Chapter 7 Accounting

10 Questions | By Lnwilcox | Updated: Mar 7, 2013 | Attempts: 234

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1.

Homes purchased a tract of land, small office building, and equipment for 1,800,000. The appraised value of the land was 1,144,000, the building 660,000, and the equip 396,000. What is the cost of the land?
- A.
  
  600000
- B.
  
  936000
- C.
  
  1144000
- D.
  
  None of the above
Correct Answer
B. 936000
2.

Which statement is false?
- A.
  
  Depreciation is based on the expense recognition principle because it apportions the cost of the asset against the revenue generated over the assets useful life
- B.
  
  Depreciation is a process of allocating the cost of a plant asset over its useful life
- C.
  
  Depreciation creates a fund to replace the asset at the end of its useful life
- D.
  
  The cost of a plant asset- accum. depreciation = book value
Correct Answer
C. Depreciation creates a fund to replace the asset at the end of its useful life
3.

A company bought a new machine for $23,000 on Jan 1. The machine is expected to last 4 years and to have a residual value of $3,000. If the company uses the double-declining method, accumulated depreciation at the end of year 2 will be
- A.
  
  23000
- B.
  
  20000
- C.
  
  17250
- D.
  
  15000
Correct Answer
C. 17250
4.

Which of the following is NOT a capital expenditure?
- A.
  
  Complete overhaul of an air-conditioning system
- B.
  
  Replacement of an old motor with a new one in a piece of equip
- C.
  
  A tune-up of a company car
- D.
  
  The cost of installing a piece of equip
Correct Answer
C. A tune-up of a company car
5.

Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?
- A.
  
  Natural resources
- B.
  
  Goodwill
- C.
  
  Land improvements
- D.
  
  Intangibles
Correct Answer
B. Goodwill
6.

Why would a business select an accelerated method of depreciation for tax purposes?
- A.
  
  Accelerated is easier to calculate because salvage value is ignored
- B.
  
  MACRS depreciation follows a specific pattern or depreciation
- C.
  
  Accelerated generates higher depreciation expense immediately, and therefore lowers taxes in the early years of the assets life
- D.
  
  Accelerated generates a greater amount of depreciation over the life of the asset than that of straight-line
Correct Answer
C. Accelerated generates higher depreciation expense immediately, and therefore lowers taxes in the early years of the assets life
7.

A company purchased an oil well for $210,000. It estimates that the well contains 30,000 barrels, has an 8 year life, and no salvage value. If the company extracts and sells 2,000 barrels of oil in the first year, how much in cost of sales should be recorded?
- A.
  
  14000
- B.
  
  105000
- C.
  
  21000
- D.
  
  26250
Correct Answer
A. 14000
8.

Which among the following is not an intangible asset
- A.
  
  Goodwill
- B.
  
  Copyright
- C.
  
  Trademark
- D.
  
  All of the above are intangible
Correct Answer
D. All of the above are intangible
9.

An important measure of profitability is
- A.
  
  Inventory turnover
- B.
  
  Quick ratio
- C.
  
  ROA
- D.
  
  Net sales
Correct Answer
C. ROA
10.

In 2012, total asset turnover for JBC has increased. This means that the
- A.
  
  Company has become more effective
- B.
  
  Company has been more efficient
- C.
  
  Company has become more effective and more efficient
- D.
  
  Company has neither become effective nor efficient
Correct Answer
C. Company has become more effective and more efficient

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Current Version
Mar 07, 2013

Quiz Edited by
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Dec 13, 2012

Quiz Created by
Lnwilcox

Chapter 7 Accounting

Homes purchased a tract of land, small office building, and equipment for 1,800,000. The appraised value of the land was 1,144,000, the building 660,000, and the equip 396,000. What is the cost of the land?

Which statement is false?

A company bought a new machine for $23,000 on Jan 1. The machine is expected to last 4 years and to have a residual value of $3,000. If the company uses the double-declining method, accumulated depreciation at the end of year 2 will be

Which of the following is NOT a capital expenditure?

Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?

Why would a business select an accelerated method of depreciation for tax purposes?

A company purchased an oil well for $210,000. It estimates that the well contains 30,000 barrels, has an 8 year life, and no salvage value. If the company extracts and sells 2,000 barrels of oil in the first year, how much in cost of sales should be recorded?

Which among the following is not an intangible asset

An important measure of profitability is

In 2012, total asset turnover for JBC has increased. This means that the