Q1.

Which of the following expenditures should be recorded as an asset?

Multiple Choice

• Interest costs during the construction period of a new building.

• Repair of a machine.

• Property taxes incurred on an existing building.

• Depreciation during the first year of an existing building.

2.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

Multiple Choice

• $900,000.

• $200,000.

• $180,000.

• $220,000

3.

Kansas Enterprises purchased equipment for $76,000 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $6,600 at the end of ten years. Using the straight-line method, depreciation expense for 2021 would be:

Multiple Choice

• $6,940.

• $8,260.

• $15,200.

• $7,600.

4.

Kansas Enterprises purchased equipment for $80,500 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $8,250 at the end of ten years. Using the double-declining balance method, depreciation expense for 2021 would be: (Do not round your intermediate calculations)

Multiple Choice

• $7,850.

• $8,050.

• $14,450.

• $16,100.

5.

6.

Which of the following is not a current liability?

Multiple Choice

• Notes payable due in six months.

• Current portion of long-term debt.

• An unused line of credit.

• Deferred revenue to be earned in nine months.

7.

The Pita Pit borrowed $206,000 on November 1, 2021, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2022. In connection with this note, The Pita Pit should report interest expense at December 31, 2021, in the amount of: (Do not round your intermediate calculations.)

Multiple Choice

• $12,360.

• $4,120.

• $24,720.

• $0.

8.

Which of the following is not an advantage of debt financing?

Multiple Choice

• Interest is tax deductible.

• The cost of borrowing may be lower than the return on equity.

• The ownership interest of current stockholders is unchanged.

• Debt financing often has no maturity date.

9.

In each succeeding payment on an installment note:

Multiple Choice

• The amount that goes to interest expense increases.

• The amount that goes to interest expense decreases.

• The amount that goes to interest expense is unchanged.

• The amounts paid for both interest and principal increase proportionately.

10.

If bonds are issued with a stated interest rate higher than the market interest rate, the bonds will be issued at

Multiple Choice

• A premium.

• Face amount.

• A discount.

• A discount or premium depending on the maturity date.