Chapter 10 Accounting Practice Test

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking area cost $25,000. Which of the following statements is true with respect to these additions? $40,000 should be debited to the Land account. $25,000 should be debited to Land Improvements. $65,000 should be debited to the Land account. $65,000 should be debited to Land Improvements.

$65,000 should be debited to Land Improvements.

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is 40%. 25%. 20%. 5%.

40%.

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets? Cost Cash needed to replace the plant asset Salvage value Estimated useful life

Cash needed to replace the plant asset

Which of the following assets does not decline in service potential over the course of its useful life? Fixtures Land Furnishings Equipment

Land

If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized. True False

True

Natural resources are long-lived productive assets that are extracted in operations and are replaceable only by an act of nature. True False

True

Natural resources include standing timber and underground deposits of oil, gas, and minerals. True False

True

Salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation. True False

True

Under the double-declining-balance method, the depreciation rate used each year remains constant. True False

True

The cost of a purchased building includes all of the following except real estate broker's commission. remodeling costs. all of these are included. closing costs.

all of these are included

The balance in the Accumulated Depreciation account represents the... amount to be deducted from the cost of the plant asset to arrive at its fair market value. amount charged to expense in the current period. amount charged to expense since the acquisition of the plant asset. cash fund to be used to replace plant assets.

amount charged to expense since the acquisition of the plant asset.

In computing depreciation, salvage value is... subtracted from accumulated depreciation to determine the plant asset's depreciable cost. an estimate of a plant asset's value at the end of its useful life. ignored in all the depreciation methods. the fair value of a plant asset on the date of acquisition.

an estimate of a plant asset's value at the end of its useful life.

The units-of-activity method is generally not suitable for factory machinery. buildings. airplanes. delivery equipment.

buildings.

The four subdivisions for plant assets are... land, land improvements, buildings, and equipment. intangibles, land, buildings, and equipment. property, plant, equipment, and land. furnishings and fixtures, land, buildings, and equipment.

land, land improvements, buildings, and equipment.

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is none of these. straight-line. declining-balance. units-of-activity.

straight-line.