Accounting Chapter 8 Quiz

Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500. What is the cost of the land?

$282,200

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. What amount will Norwood, Inc. report as depreciation expense over the 8-year life of the equipment?

$75,000

A company should choose a depreciation method that

best allocates the original cost of the asset to the periods benefited by the use of the asset.

Goodwill can be recorded as an asset when a(n)

business is purchased and payment is made in excess of the value of the net assets.

If a company constructs an asset over a period of time and borrows money, the amount of interest incurred during construction on the borrowed money is

capitalized as part of the cost of the plant asset.

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry:

debit Accumulated Depreciation; credit Machinery

The effect of recording depreciation for the year is a(n)

decrease in assets and a decrease in net income.

Operating assets with no physical properties are called

intangible assets

All of the following are included in the acquisition cost of property, plant, and equipment except:

maintenance costs

Which of the following below is an example of a capital expenditure?

replacing an engine in a company car

When constructing assets, capitalized interest is based on

the average accumulated expenditures.

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

A building with an appraisal value of $250,000 is made available at an offer price of $180,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $65,000, and a mortgage amounting to $63,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

$163,000

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. If Norwood uses the straight-line method, what is the book value at December 31, 2018?

$51,875

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Depreciation Expense—Buildings

On January 2, 2016, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Loss of $2,000

Which statement is true concerning operating assets?

Operating assets are used over two or more periods to generate revenues.

Which of the following costs related to the purchase of production equipment incurred by Newark Company during 2016 would be considered a revenue expenditure?

Repair and maintenance costs during the equipment's first year of service

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

The estimated life of the asset, its acquisition cost, and its estimated residual value

A gain is recognized on the disposal of plant assets when:

The sales price is greater than the book value and greater than the residual value.

All of the following are intangible assets except

accounts receivable

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

Assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition.

Newco Publishing Company purchased equipment at the beginning of 2016 for $200,000. The company decided to depreciate the equipment over an 8-year period using the straight-line method. The company estimated the equipment's residual value at $20,000. The journal entry to record depreciation expense for 2016 will

increase Depreciation Expense and increase Accumulated Depreciation for $22,500.

Land is not depreciated because it

will provide future benefits for a company for an unlimited period of time.