DeVry ACCT 305 Midterm Exam

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1.
Question : (TCO 1) The acquisition costs of property, plant, and
equipment do not include:
Student Answer:
The ordinary and necessary costs to
bring the asset to its desired condition and location for use.
The net invoice price.
Legal fees, delivery charges, installation, and any applicable sales
tax.
Maintenance costs during the first 30 days of use.

2.
Question : (TCO 3) Below are data relative to an exchange of
similar assets by Grand Forks Corp. Assume the exchange has
commercial substance.In Case A, Grand Forks would record the new
equipment at:
Student Answer:
$75,000.
$50,000.

$65,000.

$60,000.

3.
Question : (TCO 2) The exclusive right to benefit from a
creative work, such as a film, is a:
Student Answer:

Patent.

Copyright.
Trademark.
Franchise.

4.
Question : (TCO 4) Assuming an asset is used evenly over a
four-year service life, which method of depreciation will always
result in the largest amount of depreciation in the first year?
Student Answer:

Straight-line.

Units-of-production.
Double-declining balance.
Sum-of-the-years digits.

5.
Question : (TCO 4) On September 30, 2011, Bricker Enterprises
purchased a machine for $200,000. The estimated service life is 10
years with a $20,000 residual value. Bricker records partial-year

depreciation based on the number of months in service.

Depreciation for 2011, using double-declining balance, would be:
Student Answer:

$40,000.

$10,000.
$36,000.
$9,000.

6.
Question : (TCO 4) Accounting for a change in the estimated
service life of equipment:
Student Answer:

Is handled prospectively.

Requires retroactive restatement of prior years financial

statements.
Requires a prior period adjustment.
Is handled currently as a change in accounting principle.

7.
Question : (TCO 5) The investment category for which the
investors positive intent and ability to hold is important is:
Student Answer:
method.

Securities reported under the equity

Trading securities.
Securities classified as held-to-maturity.

Securities available for sale.

8.
Question : (TCO 5) Consolidated financial statements are
prepared when one company has:
Student Answer:
equity method.

Accounted for the investment using the

Accounted for the investment as securities available for sale.

Control over another company.
None of the above is correct.

9.

Question : (TCO 4) Interest may be capitalized:

Student Answer:
On routinely manufactured goods as well
as self-constructed assets.
On self-constructed assets from the date an entity formally adopts
a plan to build a discrete project.
Whether or not there is specific borrowing for the construction.
Whether or not there are actual interest costs incurred.

10. Question : (TCO 2) Software development costs are capitalized

if they are incurred:

Student Answer:
Prior to the point at which technological
feasibility has been established.
After commercial production has begun.
After technological feasibility has been established but prior to the
product availability date.
None of the above is correct.

11. Question : (TCO 4) The factors that need to be determined to

compute depreciation are an assets:
Student Answer:

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.

12. Question : (TCO 5) Which of the following types of securities

only includes debt securities?
Student Answer:

Securities available for sale.

Trading securities.
Consolidated securities.
Held-to-maturity securities.

13. Question : (TCO 1) The capitalized cost of land excludes:

Student Answer:

Maintenance.

Purchase price.
Razing old buildings.
Closing costs.

14. Question : (TCO 3) When selling property, plant, and equipment

for cash:
Student Answer:
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 a gain or loss for the difference between the
cash received and the book value of the asset sold.
The seller recognizes losses, but not gains.
None of the above.

15. Question : (TCO 2) Research and development (R&D) costs:

Student Answer:
Generally pertain to activities that occur
prior to the start of production.

May be expensed or capitalized, at the option of the reporting

entity.
Must be capitalized and amortized.
None of the above is correct.

16. Question : (TCO 4) The depreciable base for an asset is:

Student Answer:

Its service life.

The excess of its cost over residual value.

The difference between its replacement value and cost.
The amount allowable under MACRS.

17. Question : (TCO 5) Trading securities are most commonly found

in the books of:
Student Answer:

Oil companies.

Manufacturing companies.
Banks.
Foreign subsidiaries.

18. Question : (TCO 5) All investments in debt and equity securities

that dont fit the definitions of the other reporting categories are
classified as:
Student Answer:

Trading securities.

Securities available for sale.

Held-to-maturity securities.
Consolidated securities.

19. Question : (TCO 5) When using the equity method to account

for an investment, cash dividends received by the investor from the
investee should be recorded:
Student Answer:
account.

As a reduction in the investment

As an increase in the investment account.

As dividend income.
As a contra item to stockholders equity.

1.
Question : (TCO 2) Briefly explain the differences between U.S.
GAAP and International Financial Reporting Standards in accounting
for research and development expenditures other than software
development costs.
2.
Question : (TCO 5) Discuss the following questions.What
securities must be classified within one of the three categories of

held-to-maturity, available-for-sale, and trading? (Do not describe

how to determine how securities are classified among these three
categories.) Identify the four primary recording activities related to
investments in securities.

3.
Question : (TCO 1) Please distinguish between tangible
operational assets and intangible assets. Provide three examples of
each.
4.
Question : (TCO 4) Briefly differentiate between activity-based
and time-based allocation methods.

DeVry ACCT 305 Midterm Exam

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https://devryfinalexams.com/products/acct-305midterm-exam/