ACCT 305 DEVRY MIDTERM EXAM LATEST

ACCT 305 DEVRY MIDTERM EXAM LATEST
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ACCT 305 DeVry Midterm Exam Latest
Question 1. 1. (TCO 1) Productive assets that are physically consumed in operations are (Points : 5)
equipment.
natural resources.
land.
land improvements.
Question 2. 2. (TCO 3) Our company exchanged land and cash of $5,000 for similar land. The book value
and the fair value of the land were $90,000 and $100,000, respectively. Assuming the exchange lacks
commercial substance, which amount is correct? (Points : 5)
Debit Cash $5,000
Debit Cash $10,000
Credit Cash $5,000
Credit Cash $10,000
Question 3. 3. (TCO 2) The exclusive right to benefit from a creative work, such as a film, is a (Points : 5)
patent.
copyright.
trademark.

franchise.
Question 4. 4. (TCO 4) Depreciation (Points : 5)
is always considered a period cost.
is usually based on the declining-balance method.
per books is usually higher than MACRS in the early years of an asset’s life.
could be a product cost or a period cost depending on the use of the asset.
Question 5. 5. (TCO 4) On September 30, 2013, our company purchased a machine for $100,000. The
estimated service life is 10 years, with a $10,000 residual value. Our company records partial-year
depreciation based on the number of months in service. Depreciation for 2013 using the straight-line
method is (Points : 5)
$6,750.
$7,500.
$2,250.
$2,500.
Question 6. 6. (TCO 4) A change from the straight-line method to the sum-of-years’-digits method of
depreciation is handled as (Points : 5)
a retrospective change back to the date of acquisition as though the current estimated life had been used
all along.
a prospective change from the current year through the remainder of its useful life.
a cumulative adjustment to income in the current year for the difference in depreciation under the new
versus old useful life estimate.
None of the above
Question 7. 7. (TCO 5) Which of the following investment securities may be classified as held-to-maturity
securities in its balance sheet? (Points : 5)
Common stock
Callable preferred stock

Long-term debenture bonds
All of the above
Question 8. 8. (TCO 5) If Father Company owns 17% of the common stock of Daughter Company, then
Father Company typically (Points : 5)
would record dividends received from Daughter Company as investment revenue.
would record 17% of the net income of Daughter Company as investment income each year.
would increase its investment account by 17% of Daughter Company income each year.
All of the above
Question 9. 9. (TCO 4) Interest is eligible to be capitalized as part of an asset’s cost, rather than being
expensed immediately, when (Points : 5)
the interest is incurred during the construction period of the asset.
the asset is a discrete construction project for sale or lease.
the asset is self-constructed, rather than acquired.
All of the above
Question 10. 10. (TCO 2) Software development costs are capitalized if they are incurred (Points : 5)
prior to the point at which technological feasibility has been established.
after technological feasibility has been established but prior to the product availability date.
after commercial production has begun.
None of the above
Question 11. 11. (TCO 4) Depreciation, depletion, and amortization (Points : 5)
all generally utilize the same methods of cost allocation.
are all handled the same in arriving at taxable income.
all refer to the process of allocating the cost of long-term assets used in the business over future periods.
All of the above

Question 12. 12. (TCO 5) Unrealized gains and losses are not reported for which type of security? (Points
: 5)
Securities available-for-sale
Held-to-maturity securities
Trading securities
None of the above
Question 13. 13. (TCO 1) The capitalized cost of land excludes (Points : 5)
maintenance.
purchase price.
razing old buildings.
closing costs.
Question 14. 14. (TCO 3) When selling property, plant, and equipment for cash (Points : 5)
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 losses but not gains.
the seller recognizes a gain or loss for the difference between the cash received and the book value of
the asset sold.
None of the above
Question 15. 15. (TCO 2) Research and development expense for a given period includes (Points : 5)
the full cost of newly acquired equipment that has an alternative future use.
research and development conducted on a contract basis for another entity.
depreciation on a research and development facility.
patent filing and legal costs.
Question 16. 16. (TCO 4) The factors that need to be determined to compute depreciation are an asset’s
(Points : 5)

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.
Question 17. 17. (TCO 5) Securities that are purchased with the intent of selling them in the near future to
take advantage of short-term price changes are classified as (Points : 5)
trading securities.
securities available-for-sale.
consolidating securities.
held-to-maturity securities.
Question 18. 18. (TCO 5) Accumulated Other Comprehensive Income in the shareholders’ equity section
of the balance sheet reflects changes in the fair value of securities for which type of securities? (Points :
5)
Securities available-for-sale
Trading securities
Consolidated securities
Held-to-maturity securities
Question 19. 19. (TCO 5) When using the equity method to account for an investment, cash dividends
received by the investor from the investee should be recorded (Points : 5)
as an increase in the investment account.
as dividend income.
as a reduction in the investment account.
as a contra item to stockholders’ equity.
Page 2
Question 1. 1. (TCO 2) Briefly explain how R&D is reported in financial statements. (Points : 25)

Question 2. 2. (TCO 4) How is a change in depreciation method accounted for? (Points : 25)
Question 3. 3. (TCO 1) Please distinguish between tangible operational assets, intangible assets, and
natural resources. Provide three examples of each. (Points : 30)