ACCT 201 ACTUAL 2026 TEST PAPER QUESTIONS AND
ANSWERS GRADED A+
✔✔Factors in computing depreciation - ✔✔1. cost
2. useful life: an estimate of the expected productive life, aka service life, of the asset
3. salvage value: an estimate of the asset's value at the end of its useful life
✔✔Depreciable cost - ✔✔= cost - salvage value
✔✔Straight-line depreciation method - ✔✔companies expense the same amount of
depreciation for each year of the asset's useful life
annual depreciation expense = depreciable cost / useful life = depreciable cost x
depreciation rate x time in terms of a year
book value = cost - accumulated depreciation = salvage value
to record: dr. depreciation expense, cr. accumulated depreciation
✔✔Disclosures - ✔✔
✔✔Retirement of plant assets - ✔✔when asset is fully depreciated (zero book value):
dr. accumulated depreciation, cr. asset account
when asset is fully depreciated but still useful to company: asset and its accumulated
depreciation continue to be reported on balance sheet, without further depreciation
adjustment
when a company retires asset before it is fully depreciated and no cash is received for
scrap, a loss on disposal occurs: dr. accumulated depreciation, dr. loss on disposal of
plant assets [cost-depreciation], cr. asset account [cost]
✔✔Sale of plant assets - ✔✔company compares book value of asset with proceeds
received from sale
proceeds > book value : gain on disposal
- dr. cash [proceeds], dr. accumulated depreciation, cr. asset account [cost], cr. gain on
disposal [proceeds-book value]
- recorded in "other revenues and gains" section of income statement
proceeds < book value : loss on disposal
- dr. cash [proceeds], dr. accumulated depreciation, dr. loss on disposal [book value-
proceeds], cr. asset account [cost]
- recorded in "other expenses and losses" section of income statement
, ✔✔Natural resources - ✔✔consist of standing timber and underground deposits of oil,
gas, and minerals
two characteristics
- physically extracted in operations
- replaceable only by act of nature
acquisition cost = price needed to acquire resource + prepare it for its intended use
✔✔Depletion - ✔✔the allocation of the cost of natural resources in a rational and
systematic manner over the resource's useful life, as depreciation is to plant assets
= dep. cost per unit x #units extracted
to record: dr. inventory, cr. accumulated depreciation
✔✔Depletion cost per unit - ✔✔= (total cost - salvage value) / total estimated units
available
✔✔Intangible assets - ✔✔rights, privileges, and competitive advantages that result from
the ownership of long-lived assets that do not possess physical substance; may arise
from:
- government grants (patents, copyrights, licenses, trademarks, and trade names)
- acquisition of another business (purchase price includes goodwill)
- private monopolistic arrangements arising from contractual agreements (franchises
and leases)
✔✔Accounting for intangible assets - ✔✔record at cost, which consists of all
expenditures necessary for the company to acquire the right, privilege, or competitive
advantage; have either a limited life or an indefinite life
✔✔Amortization - ✔✔allocation of cost of intangibles over the asset's useful life, if it has
limited life
*= cost of asset / legal life or useful life, whicever is shorter (years)*
- dr. amortization expense, cr. asset account
- recorded as an operating expense in income statement
✔✔Patents - ✔✔an exclusive right issued by the U.S. Patent Office that enables the
recipient to manufacture, sell, or otherwise control an invention for a period of 20 years
from the date of the grant
- cost includes price + any legal costs to defend it
✔✔Copyrights - ✔✔granted by the federal government, gives the owner the exclusive
right to reproduce and sell an artistic or published work
- extend for the life of the creator + 70 years
- cost includes price + any legal costs to defend it
ANSWERS GRADED A+
✔✔Factors in computing depreciation - ✔✔1. cost
2. useful life: an estimate of the expected productive life, aka service life, of the asset
3. salvage value: an estimate of the asset's value at the end of its useful life
✔✔Depreciable cost - ✔✔= cost - salvage value
✔✔Straight-line depreciation method - ✔✔companies expense the same amount of
depreciation for each year of the asset's useful life
annual depreciation expense = depreciable cost / useful life = depreciable cost x
depreciation rate x time in terms of a year
book value = cost - accumulated depreciation = salvage value
to record: dr. depreciation expense, cr. accumulated depreciation
✔✔Disclosures - ✔✔
✔✔Retirement of plant assets - ✔✔when asset is fully depreciated (zero book value):
dr. accumulated depreciation, cr. asset account
when asset is fully depreciated but still useful to company: asset and its accumulated
depreciation continue to be reported on balance sheet, without further depreciation
adjustment
when a company retires asset before it is fully depreciated and no cash is received for
scrap, a loss on disposal occurs: dr. accumulated depreciation, dr. loss on disposal of
plant assets [cost-depreciation], cr. asset account [cost]
✔✔Sale of plant assets - ✔✔company compares book value of asset with proceeds
received from sale
proceeds > book value : gain on disposal
- dr. cash [proceeds], dr. accumulated depreciation, cr. asset account [cost], cr. gain on
disposal [proceeds-book value]
- recorded in "other revenues and gains" section of income statement
proceeds < book value : loss on disposal
- dr. cash [proceeds], dr. accumulated depreciation, dr. loss on disposal [book value-
proceeds], cr. asset account [cost]
- recorded in "other expenses and losses" section of income statement
, ✔✔Natural resources - ✔✔consist of standing timber and underground deposits of oil,
gas, and minerals
two characteristics
- physically extracted in operations
- replaceable only by act of nature
acquisition cost = price needed to acquire resource + prepare it for its intended use
✔✔Depletion - ✔✔the allocation of the cost of natural resources in a rational and
systematic manner over the resource's useful life, as depreciation is to plant assets
= dep. cost per unit x #units extracted
to record: dr. inventory, cr. accumulated depreciation
✔✔Depletion cost per unit - ✔✔= (total cost - salvage value) / total estimated units
available
✔✔Intangible assets - ✔✔rights, privileges, and competitive advantages that result from
the ownership of long-lived assets that do not possess physical substance; may arise
from:
- government grants (patents, copyrights, licenses, trademarks, and trade names)
- acquisition of another business (purchase price includes goodwill)
- private monopolistic arrangements arising from contractual agreements (franchises
and leases)
✔✔Accounting for intangible assets - ✔✔record at cost, which consists of all
expenditures necessary for the company to acquire the right, privilege, or competitive
advantage; have either a limited life or an indefinite life
✔✔Amortization - ✔✔allocation of cost of intangibles over the asset's useful life, if it has
limited life
*= cost of asset / legal life or useful life, whicever is shorter (years)*
- dr. amortization expense, cr. asset account
- recorded as an operating expense in income statement
✔✔Patents - ✔✔an exclusive right issued by the U.S. Patent Office that enables the
recipient to manufacture, sell, or otherwise control an invention for a period of 20 years
from the date of the grant
- cost includes price + any legal costs to defend it
✔✔Copyrights - ✔✔granted by the federal government, gives the owner the exclusive
right to reproduce and sell an artistic or published work
- extend for the life of the creator + 70 years
- cost includes price + any legal costs to defend it
