1. What is the relationship between leaseholds and leasehold improvements?

A) Both of them are tangible assets.

B) Both of them may be depreciated.

C) Leasehold improvements are amortized but leaseholds are depreciated.

D) Leasehold improvements are tangible in nature but leaseholds are intangible in nature.

E) None of the above statements accurately describe the relationship between leaseholds and leasehold improvements.

2. A large newspaper publisher decides to buy a large printing press. This press is so large that it will occupy one-half of a city block when it is fully assembled. The company pays $1,000,000 for the press, $20,000 to have it trucked to its permanent location, and $30,000 to have it assembled and test run. All three of these amounts are debited to the Machinery account. As it applies to any fixed asset, this procedure is an application of which of the following principles?

A) Monetary unit principle.

B) Going-concern principle.

C) Business Entity principle.

D) Cost principle.

E) Full-disclosure principle.

3. A company has purchased a parcel of land on which a small dilapidated building has been situated for years. The purpose of the acquisition is to tear down the building to make the land suitable to build a new warehouse. Which of the following costs incurred is not part of the cost of the warehouse?

A) The cost of obtaining a building permit.

B) The cost of installing temporary electric service on the site so the construction crews have access to electricity to operate their tools.

C) The cost of tearing down the old building.

D) The cost of materials for building the new warehouse.

E) The cost of erecting temporary walkways around the site for use by the public.

4. A company buys a parcel of land on which are erected two buildings. The first building is a 100,000 square-foot warehouse and the second building is a 25,000 square-foot garage and maintenance building. The respective fair market values for the land, the warehouse, and the garage are $125,000, $200,000, and $75,000. The company paid $210,000 for all three assets. What amounts should be allocated to the land and the garage?

A) $100,000 and $50,000

B) $70,000 and $105,000

C) $ 65,100 and $39,900

D) $105,000 and $35,000

E) None of the above

5. A company buys an automobile for use in the business. The car's manufacturer says that with proper maintenance the car should last 15 years before it has to be scrapped. A popular newsstand magazine has conducted a survey which says that most people who own this car trade it in on a new car after 6 years. If the company leased this car, the standard industry lease period is 4 years. The company has a policy of replacing its cars every 3 years. Which number represents the estimated useful life of the vehicle for depreciation purposes?

A) 15 years.

B) 6 years.

C) 3 years.

D) 4 years.

E) Some other number not listed above.