EXM3XCompPractExamMC - 1. A company purchased land for...

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1. A company purchased land for $72,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at a. $79,000. b. $72,000. c. $77,000. d. $84,000. 2. Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures 3. Topper Clinic purchases land for $95,000 cash. The Clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Topper Clinic record as the cost for the land? a. $97,200 b. $95,000 c. $99,700 d. $97,500 4. Interest may be included in the acquisition cost of a plant asset a. during the construction period of a self-constructed asset. b. if the asset is purchased on credit. c. if the asset acquisition is financed by a long-term note payable. d. if it is a part of a lump-sum purchase. 5. The book value of an asset is equal to the a. asset's market value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset's cost less accumulated depreciation. 6. Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation.
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7. Equipment was purchased for $17,000. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be a. $3,940. b. $3,340. c. $2,860. d. $2,800. 8. A change in the estimated useful life of equipment requires a. a retroactive change in the amount of periodic depreciation recognized in previous years. b. that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. c. that the amount of periodic depreciation be changed in the current year and in future years. d. that income for the current year be increased. 9. Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally a. expensed when incurred. b. capitalized as a part of the cost of the asset. c. debited to the Accumulated Depreciation account. d. not recorded until they become material in amount. 10. A gain or loss on disposal of a plant asset is determined by comparing the a. replacement cost of the asset with the asset's original cost. b. book value of the asset with the asset's original cost. c. original cost of the asset with the proceeds received from its
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This note was uploaded on 02/25/2010 for the course ACCT 300A taught by Professor Bob during the Spring '10 term at University of Arizona- Tucson.

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EXM3XCompPractExamMC - 1. A company purchased land for...

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