ach_test_5 - Achievement Test 5 Chapters 9 and 10 Financial...

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Achievement Test 5: Chapters 9 and 10 Name _________________________ Financial Accounting Instructor ______________________ Section # _______ Date _________ Part I II III IV V V Total Points 34 6 16 16 10 18 100 Score PART I — MULTIPLE CHOICE (32 points) Instructions Designate the best answer for each of the following questions. Use the following data for questions 1 and 2 below: Carlo Company bought real estate, on which there was an old office building, for $900,000. They paid $90,000 in cash as a down payment and signed a 6% mortgage for the remainder. They immediately had the old building razed at a net cost of $30,000, the salvaged materials were sold for $4,200. Attorneys were paid $7,000 in connection with the land purchase and an additional $3,000 in connection with permits and zoning variances necessary for Carlo's new office building. $25,000 was paid for excavation for the basement of the new building. $2,100,000 was paid for construction of the new building, and $95,000 was paid for a parking lot and necessary walkways and driveways. ____ 1. The new office building should be recorded at a. $2,100,000. b. $2,128,000. c. $2,125,000. d. $2,100,000. ____ 2. Land should be recorded at a cost of a. $932,800. b. $937,000. c. $935.800. d. $960,800. ____ 3. Martin Textile purchased machinery for $50,000 eight years ago. It was expected to have a useful life of ten years, no salvage value, and was depreciated using the straight-line method. At the end of its eighth year of use it was retired from service and given to a junk dealer. The entry to record the retirement includes a a. debit to Loss on Disposal for $10,000. b. debit to Machinery for $50,000. c. debit to Depreciation Expense for $10,000. d. credit to Accumulated Depreciation—Machinery for $40,000.
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Test Bank for Financial Accounting: Tools for Business Decision Making, Fourth Edition AT5-2 ____ 4. Which of the following should not be included in the plant assets (property, plant, and equipment) classification? a. Land on which warehouse sits b. Building housing corporate headquarters c. Parking lot used by visitors d. Land held for investment. ____ 5. Salvage value is deducted for the initial computation of depreciation expense in all of the following methods with the exception of a. straight-line. b. units-of-activity. c. declining-balance. d. All of the above include a deduction of salvage value. ____ 6. The cost of a patent should be amortized over a. 40 years. b. the shorter of its legal life or its useful life. c. the longer of its legal life or its useful life. d. its useful life. ____ 7. On July 1, 2007, Low Enterprises sold equipment with an original cost of $85,000 for $40,000. The equipment was purchased January 1, 2006, and was depreciated using the straight-line method assuming a five year useful life and $5,000 salvage value. The necessary entries for 2007 include a
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ach_test_5 - Achievement Test 5 Chapters 9 and 10 Financial...

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