Ch 8

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

350,000

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 for taxes 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

Which of the following situations will result in recognizing a gain on sale of a plant asset?

A fully depreciated asset is sold for $1,000

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

Depreciation Expense is reported on which of the following financial statements?

Income statement

(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.

Plant

The factors necessary to compute depreciation include all of the following, except:

book value

Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset except:

damage done when unpacking the plant asset

________ is the process of allocating the cost of a plant asset to expense while it is in use.

depreciation

Land _________ are assets that are additions to land and have limited useful lives, such as walkways and fences.

improvements

Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:

land improvements

book value is greater than the selling price

loss on sale of asset

book value is less than the selling price

loss on sale of asset

The purchase of a group of plant assets for one price is called a ______ purchase.

lump-sum

book value is equal to the selling price

no gain or loss recognized

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

plant

Straight-line depreciation is calculated by taking cost minus (salvage/market) ________ value divided by useful life.

salvage

The method of depreciation that charges a varying amount to depreciation expense for each period depending on its usage is called the _________ method.

units-of-production

Ion Co. purchased land for $190,000. Ion also paid $5,000 in real estate commissions, $1,000 in legal fees, and $500 in title insurance fees. Ion should record the cost of this land at:

$196,500

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

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

Which of the following items are plant assets?

- Equipment being used in operations - Building being used for operations

Which of the following factors determine depreciation?

-Cost of asset -useful life -salvage value

The cost at which a company records purchases of machinery and equipment should include which of the following?

-Installation -Shipping fees -Taxes -Purchase price

PT Co. purchased land and an existing building for $200,000. In addition, PT paid real estate commissions of $15,000. PT removed the unwanted building and graded the land for a total cost of $35,000. PT should record the cost of the land at:

250,000

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for three years with a $2,000 salvage value. It expects to produce a total of 8,000 units as follows: 3,000 during year one; 2,500 during year two; and 2,500 during year three. Using the units-of-production depreciation method, compute the machine's first year depreciation expense

3,000

Bina Co. purchased a machine on January 1st for $15,000 and estimates it will use the machine for three years with a $3,000 salvage value. Bina estimates that they will produce 1,500 units during year one, 1,000 units during year two, and 1,250 units during year three. Using the units-of-production method, compute the machine's second year depreciation expense.

3,200