Chapter 7 Accounting Questions
Acme purchased a property that included both land and a building for $200,000. Acme hired an appraiser who determined that the market value of the land was $140,000 and the market value of the building was $50,000. At what amount should Acme record the building cost? A) $147,368 B) $52,632 C) $200,000 D) $140,000
A
An asset was purchased for $12,000. The asset's estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $3,000 at the end of the fifth year? A) $1,000 gain B) $2,000 loss C) No gain or loss D) $1,000 loss
A
Papa's Pizza has the following items for the past year: Net sales are $24,128, net income is $2,223, total assets at the beginning of year are $14,898, and total assets at the end of year are $15,465. What is the profit margin? 9.2% 61.7% 14.6% 14.9%
A
Which of the following is included in the cost of a plant asset? A) Amounts paid to ready the asset for its intended use B) Regular maintenance cost C) Normal repair cost D) Wages of workers who use the asset
A
Which of the following would be capitalized and depreciated, rather than expensed? A) Modification for new use B) Paint job C) Replacement of tires D) Normal repair of engine
A
Which of the following would be expensed, rather than capitalized? A) Oil change and lubrication B) Major engine overhaul C) Modification for new use D) Addition to storage capacity
A
A company purchased a used machine for $80,000. The machine required installation costs of $8,000 and insurance while in transit of $500. At which of the following amounts would the equipment be recorded? A) $80,500 B) $88,500 C) $88,000 D) $80,000
B
Acme purchased a property that included both land and a building for $200,000. Acme hired an appraiser who determined that the market value of the land was $140,000 and the market value of the building was $50,000. At what amount should Acme record the building cost? A) $147,368 B) $52,632 C) $200,000 D) $140,000
B
An asset costs $80,000 and has a salvage value of $7,000. It has a four-year life. Using double-declining-balance depreciation, Year 1 depreciation would be: A) $20,000. B) $40,000. C) $18,250. D) $36,500.
B
How much depreciation should be recorded for the first year for a delivery truck with a cost of $30,000, an expected life of six years, and an estimated residual value of $6,000? Assume the double-declining-balance method is used. $ 12,000 $ 10,000 $ 8,000 $ 5,000
B
How much depreciation should be recorded in the first year for a delivery truck purchased on April 1 with a cost of $30,000, an expected life of five years, and an estimated residual value of $5,000? Assume the straight-line method is used. $ 5,000 $ 3,750 $ 4,500 $ 6,000
B
If an asset is sold at the end of its first year of use, which depreciation method would result in the highest amount of gain (or lowest amount of loss) assuming the asset is used fairly evenly over its life? Straight-line Double-declining-balance Activity-based Not enough information to determine
B
Lexis Company purchased equipment on January 1, 2012 for $35,500. The estimated useful life of the equipment was 7 years and the estimated residual value was $4,000. After using the straight-line method of depreciation for 3 years, the estimated useful life was revised to 9 years on January 1, 2015. How much is depreciation expense for 2015? A) $2,444 B) $3,000 C) $2,000 D) $3,667
B
On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is depreciation expense for 2014 if the company uses double-declining-balance depreciation? A) $13,333 B) $8,889 C) $6,000 D) $10,000
B
On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is the book value of the machine at the end of 2014 if the company uses straight-line depreciation? A) $10,000 B) $28,000 C) $17,778 D) $20,000
B
Pallmall Company has a truck which was purchased in prior years for $60,000. At the end of 2014, there is $30,000 of accumulated depreciation. The value of the truck has been impaired, and its remaining value is now estimated at $18,000. When Pallmall adjusts for the loss of value, how much will the loss on impairment be? A) $6,000 B) $12,000 C) $18,000 D) $42,000
B
Roberts Construction Company paid $40,000 for equipment with a market value of $45,000. At which of the following amounts should the equipment be recorded? A) $45,000 B) $40,000 C) $42,500 D) $5,000
B
Which of the following accounting principles requires depreciation? A) The revenue recognition principle B) The matching principle C) The reliability principle D) The entity concept
B
Which of the following asset categories would include fencing? A) Machinery and equipment B) Land improvements C) Buildings D) Land
B
Which of the following depreciation methods does NOT use a residual value in the depreciation formula? A) Units-of-production/Activity B) Double-declining-balance C) Straight-line D) First-In, First-Out
B
Which of the following intangible assets would not be subject to amortization? Patents Trademarks with an indefinite life Copyrights Franchises
B
Which of the following is an exclusive right to manufacture a product or to use a process? Trademark Patent Copyright Goodwill
B
A company makes a basket purchase of land, buildings, and equipment with estimated fair values of $70,000, $150,000, and $30,000, respectively. The purchase price is $210,000. How much should be recorded to the Land account? $ 126,000 $ 70,000 $ 58,800 $ 25,200
C
Charterhouse Services purchased a van on January 1, 2012, for $56,000. It has an estimated life of 5 years, and an estimated salvage value of $6,000. Charterhouse uses straight-line depreciation. At the end of 2013, what was the book value of the asset? A) $36,000 B) $30,000 C) $36,000 D) $12,000
C
How is a Building Shown on The Balance Sheet? Historical Cost + Accum Deprec Historical Cost - Accum Deprec At Book Value Both B & C Both A & C
C
How is a Trademark classified? Property, Plant & Equipment Asset Natural Resource Asset Intangible Asset None of the Above
C
Which of the following depreciation methods writes off more depreciation near the start of an asset's life than in later years? A) Activity/Units-of-Production B) Straight-line C) Double-declining-balance D) First-In, First-Out
C
Acme Investments plans to develop a shopping center. In the first quarter, they spent the following amounts: Purchase Land $100,000 Surveys and legal fees 1,200 Land Clearing 5,000 Install fences around the property 4,600 Install lighting & signage 2,600 What amount should be recorded as the land cost? A) $7,200 B) $101,200 C) $46,200 D) $106,200
D
An asset was purchased for $12,000. The asset's estimated useful life was 5 years and its residual value was $2,000. Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for $9,000 at the end of the first year? A) $1,000 gain B) $2,000 loss C) No gain or loss D) $1,000 loss
D
An impairment loss is recorded when: Fair value exceeds book value Book value exceeds fair value Estimated future cash flows exceed book value Book value exceeds estimated future cash flows
D
Lexis Company purchased equipment on January 1, 2012 for $35,500. The estimated useful life of the equipment was 7 years and the estimated residual value was $4,000. After using the straight-line method of depreciation for 3 years, the estimated useful life was revised to 9 years on January 1, 2015. How much is depreciation expense for 2015? A) $2,444 B) $3,000 C) $2,000 D) $3,667
D
Which of the following costs would be expensed? Adding a refrigeration unit to a delivery truck Adding a new suspension system to a delivery truck that will allow for heavier loads Adding a new transmission to a delivery truck, which will increase its life and future benefits Performing a tune-up on the delivery truck
D
