..Il Verizon 4:01 AM 28%O X ACCT 2110-03 CH 7 TKHQZ.TRC... . 1) Minor Company purchased land which is being prepared for the construction of a new office building. Which of the following should be included in the cost of the land? A) cost of removing an old building B) cost of clearing and grading the land C) cost of the fence which surrounds the property D) A and B 2) ABC Company purchased land with an old building. ABC plans to demolish the old building and then construct a new, modern building. The cost of demolishing the building will be part of the cost of the: A) new building. B) old building C) land. D) land improvements. 3) The cost of installing lights in a company's parking lot should be recorded as a cost of: A) land. B) land improvements. C) leasehold improvements. D) leaseholds. 4) The method is used to allocate the cost of multiple assets acquired in a basket purchase. A) book-value B) cost C) gross margin ratio D) relative-sales-value 5) A lump-sum purchase of multiple, long-term plant assets requires the company to: A) record the assets purchased as a single asset. B) divide the total cost among the various assets according to values estimated by the company's management. C) divide the total cost among the various assets according to their market values. D) divide the total cost among the various assets according to their book values. 6) Which of the following statements is INCORRECT? A) The cost of land includes fencing and paving. B) The cost of any asset is the sum of all the costs incurred to bring the asset to its intended use. C) The cost of a leasehold improvement should be amortized ..Il Verizon 4:01 AM 28%O X ACCT 2110-03 CH 7 TKHQZ.TRC... . 6) Which of the following statements is INCORRECT? A) The cost of land includes fencing and paving. B) The cost of any asset is the sum of all the costs incurred to bring the asset to its intended use. C) The cost of a leasehold improvement should be amortized over the shorter of its useful life or the term of the lease. D) All of the above statements are correct. 7) Land is purchased for $300,000. 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 $22,000. The cost of paving the parking lot was $8,100. The cost of land is and the cost of land improvements is A) $320,500; S30,100 B) S342,500; $8,100 C) S350,600; SO D) $342,100; S8,500 8) A machine is purchased for $80,000. The transportation cost from the seller was $3,000, installation costs were $2.000 and taxes on the purchase price were $700. Testing runs of the new machine cost $3,000. What is the cost of the machine? A) $80,000 B) 85,000 C) 85,700 D) $88,700 9) On June 1, Roadway's Trucking Company paid $9,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years. It also paid $8,000 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 $9,000 is an expense and the $8,000 is a capital expenditure. C) Both items are capital expenditures. D) Both items are expenses. 10) 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. ..Il Verizon 4:01 AM 28%O X ACCT 2110-03 CH 7 TKHQZ.TRC... . 14) As a plant asset is used in operations: A) accumulated depreciation increases and the book value of the asset increases. B) accumulated depreciation increases and the book value of the asset decreases. C) accumulated depreciation remains the same and the book value of the asset decreases. D) accumulated depreciation increases and the book value of the asset remains the same. 15) When computing depreciation using the units-of-production method: A) a variable amount of depreciation is assigned to each unit of output. B) a fixed amount of depreciation is assigned to each unit of output. C) the depreciation expense depends directly on the amount of output or usage. D) B and C. 16) Which of the following is an accurate statement regarding financial statement and income tax depreciation methods? A) Straight-line depreciation is the most popular method for income tax purposes. B) The IRS expects a company to use accelerated depreciation methods for tax purposes. C) The Modified Accelerated Cost Recovery System can be used for both financial statement and income tax purposes. D) If an accelerated depreciation method is used for income tax purposes, a company will pay more in income taxes. 17) When a plant asset is fully depreciated: A) the asset's accumulated depreciation is higher than the historical cost of the asset. B) the book value is equal to the salvage value. C) the depreciable cost is equal to the estimated residual value, and the asset is of no further use to the company. D) the book value is zero and the asset has no market value. 18) 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 .. Verizon 4:02 AM 28%O X ACCT 2110-03 CH 7 TKHQZ.TRC... " 28) Remini Company sells equipment for $20,000 cash. The equipment has a historical cost of $80,000 and accumulated depreciation of $50,000. What is the journal entry to record the sale of the equipment? A) debit Cash for $20,000 and credit Gain on Sale of Equipment for $20,000 B) debit Cash for $20,000, debit Accumulated Depreciation - Equipment for S50,000 and credit Equipment for $70,000 C) debit Loss on Sale of Equipment for $10,000, debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000 and credit Equipment for $80,000 D) debit Cash for $20,000, debit Accumulated Depreciation - Equipment for $50,000, debit Gain on Sale of Equipment $10,000 and credit Equipment for $80,000 29) Which the following statements regarding accounting for natural resources is INCORRECT? A) Natural resources are often called wasting assets because they are actually physically used up over time. B) When the natural resource is extracted, the entity follows an approach much like the straight-line method of depreciation to account for the production. C) If all of the natural resource that is extracted is sold, the amount depleted is transferred directly from long-term assets to the income statement as depletion expense. D) The portion of the extracted natural resource that is not immediately sold, becomes inventory. 30) The computation of depletion expense is most closely related to which method for computing depreciation? A) straight-line B) units-of-production C) double-declining balance D) modified accelerated cost recovery system 31) Which intangible asset is NOT amortized? A) patents B) trademarks C) copyrights D) goodwill 32) Amortization expense is recorded for: A) intangible assets with an indefinite life. B) intangible assets with a finite life. C) goodwill D) a franchise established with a contract that allows for unlimited extensions ..ll Verizon 4:02 AM 28%O X ACCT 2110-03 CH 7 TKHQZ.TRC... " working in their labs trying to develop a new drug to treat congestive heart failure. Following U.S. Generally Accepted Accounting Principles, the cost of this research and development must be: A) recorded as an intangible asset and not amortized. B) recorded as an intangible asset and amortized over 20 years. C) recorded as an intangible asset and tested for impairment on a yearly basis. D) expensed as incurred. 40) On January 1, 2019, Plenty of Oil, Inc. purchased an oil field that is estimated to have 15,000,000 barrels of oil for $45,000,000. In 2019, 1,300,000 barrels of oil were extracted and sold. In 2020, 2,100,000 barrels of oil were extracted and sold. The oil field will have no residual value. What is the book value of the oil reserves that will be reported on the balance sheet as of December 31, 2020? A) $10,200,000 B) S34,800,000 C) S38,700,000 D) $45,000,000 41) Equipment is acquired by issuing a note payable for $58,000 and a making a down payment of $26,000. The statement of cash flows will report a: A) $26,000 outflow in the operating activities section. B) 584,000 outflow in the investing activities section. C) S58,000 inflow in the financing activities section. D) $26,000 outflow in the investing activities section. 42) Equipment with a book value of $8,000 is sold for $3,000 cash. The statement of cash flows will report a: A) $3,000 cash inflow in the operating activities section B) S3,000 cash inflow in the investing activities section. C) $5,000 cash outflow in the operating activities section. D) $5,000 cash outflow in the financing activities section. 43) Each of the following transactions appear on the statement of cash flows, EXCEPT: A) acquiring long-lived assets. B) depreciating long-lived assets. C) disposing of long-lived assets for no cash proceeds. D) selling long-lived assets