Accounting 2511-Spring 2008 - final exam - answers

Accounting 2511-Spring 2008 - final exam - answers - Temple...

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Temple University Fox School of Business and Management Dr. Steven Balsam Accounting 2511 Final Exam-Answer Key May 8, 2008 Instructions: You have 150 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 ________________________________ Multiple Choice – 2 points each 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. Which of the following costs are capitalized for self-constructed assets? A) Materials and labor only B) Labor and overhead only C) Materials and overhead only D) Materials, labor, and overhead 3. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to A) the total interest cost actually incurred. B) a cost of capital charge for stockholders' equity. C) that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. D) that portion of average accumulated expenditures on which no interest cost was incurred. 4. When an enterprise is the recipient of a donated asset, the account credited may be a A) paid-in capital account. B) revenue account. C) deferred revenue account. D) all of these. 5. 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. 2
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Name ________________________________ 6. 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. 7. On February 1, 2007, Morgan Corporation purchased a parcel of land as a factory site for $200,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2007. Costs incurred during this period are listed below: Demolition of old building $ 20,000 Architect's fees 35,000 Legal fees for title investigation and purchase contract 5,000 Construction costs 1,090,000 (Salvaged materials resulting from demolition were sold for $10,000.) Morgan should record the cost of the land and new building, respectively, as
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Accounting 2511-Spring 2008 - final exam - answers - Temple...

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