CHAPTER 8 ACCOUNTING

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:

$235,000

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:

$350,000.

Which of the following are plant assets

- building used for operations - equipment being used for operations

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?

13000

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

1400

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?

17000

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

17000

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

1850

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 $

495000

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero salvage value. How much is accumulated depreciation at the end of the year?

6000

_______ assets are assets used in a company's operations that have a useful life of more than one accounting period.

Blank 1: Plant or Fixed

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.

COST

A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries? (Check all that apply.)

Debit to Cash for $500. Credit to Machinery for $7,000. Debit to Accumulated Depreciation - Machinery for $6,500.

Determine which of the following expenses are considered revenue expenditures related to a company vehicle. (Check all that apply.)

Dent repair Oil change Car wash

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

FALSE

The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.)

Installation Shipping fees Taxes Purchase price

Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called:

LAND IMPROVEMENTS

The asset's acquisition costs less its accumulated depreciation is called

book value

Depreciation expense is reported as a decrease in which of the following financial statements?

income statement

Debit to Cash for $500. Credit to Machinery for $7,000. Debit to Accumulated Depreciation - Machinery for $6,500.

machinery