1) Land, a building and equipment are acquired for a lump sum of S800,000. The market values of the land, building and equipment are $400,000, $900,000 and S300,000, respectively What is the cost assigned to the equipment? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.) A) SO B) S150,000 C) S300,000 D) $800,000 2) Land is purchased for S300,000. Back taxes paid by the purchaser were $8,500; total costs to demolish an existing building were $12,000 and the cost to clear the land was S22,000. The cost of paving the parking lot was $8,100. The cost of land is and the cost of land improvements is A) S320,500; S30,100 B) S342,500; $8,100 C) S350,600; S0 D) S342,100; $8,500 3) Jimmy Company leased a delivery van for payments of S11,000 per year for three years. In addition, Jimmy Company also paid S1,700 for new larger windows in the van and spent S5,400 for special storage racks for the van. Leasehold Improvements equal: A) $11,000 B) $1,700 C) $5,400 D) $7,100. 4 On June 1, Roadway's Trucking Company paid S9,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years. It also paid S8,000 to change the storage capacity of the truck so that it could haul more merchandise Which of the following statements is TRUE? A) The $9,000 is a capital expenditure and the $8,000 is an expense B) The S9,000 is an expense and the $8,000 is a capital expenditure. C) Both items are capital expenditures. D) Both items are expenses. 5) Treating a capital expenditure as an immediate expense A) overstates assets and stockholders' equity in the year of the error B) understates assets and stockholders' equity in the year of the error C) understates assets and overstates stockholders' equity in the year of the error D) overstates assets and understates stockholders' equity in the year of the error 6) If a company capitalizes a cost that should have been expensed A) expenses and net income will be overstated in the year of the rror B) expenses and net income will be understated in the year of the error C) expenses will be overstated and net income will be understated in the year of the error D) expenses will be understated and net income will be overstated in the year of the error 7) WorldCom's fraudulent scheme of capitalizing telephone line costs instead of expensing them was discovered by: A) external auditors. B) astute investors C) U.S. Securities and Exchange Commission D) internal auditors 8) Which of the following statements is INCORRECT? A) The rules for determining whether a cost should be expensed or capitalized are so complete and clear that judgment is not needed. B) Capital expenditures are capitalized when the cost is added to an asset account. C) Most companies expense all small (immaterial) costs regardless of whether the costs are capital in nature D) An expense merely maintains the asset in its present condition or restores it to working order. 9) Which of the following costs for a delivery vehicle should NOT be capitalized? A) repair dented fender B) service air conditioning system C) repair air conditioning system D) all of the above 10) Costs that maintain a plant asset in its present condition should be order or its prior condition should be A) capitalized capitalized B) capitalized; expensed C) expensed; capitalized D) expensed; expensed Costs that restore a plant asset to working 11) A conservative policy with regard to capitalizing or expensing costs associated with plant assets avoids A) understating profits and assets B) overstating profits and assets C) overstating profits and understating assets D) understating profits and overstating assets 12) On January 2, 2019, Konrad Corporation acquired equipment for $500,000. The estimated life of the equipment is 5 years or 18,000 hours. The estimated residual value is $14,000. If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2020, assuming that during this period, the asset was used 6,000 hours? A) $166,667 B) $97,200 C) S162,000 D) $171,333 13) On January 2, 2019, Kaiman Corporation acquired equipment for $700,000. The estimated life of the equipment is 5 years or 80,000 hours. The estimated residual value is $20,000. What is the balance in Accumulated Depreciation on December 31, 2020, if Kaiman Corporation uses the straight-line method of depreciation? A) $140,000 B) S136,000 C) S272,000 D) $280,000 14) On January 2, 2019, Kellogg Corporation acquired equipment for $700,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $40,000. What is the book value of the asset on December 31, 2020, if Kellogg Corporation uses the straight-line method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) S568,000 B) $436,000 C) $700,000 D) $660,000 15) On January 2, 2019, Kornis Corporation acquired equipment for $1,500,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is S50,000. What is the balance in Accumulated Depreciation on December 31 2019, if Kornis Corporation uses the double-declining-balance method of depreciation? A) $290,000 B) S300,000 C) $580,000 D) $600,000 16) Equipment purchased for $70,000 on January 1, 2020, was sold on July 1, 2023. The company uses the straight-line method of computing depreciation and recognizes $10,000 of depreciation expense annually. When recording the sale, the company should record a debit to Accumulated Depreciation Equipment for: A) $0 B) S30,000 C) S35,000 D) $40,000 17) Equipment acquired on January 1, 2020, is sold on June 30, 2024, for S11,200. The equipment cost $46,200, had an estimated residual value of S6,300, and an estimated useful life of 5 years. The company prepares financial statements on December 31, and the equipment has been depreciated using the straight-line method. On June 30, 2024, the company should record Depreciation Expense for the first six months of the year A) SO B) $1,995 C) $3,990 D) $7,980 18) Kolonas, Inc., sold equipment for $5,400 cash. The equipment cost $73,900 and had accumulated depreciation through the date of sale of $70,000. At the date of sale, the journal entry to record the sale will have A) a Gain on Sale of Equipment for $3,900 B) a Loss on Sale of Equipment for $3,900 C) a Loss on Sale of Equipment for $1,500 D) a Gain on Sale of Equipment for $1,500 19) On June 5, 2019, Mabel Company purchased an oil well for S850,000. The well contains an estimated $85,000 barrels of oil, with an estimated residual value of zero. During July, 2019, $25,500 barrels of oil were removed from the well. All of the oil went into inventory. What amount of Depletion Expense is recorded in July, 2019? (Round your final answer to the nearest dollar.) A) S0 B) $850,000 C) S85,000 D) $255,000 20) CBS Corporation acquired a patent for $3,800,000. The patent has a legal life of 20 years. Because of changing technology, this patent is expected to generate revenue for only 5 years and have no residual value. The annual amortization expense for the patent is: (Round your final answer to the nearest dollar.) A) SO B) S3,800,000 C) $190,000 D) $760,000 21) Sylvia Company has a long-term plant asset with the following information as of the end of the year: Net book value Estimated future cash flows s70,00 Fair value 87,500 7,000 The amount of the impairment loss is: A) $17,500 B) $3,000 C) $157,500 D) $20,500 22) Samson Company has a machine with the following data 910,00 Estimated future cash flows5760,000 S60,00 book value Fair value ls the machine impaired? A) No, the net book value of the machine exceeds the estimated future cash flows from the machine B) No, the estimated future cash flows from the machine exceed the fair value of the machine C) Yes, the fair value of the machine is less than the net book value of the machine D) Yes, the estimated future cash flows from the machine are less than the net book value of the machine. 23) When determining the rate of return on assets: A) the DuPont model breaks return on assets down into three component ratios that drive it. B) the DuPont model calculates the rate of return on assets as the net profit margin ratio times total asset turnover C) it is important for companies to develop strategies to decrease total asset turnover D) total asset turnover measures how much every sales dollar generates in profit. 24) Calculate Company Y's total asset turnover based on the following information for the current year: (Round your final answer to two decimal places.) et income ear $120.000 110,00 00,000 Assets at the of the Assets at the end of the sales A) 2.73 B) 5.22 C) 2.61 D) 2.50 25) The records of Milwaukee Sprinkler Systems report net sales of $520,000, net income of $130,000 and average total assets of S360,000. Using DuPont analysis, calculate the two ratios used for return on assets. (Round your final answer to two decimal places.) A) Net profit margin ratio is 2.77; Total asset turnover is 25%. B) Net profit margin ratio is 25%; Total asset turnover is 1.44. C) Net profit margin ratio is 36%; Total asset turnover is 4.00. D) Net profit margin ratio is 2.50; Total asset turnover is 36%. 70