2004 Fall Accounting_011_final_exam_Fall_2004_Answers

2004 Fall Accounting_011_final_exam_Fall_2004_Answers -...

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Temple University Fox School of Business and Management Dr. Steven Balsam Accounting 011 Final Exam December 15, 2004 Instructions: You have 120 minutes. Answer the questions on the pages provided and please remember to show all work so that you may receive partial credit. Also please put your name on each page in case the pages get separated. Good luck!
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Name _____________________________ 1. Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The cost of the Holiday Hotel should be a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b. written off as an extraordinary loss in the year the hotel is torn down. c. capitalized as part of the cost of the land. d. capitalized as part of the cost of the new hotel. 2. Rich Co. exchanged merchandise that cost $24,000 and normally sold for $36,000 for a new delivery truck with a list price of $40,000. The delivery truck should be recorded on Rich' books at a. $24,000. b. $30,000. c. $36,000. d. $40,000. 3. When a plant asset is acquired by issuance of common stock, the cost of the plant asset is properly measured by the a. par value of the stock. b. stated value of the stock. c. book value of the stock. d. market value of the stock. 4. A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at a. the nominal cost of taking title to it. b. its market value. c. one dollar (since the site cost nothing but should be included in the balance sheet). d. the value assigned to it by the company's directors. 5. An improvement made to a machine increased its fair market value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be a. expensed. b. debited to accumulated depreciation. c. capitalized in the machine account. d. allocated between accumulated depreciation and the machine account. 6. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were a. less than current market value. b. greater than cost. c. greater than book value. d. less than book value. 2
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Name _____________________________ Use the following information for questions 7 and 8. Equipment that cost $55,000 and has accumulated depreciation of $25,000 is exchanged for similar equipment with a fair value of $40,000 and $10,000 cash is received. 7. The gain to be recognized from the exchange is a. $4,000 gain. b. $5,000 gain. c. $15,000 gain. d. $20,000 gain. Book value is now 30,000 (55,000 cost less 25,000 accumulated depreciation) Total gain on exchange (recognized plus unrecognized) is 20,000 (50,000 received in equipment and cash less 30,000 book value) Gain recognized is calculated multiplying the ratio of cash received/total value received which is 10,000/50,000 by the 20,000 gain. 8.
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2004 Fall Accounting_011_final_exam_Fall_2004_Answers -...

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