ACT I Exam III Review

ACT I Exam III Review - 1. Adams Company purchased a tract...

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1. Adams Company purchased a tract of land, an office building, and some manufacturing equipment for $775,000. The appraised value of the land, building, and equipment were $373,100, $427,700, and $109,200, respectively. What was the debit to the Building account to record the purchase? A. $427,700 B. $303,333 C. $258,333 D. $364,250 2. When a firm buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land: A. any of the purchase cost allocated to the old building is reported as a loss. B. the cost assigned to the land excludes the cost of the old building. C. the total cost of the land and old building are capitalized as land cost. D. any of the purchase cost allocated to the old building is capitalized as part of the cost of the new building. E. any of the above are generally acceptable accounting alternatives. 3. In 20X7, Mountain Ore, Inc., paid $8,250,000 for land with an estimated 600,000 tons of ore. Mountain Ore plans to sell the land for $300,000 when all of the ore has been extracted. In 20X7, 24,000 tons of ore were mined and sold. What is depletion expense for the year? A. $318,000 B. $330,000 C. $300,000 D. $325,000 4. Speedy Deliveries Services owns and operates a fleet of delivery vehicles. Which of these is (are) considered to an ordinary repair by Speedy? A. Major engine overhaul. B. Replace dead battery. C. Add hydraulic lift to back of truck. D. Both B and C are ordinary repairs. 5. Which of the following statements is false? A. Land is never depreciated. B. An asset’s residual value and useful life must be estimated in order to compute depreciation. C. At the end of its useful life, the remaining book value of an asset will always equal its fair market value. D. The units-of-production method is most appropriate for an asset that wears out due to physical use. 6. Which of the following is (are) accounted for as intangible assets? A. Land improvements
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B. Goodwill C. Research and development D. All of the above are intangible assets. 7. Expenditures capitalized as noncurrent assets generally include those expenditures that: A. are made for normal repairs to maintain the usefulness of the asset over a number of years. B. are for items that have a physical life of more than a year, regardless of their cost. C. are material and that have an economic benefit to the entity only in the current year. D. are material and that have an economic benefit to the entity that extends beyond the current year. E. are immaterial. 8. Which of these is a true statement? A. Straight-line depreciation is most often used for tax purposes. B. The units-of-production method results in lower depreciation and therefore higher net income in the years when an asset is more productive.
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ACT I Exam III Review - 1. Adams Company purchased a tract...

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