Acc 301 Final

Bonita Industries purchased machinery for $1030000 on January 1, 2022. Straight-line depreciation has been recorded based on a $82000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2026 at a gain of $27500. How much cash did Bonita receive from the sale of the machinery?

$235900 [(1030000 - 82000) / 5] x 4 1/3 = 821600 (1030000 - 821600) + 27500 = 235900

On February 1, 2025, Marigold Corp. purchased a parcel of land as a factory site for $327000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2025. Costs incurred during this period are listed below: -Demolition of old building >> 19300 -Architect's fees >> 36400 -Legal fees for title investigation and purchase contract >> 5500 -Construction costs >> 1402000 (Salvaged materials resulting from demolition were sold for $11700.) Marigold should record the cost of the land and new building, respectively, as

$340100 and $1438400 Land: 32700+19300+5500-11700=340100 Building: 36400+1402000=1438400

Sunland Company purchased land as a factory site for $1360000. Sunland paid $112000 to tear down two buildings on the land. Salvage was sold for $8200. Legal fees of $5320 were paid for title investigation and making the purchase. Architect's fees were $46000. Title insurance cost $3800, and liability insurance during construction cost $4100. Excavation cost $15800. The contractor was paid $4300000. An assessment made by the city for pavement was $9900. Interest costs during construction were $260000. The cost of the building that should be recorded by Sunland Company is

$4625900 = 46000+4100+15800+4300000+260000

Bramble Corp. purchased equipment for $48800. Sales tax on the purchase was $2928. Other costs incurred were freight charges of $732, repairs of $427 for damage during installation, and installation costs of $813. What is the cost of the equipment?

$53273 48800+2928+732+813

On September 1, 2021, Crane Printing Co. incurred the following costs for one of its printing presses: Purchase of attachment: 38300 Installation of attachment: 6100 Replacement parts for renovation of press: 13400 Labor and overhead in connection with renovation of press: 3000 Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized?

$60,800 (all costs) because the renovation significantly increased productivity.

Metlock Corporation's plant was destroyed by a tornado. The plant had a cost of 558000 and accumulated depreciation of 202000 at the time of the loss. The plant will not be rebuilt. They received 446000 from their insurance company. What amount of the gain or loss will be recorded?

90000 gain on disposal of asset Insurance proceeds 446000 minus book value of asset destroyed 356000(558000-202000) = 90000

Describe the concept of depreciation as used in accounting.

It is the process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.

Which of the following statements is true regarding capitalization of interest? a. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. b. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. c. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. d. Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account.

a. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.

The accounting for interest costs incurred during construction recommended under GAAP is to: a. capitalize the lesser of actual interest cost for the period or the amount of interest cost incurred during the period that the company could have avoided if expenditures for the asset had not been made. b. capitalize no interest charges during construction c. charge constructing with all costs of funds employed , whether identifiable or not. d. capitalize a pro rata portion of all costs of funds employed.

a. capitalize the lesser of actual interest cost for the period or the amount of interest cost incurred during the period that the company could have avoided if expenditures for the asset had not been made.

Which of the following is one of the conditions that must be present for the capitalization period of interest to begin? a. interest costs are being incurred b. Expenditures for the asset must be budgeted. c. The construction period must occur in the current accounting period. d. Activities necessary to get the asset ready for its intended use must be known.

a. interest costs are being incurred

An impairment of property, plant, or equipment has occurred if a. the sum of the expected future net cash flows is less than the asset's carrying value b. the revised estimated useful life is less than the original estimated useful life c. the estimated salvage value is less than the actual proceeds received on disposal d. the expected future cash outflows exceeds the asset's carrying value

a. the sum of the expected future net cash flows is less than the asset's carrying value

Which one of the following is not an accelerated depreciation method? a. Sum-of-the-years' digits method b. Straight line method c. Double declining balance method d. Declining balance method

b. Straight line method

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues? a. Immediate recognition b. Systematic and rational allocation c. Associating cause and effect d. Partial recognition

b. Systematic and rational allocation

Cotton Hotel Corp. recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a. written off as a loss in the year the hotel is torn down b. capitalized as part of the cost of the land c. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down d. capitalized as part of the cost of the new hotel

b. capitalized as part of the cost of the land

Equipment that cost $156000 on January 1, 2025 was disposed of for $21000 in cash. The accumulated depreciation at the time of the sale was $140000. The entry to record the sale would include a a. credit to Accumulated Depreciation of $140000 b. credit to Gain on Sale of Plant Assets of $5000 c. credit to the Equipment account of $16000 d. debit to Loss on Sale of Plant Assets of $16000

b. credit to Gain on Sale of Plant Assets of $5000

In computing partial-year depreciation, depreciation is normally computed on the basis of: a. a full year's depreciation in the period of acquisition and none in the year of disposal. b. the nearest full month c. a half year's depreciation in the period of acquisition and disposal. d. the nearest fraction of a year.

b. the nearest full month

When an asset is sold in the middle of the fiscal year, a. the gain or loss cannot be determined b. the gain or loss is based on the asset's book value at the end of the last fiscal year c. depreciation should be updated through the date of the sale d. the gain or loss will be deferred until the following year

c. depreciation should be updated through the date of the sale

In accounting for plant assets, which of the following outlays made after acquisition should be fully expensed in the period the expenditure is made? a. expenditure made to extend the useful life of an existing asset beyond the time frame originally anticipated b. expenditure made to increase the efficiency or effectiveness of an existing asset c. expenditure made to maintain an existing asset so that it can function in the manner intended d. expenditure made to add new asset services

c. expenditure made to maintain an existing asset so that it can function in the manner intended

The depreciable base (cost) of an asset is its original cost: a. plus accumulated depreciation b. less accumulated depreciation c. less salvage value d. plus salvage value

c. less salvage value

The period of time during which interest must be capitalized ends when a. no further interest cost is being incurred b. the activities that are necessary to get the asset ready for its intended use have begun c. the asset is substantially complete and ready for its intended use. d. the asset is abandoned, sold, or fully depreciated

c. the asset is substantially complete and ready for its intended use.

Use of the double-declining balance method a. results in a decreasing charge to depreciation expense each year b. requires that salvage value is not deducted in computing the depreciation base c. requires that the book value not be reduced below salvage value d. All of the above

d. All of the above

Which of the following is true of depreciation accounting? a. It is not a matter of valuation b. It is part of the matching of revenues and expenses c. It is the process of cost allocation d. All of the above

d. All of the above

When is the restoration of an impairment loss permitted? a. None of the answers are correct b. On all tangible assets whether held for use or disposal c. On assets held for use d. On assets being held for disposal

d. On assets being held for disposal

Which of the following is a major characteristic of property, plant, and equipment? a. They lack physical substance. b. They are always subject to depreciation. c. They are acquired for resale. d. They are long-term in nature.

d. They are long-term in nature.

A principal objection to the straight line method of depreciation is that it a. tends to result in a constant rate of return on a diminishing investment base b. gives smaller periodic write-offs than decreasing charge methods c. provides for the declining productivity of an aging asset d. assumes that the asset's economic usefulness is the same each year

d. assumes that the asset's economic usefulness is the same each year

NOLO Company determines that equipment it has for sale has suffered a permanent impairment in value because of technological changes. After the impairment loss has been recorded, the equipment will be reported as its a. cost b. carrying value c. net realizable value d. fair value

d. fair value

Fences and parking lots are reported on the balance sheet as a. PPE b. land c. current assets d. land improvements

d. land improvements

The interest rate(s) used in computing avoidable interest is the: a. lower of the rate incurred on specific borrowings or the weighted-average rate. b. weighted-average rate incurred on all other outstanding debt. c. rate incurred on specific borrowings d. rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted-average rate of other borrowings for the excess expenditures.

d. rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted-average rate of other borrowings for the excess expenditures.

The major difference between the service life of an asset and its physical life is that a. service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners b. physical life is always longer than service life c. physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value d. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last

d. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last

The term "depreciable base, or "depreciation base," as it is used in accounting, refers to a. the acquisition cost of the asset b. the estimated market value of the asset at the end of its useful life c. the cost of the asset less the related depreciation recorded to date d. the total amount to be charged (debited) to expense over an asset's useful life

d. the total amount to be charged (debited) to expense over an asset's useful life