231TEST4sampleexam - Name _ 1. A company purchased land for...

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Name _________________________ 1. A company purchased land for $70,000 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. $77,000. b. $70,000. c. $75,000. d. $82,000. 2. The cost of land does not include a. real estate brokers' commission. b. annual property taxes. c. accrued property taxes assumed by the purchaser. d. title fees. 3. All leases are classified as either a. capital leases or long-term leases. b. capital leases or operating leases. c. operating leases or current leases, d. long-term leases or current leases. 4. Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets? a. Salvage value b. Estimated useful life c. Cash needed to replace the plant asset d. Cost 5. Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation. 6. Recording depreciation each period is necessary in accordance with the a. going concern principle. b. cost principle. c. matching principle. d. asset valuation principle. 7. In computing depreciation, salvage value is a. the fair market value of a plant asset on the date of acquisition. b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. c. an estimate of a plant asset's value at the end of its useful life. d. ignored in all the depreciation methods.
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--Page 2 8. Equipment was purchased for $15,000. 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. $3,540. b. $2,940. c. $2,460. d. $2,400. 9. Equipment with a cost of $160,000 has an estimated salvage value of $10,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? a. $40,000 b. $42,500 c. $41,250 d. $37,500 10. A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value at the end of its useful life. Monthly depreciation expense of $250 was recorded using the straight-line method. The annual depreciation rate is a. 20%. b. 2%. c. 8%. d. 25%. 11. A company purchased factory equipment on April 1, 2000, for $48,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2000, is a. $4,800. b. $4,200.
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This note was uploaded on 06/06/2011 for the course ACC 231 taught by Professor - during the Fall '10 term at Sam Houston State University.

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231TEST4sampleexam - Name _ 1. A company purchased land for...

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