CHAPTER 10: FIXED ASSETS AND INTANGIBLE ASSETS
1. Long-lived assets that are intangible in nature, used in the operations of the business and not held for sale in the
ordinary course of business are called fixed assets.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs
to get the asset in place and ready for use.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
3. When land is purchased to construct a new building, the cost of removing any structures on the land should
be charged to the building account.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 10: Fixed Assets and Intangible Assets
4. Land acquired as a speculation is reported under Investments on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
5. Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant,
and equipment on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
6. The cost of repairing damage to a machine during installation is debited to a fixed asset account.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 10: Fixed Assets and Intangible Assets
7. During construction of a building, the cost of interest on a construction loan should be charged to an
expense account.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
8. The cost of computer equipment does not include the consultant's fee to supervise installation of the equipment.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
9. Capital expenditures are costs of acquiring, constructing, adding, or replacing property, plant and equipment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 10: Fixed Assets and Intangible Assets
10. The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
11. Expenditures that increase operating efficiency or capacity for the remaining useful life of a fixed asset are
called capital expenditures.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
12. The cost of replacing an engine in a truck is an example of ordinary maintenance.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
13. An intangible asset is one that has a physical existence.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. Long-lived assets that are intangible in nature, used in the operations of the business and not held for sale in the
ordinary course of business are called fixed assets.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs
to get the asset in place and ready for use.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
3. When land is purchased to construct a new building, the cost of removing any structures on the land should
be charged to the building account.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 10: Fixed Assets and Intangible Assets
4. Land acquired as a speculation is reported under Investments on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
5. Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant,
and equipment on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
6. The cost of repairing damage to a machine during installation is debited to a fixed asset account.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 10: Fixed Assets and Intangible Assets
7. During construction of a building, the cost of interest on a construction loan should be charged to an
expense account.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
8. The cost of computer equipment does not include the consultant's fee to supervise installation of the equipment.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
9. Capital expenditures are costs of acquiring, constructing, adding, or replacing property, plant and equipment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 10: Fixed Assets and Intangible Assets
10. The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
11. Expenditures that increase operating efficiency or capacity for the remaining useful life of a fixed asset are
called capital expenditures.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
12. The cost of replacing an engine in a truck is an example of ordinary maintenance.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
13. An intangible asset is one that has a physical existence.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.10-01 - 10-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.13 - Long-term Assets Reporting
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
