Achievement Test 5: Chapters 9 and 10
_______ Date _________
PART I — MULTIPLE CHOICE
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.
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
____ 1. The new office building should be recorded at
____ 2. Land should be recorded at a cost of
____ 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
debit to Loss on Disposal for $10,000.
debit to Machinery for $50,000.
debit to Depreciation Expense for $10,000.
credit to Accumulated Depreciation—Machinery for $40,000.