Question 1

A capital expenditure would appear on the

	a.	income statement under operating expenses.
	b.	balance sheet under fixed assets.
	c.	balance sheet under current assets.
	d.	income statement under other expenses.

Question 2

Which of the following expenditures would NOT be included in the cost of an asset?

	a.	Freight costs
	b.	Vandalism
	c.	Sales tax
	d.	Surveying fees

Question 3

A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building from which salvaged materials sold for $1,950. What is the cost basis for the land?

	a.	$85,700
	b.	$89,600
	c.	$91,550
	d.	$93,500

Question 4

Book value is defined as

	a.	current market value less residual value.
	b.	cost less residual value.
	c.	current market value less accumulated depreciation.
	d.	cost less accumulated depreciation.

Question 5

Which method of depreciation considers residual value in computing the normal periodic depreciation?

	a.	Straight-line
	b.	MACRS
	c.	Double-declining-balance
	d.	All of these

Question 6

A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Under the straight-line method, what is annual depreciation expense?

	a.	$10,800
	b.	$11,000
	c.	$12,000
	d.	$13,200

Question 7

Equipment was purchased for $18,000. It has a useful life of 5 years and a residual value of $2,000. What is depreciation expense for year one under the double-declining-balance method?

	a.	$3,200
	b.	$3,600
	c.	$6,400
	d.	$7,200

Question 8

Goodwill is

	a.	amortized similar to other intangibles.
	b.	only written down if an impairment in value occurs.
	c.	charged to expense immediately.
	d.	amortized over 40 years or its economic life, whichever is shorter.

Question 9

NBC Company purchased a patent from ABC for $144,000. At the time of purchase the patent had been in existence for 10 years. What is the first year's amortization?

	a.	$7,200
	b.	$12,000
	c.	$14,400
	d.	$18,000

Question 10

Fixed assets are ordinarily presented in the balance sheet

	a.	at current market values.
	b.	at replacement costs.
	c.	at cost less accumulated depreciation
	d.	in a separate section along with intangible assets.