secondary markets.
replacement cost of the asset.
asset's cost less accumulated depreciation.
- 25. Multiple Choice
A gain or loss on disposal of a fixed asset is determined by comparing the..
replacement cost of the asset with the asset's original cost.
book value of the asset with the asset's original cost.
original cost of the asset with the proceeds received from its sale.
book value of the asset with the cash received from its sale.
- 26. Multiple Choice
If a fixed asset is sold before it is fully depreciated;...
only a gain on disposal can occur.
only a loss on disposal can occur.
either a gain or a loss can occur.
neither a gain nor a loss can occur.
- 27. Multiple Choice
If disposal of a fixed asset occurs during the year under yearly basis, depreciation is ..
not recorded for the year.
recorded for the whole year.
recorded for the fraction of the year to the date of the disposal.
not recorded if the asset is scrapped.
- 28. Multiple Choice
If a fixed asset is retired/discarded before it is fully depreciated (before the end of its useful life), and the salvage value is zero,..
a gain on disposal will be recorded.
phantom depreciation must be taken as though the asset were still on the books.
a loss on disposal will be recorded.
no gain or loss on disposal will be recorded.
- 29. Multiple Choice
A loss on disposal of a fixed asset is reported ..
as other expenses in the Statement of Profit or Loss
as operational expenses in the Statement of Profit or Loss
as a direct increase to the capital account in the Statement of Financial Position
as a direct decrease to the capital account in the Statement of Financial Position
- 30. Multiple Choice
Manju Company has decided to sell one of its old machines on June 30, 2017. The machine was purchased for RM200,000 on January 1, 2013, and was depreciated on a straight-line basis for 10 years with no salvage value under yearly basis. If the machine was sold for RM65,000, what was the amount of the gain or loss recorded at the time of the sale?
gain RM55,000
gain RM135,000
loss RM55,000
loss RM135,000
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