41
94)
Merchant Company purchased property for a building site. The costs associated with the property
were:
Purchase price
$185,000
Real estate commissions
15,000
Legal fees
700
Expenses of clearing the land
2,000
Expenses to remove old building
4,000
What portion of these costs should be allocated to the cost of the land and what portion should be
allocated to the cost of the new building?
A)
$200,000 to Land; $6,700 to Building.
B)
$185,000 to Land; $21,700 to Building.
C)
$200,700 to Land; $6,000 to Building.
D)
$206,700 to Land; $0 to Building.
E)
$187,700 to Land; $19,000 to Building.
95)
A company purchased property for $100,000. The property included a building, a parking lot, and
land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000.
Land should be recorded in the accounting records with an allocated cost of:
A) $0. B) $100,000. C) $35,000. D) $30,435. E) $46,087.
96)
The formula to compute annual straight-line depreciation is:
A)
Cost divided by useful life in units.
B)
Depreciable cost divided by useful life in units.
C)
(Cost minus salvage value) divided by the useful life in years.
D)
Cost multiplied by useful life in years.
E)
(Cost plus salvage value) divided by the useful life in years.
97)
The total cost of an asset less its accumulated depreciation is called:
A)
Current (market) value.
B)
Present value.
C)
Book value.
D)
Replacement cost.
E)
Historical cost.
98)
The depreciation method that charges the same amount of expense to each period of the asset’s
useful life is called:
A)
Units-of-production depreciation.
B)
Modified accelerated cost recovery system (MACRS) depreciation.
C)
Accelerated depreciation.
D)
Declining-balance depreciation.
E)
Straight-line depreciation.
99)
The depreciation method that allocates an equal portion of the total depreciable cost for a plant
asset to each unit produced is called:
A)
Accelerated depreciation.
B)
Modified accelerated cost recovery system (MACRS) depreciation.
C)
Units-of-production depreciation.
D)
Straight-line depreciation.
E)
Declining-balance depreciation.
100)
The depreciation method in which a plant asset’s depreciation expense for a period is determined
by applying a constant depreciation rate to the asset’s beginning-of-period book value is called:
A)
Units-of-production depreciation.
B)
Declining-balance depreciation.
C)
Book value depreciation.
D)
Modified accelerated cost recovery system (MACRS) depreciation.
E)
Straight-line depreciation.
101)
The depreciation method that produces larger depreciation expense during the early years of an
asset’s life and smaller expense in the later years is a(an):
A)
Unrealized depreciation method.
B)
Accelerated depreciation method.
C)
Straight-line depreciation method.
D)
Book value depreciation method.
E)
Units–of-production depreciation method.
102)
A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1,
Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much
depreciation expense should the company recognize on December 31, Year 1?
A) $1,667. B) $1,400. C) $2,067. D) $1,250. E) $5,000.
103)
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a
useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the
second year of its useful life using the double-declining-balance method?
A) $600. B) $680. C) $480. D) $544. E) $300.
104)
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a
useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the
first year of its useful life using the double-declining-balance method?
A) $2,320. B) $680. C) $300. D) $600. E) $2,720.
105)
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a
useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at
the end of the second year of its useful life using the double-declining-balance method?
A) $544. B) $1,200. C) $1,224. D) $600. E) $2,176.
106)
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a
useful life of 10 years and a salvage value of $400. What would be the book value of the asset at
the end of the first year of its useful life using the double-declining-balance method?
A) $2,320. B) $680. C) $2,720. D) $300. E) $600.
107)
A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years
and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of
woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year,
production increased to 19,000 units. Using the units-of-production method, what is the amount of
depreciation expense that should be recorded for the second year?
A) $22,500. B) $48,133. C) $23,750. D) $81,600. E) $45,600.
108)
A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years
and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of
woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year,
production increased to 19,000 units. Using the units-of-production method, what is the amount of
accumulated depreciation at the end of the second year?
A) $48,133. B) $23,750. C) $86,133. D) $45,600. E) $81,600.
109)
A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years
and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of
woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year,
production increased to 19,000 units. Using the units-of-production method, what is the book value
of the machine at the end of the second year?
A) $81,600. B) $190,000. C) $180,000. D) $144,400. E) $108,400.
110)
Revenue expenditures:
A)
Are debited to asset accounts when incurred.
B)
Extend the asset’s useful life.
C)
Are additional costs of plant assets that do not materially increase the asset’s life or its
productive capabilities.
D)
Are known as balance sheet expenditures because they relate to plant assets.
E)
Substantially benefit future periods.
111)
Another name for a capital expenditure is:
A)
Long-term expenditure.
B)
Balance sheet expenditure.
C)
Contributed capital expenditure.
D)
Asset expenditure.
E)
Revenue expenditure.
112)
To capitalize an expenditure is to:
A)
Debit an expense account.
B)
Credit an expense account.
C)
Debit an asset account.
D)
Credit an asset account.
E)
Credit the owner’s capital account.
113)
Extraordinary repairs:
A)
Are revenue expenditures.
B)
Are expensed when incurred.
C)
Extend the useful life of an asset beyond its original estimate.
D)
Are additional costs of plants assets that do not materially increase the asset’s life.
E)
Are credited to accumulated depreciation.
114)
Which of the following is an example of an extraordinary repair?
A)
Replacement of all florescent light tubes in an office.
B)
Carpet cleaning and repair.
C)
Routine machine maintenance.
D)
Replacing the roof on a manufacturing warehouse.
E)
New tires for a truck.
115)
Ordinary repairs meet all of the following criteria except:
A)
Are necessary if an asset is to perform to expectations over its useful life.
B)
Include cleaning, lubricating, and normal adjusting.
C)
Extend the useful life of an asset beyond its original estimate.
D)
Are treated as expenses.
E)
Are expenditures to keep an asset in normal operating condition.
116)
Betterments are:
A)
Revenue expenditures.
B)
Expenditures making a plant asset more efficient or productive.
C)
Credited against the asset account when incurred.
D)
Also called ordinary repairs.
E)
Always increase an asset’s life.
117)
An asset’s book value is $18,000 on December 31, Year 5. The asset has been depreciated at an
annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31,
Year 5 for $15,000, the company should record:
A)
Neither a gain nor a loss is recognized on this transaction.
B)
A loss on sale of $3,000.
C)
A gain on sale of $3,000.
D)
A loss on sale of $12,000.
E)
A gain on sale of $12,000.
118)
Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company
sells the equipment for cash of $42,000. At the time of sale, the company should record:
A)
A gain on sale of $2,000.
B)
A loss on sale of $45,000.
C)
A loss on sale of $5,000.
D)
A loss on sale of $2,000.
E)
A gain on sale of $5,000.
119)
Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The
company sells the machinery for cash of $42,000. The journal entry to record the sale would
include:
A)
A debit to Accumulated Depreciation of $47,000.
B)
A credit to Accumulated Depreciation of $40,000.
C)
A debit to Cash of $42,000.
D)
A credit to Gain on Sale of $2,000.
E)
A credit to Machinery of $47,000.
120)
An asset’s book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per
month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the
company should record:
A)
A loss on sale of $2,000.
B)
A loss on sale of $1,000.
C)
Neither a gain or loss is recognized on this type of transaction.
D)
A gain on sale of $1,000.
E)
A gain on sale of $2,000.
121)
Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is
estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line
depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to
record the sale will include a:
A)
Debit to accumulated depreciation for $22,500.
B)
Credit to loss on sale for $10,000.
C)
Credit to cash for $20,000.
D)
Debit to loss on sale for $10,000.
E)
Debit to gain on sale for $2,500.