Plant Assets And Depreciation Chap 10

29 Questions | Total Attempts: 42

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This Exam review covers Plant Assets and Depreciation


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Questions and Answers
  • 1. 
    Which of the following assets does not decline in service potential over the course of its useful life?
    • A. 

      Equipment

    • B. 

      Furnishings

    • C. 

      Land

    • D. 

      Fixtures

  • 2. 
    The four subdivisions for plant assets are
    • A. 

      land, land improvements, buildings, and equipment.

    • B. 

      Intangibles, land, buildings, and equipment

    • C. 

      Furnishings and fixtures, land, buildings, and equipment

    • D. 

      Property, plant, equipment, and land

  • 3. 
    The cost of land does not include 
    • A. 

      Real estate brokers' commission.

    • B. 

      Annual property taxes

    • C. 

      Accrued property taxes assumed by the purchaser

    • D. 

      Title fees

  • 4. 
    Gagner Clinic purchases land for $110,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Gagner Clinic record as the cost for the land? 
    • A. 

      $112,200

    • B. 

      $110,000

    • C. 

      $114,700

    • D. 

      $112,500

  • 5. 
    Carey Company buys land for $50,000 on 12/31/10. As of 3/31/11, the land has appreciated in value to $50,700. On 12/31/11, the land has an appraised value of $51,800. By what amount should the Land account be increased in 2011? 
    • A. 

      $0

    • B. 

      $700

    • C. 

      . $1,100

    • D. 

      $1,800

  • 6. 
    Hull Company acquires land for $96,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,530 Paving of parking lot 10,000 Closing costs 560  Hull will record the acquisition cost of the land as 
    • A. 

      $96,000

    • B. 

      $98,090

    • C. 

      . $99,990

    • D. 

      $99,770.

  • 7. 
    Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions
    • A. 

      $30,000 should be debited to the Land account.

    • B. 

      $15,000 should be debited to Land Improvements.

    • C. 

      $45,000 should be debited to the Land account.

    • D. 

      $45,000 should be debited to Land Improvements

  • 8. 
     Land improvements should be depreciated over the useful life of the 
    • A. 

      Land.

    • B. 

      Buildings on the land.

    • C. 

      Land or land improvements, whichever is longer.

    • D. 

      Land improvements.

  • 9. 
    Mattox Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true? 
    • A. 

      Excavation fees are capitalized but building permit fees are not.

    • B. 

      Architect fees are capitalized but building permit fees are not.

    • C. 

      Interest is capitalized during the construction as part of the cost of the building.

    • D. 

      The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

  • 10. 
     If a plant asset is sold before it is fully depreciated, 
    • A. 

      Only a gain on disposal can occur.

    • B. 

      Only a loss on disposal can occur.

    • C. 

      Either a gain or a loss can occur.

    • D. 

      Neither a gain nor a loss can occur.

  • 11. 
    Depletion is 
    • A. 

      A decrease in market value of natural resources.

    • B. 

      The amount of spoilage that occurs when natural resources are extracted.

    • C. 

      The allocation of the cost of natural resources to expense.

    • D. 

      The method used to record unsuccessful patents.

  • 12. 
    Identify the item below where the terms are not related. 
    • A. 

      Equipment—depreciation

    • B. 

      Franchise—depreciation

    • C. 

      Copyright—amortization

    • D. 

      Oil well—depletion

  • 13. 
    A patent 
    • A. 

      Has a legal life of 40 years

    • B. 

      Is nonrenewable

    • C. 

      Can be renewed indefinitely

    • D. 

      Is rarely subjected to litigation because it is an exclusive right

  • 14. 
    Erin Danielle Company purchased equipment and incurred the following costs. Cash price $24,000 Sales taxes 1,200 Insurance during transit 200 Installation and testing 400 Total costs $25,800   What amount should be recorded as the cost of the equipment?
    • A. 

      $24,000

    • B. 

      $25,200

    • C. 

      $25,400

    • D. 

      $25,800

  • 15. 
    Depreciation is a process of:
    • A. 

      Valuation

    • B. 

      Cost allocation

    • C. 

      Cash accumulation

    • D. 

      Appraisal

  • 16. 
    Micah Bartlett Company purchased equipment on January 1, 2013, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used, is
    • A. 

      $80,000.

    • B. 

      $160,000.

    • C. 

      $78,000

    • D. 

      $156,000

  • 17. 
    Ann Torbert purchased a truck for $11,000 on January 1, 2013. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2014, can be computed by the following formula:
    • A. 

      ( $11,000/ total estimated activity) x units of activities for 2014

    • B. 

      ( $10,000/ total estimated activity) x units of activities for 2014

    • C. 

      ( $11,000/ total estimated activity) x units of activities for 2013 and 2014

    • D. 

      ( $10,000/ total estimated activity) x units of activities for 2013 and 2014

  • 18. 
    Jefferson Company purchased a piece of equipment on January 1, 2014. The equipment cost $60,000 and has an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2015 under the double-declining-balance method
    • A. 

      $6,500.

    • B. 

      $11,250.

    • C. 

      $15,000.

    • D. 

      $6,562

  • 19. 
    When there is a change in estimated depreciation:
    • A. 

      Previous depreciation should be corrected.

    • B. 

      Current and future years' depreciation should be revised.

    • C. 

      Only future years' depreciation should be revised

    • D. 

      None of the above.

  • 20. 
    Able Towing Company purchased a tow truck for $60,000 on January 1, 2012. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31, 2014, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2014) and the salvage value to $2,000. What was the depreciation expense for 2014?
    • A. 

      $6,000.

    • B. 

      $4,800

    • C. 

      $15,000

    • D. 

      $12,100

  • 21. 
    Additions to plant assets are:
    • A. 

      Revenue expenditures.

    • B. 

      Debited to the Maintenance and Repairs Expense account.

    • C. 

      Debited to the Purchases account.

    • D. 

      Capital expenditures.

  • 22. 
    Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2014. The machine was purchased for $80,000 on January 1, 2010, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale?
    • A. 

      $18,000

    • B. 

      $54,000

    • C. 

      $22,000

    • D. 

      $46,000

  • 23. 
    Maggie Sharrer Company expects to extract 20 million tons of coal from a mine that cost $12 million. If no salvage value is expected and 2 million tons are mined and sold in the first year, the entry to record depletion will include a:
    • A. 

      Debit to Accumulated Depletion of $2,000,000.

    • B. 

      Credit to Depletion Expense of $1,200,000.

    • C. 

      Debit to Depletion Expense of $1,200,000

    • D. 

      Credit to Accumulated Depletion of $2,000,000

  • 24. 
    Which of the following statements is false?
    • A. 

      If an intangible asset has a finite life, it should be amortized.

    • B. 

      The amortization period of an intangible asset can exceed 20 years.

    • C. 

      Goodwill is recorded only when a business is purchased.

    • D. 

      Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

  • 25. 
    Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2, 2014. On July 31, 2014, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2014, should be:
    • A. 

      $150,000.

    • B. 

      $35,000

    • C. 

      $185,000

    • D. 

      $170,000

  • 26. 
    Indicate which of the following statements is true
    • A. 

      Since intangible assets lack physical substance, they need be disclosed only in the notes to the financial statements.

    • B. 

      Goodwill should be reported as a contra account in the owner's equity section.

    • C. 

      Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

    • D. 

      Intangible assets are typically combined with plant assets and natural resources and shown in the property, plant, and equipment section.

  • 27. 
    Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover?
    • A. 

      0.90

    • B. 

      0.20

    • C. 

      0.72

    • D. 

      1.39

  • 28. 
    Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books?
    • A. 

      $45,000

    • B. 

      $46,000

    • C. 

      $49,000

    • D. 

      $50,000

  • 29. 
    In exchanges of assets in which the exchange has commercial substance:
    • A. 

      Neither gains nor losses are recognized immediately.

    • B. 

      Gains, but not losses, are recognized immediately.

    • C. 

      Losses, but not gains, are recognized immediately.

    • D. 

      Both gains and losses are recognized immediately.