module 5.docx - Homework 1 Question 1 0.375 out of 0.5 points Classify each of the items below according to the section of a firm's financial statements

module 5.docx - Homework 1 Question 1 0.375 out of 0.5...

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Homework 1 Question 1 0.375 out of 0.5 points Classify each of the items below according to the section of a firm's financial statements in which it would be reported. Some sections may be used more than once. Some may not be used at all. Current Assets Current Liabilities Long-term Assets Long-term Liabilities Common Stock Question Correct Match Selected Match Copyrights B. Long-term Assets A. Current Assets Notes Payable (due in 2 years) D. Long-term Liabilities D. Long-term Liabilities Equipment (Net of Accumulated Depreciation) B. Long-term Assets B. Long-term Assets Depreciation Expense F. Expenses F. Expenses All Answer Choices A. Current Assets B. Long-term Assets C. Current Liabilities D. Long-term Liabilities E. Common Stock F. Expenses G. Revenues Response Feedback: See Module 5, LO 1 Copyrights , Long-term (Noncurrent) Assets, are resources that will be
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used for more than one year. Notes Payable (due in 2 years), Long-term Liabilities, are obligations that will not be satisfied within the year. Equipment (Net of Accumulated Depreciation) , Long-term (Noncurrent or Fixed) Assets, is a resource that will be used for more than one year. Depreciation Expense is an expense on the income statement that reports the amount of usefulness used of Long-term assets. Question 2 0.5 out of 0.5 points Basket Cases, Inc., purchased land and two buildings at a total cost of $380,000. To the right of the appraised values below, show the amount Basket Cases should record as the cost for each of the assets purchased: Fair Market Values Land Building 1 Building 2 Question Correct Match Selected Match Land L. $95,000 L. $95,000 Building 1 F. $152,000 F. $152,000 Building 2 I. $133,000 I. $133,000 All Answer Choices A. $400,000 B. $380,000 C. $200,000 D. $168,000 E. $160,000 F. $152,000
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G. $147,000 H. $140,000 I. $133,000 J. $105,000 K. $100,000 L. $95,000 M. $80,000 Response Feedback: See Module 5, LO 1.1 Basket Purchase Allocations. The cost will be split based on each asset's fair market value at the time of purchase. The fair market value of each of the assets purchased together is divided by the sum of all of the assets' fair market values to arrive at a percent. This percent is then multiplied by the total cost to get the asset's individual cost. Land: ($100,000/$400,000) x $380,000 = 25% x $380,000 = $95,000 Building 1: ($160,000/$400,000) x $380,000 = 40% x $380,000 = $152,000 Building 2: ($140,000/$400,000) x $380,000 = 35% x $380,000 = $133,000 The entry to record the purchase will include debits to Land for $95,000 (+A) and Buildings for $285,000 (+A) and a credit to Cash (-A) for $380,000. Question 3 0.5 out of 0.5 points A capital expenditure _________. Selected Answer: is debited to a long-term asset account Answers: records additional capital is debited to a long-term asset account is expensed immediately is credited to a Shareholders' Equity account more than one of these is correct
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Response Feedback: See Module 5 LO2 An expenditure that will benefit more than one accounting period is a capital expenditure. Capitalizing a cost means the cost is recorded as an asset on the balance sheet rather than as an expense on the income statement . Costs that are capitalized include all costs to get the asset in place ready for its intended use. They include transportation costs, installation costs, architect and attorney fees,
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