431648961-Investment.pdf - Chapter 12u2014Investments in...

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Chapter 12—Investments in Noncurrent Operating Assets-AcquisitionMULTIPLE CHOICE 1.Kramer Service Corporation bought a building lot to construct a new corporate office building. An older home on the building lot was razed immediately so that the office building could be constructed. The cost of purchasing the older home should be a.recorded as part of the cost of the land.b.written off as a loss in the year of purchase.c.written off as an extraordinary item in the year of purchase.Cd.recorded as part of the cost of the new building.ANS:AOBJ:LO 1 2.The term "intangible assets" is used in accounting to denote OBJ:LO 1 3.Which of the following intangible assets does nothave the characteristic of exchangeability? OBJ:LO 1 4.In a business combination, goodwill is defined as the excess of cost over the OBJ:LO 1 5.Goodwill should be recorded in the accounting records only when a.it is purchased from another company.b.it can be established that a definite benefit or advantage has resulted to a firm from some item such as a good name, capable staff, or reputation.c.it is acquired through the purchase of another business entity.d.a firm reports above normal earnings for five or more consecutive years.OBJ:LO 1510 15 20 25 30
6.Donated equipment for which the fair value has been determined should be recorded as a debit to the appropriate equipment account and a credit to OBJ:LO 2 7.Lakepoint Company recently accepted a donation of land with a fair value of $200,000 from the city of Dale in return for a promise to build a plant in Dale.The entry that Lakepoint should use to record this land is: OBJ: LO 2

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