13 Which of the following statements does not accurately describe the lower of cost or market (LCM) valuation method?

A The journal entry to write-down inventory decreases gross profit.

B The journal entry to write-down inventory decreases current assets.

C The journal entry to write-down inventory does not affect pretax income.

D The journal entry to write-down inventory increases cost of goods sold.

14 Which of the following includes only tangible assets?

A Land, buildings, and natural resources.

B Land, buildings, and leasehold rights.

C Natural resources, buildings, and franchises.

D Licenses, trademarks, and land.

15 Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000.

A Total assets increase $350,000.

B Stockholders' equity increases $250,000.

C Stockholders' equity increases $330,000.

D Total assets increase $330,000.

16 A company acquires land by issuing 10,000 shares of its $10 par value common stock currently trading at $20 per share and the appraised value of the land is $250,000. Which of the following statements correctly describes the recording of the land?

A Record the land at its appraised value of $250,000 and recognize a gain of $50,000 since the issued stock is currently worth $200,000.

B Record the land at the $200,000 value of the consideration given up.

C Record the land at the average of its appraised value of $250,000 and the $200,000 value of the stock issued, thereby recognizing a $25,000 gain.

D Record the land at the par value of the stock given up, $100,000.

17. If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as repairs and maintenance expense, which of the following statements is true?

A The current year's net income will be lower and future depreciation expense will be higher.

B The current year's net income will be higher and future depreciation expense will be lower.

C The current year's net income will be higher and future depreciation expense will be higher.

D The current year's net income will be lower and future depreciation expense will be lower.

18. Gilbert Company made an ordinary repair to a delivery truck during 2014 at a cost of $500 and capitalized the repair cost. What is the effect on the 2014 financial statements as a result of the capitalization?

A The financial statements are not affected.

B Assets are understated and net income is overstated.

C Assets are overstated and net income is overstated.

D Assets and stockholders' equity are both understated.