Accounting chapter 8

PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should record the cost of the land for: Multiple choice question. 1. $ 215,000 2. $200,000 3. $235,000 4. $250,000

Answer; 250,000 $215,000 Reason: 200,000+15,000+35,000=250,000 $200,000 Reason: 200,000+15,000+35,000=250,000 $235,000 Reason: 200,000+15,000+35,000=250,000

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method. $2,600 $2,300 $2,000

$2,000

Nimo Co. purchased a machine for $12,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

$4,800 12,000 x [100%/5)x2]

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $. _________

$495,000

On January 24, Bora Co. purchased a delivery van for $22,000. Bora expects to drive the van for approximately 5 years or 100,000 miles, before disposing of it for an estimated salvage value of $2,000. During the first year, Bora drives the van for 18,000 miles. How much would depreciation expense be if Bora uses the units-of-production depreciation method? Multiple choice question:. $4,000 $3,960

(22,000-2,000)/100,000 x 18,000=3600 $3,600

Straight-line depreciation can be calculated by taking: Multiple choice question. (cost minus salvage value)/productive life (cost plus salvage value)/productive life (cost plus salvage value)/useful life (cost minus salvage value)/useful life

(cost minus salvage value)/useful life

Digg Co. installs a manufacturing machine in its factory at the beginning of the year at a cost of $36,000. The machine's useful life is estimated at 10 years, or 300,000 units of product, with a $6,000 salvage value. During its first year, the machine produces 14,000 units of product. Determine the machine's first year depreciation expense under the units-of-production method. Multiple choice question. $3,000 $3,600 $1,680 $1,400

1400

Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the can for two years at a straight-line amount for $4,000 per year. The book value of this van at the end of the second year would be $__________.

17000

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at: Multiple choice question. 1. $200,000 2. $220,000 3. $215,000 4. $235,000

4. 235,000 15,000 + 20,000 = 35,000 35,000+ 200,000= 235,000

The purchase of multiple plant assets for one purchase price is called a ______ purchase. Multiple choice question. 1. betterment 2. extraordinary 4. fixed-rate 5. lump-sum

5. lump-sum

On January 2, Dice Co. purchases a mixing machine for $25,500. The machine is expected to last four years and have a salvage value of $5,500. Assuming the company uses the straight-line method, depreciation expense should be $__________per year.

5000

True or false: The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation True false

Answer : False True Reason: Costs should not include repairs to damages or errors incurred after installation.

The factors necessary to compute depreciation include all of the following, except: Multiple choice question. book value. cost. salvage value. useful life.

Answer: Book Value

______ is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use.

Deprecation

Which of the following items related to depreciating equipment would be found on a company's income statement?

Depreciation Expense - Equipment

Which of the following items related to depreciating equipment would be found on a company's income statement? Multiple choice question. Depreciation Expense - Equipment Equipment Accumulated Depreciation - Equipment Net Book Value

Depreciation Expense - Equipment

Modified Accelerated Cost Recovery System is ________ acceptable for financial reporting purposes.

NOT

The cost of a plant asset includes the following: Multiple select question. Depreciation expense Disposal cost Purchase price Cost to prepare it for use

Purchase price Cost to prepare it for use

Fill in the blanks to complete the sentence. _____________value, also called residual value or scrap value, is an estimate of the asset's value at the end of its benefit period

Salvage

True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and prepare it for its intended use. True false question. True False

True

True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and prepare it for its intended use. True false question. True false

True

Book value can be calculated by taking an asset's acquisition costs less its .______________ __________________

accumulated depreciation

The asset's acquisition costs less its accumulated depreciation is called: Multiple choice question. accumulated deprecation market value book value resale value

book value

Accumulated depreciation is a ___________ asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

contra

Consistent with the ________ principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. Multiple choice question. plant asset cost monetary unit full disclosure

cost

The factors necessary to compute depreciation include (cost/selling price/market value) _________________, salvage value and useful life

cost

Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the ________ depreciation method. Multiple choice question. units-of-production declining-balance straight-line

declining- balance

The depreciation method that determines the depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is known as the __________ method. Multiple choice question. declining-balance straight-line units-of-production

declining-balance

A permanent decline in the fair value of an asset relative to its book value is called asset ____________.

impairment

A(n) _________ is a permanent decline in the market value of an asset relative to its book value. Multiple choice question. impairment obsolescence betterment inadequacy

impairment

The inability of a company's plant assets to meet its demands is called: Multiple choice question. obsolescence salvage scrap inadequacy

inadeqacy

Multiple Choice Question The term ______ refers to a plant asset that is in process of becoming outdated and no longer used. Multiple choice question. inadequacy scrap obsolescence salvage

obsolescence

True or false: The book value of an asset when using straight-line depreciation is always greater than the book value from using double-declining-balance, except at the beginning and end of the asset's useful life, when it is the same. True false question. True False

true

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the ________ depreciation method. Multiple choice question. units-of-production MACRS straight-line declining-balance

units-of-production

he method of depreciation that charges a varying amount to depreciation expense for each period of an asset's useful life depending on its usage is called the _________ method. Multiple choice question. MACRS units-of-production straight-line declining-balance

units-of-production

The ______ life of a plant asset is the length of time it is productively used in a company's operations Multiple choice question. productive obsolescence total useful

useful

Consistent with the ________ principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. Multiple choice question. 1. cost 2. monetary unit 3. full disclosure 4. plant asset

1. cost

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation at the end of the period? Multiple choice question. $25,000 $12,000 $37,000 $13,000

25,000-12,000 =13,000

Select all that apply The cost of a plant asset includes the following: Multiple select question. 1. Disposal cost 2. Cost to prepare it for use 3. Depreciation expense 4. Purchase price

Answer 2. Cost to prepare it for use 4. Purchase price 1. Disposal cost Reason: The cost of a plant asset includes all necessary and reasonable expenditures to acquire it and prepare it for its intended use. 3. Depreciation expense Reason: The cost of a plant asset includes all necessary and reasonable expenditures to acquire it and prepare it for its intended use. Depreciation expense is the allocation of the cost of an asset over its expected useful life.

Accumulated depreciation is recorded on which of the following financial statements? Multiple choice question. Balance sheet Statement of cash flows Income statement Statement of retained earnings

Balance sheet

Straight-line depreciation is calculated by taking cost minus (salvage/market) _______________value divided by useful life. Listen to the complete question

Salvage

______ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its benefit period. Multiple choice question. Useful Leftover Obsolescence Salvage

Salvage

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.) Multiple select question. Testing Repairs necessary for damages incurred during installation Fines incurred for failing to get the correct permits Assembling Shipping charges

Testing Assembling shipping charges

The ______ life of a plant asset is the length of time it is productively used in a company's operations Multiple choice question. obsolescence productive useful total

Useful

The _________ life (also called service life) is the length of time the asset is productively used in a company's operations.

Useful

Depreciation Expense is reported on which of the following financial statements? Multiple choice question. Income statement Statement of cash flows Statement of retained earnings Balance sheet

income statement

Accumulated depreciation is recorded on which of the following financial statements? Multiple choice question. Statement of cash flows Balance sheet Statement of retained earnings Income statement

balance sheet