1. The cost allocation method utilized affects the amount of net property, plant, and equipment that is used in the computation of the fixed asset turnover ratio.

Select one:

True

False

2. The cost of a major addition to an operational asset should be recorded as an asset and depreciated over its useful life.

Select one:

True

False

3. In 20X2, Gamma Company made an ordinary repair to a delivery truck at a cost of $300. Gamma's accountant debited the asset account, Delivery Vehicles. Was this treatment an error, and if so, what will be the effect on the financial statements of Gamma?

Select one:

a.The error increased assets and profit in 20X2.

b.The repair was accounted for correctly.

c.The error decreased profit in 20X2.

d.In the years following 20X2, net income will be too high.

4. Operational assets do not include which of the following kinds of assets?

Select one:

a.Plant and equipment in use.

b.Patents in use.

c.Land held for resale.

d.Mineral deposits being mined.

5. A municipality has decided to donate a plant site to a local manufacturer that plans to open a new factory and create jobs. The donated plant site should be recorded on the manufacturer's books at

Select one:

a.the value assigned by the company's directors.

b.its market value.

c.the nominal cost of taking title to it.

d.one dollar (since the site cost nothing but should be included in the balance sheet).

6. Johnson Company acquires land and building for $4,000,000 including all fees related to acquisition. The land is appraised at $2,700,000 and the building at $2,100,000. The building is then renovated at a cost of $750,000. What amount is capitalized to the building account?

Select one:

a.$2,500,000

b.$2,375,000

c.$2,078,125

d.$4,000,000

7.On March 1, Chapin Company purchased a new stamping machine for $5,000. Chapin paid cash for the machine. Other costs associated with the machine were: transportation costs, $300; sales tax paid, $200; and installation cost, $100. What cost was recorded for the machine?

Select one:

a.$5,600

b.$5,200

c.$5,500

d.$5,000

8. Belmont Corporation made a basket purchase of land, a building and equipment, paying a total of $1,500,000. Market values for the assets were not available, but the appraised values were $300,000 for the land, $900,000 for the building, and $600,000 for equipment. What amounts should be recorded in the Land, Building, and Equipment accounts, respectively?

Select one:

a.$250,000, $750,000, and $500,000

b.$1,500,000, $-0-, and $-0-

c.$300,000, $900,000, and $600,000

d.$500,000, $500,000, and $500,000

9. Accelerated depreciation methods are not desirable from the income tax point of view because the asset will produce a greater profit when it is new (the early years) than when it is older (the later years).

Select one:

True

False

10. Which of the following would be an example of a land improvement?

Select one:

a.Costs of digging the hole for the foundation

b.Land transfer tax paid on purchase of the land

c.Costs of grading the land before building

d.Costs of installing lighting