Chapter 7 - Tangible Fixed Assets

8/18/2019 Chapter 7 - Tangible Fixed Assets

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Multiple Choice Identify the choice that best completes the statement or answers the question.

1. What is the principal criterion used to distinguish between tangible assets andinventories?a. The physical substance of the asset.

b. The acquisition cost of the asset.c. The nature of the company’s activity, which determines the purpose for which

the asset is held.d. The moment in the accounting period when the asset is acquired.

ANSWER: CEasy

POINTS: 0 / 1REF: page 233

2. What is the acquisition cost of an asset given the following items:Purchase price 100Import duties 10Transportation 15Installation cost 7Professional fees 2

a. 100 b. 109c. 125d. 134

ANSWER: DModerate

POINTS: 0 / 1REF: pages 236, 237

3. According to IAS 16, what is “the systematic allocation of the depreciable [cost] of anasset over its useful life”?a. Impairment

b. Depreciationc. Write-downd. Write-off

ANSWER: BEasy


4. The choice of the appropriate depreciation method should be made so as to:a. Best reflect the pattern of decline in the asset’s service potential.

b. Facilitate the computation of the depreciation expense by the accountants.c. Reduce the depreciation expense when the enterprise reports a loss.

Name: Score: 0 / 10 points (0%)

Chapter 7 - Tangible fixed assets


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d. None of the above

ANSWER: AEasy


5. Given the following data, what is the depreciation expense of an asset for the first year?

Acquisition cost 6 000Estimated residual value 1 000Estimated useful life 5Depreciation method used Straight-line method

a. 2 000 b. 1 500c. 1 200d. 1 000

ANSWER: D

ModeratePOINTS: 0 / 1REF: page 241

6. What happens when the book value has reached the residual value?a. The asset will no longer be reported in the balance sheet.

b. The asset is systematically disposed of.c. The asset might not be taken out of service if it is still reliable and useful and

will be carried in the balance sheet for a book value equal to the residual value.d. None of the above

ANSWER: CModerate


7. Which of the following entries is made to record the depreciation expense for amanufacturing asset, in an income statement organized by nature of expenses?

a.

b.

c.

d.

ANSWER: BModerate


8. How are tangible assets, which were created or developed internally, valued?a. At their replacement cost

b. At their liquidation costc. At their present costd. At their historical cost

ANSWER: D


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EasyPOINTS: 0 / 1REF: page 248

9. Which of the following statements is false?a. If the fair market value of a tangible asset is less than its book value, such asset

should be written down and a loss recognized as an “impairment loss” expense. b. In practice, tests for impairment are very difficult to implement.

c. An impairment loss cannot be reversed.d. Practice and regulation regarding impairment have varied over time and between

countries in the world.

ANSWER: CEasy


10. How is depreciation recorded when an asset is sold during the accounting period?a. Depreciation must be recorded for the whole accounting period.

b. Depreciation must be recorded for the period of time between the date of the lastdepreciation entry (end of the previous accounting period) and the date of sale.

c. Depreciation is not recorded.d. None of the above

ANSWER: BModerate

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Chapter 7 - Tangible Fixed Assets