QUESTION 1

For each of the cost items listed, choose the asset (or expense or other) for which the cost item is recorded. Each item has only one correct answer, but answer items can be used more than once or not at all.

A. Building B. Copyright C. Equipment D. Expense E. Franchise F. Furniture G. Goodwill H. Inventory I. Land J. Land Improvements K. Office Improvements L. Patent M. Trademark N. Vehicles

1. Brock Hotel installed a sprinkler system throughout the hotel at a cost of $13,000. No additional benefits are expected from the sprinkler system. 2. Kuhn Co. purchased land and two buildings. The cost of razing the smaller building was $1,200. 3. Legal fees of $4,000 were incurred to obtain protective rights for a book written by a newly discovered author. 4. New shrubs and flowers are planted in front of the office building. The last time shrubs and flowers were planted was 3 years ago. 5. Kirkland Co. paid interest of $24,000 relating to bonds obtained to finance the construction of a new plant. 6. Drew Corp. paid $3,000 in real estate fees to obtain a new plant location. 7. The copying machine's copying drum was replaced at a cost of $800. The copying machine is expected to last the remaining 2 years of its original life. 8. Sally decided to open a new Outback Steakhouse restaurant in her hometown. She paid $10,000 for the right to use the Outback Steakhouse name and recipes. 9. Jim Dent and Ann Riley, maintenance repair workers, spent 3 days unloading and setting up a new precision machine. Wages paid were $500. 10. Sumbeam Company purchased goods that were shipped FOB shipping point but are still in transit at year end. 11. Applebees Inc. purchased "out lot" space from Meijer Inc. to build a restaurant on the front part of Meijer's new store land. Applebees spent $10,000 to pave a parking lot and driveways around the restaurant building. (Ignore the land purchase) 12. Marck Co. paid $12,000 of interest on a loan obtained to purchase raw materials to produce routinely manufactured inventory. 13. A new part, costing $500, was added to an existing machine. The machine's production quality improved 10% because of the new part. 14. Simpson Company paid $5,000 to General Shipping Company for freight charges on goods delivered to Simpson. 15. Pharmacy Inc. spent $1.2 million on developing a new cancer drug that was eventually patented by Pharmacy. 16. Unique Jewelry spent $25,000 to protect its brand symbol in a lawsuit against Ordinary Jewelry. 17. Hunter Inc. purchased a new stamping machine. The machine required special flooring to operate the machine properly, and Hunter spent $15,000 installing the floor. 18. To improve the office appearance, Dr. Weiss spent $8,000 to repaint and recarpet the office. 19. Werth Co. spent $200,000 to replace the roof on its office building. The old roof was damaged severely in a hurricane. The new roof is expected to last 5 years beyond the life of the old roof. 20. Pharmacy Inc. purchased a patent for $2 million so that the company could use the patented material in its current operations.