The depreciated cost is the deduction of the estimated residual value from the cost of a tangible asset.

When the investor buys more than 50% of total shares of investee, the accounting treatment is consolidation. The correct answer is E.

Property, Plant and Equipment assets remain on the business’s accounting books until they are disposed of. Companies dispose of property, plant and equipment assets which are no longer useful for the company. Eventually, a long-lived asset wears out or becomes obsolete. When plant assets are no longer useful because they have physically deteriorated or become obsolete, a company can dispose them by discarding, selling them for cash, or exchanging them for a new long-lived asset. The disposal of property, plant and equipment assets can take one of three forms:

• Discard (retire) the long-lived asset.
• Sell the long-lived asset for cash.
• Exchange the long-lived asset for another long-lived asset.

Discarding (retiring) of property, plant and equipment assets involve disposing of the asset for no cash. If an asset is disposed of when it is fully depreciated and has no residual value, then the original cost and accumulated depreciation of the long-lived asset are simply written off the accounting books. There is no need to bring the depreciation up to date because the asset is already fully depreciated. In addition, no gain or loss is recognized because no cash was received or paid. A loss is recognized if a company retires a long-lived asset before it is fully depreciated and no cash is received for residual or salvage value. If a long-lived asset is still being used, its cost and accumulated depreciation should remain in the ledger even if the asset is fully depreciated until the company discard the asset. The company may continue to report it on balance sheet even though no additional depreciation expense is recorded.

Accounting for the sale of a long-lived asset is essentially the same as accounting for its discarding except that cash is received in the exchange. In a disposal by sale for cash, the company compares the book value of the asset with the cash received from the sale. If the cash received from the sale exceed the book value of the long-lived asset, a gain on disposal occurs. If the cash received from the sale is less than the book value of the long-lived asset sold, a loss on disposal occurs.

If exchanges have commercial substance (which is when there is a change in cash flow resulting from the transaction), the parties should recognize a gain or loss on the exchange. The old asset will be removed from the accounting books, and the new asset will be recorded at its market value. Most of the exchanges have commercial substance (even when similar assets are exchanged).

As can also be understood from the information given, all the options are the forms of the disposal of property, plant and equipment assets, so the correct answer is E.

Goodwill means different things to different people. Generally, it refers to a company’s good reputation and intangible assets of a business that is created from favorable attributes that relate to a company and are not attributable to any other specific asset. These include managerial skills, desirable location, good customer relations, skilled employees, high-quality products, and good relations with labor unions. A good reputation may create goodwill, but that company cannot record goodwill for its own business.

 There are three possible cases and three treatments ;

a. Almost impossible to lose the lawsuit; so does not pay any indemnity – No Liability Reported

b. Probably will lose the lawsuit, however the amount of indemnity cannot be estimated reliably – Liability Disclosed in Footnotes

c. Probably will lose the lawsuit and the amount of indemnity can be estimated reliably – Journalized and Reported in Financial Statements 

The correct answer is A.

According to the information given in the question patents account is 10.000 debit and cash is 10.000 credit. 

Matching principle requires the recognition of expenses in the period in which they incur to generate revenues. Therefore, as of the end of period, all expenses should be recorded independent from whether they are paid or not. When an expense incurs but is not paid yet, it should be recorded as accrued expense. In other words, accruals can be defined as liabilities for unpaid expenses. The most common examples of accrued expenses are interest payable, salaries payable, income taxes payable etc. The correct answer is D.

Treasury bonds and corporate bonds are some of the examples of
debt securities. Common stocks and preferred stocks are some of the examples of equities securities.

All assets, except land, lose their ability to provide services and wear out as they are used.

The correct answer is C. Purchase returns account is a contra expense account. Others account is contra revenue account.

The residual value (also called salvage value) and the useful life of the asset are estimations. The company should estimate the cash value of the asset at the end of its useful life. In other words, residual value is the amount that the company will receive when it is sold at the end of its useful life. By considering together, the company will find out the depreciable cost of the asset. Depreciable cost is the cost when residual value is subtracted from capitalized cost of the asset. The correct answer is E.

There are also some regular maintenance operations during the life of property, plants and equipment. As for the building, it may be the inside paintwork, some repairs, etc. These expenditures will not be added to the cost of the building, because they do not extend the useful life or increase the capacity of the asset. These kinds of expenditures will be recognized as a period expense and are debited to Repairs and Maintenance Expense account. The correct answer is C.

In an investment process, the investing party is called investor while invested company is called as investee. 

It is vitally important for a company to pay its current liabilities. What is called “current” is either the benefits to be received, or obligations to be met in one-year period. Combining these two definitions, companies care about the ability of current assets to meet current liabilities. If the current assets cannot match current liabilities, companies will have to either convert their non-current assets, which are usually used in providing capacity for operations, into current assets (in most cases cash) or will have to extend the maturities to longer terms with an additional amount of interest. Therefore, companies operating with too much share of current liability in total financing is usually accepted as too much risky to either invest or lend. On the other hand, if the company finances its operations mostly by using long-term financing options, the cost of financing will incur more compared to short-term financing, in terms of either interest or dividends. The correct answer is C.

Purchase Price 200,000 TL
(+) Additional Costs 25,000 TL
Transportation & Ins. 20,000 TL
Assembly & Testing 5,000 TL
Cost of the machine 225,000 TL
Residual Value 45,000 TL

Double - Declining Balance Depreciation 1st Year=
(225,000-0)x2/5=90,000 TL

Double - Declining Balance Depreciation 2nd Year=
(225,000-90,000)x 2/5=54,000 TL

Double - Declining Balance Depreciation 3rd Year=
(225,000-144,000)x 2/5=32,400 TL

The correct answer is D.

Sorunun doğru yanıtı D şıkkıdır. If the company cannot pay its obligations, it may go bankrupt. Therefore, liquidity is an indicator for investors showing the going concern of company and an indicator for creditors representing the probability that they will be able to collect their funds back. 

The ordinary repairs are called revenue expenditures (income statement expenditures). Revenue expenditures do not increase the capacity or efficiency of an asset or extend its useful life and are reported on the income statement as an expense in the period incurred.

A capital expenditure (balance sheet expenditure) is debited to an asset account because it increases the asset’s capacity or efficiency or extends the asset’s useful life. A capital expenditure is reported on the balance sheet as an asset.

As can also be understood from the information given the statements “The ordinary repairs are called revenue expenditures (income statement expenditures).” and “A capital expenditure is reported on the balance sheet as an asset.” are correct, so the correct answer is B. The statement  “Revenue expenditures are debited to an asset account because they increase the asset’s capacity or efficiency or extend the asset’s useful life.” is not correct, because “Revenue expenditures do not increase the capacity or efficiency of an asset or extend its useful life and are reported on the income statement as an expense in the period incurred.”. The statement  “A capital expenditure (balance sheet expenditure) does not increase the capacity or efficiency of an asset or extend its useful life and is reported on the income statement as an expense in the period incurred.” is not correct, either. “A capital expenditure (balance sheet expenditure) is debited to an asset account because it increases the asset’s capacity or efficiency or extends the asset’s useful life.”

Companies may invest in other in the shares of the other companies’ shares at such a percentage that is enough to join policy determination process but not to control the entity. Generally, it is assumed that having at least 20% of the shares of a company gives an investor the right and power to participate in policy determination process; however, some possible exceptional situations may exist. The correct answer is E.

A copyright is an exclusive right granted by the government to publish, reproduce and sell a book, musical composition, film, other art works, computer programs, or intellectual property. Government grants copyrights to authors, composers, sculptors and other artists for their creations and works. Copyright belongs to the person who creates it. The correct answer is A.

Purchase Price 200,000 TL
(+) Additional Costs 25,000 TL
Transportation & Ins. 20,000 TL
Assembly & Testing 5,000 TL
Cost of the machine 225,000 TL
(-) Residual Value (25,000) TL
Depreciable Cost 200,000 TL
Straight - linedepreciation = 200,000 x 1/5 years = 40,000 TL

The correct answer is C.