41.Once a company establishes that an estimated useful life of a plant asset has changed significantly:
a.the plant asset must be disposed.
b.the change must be made for the current and future years.
c.a correcting journal entry must be made.
d.the previous year's financial statements must be corrected.
42.The calculation of a ‘depreciation base’ requires subtracting:
a.the salvage value from the asset’s book value.
b.the asset’s book value from its original cost.
c.the asset’s salvage value from its capitalized cost.
d.accumulated depreciation from the asset’s original cost.
43.The units of production method of depreciation:
a.allocates the cost of the long-lived asset based on an activity.
b.allocates an equal amount of plant asset cost to each accounting period.
c.is an accelerated method.
d.is used when an asset has no salvage value.
44.During 2009, Erie Inc. developed a new process for packaging products. Erie paid its employees $450,000 over the past five years in developing this process. On January 1, 2009, Erie paid $12,000 to register the packaging patent. The company believes the patent will produce profits for 10 years. The patent has a 17-year legal life. How much amortization expense should be recognized during 2009?
a.$27,118
b.$46,200
c.$1,200
d.$647
45.One primary reason management may choose a particular depreciation method is:
a.to save cash for the replacement of the plant asset.
b.to avoid violation of debt covenants tied to net income.
c.to decrease the cash flows of the company.
d.to hide judgment errors that managers have made during the accounting period.
46.Once a plant asset becomes fully depreciated, the:
a.asset may no longer be used.
b.asset may still be used.
c.asset should be retired.
d.cost of the asset must be removed from the accounting records.
47.When a plant asset is sold, its original cost and its:
a.market value must be removed from the accounting records.
b.accumulated depreciation must be removed from the accounting records.
c.salvage value must be expensed immediately.
d.related maintenance costs must be transferred to the income statement immediately.
48.When a plant asset is traded in for a similar asset, the valuation of the new plant asset should be:
a.at the original cost of the old asset.
b.at the fair market value of the asset given up, or the asset received, whichever is more clearly evident.
c.at the replacement cost of the old asset.
d.at the value at which the new asset received was carried in the accounting records of the manufacturer.
49.Intangible assets differ from plant assets in that they:
a.are consumed in the current accounting period.
b.include prepaid expenses that extend beyond the current accounting period.
c.have no physical existence.
d.are matched against the revenue in the period the related revenue is recognized.
50.Which one of the following costs would be capitalized as an ‘organizational cost’?
a.Goodwill
b.Underwriting a company's first stock issuance
c.Copyrights
d.None of the above