OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
Multiple Choice
1. LO 11.1 Property, Plant, and Equipment is considered which type of asset?
A. current asset
B. contra asset
C. tangible asset
D. intangible asset
Solution
C
2. LO 11.1 Which of the following would not be considered an intangible asset?
A. goodwill
B. patent
C. copyright
D. inventory
Solution
D
3. LO 11.1 The legal protection that provides a company exclusive rights to produce and sell a
unique product is known as which of the following?
A. trademark
B. copyright
C. patent
D. goodwill
Solution
C
4. LO 11.2 Which of the following statements about capitalizing costs is correct?
A. Capitalizing costs refers to the process of converting assets to expenses.
B. Only the purchase price of the asset is capitalized.
C. Capitalizing a cost means to record it as an asset.
D. Capitalizing costs results in an immediate decrease in net income.
Solution
C
5. LO 11.2 Ngo Company purchased a truck for $54,000. Sales tax amounted to $5,400;
shipping costs amounted to $1,200; and one-year registration of the truck was $100. What is the
total amount of costs that should be capitalized?
A. $60,600
B. $66,100
C. $54,000
D. $59,400
Solution
A. $60,600. Includes purchase price, tax, and shipping costs. Registration is not included as it is
a yearly expense.
6. LO 11.2 If a company capitalizes costs that should be expensed, how is its income statement
for the current period impacted?
Page 1 of 27
,OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
A. Assets understated
B. Net Income understated
C. Expenses understated
D. Revenues understated
Solution
C. Assets would be overstated and expenses understated.
7. LO 11.3 Depreciation of a plant asset is the process of ________.
A. asset valuation for statement of financial position purposes
B. allocation of the asset’s cost to the periods of use
C. fund accumulation for the replacement of the asset
D. asset valuation based on current replacement cost data
Solution
B
8. LO 11.3 An accelerated depreciation method that takes more expense in the first few years of
the asset’s life is ________.
A. units-of-production depreciation
B. double-declining-balance depreciation
C. accumulated depreciation
D. straight-line depreciation
Solution
B
9. LO 11.3 The estimated economic life of an asset is also known as ________.
A. residual value
B. book value
C. salvage life
D. useful life
Solution
D
10. LO 11.4 The amortization process is like what other process?
A. depreciation
B. valuation
C. recognizing revenue
D. capitalization
Solution
A
11. LO 11.4 How are intangible assets with an indefinite life treated?
A. They are depreciated.
B. They are amortized.
C. They are depleted.
D. They are tested yearly for impairment.
Solution
D
12. LO 11.4 If the market value of goodwill is found to be lower than the book value, goodwill is
__________ and must be adjusted by __________.
A. worthless; reducing it with a credit
B. impaired; reducing it with a credit
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, OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
C. impaired; increasing it with a credit
D. worthless; increasing it with a credit
Solution
B
13. LO 11.5 Which of the following represents an event that is less routine when accounting for
long-term assets?
A. recording an asset purchase
B. recording depreciation on an asset
C. recording accumulated depreciation for an asset or asset category
D. changing the estimated useful life of an asset
Solution
D
14. LO 11.5 Which of the following is true regarding special issues in accounting for long-term
assets?
A. An asset’s useful life can never be changed.
B. An asset’s salvage value can never be changed.
C. Depreciation expense calculations may need to be updated using new and more accurate
estimates.
D. Asset values are never reduced in value due to physical deterioration.
Solution
C
15. LO 11.5 The loss in value from all causes within a property except those due to physical
deterioration is known as which of the following?
A. functional obsolescence
B. obsolescence
C. true obsolescence
D. deterioration
Solution
A
Questions
1. LO 11.1 What is the difference between tangible and intangible assets?
Solution
The main difference between tangible and intangible assets is that tangible assets have a physical
substance to them. This means they can be touched and have some physical form.
2. LO 11.1 Define intangible assets.
Solution
Intangible assets are long-term assets with no physical substance to them. Examples are
goodwill, trademarks, and copyrights.
3. LO 11.1 What is the difference between a patent and a copyright?
Solution
A patent is a contract that provides a company with exclusive rights to produce and sell a unique
product. It is granted by the federal government and provides exclusivity from competition for
twenty years. A copyright provides the exclusive right to reproduce and sell artistic, literary, or
musical compositions for a period of seventy years beyond the death of the original author.
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Chapter 11: Long-Term Assets
Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
Multiple Choice
1. LO 11.1 Property, Plant, and Equipment is considered which type of asset?
A. current asset
B. contra asset
C. tangible asset
D. intangible asset
Solution
C
2. LO 11.1 Which of the following would not be considered an intangible asset?
A. goodwill
B. patent
C. copyright
D. inventory
Solution
D
3. LO 11.1 The legal protection that provides a company exclusive rights to produce and sell a
unique product is known as which of the following?
A. trademark
B. copyright
C. patent
D. goodwill
Solution
C
4. LO 11.2 Which of the following statements about capitalizing costs is correct?
A. Capitalizing costs refers to the process of converting assets to expenses.
B. Only the purchase price of the asset is capitalized.
C. Capitalizing a cost means to record it as an asset.
D. Capitalizing costs results in an immediate decrease in net income.
Solution
C
5. LO 11.2 Ngo Company purchased a truck for $54,000. Sales tax amounted to $5,400;
shipping costs amounted to $1,200; and one-year registration of the truck was $100. What is the
total amount of costs that should be capitalized?
A. $60,600
B. $66,100
C. $54,000
D. $59,400
Solution
A. $60,600. Includes purchase price, tax, and shipping costs. Registration is not included as it is
a yearly expense.
6. LO 11.2 If a company capitalizes costs that should be expensed, how is its income statement
for the current period impacted?
Page 1 of 27
,OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
A. Assets understated
B. Net Income understated
C. Expenses understated
D. Revenues understated
Solution
C. Assets would be overstated and expenses understated.
7. LO 11.3 Depreciation of a plant asset is the process of ________.
A. asset valuation for statement of financial position purposes
B. allocation of the asset’s cost to the periods of use
C. fund accumulation for the replacement of the asset
D. asset valuation based on current replacement cost data
Solution
B
8. LO 11.3 An accelerated depreciation method that takes more expense in the first few years of
the asset’s life is ________.
A. units-of-production depreciation
B. double-declining-balance depreciation
C. accumulated depreciation
D. straight-line depreciation
Solution
B
9. LO 11.3 The estimated economic life of an asset is also known as ________.
A. residual value
B. book value
C. salvage life
D. useful life
Solution
D
10. LO 11.4 The amortization process is like what other process?
A. depreciation
B. valuation
C. recognizing revenue
D. capitalization
Solution
A
11. LO 11.4 How are intangible assets with an indefinite life treated?
A. They are depreciated.
B. They are amortized.
C. They are depleted.
D. They are tested yearly for impairment.
Solution
D
12. LO 11.4 If the market value of goodwill is found to be lower than the book value, goodwill is
__________ and must be adjusted by __________.
A. worthless; reducing it with a credit
B. impaired; reducing it with a credit
Page 2 of 27
, OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 11: Long-Term Assets
C. impaired; increasing it with a credit
D. worthless; increasing it with a credit
Solution
B
13. LO 11.5 Which of the following represents an event that is less routine when accounting for
long-term assets?
A. recording an asset purchase
B. recording depreciation on an asset
C. recording accumulated depreciation for an asset or asset category
D. changing the estimated useful life of an asset
Solution
D
14. LO 11.5 Which of the following is true regarding special issues in accounting for long-term
assets?
A. An asset’s useful life can never be changed.
B. An asset’s salvage value can never be changed.
C. Depreciation expense calculations may need to be updated using new and more accurate
estimates.
D. Asset values are never reduced in value due to physical deterioration.
Solution
C
15. LO 11.5 The loss in value from all causes within a property except those due to physical
deterioration is known as which of the following?
A. functional obsolescence
B. obsolescence
C. true obsolescence
D. deterioration
Solution
A
Questions
1. LO 11.1 What is the difference between tangible and intangible assets?
Solution
The main difference between tangible and intangible assets is that tangible assets have a physical
substance to them. This means they can be touched and have some physical form.
2. LO 11.1 Define intangible assets.
Solution
Intangible assets are long-term assets with no physical substance to them. Examples are
goodwill, trademarks, and copyrights.
3. LO 11.1 What is the difference between a patent and a copyright?
Solution
A patent is a contract that provides a company with exclusive rights to produce and sell a unique
product. It is granted by the federal government and provides exclusivity from competition for
twenty years. A copyright provides the exclusive right to reproduce and sell artistic, literary, or
musical compositions for a period of seventy years beyond the death of the original author.
Page 3 of 27
